# Rent-to-Own Scenario



## NoPennyBenny (Nov 22, 2011)

Please provide input on the following situation:

I have a mature medical school student with $15,000 ready for a down payment but does not qualify for a mortgage since he is still in school. He will have high earning potential and no problem to get a job when he graduates. He has found a 2 apartment home at $300,000 that he would like to buy. 

I have offered to buy the house and he is willing to provide me with the $15,000 as an initial option deposit and pay $1,400 per month (1100 towards rent and 300 towards the monthly option deposit). Typical rents are 1300 to 1500 for this size of a house. I will setup the 2nd apartment tenants and collect the rent ($800/month). So total income will be $2200/month. The current student has agreed to pay $347,000 to purchase the home any time within the next three years (an annual appreciation of 5%). If the value of the home goes up according to the last few years, any additional increases will be the tenants profits upon purchasing the property. Vacancies are less than 1 percent and houses have appreciated close to 10-20% per year for the last 4 years in this area.

The expenses (~$655/month) are as follows: 
Taxes $3,300.00/year 
Insurance $600.00 /year
Property Management $480.00/year - my costs to manage 2nd apt.
Vacancies $480.00/ year- vacancy associated with 2nd apt.
Repairs & Maintence $3,000.00 / year on major items
Repairs & Maint. < $300 to be covered by tenant
Utilities - POU

The debt services will be as follows:
1st Mortgage (80% LTV), 5.29% interest over 25 years - $1,443.86 / month
20% down payment - (maybe also financed)

Total profits in three years after all expenses (incl. closing costs) is $41,098.63, with all expenses covered and approximately $200 cash flow per month.

For the tenant, he will have ~$25,000 to put towards the purchase of his home and will only be paying ~$100 more than if he had just rented for the 3 years. The type of client is extremely important and they must be wanting and ready to purchase the property that has been chosen. The tenant is also completely aware that if he decides against the purchase of the property the option deposits are non-refundable.

Renting in the current environment is not feasible as the cost of housing is too high compared to the potential rents on properties.

Let me know what you all think. Thank you very much.


----------



## iherald (Apr 18, 2009)

I don't see the benefit to you in this case. You are losing $10,800 in rent over three years by only charging $1100 a month versus $1400. If you were to charge the 1500, then you're losing $14,400.

You've limited your upside for the property. If the value of the property is $330,000 or less in three years (which is certainly possible) then why would the doctor buy the property? There is no limit to your downside.

Also, don't forget your true income is really $1900 a month versus $2200 since really you are simply holding that $300 as a downpayment. It may not make a difference in the cash in your pocket but don't forget that $300 a month is being subtracted from your purchase price.

So while you're paying $300,000 out of your pocket, you'll actually only be getting a check for $321,200 at the end of three years. You will have received the rest in rent / down payment, but you can't think of that money as monthly income and then also think of it as profit at the end of the term. It's one or the other.

Your profit number doesn't work, at least to the way I see the world. You are also paying interest on your mortgage. I'm not certain why you are using 5.29% as your interest rate, since you get get them in the mid 3%'s. I have assumed that you got a mortgage for the entire selling price, since you've said you may finance the down payment. But, based on those numbers you'll have paid approx $74,000 in interest on your mortgage (you'll also have paid approx $33,000 in principal), so you'll have paid $41,000 'extra' to hold the property.

Purchase Price $300,000
Mortgage (end of 5 years) $266,717
Selling Price $347,000

Gross Profit $ 80,283

Interest on mortgage ($74,000)

Net Profit on sale $6,283

That does not take into effect any amount you will get in rent over the years and any profit or money you will make from that. This is purely on the idea that you have 'sold' the property already but will have to carry it for three years. I personally wouldn't take the risk of unlimited downside for an upside of just over $6,000


----------



## the-royal-mail (Dec 11, 2009)

Don't forget the RE fees that are 4% of the $347K selling price or $13880. Apply the profit of $6283 and you have a *net loss *of $7597.


----------



## jamesbe (May 8, 2010)

the-royal-mail said:


> Don't forget the RE fees that are 4% of the $347K selling price or $13880. Apply the profit of $6283 and you have a *net loss *of $7597.


Why would there be realtor fees? He's selling to someone without the need for a realtor. There will be closing costs etc, land transfer taxes , lawyer fees and HST on those items, who is paying those?


----------



## Charlie (May 20, 2011)

Assuming $1400/mo is fair value for rent over the three years:

Your return, before financing, is $2200-655/mo or about $18K/yr (approx 6%).

The 'option price' is really $15000. This is what you get to keep if he chooses not to buy. It's what you get in addition to what you could have got through ordinary rentals.

The strike price -- the value at which it makes sense for him to buy is $347K -- less the $15K deposit, less the $300/mo additional credit -- so if it's worth $325K or more, he buys. And you make $25K less transfer costs in addition to your 6% annually calculated above.

So....if he buys, you make 6%/yr + $25K at end of 3 yrs.
if he doesn't buy, you make 6%/yr + $15K forfeited deposit.

Not a bad deal if you're willing to own the place and be a landlord. Usual rental property caveats apply.


----------



## NoPennyBenny (Nov 22, 2011)

*Rent-to-Own*



iherald said:


> I don't see the benefit to you in this case. You are losing $10,800 in rent over three years by only charging $1100 a month versus $1400. If you were to charge the 1500, then you're losing $14,400.


The most that could be charged for rent in a regular rental market is 1100 to 1300, so 1400 would not be attainable. 




iherald said:


> So while you're paying $300,000 out of your pocket, you'll actually only be getting a check for $321,200 at the end of three years. You will have received the rest in rent / down payment, but you can't think of that money as monthly income and then also think of it as profit at the end of the term. It's one or the other.


I'm not sure where you got the $321,200, he will pay $347,000 at the end of three years. 

The goal of this arrangement is that the initial cash required to begin the deal will be reduced since the person moving in will provide 5%. So if I can get 80-90% financing on the property, he will cover 5% and I will cover the other 5-15%. 

With high prices and low rents, the current market cannot sustain buy-and-hold properties. This rent-to-own property will cash flow consistently for the entire duration as there is a premium added to the typical rents. There will be reduced expenses, as the tenant will pay for repairs under $300, vacancy will not be an issue, without him sacrificing his option deposits and since he will take pride in the property, property management concerns would be reduced.

As mentioned, I was using 5.29% interest as a conservative estimate. If we go with 3.5% then that would be $1,201.50/month, allowing for $343.50 cash flow per month or $43.50 discounting the monthly option deposit.

There are two potential outcomes to the value of the home here, the fair market value continues to go higher beyond $347,288, which will provide the tenant with additional profit after purchases; or the FMV goes down below 330,000 and the tenant decides not to purchase. At this point, I would have all expenses covered and the property could sustain a drop to 275,000 and I would not experience a loss. In contrast if I purchase the house for a regular buy-and-hold, any amount below 300,000 would be a loss. Also, if the value did drop significantly or the tenant decided to leave then I could setup another rent-to-own on the same property.

To roughly calculate the profits after three years:

There would be ~20,000 of equity built up in the house (initial mortgage of 240,000 would be ~220,000 on the remaining balance after three years)
~50,000 net gain on price
~12,348 in cash flow profits
~15,000 loss on initial option deposit
~10,000 loss on monthly option deposit

*That would be a net profit of $57,000*


----------



## iherald (Apr 18, 2009)

Charlie said:


> Not a bad deal if you're willing to own the place and be a landlord. Usual rental property caveats apply.


Agreed, but it's the interest charges that will change the numbers so much that it wouldn't make sense to me.


----------



## marina628 (Dec 14, 2010)

Also if OP has their own home this will become subject to capital gains and also you tie up yourself financially for next 3 years.If you already owned the house and was facing a difficult sell maybe rent to own will work but as an investor I do not think I would buy a place in this situation .


----------



## the-royal-mail (Dec 11, 2009)

Students are volatile. Is there any legal agreement for him to purchase the home? Students are poor by definition. I have never heard of any student taking on such expensive obligations at a young age. I would hope his parents would talk him out of this. He'll be broke and looking to move elsewhere after graduation and won't want the obligation of buying the house from you once he's done living there.


----------



## NoPennyBenny (Nov 22, 2011)

the-royal-mail said:


> Students are volatile. Is there any legal agreement for him to purchase the home? Students are poor by definition. I have never heard of any student taking on such expensive obligations at a young age. I would hope his parents would talk him out of this. He'll be broke and looking to move elsewhere after graduation and won't want the obligation of buying the house from you once he's done living there.



I would agree that most student would be volatile for this type of setup but this is a mature student that I am working with that has worked as a nurse for 5 years and has gone back to school to become a doctor. He has a substantial amount of savings but does not currently have an income outside his bursaries so he does not qualify for a mortgage. He won't be broke nor will he be paying any substantial difference compared to what he would pay as a regular renter. 

As a renter, he will be guaranteed to have no return on any of his money. He will be no more exposed to the market then if he had simply purchased the home. He will also capture any additional rise in the FMV.

To answer your first question, there will be two contracts - an option contract and rental agreement. The rental agreement will be governed under the local tenant / landlord's act and the option contract will be a legal agreement. As far as him not wanted the house or move somewhere, he is really happy with the home and area and is hoping to settle down in it.


----------



## Charlie (May 20, 2011)

NPB:

I agree with your math on the gain. Basically, the 25K I'd calculated earlier, and the spread on 6% return, and 3.5% financing for three yrs. Makes sense -- though you'd have to check if 3.5% was available for a rental property.

You do state your opinion that it doesn't make sense to buy and hold given values and rents. So you should check the impact of selling in 3yrs at $300K or $275K factoring in selling costs -- extra vacancy, realtor etc. And the effect of the doctor abandoning the deal before 3 yrs (and saving his extra $300/mo). Just check your downside. 

Your situation is somewhat unique. You have a tenant/buyer who is prepared to pay a premium to secure ownership down the road and get the intangibles of ownership now. But there's a very real possibility (some say inevitability) that real estate won't appreciate at 3-5% per year. So just make sure you're OK with what happens if your doctor has a change of heart. (and make sure he's committed to the deal and prepared to pay the $15K before you buy).

Interesting.


----------



## iherald (Apr 18, 2009)

NoPennyBenny said:


> I'm not sure where you got the $321,200, he will pay $347,000 at the end of three years.


I got 321,200 by subtracting the down payment he is giving you ($15,000) and the amount of rent that is going to his down payment. My point was that you're right, he will give you a check for $321,200 and have paid the rest to you in advance through the down payment and extra rent. However, you were calculating your profit by including those numbers twice.

You had your monthly income as $1400, minus your expenses. That's fine. But you also seemed to have an extra profit selling the property for $347. 

But at the end of the day, if my math is wrong, my math is wrong. I'm not spending too much time thinking about it. If you're happy with what you're doing then fantastic.


----------



## NoPennyBenny (Nov 22, 2011)

Charlie said:


> NPB:
> 
> I agree with your math on the gain. Basically, the 25K I'd calculated earlier, and the spread on 6% return, and 3.5% financing for three yrs. Makes sense -- though you'd have to check if 3.5% was available for a rental property.
> 
> ...



Hi Charlie, 

I completely agree with what you have posted. I have verified these numbers in a variety of scenarios - for example, if the tenant/buyer were to leave without purchasing in 1 year, 2 years, or at the end of 3 years. Also, I have looked at the minimum sale price at which I would break even, including Real Estate Agent Fees and additional vacancies.

In the worst case scenario, the numbers work out that at any point the Tenant/Buyer decides that he does not what to purchase the property, the property could be sold for $20,000 below the purchase price ($280,000) or I could go ahead and find another suitable candidate that would be interested in such an arrangement. Finally, I could set up a regular rental situation with a negative cash flow of $200 for 8 years and still break even or $400 for 4 years. Obviously those situations would be a last resort but these cash flows are realistic in the current economic / rental situation of the area.

This seems to be the only viable method of profiting in the real estate economy mentioned previously, where the cost of homes versus rents do not allow for cash flow.

If you have another method, please let me know.

Thanks


----------



## Charlie (May 20, 2011)

i think you messed up on the mortgage harold....you had $33K in principal and $74K in interest, for a total payments of $109K over 36 months....about $2900/mo. I suspect that's where the discrepancy comes from. Just in case this was keeping you up at night . And I'm guessing it isnt!


----------



## HaroldCrump (Jun 10, 2009)

Charlie said:


> i think you messed up on the mortgage harold


Not moi! That was Herald 
My math is solid as gold


----------



## Charlie (May 20, 2011)

sorry 'bout that harold. Guess my spelling's on par with his math.


----------



## NoPennyBenny (Nov 22, 2011)

iherald said:


> I got 321,200 by subtracting the down payment he is giving you ($15,000) and the amount of rent that is going to his down payment. My point was that you're right, he will give you a check for $321,200 and have paid the rest to you in advance through the down payment and extra rent. However, you were calculating your profit by including those numbers twice.
> 
> You had your monthly income as $1400, minus your expenses. That's fine. But you also seemed to have an extra profit selling the property for $347.
> 
> But at the end of the day, if my math is wrong, my math is wrong. I'm not spending too much time thinking about it. If you're happy with what you're doing then fantastic.


Hi ihearld,

The initial option deposit is taken and then given back so I'll be up 15,000 when the deal is setup and then down 15,000 at the end when I give it back, net change of zero. We can take that completely out of the calculation and just look at (I missed the closing cost on the previous post and no need of factoring in the initial option deposit):

*Income $79,636* (cashflow:~12,348, profit in sale:~47,288, equity built up in home:~20,000) 

*Expenses $20,000* (closing costs:~10,000, monthly option fees back to tenant/buyer: ~10000)

*Profit: $59,636*

I don't mean to be argumentative, I am mostly seeking advice / what experienced members like yourself think of the setup describe above. Input is highly welcomed.

Thank you


----------



## andrewf (Mar 1, 2010)

And if the renter breaks the contract, you keep the accumulated down payment?


----------



## jamesbe (May 8, 2010)

I haven't read all the numbers as I just don't have time. 

But when looking into these deals previously my biggest concern was tax implications. Of the $300 each month he is assigning towards a down payment that is "income" for you not capital gain I believe... unless you can figure out how to prove that this is like a dividend.

So for those years you hold the mortgage you will be collecting $300 a month extra in income on top of the extra income. So you may go to a higher tax bracket and you will most likely have to pay tax on that $300.


----------



## NoPennyBenny (Nov 22, 2011)

andrewf said:


> And if the renter breaks the contract, you keep the accumulated down payment?


Hi Andrew, 

That is right and he is under that understanding but overall it is only roughly $100 per month more than if he was just renting.


----------



## NoPennyBenny (Nov 22, 2011)

jamesbe said:


> I haven't read all the numbers as I just don't have time.
> 
> But when looking into these deals previously my biggest concern was tax implications. Of the $300 each month he is assigning towards a down payment that is "income" for you not capital gain I believe... unless you can figure out how to prove that this is like a dividend.
> 
> So for those years you hold the mortgage you will be collecting $300 a month extra in income on top of the extra income. So you may go to a higher tax bracket and you will most likely have to pay tax on that $300.


You are correct, the $300 each month will be income. The corporate structure in which the property will be held will allow for only 15% taxes on after expense income (net income).


----------



## the-royal-mail (Dec 11, 2009)

All of us have inadvertadley (sp) tried to poke holes in this idea but it sounds like the OP has given this a lot of thought. The decision rests with her but unless I've missed something really obvious in the responses, I withdraw my objections to this plan as long as everything is documented and official and you are prepared for the worst case scenario. If you can handle that then maybe it is worthy of your consideration.


----------



## marina628 (Dec 14, 2010)

So you have a holding company set up to purchase this property?And mortgage approved?I bring this up because when we looked to buy a house in our corporation name we had to set up a holding company as the bank didn't want title in the corporate name and also needed us to guarantee it.When I factored in extra expenses to set it up and pay accountant for another set of books I did not bother.


----------



## jamesbe (May 8, 2010)

NoPennyBenny said:


> You are correct, the $300 each month will be income. The corporate structure in which the property will be held will allow for only 15% taxes on after expense income (net income).


^ that makes a big difference, much better than in your personal name.


----------



## andrewf (Mar 1, 2010)

Is that actually true? I don't know if rent-to-own counts as active business income. And don't forget that you pay corporate tax, but for those after tax profits to be of any use to your personally, you have to take it as dividends or wages, and pay personal tax.


----------



## Charlie (May 20, 2011)

there is no tax advantage to owning a rental property in a holding company as the income is not considered 'active income.'


----------



## marina628 (Dec 14, 2010)

I assumed he had another business , it makes no sense to register a business to flow through rent on one property.


----------



## andrewf (Mar 1, 2010)

Even if you already have a business, only the active business income in that business is eligible for the lower rate. Any bonds, GICs, stocks, etc. are passive and taxed at the higher rate.


----------



## marina628 (Dec 14, 2010)

We wanted the mortgage to show on biz credit bureau but not ours , it seemed impossible to do with residential mortgages but I only tried one time at one bank .These days we are holding cash and if things continue to go down on the markets I think I will stick to dividend stocks only for my 2012 purchases.


----------



## NoPennyBenny (Nov 22, 2011)

*Passive and Active Taxes*



andrewf said:


> Is that actually true? I don't know if rent-to-own counts as active business income. And don't forget that you pay corporate tax, but for those after tax profits to be of any use to your personally, you have to take it as dividends or wages, and pay personal tax.





Charlie said:


> there is no tax advantage to owning a rental property in a holding company as the income is not considered 'active income.'





marina628 said:


> I assumed he had another business , it makes no sense to register a business to flow through rent on one property.





andrewf said:


> Even if you already have a business, only the active business income in that business is eligible for the lower rate. Any bonds, GICs, stocks, etc. are passive and taxed at the higher rate.


Its all about how you structure your businesses. You are all correct if you keep all the money in the same business name as the piece of real estate, you will indeed be taxed at a high rate. If you run a property management company and charge the company in which the property is held, then all profits will be taxed at a low rate, as it will be an active company. You can also pull the income out without being taxed further.


----------



## Berubeland (Sep 6, 2009)

CRA will have no problems figuring this out if you have one property, not to mention the expense of holding these companies for a transaction that lasts 2-3 years, ridiculous. 

Ask any accountant worth his or her salt and they'll tell you not to bother until you make 80-100K per year. Are you making 100K per year? No? Then this sounds like something that you heard on a late night infomercial. 

Maybe a Nevada Corporation or a Bahamian tax shelter next. 

The deal itself doesn't sound too bad considering our current real estate environment.


----------



## kcowan (Jul 1, 2010)

I just read this whole thread and I think this is a deal is workable but only if you really want to do this med student a favour. There are tax issues and cost issues in addition to investment issues. If someone offered it to me, I would decline. But No PennyBenny seems to have thought through all the issues and is prepared to take those risks.

As an investment, a limited upside in return for serious downside seems to be too one-sided for me.


----------



## NoPennyBenny (Nov 22, 2011)

Berubeland said:


> CRA will have no problems figuring this out if you have one property, not to mention the expense of holding these companies for a transaction that lasts 2-3 years, ridiculous.
> 
> Ask any accountant worth his or her salt and they'll tell you not to bother until you make 80-100K per year. Are you making 100K per year? No? Then this sounds like something that you heard on a late night infomercial.
> 
> ...


Hi Berubeland,

Why /how do you assume that I do not make 80-100K per year? If this was the only deal / source of income then it would not be a worth while structure. You are correct, you need to be making at least that to be able to justify all the legal setup and accounting costs. Taxes and fees can only be assess with the complete picture in mind. The deal is a viable opportunity and combined with other profit generating ventures can be a great setup.


----------



## NoPennyBenny (Nov 22, 2011)

kcowan said:


> I just read this whole thread and I think this is a deal is workable but only if you really want to do this med student a favour. There are tax issues and cost issues in addition to investment issues. If someone offered it to me, I would decline. But No PennyBenny seems to have thought through all the issues and is prepared to take those risks.
> 
> As an investment, a limited upside in return for serious downside seems to be too one-sided for me.


Hi Kcowan,

Please elaborate on your states that "deal is workable but only if you really want to do this med student a favour" and "As an investment, a limited upside in return for serious downside seems to be too one-sided for me."

Thanks


----------



## kcowan (Jul 1, 2010)

NoPennyBenny said:


> Hi Kcowan,
> 
> Please elaborate on your states that "deal is workable but only if you really want to do this med student a favour" and "As an investment, a limited upside in return for serious downside seems to be too one-sided for me."
> 
> Thanks


You have limited your upside to 5% less your costs. If the student chooses to walk away, you can only sue him to recover your 5% appreciation money. Because he has a lot of debt, there is nothing to recover. I suspect the courts would be more sympathetic to the student than the landlord. So you are doing him a favour.

To put it another, as a student, I would jump at this offer!


----------



## Charlie (May 20, 2011)

kcowan said:


> To put it another, as a student, I would jump at this offer!


I had the opposite reaction . Wouldn't go near this as a student.

and NPB -- I'll leave your corp structure to you...but make sure you understand the specified investment rules (I think you're offside) -- and that seems rather complex and costly for such a small additional annual income. Your call, of course. And I don't think tax impacts this particular venture too much.


----------



## Berubeland (Sep 6, 2009)

NoPennyBenny said:


> Hi Berubeland,
> 
> Why /how do you assume that I do not make 80-100K per year? If this was the only deal / source of income then it would not be a worth while structure. You are correct, you need to be making at least that to be able to justify all the legal setup and accounting costs. Taxes and fees can only be assess with the complete picture in mind. The deal is a viable opportunity and combined with other profit generating ventures can be a great setup.


I'm not assuming you make less than 100K per year. Each business that is incorporated should make that much... the accounting and reporting fees alone cost $1500 per year. 

Usually each building has it's own corporation. Houses usually do not generate enough cash to warrant a corporation. 

The trick with rent to own is that usually the rent is also above market rent plus a certain extra payment is put towards the down payment. If market rent is say 1200 then the rent on a rent to own would be $1400 plus the lease occupancy payment amount. Say $200 per month so $1600 per month. Then the capital appreciation is priced into the deal for a few years. For example is the house is worth 100,000 year 0 then year 1 the new price when closing would be 105,000 with 5% capital appreciation priced in on year 1 and so on going forward. 

This is how these deals are structured.


----------



## NoPennyBenny (Nov 22, 2011)

Berubeland said:


> I'm not assuming you make less than 100K per year. Each business that is incorporated should make that much... the accounting and reporting fees alone cost $1500 per year.
> 
> Usually each building has it's own corporation. Houses usually do not generate enough cash to warrant a corporation.
> 
> ...


You are explaining the principles behind the rent-to-own, it sounds like you haven't read the rest of the thread as all this information is already posted.


----------



## NoPennyBenny (Nov 22, 2011)

kcowan said:


> You have limited your upside to 5% less your costs. If the student chooses to walk away, you can only sue him to recover your 5% appreciation money. Because he has a lot of debt, there is nothing to recover. I suspect the courts would be more sympathetic to the student than the landlord. So you are doing him a favour.
> 
> To put it another, as a student, I would jump at this offer!


The upside is 5 percent per year on the overall purchase price not on my initial investment. If 20% of the purchase price is the required investment then the gains on the investment would be 25% annually. Overall this would equate to 79% upside over the three year period.

There would be no need to sue anyone in either situation. The reason contracts are created and agreed by both parties involved is to set a path forward in the event of foreseeable events; for example, as you mentioned the student walking away from the deal. This is a foreseeable event and would have explicit rules associated with in the signed contract. 

If you are interested in such a deal, it can be quite advantageous to both parties. Please let me know.


----------



## NoPennyBenny (Nov 22, 2011)

Charlie said:


> I had the opposite reaction . Wouldn't go near this as a student.
> 
> and NPB -- I'll leave your corp structure to you...but make sure you understand the specified investment rules (I think you're offside) -- and that seems rather complex and costly for such a small additional annual income. Your call, of course. And I don't think tax impacts this particular venture too much.


This corporate structure as others have stated would be a costly one BUT you all seem to be assuming that there is only one property / revenue stream in this setup.


----------



## marina628 (Dec 14, 2010)

Benny do you currently own rental properties?I recommend you go see an accountant to get them to look over your business plan before you make any decision .One thing I have learned as a Business owner and Real estate investor with a few properties is never assume anything 
Do you need his $15,000 for the down payment?Also ask yourself what if that house is worth $480,000 in three years would you want to sell it for $347,000?
Also you are paying yourself $40.00 a month to manage the 2nd apartment ,that is extremely low ,who decided that number?
Also rental properties require 20% down and if you own more than one they can require 35% down payments.You will have to prove where the down payment came from in most cases on investment properties.I live in Ontario and have six rentals now so I am just sharing the few things I encountered in 2010/2011 when I purchased my last two properties.I would also have a lawyer read over any agreements before you take this too far .


----------



## kcowan (Jul 1, 2010)

NoPennyBenny said:


> If you are interested in such a deal, it can be quite advantageous to both parties. Please let me know.


No I am staying away from real estate these days. I need liquidity. But thanks for the offer. And I hate the frictional costs.


----------



## NoPennyBenny (Nov 22, 2011)

marina628 said:


> Benny do you currently own rental properties?I recommend you go see an accountant to get them to look over your business plan before you make any decision .One thing I have learned as a Business owner and Real estate investor with a few properties is never assume anything
> Do you need his $15,000 for the down payment?Also ask yourself what if that house is worth $480,000 in three years would you want to sell it for $347,000?
> Also you are paying yourself $40.00 a month to manage the 2nd apartment ,that is extremely low ,who decided that number?
> Also rental properties require 20% down and if you own more than one they can require 35% down payments.You will have to prove where the down payment came from in most cases on investment properties.I live in Ontario and have six rentals now so I am just sharing the few things I encountered in 2010/2011 when I purchased my last two properties.I would also have a lawyer read over any agreements before you take this too far .


Thank you marina628, you have offered advice from having previous experiences on the topic. It is encouraging to see that some users on this system have valuable things to add instead of being extremely negative on topics that they do not have any knowledge or experience with.

Regards


----------

