Vendor Take Back - VTB

15 Replies

Hi BP,

I want to learn more about the VTB strategies. Any recommendation on a book, e-book or other resource that you have come across which explain this strategy in details?

Looking to invest in Canada, Toronto GTA.


Ask away??? 

You just gave me a great idea for Video,,, Great to meet you last night @Ajay Kahlon  

Search for "seller finance" since that is the USA term. 

@Gary McGowan  that be awesome. Congrats on the job you are doing adding value to investors with your meet-ups. Really impressed and thank you for that.

I rather have all the info in one place, like a e-book, video, book, etc. Thanks for the tip @Steve Babiak  , will do that.

@Ajay Kahlon  

Gary, myself and other Canucks here have been down the VTB path, so ask away.

@Roy N.  @Gary McGowan  alright, this is what I will do: Learn the basics through the forums and then ask you gentlemen the advanced questions. What I was originally thinking is to be referred to a book like Mark Loeffer's book on Lease Option, but I am assuming that such a book for VTB doesn't exist yet. Stay tuned and thank you.

@Ajay Kahlon  

There are a few Canadian focused books which discuss VTB/vendor carry:

  • Cohen & Dubé: "Legal, Tax & Accounting Strategies for the Canadian Real Estate Investor"
  • Boiron & Boiron: "Commercial Real Estate Investing in Canada: the complete reference for real estate investors and professionals"
  • Barsoum & Venuto: Canadian Real Estate Investor Financing: 7 secrets to getting all the money you want"  {I didn't particularly care for the book, but it does cover vendor financing}

I also think @Julie Broad discusses it in her cash flow book.   I'm sure Gary will have a Don Campbell book or two for you to read as well ;-)

The basic principals are the same as in the U.S.A., so what you read here will give you the basics.  However, the regulation and taxation matters are much different here in Canada.

@Roy N. Thanks! I'm always interested to add more Canadian-focused books to my reading list.

I'm getting ready to purchase a 2-4plex and was wondering if the seller might finance part of it. Do you think it's unreasonable to ask on a property this size? Also do you know if there's a way to check how much equity the current owner has, or is that private on this type of property?

@Account Closed  

It may be just fine.  Remember, you are not {just} buying a business/property, you are solving a problem.    If the Vendor owns the property free and clear and has owned it for a long time, it may be possible for them to defer the capital gains over a period of up to five years, while turning their property into an annuity (you paying them interest).  If structured correctly, they can pocket significantly more through a VTB than a straight sale.

The biggest barriers will be: 

1) the Vendors realtor {I seldom meet one who understands  the benefits of a vendor carry and most are afraid it will impact their commission, so they will discourage it};

2) educating the vendor.  I usually provide a small 2-3 page example of a straight sale versus a vendor carry and offer to have them visit my (or another) accountant for an hour on my dime.

You first need to educate yourself, so you can spot when a Vendor carry could enhance a vendor's situation.

On the topic of VTB, any suggestions for accounting/bookkeeping software? Currently using QB for our rentals, but very manual to input the amortization (trying to figure out if I can import maybe?)

I agree this is a great book! They also run classes in Toronto that I have not attended yet...

  • Boiron & Boiron: "Commercial Real Estate Investing in Canada: the complete reference for real estate investors and professionals"

@Carl Ebsen

Additionally, @Claude Boiron joined BP about a month ago.  Not sure how often he visits, but hopefully he'll pop in on occasion to provide insight.

Roy - You're onto me - you mention my name in a post, and just like flashing the Bat sign and Batman shows up, here I am!

Carl: Thanks for your kind words about my book. Yes, I started teaching a new course at the University of Toronto this week actually. Hope to see you later this year or next year.

Regarding VTBs: There is a lot of information out there, but as with many things regarding investing in Real Estate, and as Roy hinted at, it has to do with "feel".

By that I mean looking for clues and hints (sometimes they will be in answer to you asking the right questions, or making certain suggestions) that the Listing Agent (if there is one) can be molded to embrace a VTB (he still gets paid on Closing, so why not??), and that the Seller is in a financial situation to accept a VTB as part of the deal.

I find VTB is more extension of your networking skills combined with market situations and who you know than I strategy, because I find it more opportunity driven then analysis driven. Great way to get in for people with less cash and financing capabilities though, plus with 0% down your ROI is always going to be great.

I find it tough coming across VTB's with good numbers in my market, But I do notice lots of opportunities in slower markets with lower values. For example London Ontario and Chatham I have come across them on multiple occasions.

A good source is Kijiji, look for people who don't like Realtors and own free and clear or close to it. Anyone selling saying specifically in the ad no Realtors, call them stay in touch and follow-up. 90% of for sale by owners sell with realtors and sometimes owners stubborn on a high price and not cooperative with Realtors or their clients will end up in a tight situation after 2-3 months. This is where you come in and save the day.

That's my experience and 2 cents.

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