Lease to Own or Rent to Own Versus Long Term Buy and Hold

Lease to Own or Rent to Own Versus Long Term Buy and HoldA number of years ago, I read a book that was co-authored by Donald Trump and Robert Kiyosaki. The book was titled “Why We Want You To Be Rich – Two Men – One Message”. If you have not read this book, I encourage you to do so. It provides many insights as to why both these gentlemen have become very, very rich! Chapter twenty nine is titled “Leaders Are Teachers”. In this chapter Donald makes reference to a quote from one of the world’s greatest leaders of all time, Sir Winston Churchill: “We make a living by what we get, but we make a life by what we give.” What a truly great quote!

So I ask that you please ask yourself this question: Are YOU giving something back?

Giving comes in many forms. It could be your time. It could be your money. Or it could be both. Maybe you could share your knowledge and wisdom with somebody else. Whatever it is…be sure that you do your part!

This particular topic is very dear to my heart, as I have and I continue to invest in both types of real estate strategies. Each strategy offers a slightly different spin.

The Long Term Buy and Hold strategy provides the investor with many benefits but, in my view, these are the four key benefits:

1. Income (cash flow)
2. Depreciation (tax breaks)
3. Amortization (mortgage pay down)
4. Appreciation (increase in value)

Depending on the individual market you are choosing to invest in, your returns may be reflected in any one or all four of the referenced areas. What do I mean by this? For instance, in a fast appreciating (hot) real estate market, you may find it difficult to cash flow. While appreciation may be significant, you have to be in a position to “weather the storm” until you finally liquidate the property and reap the rewards.

In May of 2006 I attended a Robert Kiyosaki (Rich Dad) event in Toronto. During the event Robert made reference to the following; “Investing strictly for long term appreciation is suicide.” I would like to qualify (in my own words) what I believe Robert was really saying. While you may do very well in the “appreciation” category, you will only do well if you actually get there. If you are unable to support the asset, you may very well “crash and burn” before you reach your objective. The only way you will get there is if your properties provide you with enough (positive) cash flow, or you are in a position to fund your shortfalls from other sources such as your job. I do not personally like to fund my properties out of my own pocket because that takes all the fun out of Real Estate Investing! I like to refer to these types of properties as “Alligators”.

Please remember this…Alligators Will Eat You Alive!

As an Investor: CASH IS KING!

The other issues that most (long term buy and hold) investors are typically faced with, I like to refer to as “The Terrible T’s” (Tenants & Toilets). Please do not get me wrong, Long Term Buy and Hold has and continues to serve me very well, but only because I follow a system and play close attention to the economic fundamentals. Many an inspiring investor has had his or her dreams destroyed as a result of bad Tenants and/or a lack of positive cash flow. When I attend real estate seminars and events around the country, the common issue that most real estate investors are typically faced with is the lack of or no cash flow.

Like I said earlier, these types of properties are Alligators! And they will eat you alive!

Early on in my own personal real estate investing career, I became very well aware of the “cash flow” problem. Not that I had negative cash flow properties, because I only purchased positive cash flow properties that fit my system. I had a different problem…I wanted to give up my day job! The reality of giving up my day job by following the investor (buy and hold) masses of the past was not an option! In order to give up my day job and stay in real estate, I knew that I would have to become creative. So, creative I became! I attended a number of real estate seminars that exposed me to the “Rent To Own” and “Lease To Own” Real Estate Investing concepts. I implemented many modifications to the strategies that were presented and that were taught. It was vitally important to me that the concepts not only worked effectively in my market but that they could also create success for the Tenant/Buyers. I am a strong advocate of making sure all stakeholders win!!

So What Are The Benefits of Lease To Own You May Ask?

There are many! I like to summarize all of the benefits using one simple word…PREDICTABLE!

1. The (positive) cash flow is superior to Long Term Buy and Hold properties and it is PREDICTABLE.
2. The exit (liquidation of property) strategy is shorter and more PREDICTABLE.
3. There are no more “Terrible T’s” (Tenants & Toilets).
4. You do not make any repairs or perform any maintenance because the

Tenants do that for you.

While reading the Donald Trump and Robert Kiyosaki book, I realized that the Lease To Own Real Estate Investing strategy is a perfect example of what they referred to as “The Formula”. Part three (page 163) of the book is titled “DEFINING MOMENTS – Going Beyond Winning and Losing”.

They describe the formula as: Leverage, Control, Creativity, Expansion and Predictability.

In the Lease To Own business model, I view the formula in this way:

Leverage: By creating a track record for both yourself and that of your company, you can use other people’s (sellers, investors and banks) money to purchase more properties.

Control: You retain complete control over your investments and with Lease to Own the asset is your property. Unlike stocks, bonds and mutual funds where you effectively have no control! The reality is…you have even LESS control if you are handing your money over to someone else to manage it for you.

Creativity: Doing something different. Not doing what the (real estate investor) masses have done before you.

Expansion: As a result of creating success with the Lease To Own business model, you would have the ability to provide others with the opportunity of implementing your systems in other locations.

Predictability: You are able to predict your monthly cash flow, your exit strategy and profits for your investors and yourself.

The best thing of all…you have the capability to help other people achieve their goals in life! You would be providing people with the opportunity to own their own home! Remember the “Giving Something Back” concept that I spoke about earlier?

I am currently implementing both investment strategies, but I have leaned more and more towards the Lease To Own Real Estate Investing strategy over the years, as it provides my investors and me with a more predictable return on our investment dollars!

My name is Tony Peters and I have been investing in Canadian real estate since 2000. I have personally transacted on “hundreds” of properties and have done so without using any of my own money! As a result of my “creative” strategies that I apply, I was able to give up my ($150K a year) day job and take control of my own financial future. I accomplished this by using “OPM” (other people’s money) and buying properties with No Money Down!

I have since developed a unique and extremely rewarding “Lease To Own” real estate System and as a result of being asked, I have now made ourSystemTM available for others to purchase: My system is so complete that I like to refer to it as “A Business in a Box”. I also have a personal philosophy that in order to be successful you must always ensure that everyone is set up for success and that all stakeholders WIN!!

I specialize in “Educating, Empowering and Motivating Others to Take Action!” I accomplish this objective by sharing my extensive (business and real estate) knowledge and my “real life” experiences in my Creative Real Estate Investing Seminars and Workshops:

I am a huge believer in the (unwritten) universal rule that requires us to “give back”. I publish a free monthly e-Letter titled, “The Creative Edge”. As well, I chair a not-for-profit organization called the “Edmonton Financial Literacy Society”.

My personal motto: If you can’t make money without money, you can’t make money with money!

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