My First REAL Rent to Own Client

It wasn’t too long after my first rent to own client fail that I had another prospective client. Only this time I was way more prepared.

They were saving for a down payment on a home when they had an unfortunate incident with a fast food retailer that required some legal representation. I didn’t push for many details, but I had a feeling that anytime you deal with a major corporation on a legal matter that it’s not going to be cheap. Long story short, it took their down payment money to pay the legal bill, so they were back to square one. They ended up seeing my ad on Kijiji and thought that this could help them realize their dream of home ownership sooner, rather than waiting another two or more years to build back up their savings.

I Did My Due Diligence

So I met with them, they told me their story and provided me with the application as well as proof of income. They combined well over $100,000 in income, but because most of that was on commission, mortgage brokers wanted 10% down instead of the more common 5% down for a mortgage. I reviewed everything they provided and even passed their info along to my mortgage broker to see if there was anything he could do right away before we went the rent to own route. He confirmed the 10% down requirement, and also mentioned that they had some debt that was holding them back. He assured me that based on their income for the past 3 years and their debt level that they should have no problem with a rent to own on a 2 year agreement.

With that in mind and requirements from the clients, we came to a tentative agreement on a 2 year plan, but of course all contingent on finding the right home. Lucky for me, they had two homes they had already picked out that they wanted me to look at. The first one they were kind of dreaming a bit. The home was in a small town in Prince Edward County, and was probably $40,000 over what I thought they could afford. I had been through the house already about a month before, so we went through anyway and I showed them all about it. I leveled with then and told them how much it would cost per month, and they both agreed that it was too much to spend.

One Angry Agent Later…

The other house was in Sterling, which was about a 40 minute drive from my house. The clients took it upon themselves to book an appointment with the selling agent, and made the mistake of telling him that they really liked it and were ready to put an offer in. The only problem being it was me that was going to put the offer in through my own realtor. The selling agent was really pissed off that there was no another agent involved, which essentially cut his commission in half. He had every right to be pissed off, and my agent was even pissed off at me because she didn’t want to develop a reputation of swooping in at the last minute to collect a commission. Once things calmed down and we explained the situation to the selling agent, he understood the confusion and everything was ok. The lesson here was that it’s ok for clients to look on their own, but they need to keep their emotions in check and realize how the process works. It’s something that I corrected for my next deal.

After that excitement, we hammered out a rent to own agreement making sure that all parties were satisfied, and I proceeded to put the offer in. Not long after that, the offer was accepted and I had my inspector come in to look the place over. The place was in excellent condition, with only a couple of minor things that I had to take care of prior to the clients moving in.

It’s Been Going Well

Dealing with these rent to own clients has been for the most part very smooth. We had a two year agreement, so they provided me with two years worth of cheques when they met me to give me the $5000 down payment. I only had one issue that I had to help resolve, which was some ice damming that resulted in some drywall and shingle repair. Other than that, I’ve left them alone with maybe one visit per year to make sure they haven’t burned the place down!

As of writing this, their two year agreement is up and they asked me if they could prolong the agreement for at least another 6 months. Unfortunately at the time the contract was set to expire I was also in the middle of purchasing a new home and renting my previous address, so I was looking to use proceeds from their sale to fund my down payment. It made for some fancy money maneuvering, but I made it work. They did end up giving me $10,000 towards their eventual purchase that I used to help with my own down payment. Other than that, I had no issues in prolonging the agreement. The longer they keep renting, the more money I will make on the house in the long run.