The Rapid Cash Program: Creative Investing Strategies for the Canadian Real Estate Market.
Want to know how to make quick money in Canada? Forget about cryptocurrencies (like Bitcoin, Ripple, and Ethereum) or other get-rich quick schemes. Real estate investment is a tried and true way to increase your wealth. You don’t even need much money to get started— anyone can do it if they have the right knowledge, expertise, and resources! The Rapid Cash Program is a 6-month package that includes everything you need to start doing real estate deals. If you’re already convinced, click here to register now for the next Quick Start Focus Workshop that kicks off the Rapid Cash Program on April 7th and 8th, 2018 in Red Deer, Alberta. Or read on for more information.
There is a special ingredient in the Rapid Cash Program that makes it different from other methods of real estate investment. What I call ‘Creative Strategies’ are little-known techniques for finding, negotiating, and making deals that are win/win solutions for common real estate problems—and that make money quickly.
Here’s a bit of background on creative strategies and the Rapid Cash Program. I’ve been a real estate lawyer and investor in Alberta for over 40 years. In the last four years, I’ve distilled my experience down to focus on creative investing strategies for the Canadian market. Previously, I’d been running a series of Focus Workshops to help real estate investors with their legal documents. There was a little bit about marketing, managing, and exits, but mostly it was all about the documentation. I soon realized that investors were eager to know more about fast, innovative, legal ways to make money with real estate in Canada, which led to the Rapid Cash Program. This new Focus Workshop included 6-months of coaching and introduced creative real estate investment strategies, including:
- Rent-to-Own (also known as Lease Options)
- Agreements for Sale (also known as Seller Financing)
- Fix and Flip
- Assignments (also known as Wholesaling)
- Joint Ventures
At this point, I’d like to emphasize that for most real estate investors, including my wife Donna and I, the basic strategy is long-term buy-and-hold. You buy great houses in great areas and then search hard for great tenants. The tenants pay all the expenses of the properties; the rent covers the mortgage and repairs, plus a little bit extra for positive cash flow, providing some passive income. In due course, the mortgage gets paid off and the value of the property rises, leading to profits when it’s time to sell. Long-term buy-and-hold is a winning strategy, which is why it’s the foundation of most successful real estate investment portfolios.
But, thanks to creative strategies, other opportunities are out there. Learning these investing tactics will help you analyse or re-analyse opportunities you might have previously rejected.
If you understand the strategy,
you will recognize the opportunity.
I’ll now provide an overview of the creative strategies I teach. These have all been updated since I last ran the last Rapid Cash Program four years ago. I’ll finish with some real-life examples of investors who applied the strategies and made some good money! Let’s get started with a review of the five key strategies.
5 Quick Ways to Make Money with Real Estate Investment
Rent-To-Own (RTO):
This strategy helps folks who want to own their own property now, but can’t qualify for a mortgage. Technically, the renter-to-owner picks out a property that they would like to own, you acquire it and lease it to them with an option to buy at a later date. There are many reasons why a renter cannot qualify for a mortgage, but that doesn’t mean they have to be just a tenant. Some of those reasons for non-qualification are being a new business owner, divorced, newly immigrated to Canada, and newly employed. Mainline lenders simply are not very interested in lending to hopeful homeowners that fit in these categories. We prefer folks in these categories, rather than people who are credit challenged. The ideal renter-to-owner has excellent credit and simply ran into artificial banking rules that prevented them from qualifying for a mortgage.
Once such a hopeful homeowner qualifies under your RTO rules, you try for as big an upfront option payment as they can manage. Your edge in the deal comes from being able to use those option monies now. You lease to them for at least the going market rate for rent (often better) and they pay market value for the home when they exercise the option to purchase. Especially in a rising market situation, this can be a very lucrative strategy.
Agreements For Sale (AFS):
AFS is a seller financing strategy. You buy a property from a seller and s/he is your bank. AFS works very well—especially for beaten up properties (ugly houses) or in beaten up real estate markets where property values have fallen to the point where they might equal or be close to the value of the mortgage on a property. In such circumstances, you can buy the property for little or no money down, with no mortgage qualification. Sometimes these properties have a negative value. In other words the mortgage is worth more than the market value. Result: sellers have been known to pay buyers to take over the property! Of course, the property still has to work for you in the sense that you need to be able to at least rent it for neutral or positive cash flow. AFS often gives you the ability to control the property, where you are in charge of renewing the existing mortgage for as long as you want. This situation makes your potential exit strategies much more flexible: add the property to your own portfolio, assign your interest in the property, or perhaps convert to a RTO.
Fix and Flip:
This strategy is about finding a property under market value, doing appropriate renovations to add value, and then selling to a third party buyer for a profit. Easy to say, but like any successful strategy, the devil is in the details. Fix and flip deals can have a few different types of challenges: failure to buy well in the first place, underestimating the renovation time, misjudging the renovation cost, overestimating the ultimate sale price, and underestimating the length of time it will take to close the deal. It seems like it’s just human nature to shave those factors in the wrong direction.
The most important success factor for fix and flip is how you buy. You will need to develop expertise in marketing to find properties that are so unattractive they can be purchased way under market value compared to a similar property in decent shape. And that’s tricky, because every smart investor wants those properties. It’s a classic strategy that is fairly widely known in the world of real estate investing, but near and dear to our hearts. I’ve got some tricks up my sleeve for success with fix and flip, which I teach by showing people how to track down those diamonds in the rough.
Assignments:
If you get good at finding properties, this strategy lets you make a profit by wholesaling real estate to other investors. Basically, you get a property under contract to buy and then you ‘assign’ (sell) your interest in that property to another investor before the purchase date. That investor gives you back your deposit, pays you some money (the assignment fee) for the deal, and then the investor closes the deal.
As you develop your own approach to creative investing, part of that approach will be marketing to find the properties that fit your strategy. In most cases, you have to find these properties on your own. Occasionally you might be able to find a property through a realtor who has a ‘pocket’ listing or perhaps an MLS listing, but really only occasionally. Once you develop a robust marketing strategy, people will be calling you. And if you get really good at marketing, students tell us that they often have more possibilities than they can handle. When you have excess possibilities, assignment is an ideal strategy.
Joint Ventures (JV):
Creative investors have real estate expertise, but not always enough money to keep up with the opportunities they find and so they often need ‘money partners.’ Most creative investors use joint venture money in one way or another. Creative strategies lend themselves to joint venturing partnerships where one partner finds, implements, and manages the deal, while the other partner bankrolls the investment. Both partners in the join venture split the profits according to the terms of their agreement, which should be in writing. Yes, as part of the Rapid Cash Program you get great JV template documents!
- In the RTO strategy, the creative investor identifies and qualifies a good RTO candidate. The tenant-buyer goes out and finds their dream home. The money partner buys the home so the creative investor can then lease it to the new tenant-buyer.
- Fix and flip investors need money to buy beaten up, undervalued properties and money to do the renovations. They create a joint venture with a money partner who provides funds.
- In assignment situations, the creative investor writes a contract and controls the property. If the deal goes unconditional without being assigned, the investor is obligated to buy. As an exit strategy, a money partner steps up to buy and do a joint venture on the property with the creative investor.
- In the agreement for sale category, money partners are valuable to joint venture properties that require a substantial cash component.
Why Do Creative Real Estate Deals Exist?
At this point when I’m talking about creative real estate, the uninformed tell me I’m crazy. Why would anyone sell their house for way less than market value or insist on owning before they were ready? Here are 3 reasons:
- Mortgages are harder to get:
Banking rules have always been restrictive and discriminatory. New rules increase the inability of homeowners to qualify for mortgages. That drives potential homeowners into the arms of creative real estate investors. - Bad luck:
Bad luck plays a part. It was bad luck for those homeowners who bought at the peak of the market. If prices collapsed to less than the value of the mortgage on a property, what are that homeowner’s exit strategies? They don’t have any conventional options; they need a creative strategy (particularly AFS) to perhaps help them get out of a bad situation. - Circumstances:
And, circumstances often play a big part. Job loss, divorce, starting a new business, or starting a new job all make homeownership difficult. As a creative investor, you can make it easier.
The reasons above for ‘why do these deals exist?’ are pretty easy to understand. The thing we discovered over the last four years since the last Rapid Cash Program are the result of analysing hundreds of deals, and yet we will never be able to predict a seller’s motivation or reasons. Yes, the ‘why’ of most creative opportunities fits in one of the categories above. But, sellers often have their own reasons that don’t fit with logical investor analysis.
You wouldn’t think these opportunities exist but they do. The lesson here is we will never fully understand or be able to predict seller motivation. Don’t even try. Just realize that there are more opportunities that don’t make sense than you realize. Just go for it!
Are These Deals Legal?
Another question we often get is, “are these deals legal”? As a lawyer, I can assure you that the way we teach creative real estate is absolutely legal. Firstly, we recommend full disclosure of who you are and what you might plan to do with the property. No cheating or lying or taking advantage. We always stay out of the grey area when drafting our contracts. We insist that sellers get their own lawyers. Buyers and sellers sometimes want to use the same lawyer. Big mistake! Having the seller independently advised by his or her own lawyer is great protection for creative investors if the seller complains or changes his or her mind after the fact. And we try and avoid any of these nasty situations by applying a win/win approach. I can’t emphasize enough that creative investors don’t take advantage or cheat or lie or steal.
Examples of Creative Real Estate Investing Deals
Now, having gone through the details and talked about the progress of creative real estate, let’s get down to a very important question: can investors make a profit applying creative real estate strategies? The following real life examples illustrate how effective creative strategies can be, so let’s take a look.
Example #1:
This was a Fix and Flip where our creative investor paid $220,000 on a value of $330,000. This house was in pretty decent shape, but after the seller listed it at $330,000, he discovered he hated potential buyers tromping through his home, so he sold to our investor for $220,000. The projected profit in the four-month turnaround is $45,000.
Example #2:
In this ‘Agreement For Sale’ deal, our investor purchased a 4-plex with mortgaging of $680,000 and the tax assessed value of $750,000. The investor’s cash was to pay the seller’s legal fees and take responsibility for the security deposits ($7,500). The seller was too lazy to do the work to list and sell the property. There is an immediate equity gain of $70,000 and the property cash flows $650 per month.
Example #3:
This Rent-To-Own deal involved a husband-and-wife who worked labour type jobs and had three school-age kids. They couldn’t qualify because their TDSR (total debt service ratio) was too high and their credit scores were too low. Our client’s mortgage advisor set them up on a one-year plan to save more money and improve their credit scores. They had $17,000 to put up as option money. In one year they did exit the deal and our investor shared $18,000 net profit with the joint venture partner. Our investors ROI (return on investment) was infinite as they put up no money and got $9,000 profit.
Example #4:
Our clients focused on a particular neighbourhood and marketed to find owners who wanted to sell. This gem of a deal had our clients assigning their interest to an ultimate buyer with full disclosure and obtaining a profit of net $63,000. This transaction is certainly out of the ordinary because most Assignment deals do not generate this type of profit. But, this one did!
Example #5:
These money partners funded three fix and flip Joint Venture deals in the past 18 months where their investment was in the $300,000 to $350,000 range for each property. The net profit generated for the three deals was equivalent to a return of 32%, 9%, and 29% return on their money invested (calculated on an annual basis).
Final Thoughts:
- Creative real estate strategies are a legal, alternative way to invest in Canadian real estate.
- Today’s real estate market is wonderfully conducive to applying creative strategies.
- Yes, investors can and do make a profit with creative real estate strategies in Canada!
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The Freshly Revised Rapid Cash Program This package provides everything you require to succeed in “quick-turning” properties, creating an infusion of cash flow into your bank account. You won’t just be listening to theories and facts, trying to absorb by osmosis. 100% of the program’s focus is on implementation and getting you to increase your cash flow… rapidly! We are kicking off The Rapid Cash Program with a 2-day, At the Focus Workshop weekend, you will receive:
And after the Focus Workshop, your dedicated 6-month implementation program includes:
But wait, there’s more! Your bonus home study kit includes binders full of valuable resources:
Spaces are limited, so don’t miss out!
Rapid Cash Program April 7th and 8th, 2018 For pricing and to register, go to: |