Videos
RTO Capital is in the process of developing a series of videos to assist in explaining who we are and what we do. We will be regularly rolling out new videos in the near future and invite you to check them out and provide feedback on how well they explain the Rent To Own process, the benefits of Rent To Own, and our company.
What is Rent to Own (RTO)?
The RTO Capital rent-to-own agreement is a contract between RTO Capital, and a tenant, that gives the tenant rights and obligations beyond a standard lease agreement. It is designed to start people on a pathway to get into their own home before their credit situation allows them to get bank financing. RTO Capital holds title and finances the property on behalf of the tenant. It is like “home ownership with training wheels”. While the tenant is working to become bankable they make the same type of payments that anyone would with conventional bank financing. They also accumulate equity from market appreciation and debt reduction, and in the case of our Landlord Partnership Program (LPP) we share the apartment rent. If they never achieve bankability, they can sell the house and pay off RTO Capital in the same way as if they actually held title, or in the case of the LPP after 25 years they will own the property.
Who can qualify?
In order to qualify, a prospective client needs to:
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Provide a cash down payment (usually 5% but in some cases we have down payment programs)
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Demonstrate the ability to make payments*
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Pass normal tenant screening (landlord references, etc.)
*The banks assess ability to pay based largely on current credit rating and job income reflected on T4s, but if clients have bruised credit and other income that is not reflected in a T4 we can also consider this, for example family or friend assistance.
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Photo by Erik Mclean on Unsplash
How Does Rent to Own Work?
The Rent to own process consists of the following main steps:
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Check out our website to learn about our Landlord Partnership Program (LPP) if you are interested in buying an existing two apartment home or check our Available Properties to see if there is a home you are interested in.
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Get in touch with us to discuss options and view properties. If we don't currently have what you are looking for or you don't yet qualify, Contact Us to be added to our e-mail list to be notified of future opportunities.
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To pre-qualify for Rent To Own financing, complete our online Application Form.
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If client, property and program are a good match and client meets qualification requirements, a Rent To Own proposal is prepared. For LPP you engage with our real estate and legal team to begin searching the market for your property based on your application approval .
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If parties agree to a suitable arrangement, a legally-binding Rent To Own contract is put into place, the down payment is made and the acquisition process for your Rent-to-Own home has started.
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Clients are engaged with our team throughout the acquisition and upon completion, clients move into their own Rent To Own home (renting while building equity).
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At or before the end of the Rent To Own term, once clients secure bank financing, they execute their purchase option, and are credited their savings and accumulated equity towards their down payment and take ownership of their home!
How Long Does the Rent To Own Process Take?
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The amount of time required for this process will vary on a case-by-case basis, depending on a number of factors (e.g. location, complexity of property acquisition process, time needed to repair credit, etc.). The acquisition process (Steps 2-6) may take anywhere from several weeks for homes in our inventory to several months or more for purchasing a home through the LPP.
Photo by Erik Mclean on Unsplash
Photo by Erik Mclean on Unsplash
Photo by Eric Mclean from Unsplash
What are Some Advantages of Rent-to-Own?
From a cashflow perspective, Rent-to-Own is usually more expensive than straight rent, so why choose Rent-to-Own? Some of the advantages are:
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Approval – The approval process is simpler than the process for bank mortgages.
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Stability – As long as the client pays their bills and looks after the house they are guaranteed the right to live there. Tenants in standard rentals often find themselves getting asked to leave because the life situation of the landlord changes (e.g. landlord decides to sell, move in, rent to family members, etc.). Rent-to-Own creates stability.
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Equity – The rent-to-own client builds equity in the property (dependant on market fluctuations) which makes buying the house at the end easier as this equity contributes toward the down payment.
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Locked-in price – House prices change over time. RTO contracts specify the purchase price at the onset of the agreement, affording more certainty and potential for profit if prices increase.
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Pride of ownership – The client has a guaranteed right of ownership, therefore there is incentive for small things like lawn care and cosmetic improvements, and security for big things like adding a basement apartment or building a detached garage.
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Added value - In a traditional rental arrangement, any improvements made by the tenant ultimately benefit the landlord. With a Rent to Own model, the tenant is rewarded for their investment in the property. Under the Landlord Partnership Program (LPP), rental income is shared, and you receive expert guidance from RTO Capital as you transition into property ownership and learn the ropes of being a landlord.
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Financial security – Straight rental is cheaper month-to-month but Rent-to-Own offers clients an opportunity to increase their wealth by accelerating home ownership and offering the potential for long term appreciation of your home value.
Photo by Erik Mclean on Unsplash
Photo by Erik Mclean on Unsplash
What are Some of the Risks of Rent-to-Own?
As with a conventional home purchase, Rent-to-Own programs are best suited to clients looking for long term, stable living arrangements. As with any contract, all parties are advised to seek independent legal advice and are responsible for any due diligence needed to ensure they are satisfied before entering into an agreement. In general, the risks are similar as those faced by all home buyers and are not unique to Rent-to-Own, and include:
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Interest rate risk – If rates are up at the end of a 2-year term, payments will go up.
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Income security – If you lose your job or are otherwise unable to pay your bills you may lose your home.
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Market price risk – As with any home purchase, there is always the potential risk that market value of a home can decrease over a given time period.
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Maintenance cost – Maintenance cost are the responsibility of the client. With newly built homes there is a 12-month builder warranty and a 7-year Atlantic New Home warranty, and in all cases, there is some protection provided by insurance.
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Breakout costs – As with fixed rate, closed term mortgages offered through banks, there are costs to the client if they decide to break out of an RTO agreement.