Did some surfing - Nova Scotia looks fantastic. I might move there...and they have a growing economy / resource industry according to wiki...
Exciting times ahead
- Thread starter kathryn d
- Start date
ahhh...but can you handle the -20 cel in the winter, that lasts, for what seems like 9 months of the year?
mmm - that cold hey. Wikipedia reckons its the warmest part of Canada...We have terrible bushfires here. Maybe my subconscious is looking for an antidote..
In the livable parts, it can be -40C and then there is the windchill factor.
Other parts you drive over the ocean, as it is frozen.
Update on House + 4 mobile property.
The owner had to evict the tenant of the house for nonpayment of rent.We are working together to find a new tenant.Actually having an Open House today.
I had advertised looking for a handyman tenant who would be willing to do flooring, painting etc if we supplied the materials. We would pay (return) some rent after completed.
We are going to revovate the mobiles as well.
Owner is very nice, and he is also interested in looking at our PPOR which we now have a tenant doing a Rent to Own (but is in default on Monday)So we should be able to negoatiate, as my property also needs renovation.
We have an an accepted offer on another property with 4+ acres of land. Already have a Rent to Own tenant for this.
Just need to secure financing, which should be ok.
(technically got lay off notice at work yesterday, but I am able to bump back to my previously held job, 40 others aren't so lucky, and will need to find work elsewhere)
The owner had to evict the tenant of the house for nonpayment of rent.We are working together to find a new tenant.Actually having an Open House today.
I had advertised looking for a handyman tenant who would be willing to do flooring, painting etc if we supplied the materials. We would pay (return) some rent after completed.
We are going to revovate the mobiles as well.
Owner is very nice, and he is also interested in looking at our PPOR which we now have a tenant doing a Rent to Own (but is in default on Monday)So we should be able to negoatiate, as my property also needs renovation.
We have an an accepted offer on another property with 4+ acres of land. Already have a Rent to Own tenant for this.
Just need to secure financing, which should be ok.
(technically got lay off notice at work yesterday, but I am able to bump back to my previously held job, 40 others aren't so lucky, and will need to find work elsewhere)
My understanding is that a wrap and rent to own (the same as we call a "lease option") are different.
With a wrap, both parties are committing to the purchase/sale at the outset. With the wrap, there's no "option"; from day 1, the tenant has already committed to buy the property. You, the wrapper, take out a mortgage in your name (since they can't get one), and they pay you a premium (both in capital price of the property, and interest rate) to you for holding the mortgage for them.
So in a wrap, you buy a property at, say, $100K at 6%, 100% financed, and your P&I repayments are $7,800 per year. You on-sell it as a wrap to somebody else (effectively with vendor finance), for say $125K at 7.5% interest, and their P&I payments to you are then $11,200, and you profit $3,400 per year. Tenant/owner pays all outgoings; your only expense is the mortgage. Usually you also get a deposit out of the tenant/owner, which reduces your ongoing cashflow but gives you a lump sum now. Effectively, they're paying you $3,400 per year for having assisted them to buy a house with your ability to borrow. There is usually a provision whereby the "owner" can refinance with a conventional lender after a certain time period, so in practise they don't usually go for 20-25 years, because the purchasers can get more attractive terms elsewhere (unless they've really screwed up their credit). But wraps can go for 25 years.
Wraps are legally very tricky in Australia, particularly in QLD where the tenant can demand the title once they've paid 30% of principal. For that reason, I understand that most "wrappers" in Australia actually use lease options, which are much simpler and more flexible.
The lease option, by contrast, has a fixed duration, maybe 3 years. In the first 3 years, the tenant is a TENANT, but they pay a premium on top of market rental in order to have the option to buy for up to 3 years at the pre-determined price. So, from a cashflow (ignoring deposit) perspective, if market rent is $100 per week, the tenant would usually pay something similar to if you were doing a wrap, so maybe $220 per week. This would usually consist of market rent $100, non-refundable option fee $60 (giving the option to buy for $125K any time in the 3 years), and deposit $60. So if all cruises along for 3 years, the landlord has had $160 pw rent instead of $100pw, has had the lump sum deposit that may have been given at the outset, and the purchaser has "saved" $60 per week for 3 years, or a bit under $10K. If they'd also put down $15K deposit at the outset, then they now have $25K "deposit", and only owe you another $100K. So they go to their lender, only need an 80% lend (to borrow $100K against a purchase price of $125K), and can prove - via having paid $220 pw rent for 3 years - that they can meet repayments.
The big advantage with lease options is that it's very simple if the purchaser wants to walk away; they've just paid $160 per week rent instead of $100 for as long as they were there. I believe with wraps a purchase agreement has actually been entered into and it's much messier for either party to walk away from. With the lease option, there is no purchase until the option is exercised.
I know a few people who've wandered down this road, and their experience is that it's very hard to find people who'd be suitable to take on as wrap clients, and that often the arrangements don't last very long, people walk within 6 - 12 months. From a profit perspective, that can be attractive, but it means it requires a lot of effort in sourcing new wrap clients. It's far from passive, in other words.
I think this strategy works a lot better in the USA (don't know about Canada) because there are so many people who are undocumented and can't get conventional mortgages, even though they may be creditworthy. Their credit rating system (the FICO score) is also much more fine detailed than our exception reporting system, and every missed credit card payment or returned cheque lowers your credit score, so you're viewed as having "bad credit" for much smaller offences in the USA than here. People who'd have no trouble getting a mortgage in Australia, may have huge difficulty if they had the same history and were in the USA.
But in Australia, creditworthy people who can't get a mortgage are much thinner on the ground, which is why I don't think wraps/lease options are going to be as widespread here.
Ozperk,
Thank you.
What would happen in a wrap, if the the person you are wrapping the property for, cannot make the mortgage payments?
With us, as soon as they default, they can be required to leave, or just continue making rent payments.Depending on the time of year, market conditions etc, we may just leave a tenant there.
Tomorrow at noon, will need to make such a decision, if our client doesn't make her payment.
Thank you.
What would happen in a wrap, if the the person you are wrapping the property for, cannot make the mortgage payments?
With us, as soon as they default, they can be required to leave, or just continue making rent payments.Depending on the time of year, market conditions etc, we may just leave a tenant there.
Tomorrow at noon, will need to make such a decision, if our client doesn't make her payment.
That's the problem... it varies enormously depending on the state and the wording of the contract, but I'm pretty sure that if it's even doable in Australia, it's not as simple as just walking away and they forfeit everything! I'm pretty sure that true wraps would be viewed as purchases by instalment everywhere in Australia and that's why I think that "wrappers" really only do lease options here in Australia.
ROTFLOL... Thanks, Dazz!Gee - zus, you are a certified guru Tracey. Thanks for sharing.
update
We closed on the 4 bedroom house with the 4 mobiles yesterday.As usual, it wasn't without the "scary moments" We thought we had a good working relationship with the vendor, as it was a private deal.
Within 23 days of the closing, the vendor reneged on the Vendor Financing of the 10% downpayment.Left us in an uncomfortable position, but decided to trod ahead.
A month previously I had paid off a credit card and had $10K available to access. Next thing I realised, the credit card company had decided I had enough credit and lowered my limit, and now I didn't have access to that 10 K.
The money we had planned on for renovations, would now need to be used for the downpayment.Things happen...so, oh well.
We worked our way thru the mortgage process, which seems to take forever, as they ask for everything.We hit a snag with the Mortgage Insurers, as the mobiles were not permitted to listed on the Purchase and Sale Agreement.We asked the Vendor to sign a new one, which would consist of two. One for the house and one for the mobiles.He would need to consult with his older sister (this man is mid fifties) and then said she didn't like it. He would consult with his lawyer and accountant...who he then stated were having reservations about.(altogether we waited 9 days)
We go to our lawyer March 20 , and explain the situation, as we are closing in on the date of April 1.Our lawyer speaks to our MB and finds out what the problem is.Our lawyer decides to rewrite the Purchase Agreement to satisfy the Mortgage Insurer. It is submitted to the vendor's lawyer Monday morning, witha revised closing date of April 9. (trying to recapture the 9 days the vendor wasted).We receive a call later that day the vendor won't sign.If we want to close, we must by noon Wednesday.
Catch is, we can't, because he won't sign the Purchase Agreement, which our Mortgage Insurer require.
I call the vendor, and now he decides he doesn't want to talk to me anymore.I ask him if he has another offer...he won't answer except to say if we have financing by noon on Wed, we can close.
The next day, we go to our lawyer, and ask what our legal recourse is.Talk to our Mortgage broker and he states, if the Agreement had been signed and submitted, we could still have it completed by the deadline.
By 5 pm Tuesday, after a letter from our lawyer to vendor's lawyer stating we are threatening legal action. Along with an accompanying stack of emails between the vendor and us, where he states the closing date is not an issue previously, he knows we may have a case.
We now have a signed Agreement amended to noon Thursday.We have one full business day + a morning to complete.
At 10 :45 Thursday, the papers were signed..
Met our new tenants who we inherited. They didnt like their old landlord.We told them we were going to renovate their mobiles and double their rent.Not sure what they must be thinking, because they smiled and had a slight nervous laugh and said OK.
April 15 we close on the Rent to Own deal.
At least this should be simpler, as the funds are waiting for our lawyer to request.
It's a wonder I have any hair left !!!!
We closed on the 4 bedroom house with the 4 mobiles yesterday.As usual, it wasn't without the "scary moments" We thought we had a good working relationship with the vendor, as it was a private deal.
Within 23 days of the closing, the vendor reneged on the Vendor Financing of the 10% downpayment.Left us in an uncomfortable position, but decided to trod ahead.
A month previously I had paid off a credit card and had $10K available to access. Next thing I realised, the credit card company had decided I had enough credit and lowered my limit, and now I didn't have access to that 10 K.
The money we had planned on for renovations, would now need to be used for the downpayment.Things happen...so, oh well.
We worked our way thru the mortgage process, which seems to take forever, as they ask for everything.We hit a snag with the Mortgage Insurers, as the mobiles were not permitted to listed on the Purchase and Sale Agreement.We asked the Vendor to sign a new one, which would consist of two. One for the house and one for the mobiles.He would need to consult with his older sister (this man is mid fifties) and then said she didn't like it. He would consult with his lawyer and accountant...who he then stated were having reservations about.(altogether we waited 9 days)
We go to our lawyer March 20 , and explain the situation, as we are closing in on the date of April 1.Our lawyer speaks to our MB and finds out what the problem is.Our lawyer decides to rewrite the Purchase Agreement to satisfy the Mortgage Insurer. It is submitted to the vendor's lawyer Monday morning, witha revised closing date of April 9. (trying to recapture the 9 days the vendor wasted).We receive a call later that day the vendor won't sign.If we want to close, we must by noon Wednesday.
Catch is, we can't, because he won't sign the Purchase Agreement, which our Mortgage Insurer require.
I call the vendor, and now he decides he doesn't want to talk to me anymore.I ask him if he has another offer...he won't answer except to say if we have financing by noon on Wed, we can close.
The next day, we go to our lawyer, and ask what our legal recourse is.Talk to our Mortgage broker and he states, if the Agreement had been signed and submitted, we could still have it completed by the deadline.
By 5 pm Tuesday, after a letter from our lawyer to vendor's lawyer stating we are threatening legal action. Along with an accompanying stack of emails between the vendor and us, where he states the closing date is not an issue previously, he knows we may have a case.
We now have a signed Agreement amended to noon Thursday.We have one full business day + a morning to complete.
At 10 :45 Thursday, the papers were signed..
Met our new tenants who we inherited. They didnt like their old landlord.We told them we were going to renovate their mobiles and double their rent.Not sure what they must be thinking, because they smiled and had a slight nervous laugh and said OK.
April 15 we close on the Rent to Own deal.
At least this should be simpler, as the funds are waiting for our lawyer to request.
It's a wonder I have any hair left !!!!
I hate dealing with people like this.
What a pain in the ***....Congratulations on persevering; I hope it ends up being a great purchase for you, to justify the pain.
That has been one hell of a roller coaster ride for you guys. Congratulations on your tenacity, lateral thinking, perserverence, determination and fortitude...(and everything else!).
It's all yours.
And thanks for sharing this deal and journey with us, I kinda held my breath halfway through your last post..not sure if you had it in grasp or not.
Canadian's Rule. Have fun folks.
It's all yours.
And thanks for sharing this deal and journey with us, I kinda held my breath halfway through your last post..not sure if you had it in grasp or not.
Canadian's Rule. Have fun folks.
Thank you everyone.
On Monday, we were devastated because we had worked so hard to pull this deal off, and it then became obvious to us, the Vendor didn't want to sell. He was doing everything to delay, so we would default.
We had signed up 2 of the new tenants personally, acting as agent for him. He encouraged us, as they would become our tenants. We required tenants who were carpenters by trade for the majority of the renos. The mobiles needed a lot, and we had offered him a full year of free rent in exchange. The other tenant we signed for the house we offered a free month of rent for laying of laminate floor and repainting the entire property.
We also agreed to not raise the rent after the first year, even though it is improved.
I had to call them Monday evening, and tell them it looks like the deal may fall thru. The family moving into the house didn't want the old landlord, as workmates knew of him. Nobody had anything nice to say about him.She wanted out of the lease if we weren't going to be the owners. We contacted the Director of the Tenancy Board, on her behalf, and they helped. They told her to ask to be released from the lease and for her Bond to be returned to her.
She did, and the Vendor said he would, but he needed to wait until the contract with had expired.The other tenant for the mobiles, was disappointed, but was getting cheap rent ( $425 month) but had looked forward to the year of free rent, but would continue with the lease.
It was after contacting the tenants, we decided we were not going to let this deal go. We had worked for a couple of months dealing with 100+ emails from potential tenants and all the information we needed to collect.It was like pulling teeth to get him to do anything....and he is a teacher by proffession.
All is good now, and the new tenants are pulling up old carpets today, and removing wallpaper.We purchased paint and supplies and go for flooring tomorrow.
On Monday, we were devastated because we had worked so hard to pull this deal off, and it then became obvious to us, the Vendor didn't want to sell. He was doing everything to delay, so we would default.
We had signed up 2 of the new tenants personally, acting as agent for him. He encouraged us, as they would become our tenants. We required tenants who were carpenters by trade for the majority of the renos. The mobiles needed a lot, and we had offered him a full year of free rent in exchange. The other tenant we signed for the house we offered a free month of rent for laying of laminate floor and repainting the entire property.
We also agreed to not raise the rent after the first year, even though it is improved.
I had to call them Monday evening, and tell them it looks like the deal may fall thru. The family moving into the house didn't want the old landlord, as workmates knew of him. Nobody had anything nice to say about him.She wanted out of the lease if we weren't going to be the owners. We contacted the Director of the Tenancy Board, on her behalf, and they helped. They told her to ask to be released from the lease and for her Bond to be returned to her.
She did, and the Vendor said he would, but he needed to wait until the contract with had expired.The other tenant for the mobiles, was disappointed, but was getting cheap rent ( $425 month) but had looked forward to the year of free rent, but would continue with the lease.
It was after contacting the tenants, we decided we were not going to let this deal go. We had worked for a couple of months dealing with 100+ emails from potential tenants and all the information we needed to collect.It was like pulling teeth to get him to do anything....and he is a teacher by proffession.
All is good now, and the new tenants are pulling up old carpets today, and removing wallpaper.We purchased paint and supplies and go for flooring tomorrow.
