How to Buy Real Estate Without Having to Work with Banks

How can the creative financings like lease options, rental owns and all those creative investment strategies can really help investors? All right, Cam, so great to meet you. And I want you to ask him where do you locate it and what kind of creative real estate deals are you doing?

Well, I'm here in Winnipeg, Manitoba and I've been doing creative deals probably about 12 years ago. I read Rich dad, Poor dad back in 2006 and that was a catalyst for me to finally get off the couch and take some action and buy a deal. A single family here near the university. And it was awesome. I just loved it. It was very basic. I just took his very basic cash flow rules and I bought a place and it cash flowed positive. So that was great. Then I started doing more deals and it's kind of like carbohydrates. The more carbohydrates you eat, the more you crave. Same with real estate. The more, the more I did these deals, the more I wanted to do it. And so I finally got to the point where it was like, I want to do this full time. And I had been with my job for 17 years, but I just felt it was time to move on. And it's like, okay, how do I do this full time? And I couldn't really do it by just buy rent and hold single families. The cash flow just wasn't strong enough to replace my income. So that's when I remembered lease options, the strategy lease options, also known as rentone. I remembered that these were deals that you could do essentially with no money down. If you structure them right, you also cash flow higher than normal than I buy rent and hold. And it just seemed like a really creative way to do these deals. And I thought, well, if I could figure out how to do those, maybe I could replace my income. So I hired a coach. I, I did my first deal in about six weeks, structured it, it was great. I made like 20k up front. It cash flowed, you know, positive every month. And there's like, I only have to do about four more of those and it's going to replace my income. Now the key point in this was I structured that as a no money down deal. I got another investor to purchase the property, but I ran the deal and so it's when I sat down and looked at those numbers and go, wow. My investors are super happy. They've got a turnkey hands free property I'm looking after. Everything is cash flowing for me as well. And I'm making money up front during it each month and at the End when the deal closes. Why couldn't I duplicate this process over and over again? So I attacked that. And over the next five years, I put 40 of those deals together. All no money down deals, all cash flowing positive. And it just changed everything about my real estate investing strategy. Just opened up my mind to there's so many different creative ways that you can structure deals. And I focus on this particular strategy and yeah, that's really what I do full time here in Winnipeg.

Wow, that's impressive. And when you mention about no money down, do you want to expand on that a little bit? Like, how do you mean by no money down deals?

Well, there's many ways you can do no money down deals. Probably the two ways that I do it, first of all is I will negotiate with the seller and I will get the seller to hold financing. Now, this typically isn't a seller who is, you know, a family who's selling a house and they need to sell to move on the next house. That's not the type. Most of my deals are off market. They're not on MLS and they, they're usually from other investors and they're often tired or frustrated landlords, meaning that, you know, they've made a couple bad choices and has just turned the deal sour for them. And those bad choices can be not doing proper due diligence on the tenants they put in, accepting cash and six months cash up front and, or, or, you know, two months cash up front. They are horrible tenants. Right. It only takes a few months in a row of bad decisions. It can only be two or three. And all of a sudden your, your deal is performing horrible and you're up at night and you're scrambling to solve this headache. Put it on MLS isn't your first way of getting rid of it because now you got to pay realtor fees and if you've got a tenant in there, they might become belligerent and it's hard to sell a tenanted property. So. So they're often searching for people like me who are doing, you know, creative deals. And basically what I do is I come in and I listen to, you know, like, what are your pain points? What problems do you need solved? I don't necessarily ask them like that, but I try to figure out what their pain points are. Then I try to like, address those pain points. So on those, you know, for example, a couple deals that I've done like that, I mean, I've got a video that talks specifically about one like this. But it was hard and frustrated. Landlord hadn't been in. He was absent. Even though he lived like two blocks from the property, the tenant says, okay, I'm gonna move out. He hadn't been in there for three years. He went in, his heart was broken because the house was in shambles and it smelt bad. You know what they say, the smellier a house, the more money you're gonna make. And that's the scenario on this one for me. So this guy didn't know what to do because if you put it on the mls, you know, flippers would come in and they'd lowball him. He needed X amount to sell, really Realtor fees to pay off his. His mortgage on the open market. It wouldn't catch that. So what I did is I structured a deal where I agreed to pay him the price he needed to get out of the deal. And. But I got him to hold the mortgage for an additional seven months. So basically what I did was I kind of became his tenant. I paid him rent each month, you know, basically to cover his costs. So rather than me borrowing money from somebody else and paying them money money, I'm just paying the owner. And we renovated the whole house. I think we spent about $70,000. And then we turned around and put it on MLS and we sold it. We did what's called a double close and we sold it. So his headache and problem was fixed not only at the end, but immediately, because now he knew that someone was working in the property that actually cared about the property. Right, because we want to make a profit.

Right?

And so that was. That was a win for him right off the bat because, you know, he could sleep at night knowing that Cam and his team is gonna. They're gonna fix up my property, and we're gonna, we're gonna solve this headache. Now, not everybody can do this, but I was able to secure that deal with $100 check. So that's what I mean by no money down. So after all the negotiating, you know, a couple meetings with this guy, viewing the property, running numbers, it was like, okay, here's what we can do for you. And we can buy it off of you in seven months for X price. We're gonna rent it from you, and I'm gonna secure the deal with a hundred dollar check. So I don't know how deep we want to go into this, but basically, I did a lease with them. I did an option. The option says I'm going to purchase it in the future at X price. Then I also did a offer to purchase, right, your traditional MLS offer. To purchase contract. It's a buy and sell contract. And in that stated all the same key details. $100 check was my deposit, he cash it. So now it's a legal binding agreement. I registered that offer to purchase on title. So now my interest is registered. You know, he can't sell it to anybody else while I'm pouring 70 grand into the property. And so yeah, seven months went by, you know, some ups and downs, but we sold it, he got his money, we made some profit and the deal is done. So that's the first way that I do a no money down deal. The other way is where I'll work with investors who, you know from across Canada who want to invest in real estate. But they don't want to fix toilets or talk or deal with tenants. Right. Basically they want, they want all the gains you can get from, you know, a property tax, write offs, cash flow appreciation, all that stuff. But they don't want to have to deal with, with any of the headache stuff. And so that's where I partner with investors. And basically what I do is I find properties and you know, I put together my seven page performer and then I'll send it off to them. And basically what they do is they qualify for a mortgage and they put 22% down of the purchase price. Basically 20% down, 2% for closing costs. And we signed some contracts similar to the ones I just shared with you and then I run the deal and so on these deals typically what I'll do is I will put a rental client into it. So it's a about a three to five year deal. Sometimes it's shorter where my investor gets rent every month, but no phone calls. My company deals with the headaches and the rents and the late rents which does happen. And we help these families get into homeownership. There's kind of a multiple approach to this in that it's an investment, but it also has helps people get into home ownership. We do some training stuff like that. And so same deal there is with that investor. When we put together contracts, I give them a check or an E transfer for a hundred dollars and now it's a legal binding agreement. And so we're off to the races. And that's how we do no money down deals. And really anybody can do them if you know how to structure them properly. Unfortunately there's lots of people out there that try to structure these deals but they don't know the complexity and they don't have the proper contracts. And so those deals will inevitably fall Apart. But you know, if you work with someone who's got experience and they know what they're doing, they got the right contracts, they got a track record, you can put these deals together and it's, it's a win, win, win for everybody.

Wow, that's great. Sounds like a very win, win, win situation is winning because you're helping someone who's not able to get into the home ownership. You are able to help people, which is great. And also you are helping investors because you know for our bankers about audience and then you know our clients who practice becoming your own banker, we're always looking for opportunities where we can capitalize and grow our capital. So sounds like that's a great win if we were able to find opportunities like that. And also is a great win because just like you mentioned, it sounds like you need to have a lot of experience, you have to have a good training, tracking record. And camel. Where did you find all those deals and where did you find those tenants?

Yeah, good question. Just being active in the community here, you know, real estate groups and interacting with people who are investors and landlords and so networking. So that's one way I find deals. A lot of word of mouth stuff, you know, get a text or an email from someone, hey, my brother's uncle's roommate, you know, can't sell his house or whatever. You know, there's a lot of networking that goes on that, that way. I also work with a couple realtors and find a lot of off market stuff. We do buy on mls but you know, MLS is kind of like buying at the mall. You might get a deal but you have to be able to buy quickly. You know, when that deal is there. You know, this is, this is really wholesale pricing that, that I'm buying. And so you become active, you get to know a lot of people. You, you put stuff out there, you help people and you ask a lot of questions. People get to know you. If you can follow through on what you say you're going to do, then people will come back to you. Right. So you know, if someone refers, you know, Alex over here and Alex never actually closes on a deal, people will stop referring Alex. But if Alex, you know, closes on deals or at least makes offers, most people don't even make offers. They'll analyze a deal to death, but they don't even make an offer. If you make offers and try to make the deal work, people will start sending stuff to you. And that's how I find my deals. In terms of properties, rental clients is pretty Simple. You have a couple good ads on Kijiji or Facebook, Marketplace, Craigslist, whatever's popular in your area. And you put out some good ads and you've got some really basic content either on a Facebook page, a web page, and you've got some email blasts that go out. You can find some really good people that way. So there are a lot of tire kickers, but you just develop your systems that you can get through the tire cookers quickly to get to the view that you can actually help.

I see. Thank you so much for that. And do you just work locally around the Winnipeg areas? Do you expand your, you know, rental markets to other areas in Canada?

Yeah, so most of my stuff is here just because there's, there's so much opportunity. I don't really expand my own lease option deals beyond this market. But I do coach and I've got students from across Canada. That's kind of how I can get involved in, you know, different provinces is through my students and, and their deals and me helping them find success doing these deals. Because that's really important, right, to, to go through, do the work, get a deal done and find success. So.

Wow. How long have you been coaching?

I've been coaching since about 2016, I think. I love helping people. I love working with people. And you know, from 2010 to 2015 is where I did those 40 no money down deals. And so people would be asking me all the time. It was like, hey, can you teach me how to do this? And. And so finally I started taking time to actually unpack the macro steps that need to happen to put together one of these creative deals. And then, yeah, I started coaching. I started with, you know, really one client and then it went from there.

Oh, that's awesome. One of the question that I also wanted to ask you, Cam, is that we know that for real estate investors, we all know that interest rate is increasing lately. I actually just received a call from the bank that I got triggered on one of my mortgages. I think for times like this, people are looking for more and more creative ways to invest in real estate. Especially, we know it's very important to make sure that we're cash flow positive. Right. In a time like this. Do you want to explain to us about, you know, how can the creative financings like lease options, rental and all this, creative investment strategies can really help investors?

Yeah, well, depends on what side of the investor coin you're on, right? So for me, as an investor who I structure a lot of deals with other investors who are the financial partner. For me, the investment hikes don't directly affect me today. Basically what happens is, you know, we've got to run the numbers for our tenant buyers. So when our tenant buyers, you know, like our rent owned clients, we got to make sure that they're going to qualify and three to five years. So we're running numbers just the way the banks are, but we're forecasting an additional three to five years. Right, that's important. We, we have to be up with that. The thing is, for my investors that come in and buy a property, we also have to adjust the numbers for them. So I'm working on a deal right now structuring a single family home with an investor and we're running the numbers to make sure that it cash flows for them. Because what's interesting for these guys is that, so they're actually finishing up a current deal with us. They bought a house that I presented to them a year ago and we put a tenant buyer in there for a three year term. Tenant buyer qualified after one year. We're just in the process. That tenant buyer is going to own the home on October 31st of this year. And my investor is happy, but he's also kind of like, oh man, like I locked into a 2.7 rate for three years. I don't want to lose that. Fortunately, his bank's also creative. They're allowing him to blend his mortgage. So he's going to buy a new property later this month with a blended mortgage of 2.7% and 5.35 for the other portion of the mortgage. So it's kind of like he's got one mortgage, but it's two different rates on two different amounts. The thing what's nice about this is that his expenses, even though they've gone up in terms of the mortgage, his other expenses are lower because when a tenant buyer comes in the property, they're putting money down up front. So this deal that we're closing on this month, the tenant buyer put down $10,000 up front. So that sits in my account. That acts as a buffer if the tenant leaves and it becomes vacant or if the tenant stops paying rent, which can happen, not as often, but it does still happen. So that 10,000 becomes a buffer. Restoration's got no vacancy costs because we've got that buffer. The tenant buyer who is going to own the property in a couple years is going to pay for repairs up to $1,000 per instance. So if tomorrow the furnace fan goes and it's a $600 bill, the tenant's going to pay for that. The following day the sewer system backs up and that's a three hundred dollar bill. The tenant's going to pay for that. For you who have single family, just as a straight rental, you know that one month, that sewer system plug can kill your cash flow for that month.

Absolutely.

You also know that the furnace fan can kill your cash flow for one month or two months or three months, depending on your numbers. It's not uncommon that you'll have three ticket items happen in a row. It's like your cash flow for the year is gone. I was like, what's going on? Right. So, so that does happen with these scenarios. There's less overhead expenses for the investor because of those things. So we're adapting our deals to deal with the higher mortgage costs. And you know, when we start a new deal, we can kind of reset the rents. Obviously the, the rents have to be acceptable for the product that you're offering. So we're actively working with the, the current mortgage rates when we're putting new deals together. And so that when we actually close a deal with an investor, it cash flows positive. It might only cash flow, you know, a little bit. But you know, some of my investors don't care about the cash flow. They want the capital gain, others want higher cash flow. So we, we adjust deals. Sometimes it's higher cash flow, lower at the end, you know, that sort of stuff.

Stuff. Thank you so much, Cam. I guess as e investor sometimes, you know, when we doing long term rental, own tenant is always a big problem, right. When you have a rental owned tenants, that seems to be solved a big problem because as you acquire more and more properties, you're expanding your portfolio. Property management going to become a big issue. Right. And then like you mentioned the toilet, the termites and those are all the things that could be taken care of by your tenant buyer, right?

Absolutely.

Yeah.

Actually the way I think of it is every tenant buyer is really my on site property manager. They're paying me to manage the property, right. They're paying that extra amount. And so it's awesome that way because people really take ownership of it. That's great because I know that I've got people caring for the property.

What is a rate for successful rate? Is it most of the deals went through, right.

Like for the tenant buyers or for the investors?

For the tenant buyers, right. Is there a way that people should be cautious about or be mindful about when they stepping into something like this kind of creative investment?

The closing rate for the rent owned clients is not as high as I would like it to be. But usually what happens is it's the same as when they own a house because rent really, what it is is the common thread that I see is when a deal fails from the tenant buyer perspective, there's some sort of relationship breakdown in, in their life and that happens to a lot of people. And it's the same as if a couple owns a house, they've got to sell the house and all that sort of stuff and, and you know, the house kind of vanishes. And it's the same with my rent owned clients. It's like, you know, they'll have a relationship breakdown and, and the deal just kind of falls apart. And that stuff we can't really control. And we do our best to work with, with our clients. We, we want our clients to succeed. I mean we've had clients who've lost jobs, but you know, they've kept in great communication with us. We let them not pay rent for I think this one family up to three months. But we had a plan on how they would pay that back. He got a new job, he got back on track with earlier payments and he started paying off the other ones and then he closed on the deal. And so, you know, it's like we said before, it's about a win, win, win. It's, it's just, you know, everyone's got a part to play to make a win, right. But for the investor, what's good about this is that if you've got a property that the tenant buyer fails, well, the investor, we're still left with the asset, so we can go, well, let's start over again. And in that time, they've had some market appreciation, they've got some cash flow, they got mortgage pay down. So you know, for the investor and for our team, it's a win.

That's awesome. There's several exit strategies for the money partner for this deal that. Fantastic. So if you want to know how to become your own banker for creative deals, check out this video here.