Structuring My First Deal

[Sarrowar Hossain]

Hello fellow Canadian BP members, I am the verge of doing my first real estate deal and I am a bit overwhelmed, so I would like to clarify some of the things. I am looking to structure a lease option/rent-to-own deal with the seller and assign it to a tenant buyer. 

So my questions here are:

1. What contracts do I need to use to acquire the property, allowing me to market it and give me equitable interest?

          I have sat down with the sellers and they are willing to do a 12 month lease period      after which they would want to sell. They are not sure of the end price as of yet, but they want $1700 for rent. 

2. What contracts do I sign with the tenant/buyer? 

           I have a few prospects that I am in the process of pre-screening with a mortgage broker. 

3. Is it necessary to have rent credits? How does that fit in with the end purchase price?

           I need some clarification as to how the rent credit work, and is beneficial for the tenant buyer.

4. How does the assignment work?

            Clarification on which contracts get assigned, and to whom. 

So those are my questions to all the experience investors in the field. I have taken in a lot of information on wholesaling lease options however they are all from the US. I am in GTA in Ontario and I would appreciate any help I can get on this matter.  

[Gary McGowan]

I have done many rent to owns in the GTA. What you are trying to do here is a sandwich lease option. Very rare in Toronto.

First factor is the financing for the tenant buyer. Currently CMHC or Genworth will require them to have a min of 10% down when. This will be very hard to do based on your one yr deal with the current owners. You can get creative and get them a 80% ltv first mortgage with a 10% ltv second mortgage to stay away from an insured mortgage.

Secondly. Most tenant buyers will need 3-4 years to create enough down payment and to get their credit score up.

Thirdly. You must have two documents between you and the tenant buyer. Occupancy agreement and an Option to Purchase. Do not have one document for both.

Fourthly. The agreement between you and the seller can be many different things. Use the same structure as above with some slight changes.

Read this book. It's Canadian and written by a good friend of mine.

http://www.amazon.ca/Investing-Rent-Own-Property-Investors/dp/047073759X