Renters Nightmare - How to turn renters to buyers - Ask Evan

Hi, I'm Evan Carmichael. Welcome to another edition of Ask Evan. In today's episode, I'm going to answer a question from one of my newsletter readers, Indra, who is a real estate investor, buys buildings, and then rents out the units and is having a hard time convincing the people who rent to then want to buy and own the units. So it's offered as an option to rent-to-own and basically provide as much information as possible to make it really easy for somebody to become an owner instead of just a renter. But it's having a hard time convincing people to make that step from being a renter to a buyer and wanted my advice on how to do it. So Indra, thanks for the question. I think when you're dealing with renters and buyers, it's different breeds. And at some point in somebody's life, they make that transition where they want to own but it could take years and you may not have time to wait that out. I think the biggest challenge for you is in your qualifying at the beginning. And instead of making that an option to be rent-to-own, I'd make that a mandatory thing. So you're looking for people who want to buy, right? And you can give them a program where it's either 6 months or a year, I don't know, however long you want them to be renters for before they buy. But you make that part of your qualification process. So you're not just getting any renter in there, you're getting somebody who from the beginning understands that this is the program that you set up for them. And there are people who do want to, you know, rent to eventually own, but there's a lot fewer of them than just people who want to be renters, right? So you got to go and find them and do your marketing to find them. It's a lot better, I think, than trying to go after just any renter, somebody who's not a qualified prospect, and hoping to turn them into an ideal customer. So with any business, you want to— you know, I like the idea of using a thin wedge into the market, so you have something that's easy for people to, to buy and get used to and want to use. And then as you get into the business, you're able to sell more to them and upsell them. But it has to be an ideal client. You don't want to spend a lot of time working with that, you know, thin wedge in, and that's your only entry into that business. So for you, how do you apply that to your market, you don't want to bring on the renters who will never become owners. If you know that they have no intention of ever buying, then don't bring them in as a renter at the beginning. You know, unless you really, really need that cash flow at the start, maybe you segment them, maybe half of them are just renters and half you really focus on getting people who want to become owners right from the very beginning. And when it's something that's a little bit in the future, it's a lot easier to sell people on it, I find. So you can say, if it's 6 months or it's a year or 2 years or however long it is before you want them to buy, then if you set them up for that upfront, it's a lot easier because that pain point of changing their life and having to become an owner is in the future. So the pain— I just hit my light there— the pain is a lot less because it's so far in the future. So it's a lot easier, I think, to do that than to then have them as a renter and then the pain comes on them and then they don't want to make that change. So if you make them sign up for that from the very beginning, then I think you're going to have a much better chance of being able to get people to go on the program that you want. It's more work up front to get the qualified people that you want for your business, but I think you'll end up being a more successful business owner if you're able to get those people on. That's my take. I wanted to then invite my friend John Carter, who is a real estate investor and entrepreneur, to to share his two thoughts and give you some feedback as well on how you can get that business going.

Thanks for the introduction, Evan, and I appreciate the opportunity to answer Indra's question. I'm John Carter with Parkhurst Real Estate Investments, and you can find out more information about me at johncarter.ca or ptrust.ca. My background in real estate is in all types of real estate investment. From single-family to large commercial properties. Currently, I have a focus on multi-family limited partnerships. So to answer your question, Zindra, I would first ask you on the rent-to-own strategies, why are you trying to convince renter mentality people to own? That's the first question. There's oftentimes in every major city in North America, 30 to 40% of the population who rent. And even though I have the same belief that I think homeownership is the smartest decision, financial decision especially, for the average person, it's often not right for everyone. And if they don't have the financial discipline to save on a monthly basis, spend less than they make, and put that money away towards a down payment, there's a reason they can't buy. Also, if your marketing program is effectively marketing to give something for nothing, that's the perceived value of it— nothing. So I would suggest for you to look at your lead generating systems, the marketing you're doing, and perhaps the type of properties you're buying and targeting as to improve the quality and improve your qualification in the target rent-to-own customer that you're after. To your second question around financing, my, again, first question to you is, why are you buying all cash? I'm understanding that you have a flip business model where you're buying and improving properties. Great strategy and can be an excellent way to get started in real estate investment, and most people do start that way. I have one past colleague, client, who had a great system renovating an average of over 50 homes a year for several years in a row, and they did so with $500,000 capital that they were revolving and an established relationship with one lender. They had a very tight system, set renovations, set type of property they were buying, and they would keep properties along the way. And it's oftentimes easier to get financing when lenders, both as well as private lenders, see that you have some existing assets. So those would be my tips for you, and feel free to contact me if you had any additional questions. I'm always happy to talk real estate investment with anyone. You can reach me at johncarter.ca, or for more information and investment tips, visit ptrust.ca for Parkhurst. Thanks very much. Take care.

So Indra, I hope that helped. I hope what I said was useful. I hope what John said was also helpful. Thank you, John, for joining us for this, for this video. If you guys like the video, please give it a thumbs up below. Makes me want to keep more of these videos coming for you. And I'd love to hear what you have to think. If you have a comment or question, leave it down there in the comments below, and we'll see you on the next episode.