Episode 5 – Daniel St-Jean discusses “Rent to Owns”

You’re listening to Your Happy Place Podcast. Each week we will be bringing you interviews with real estate experts and investors. The show features interviews and discussions with on real estate investing, property management and inspirations. With your host Jenna Ross.

Jenna: Today on our podcast myself and producer Melissa are interviewing Daniel St. Jean professional real estate investor, realtor, educator and co founder of The Right Club. Welcome Daniel.

Daniel: My pleasure. Good afternoon.

Jenna: How long have you been in the real estate industry? 

Daniel: Actually we incorporated our business on February 1,2010 so for ten years now. 

Melissa: That’s a long time. I had the pleasure of going to Ontario and meeting both you and your wife and I know you guys love your wines. It was definitely a pleasure talking wines with you. What did you do before real estate? Were you winery owners?

Daniel: Actually no connection to wine what so ever. It would take the whole podcast to say what I was doing. My last paycheck I was an employee of any body was in October 1986. For the past 36 years I have been an entrepreneur. I owned an art gallery, a publishing company, done contracts for the federal government. The last 4-5 years before real estate I was a special consultant for the federal government in Ottawa. That’s what I was busy doing.

Melissa: That is busy. 

Daniel: Nothing related to real estate though. 

Jenna: That is so interesting. Daniel, you are one of the co founders of The Right Club. Can you tell us more about this club?

Daniel: Yes. I got the idea to start the club back in the fall of 2016 because I live in Niagara on the lake and every where I was driving to any good club was always an hour and half to two hours away. One day I looked at the map and realized that there was nothing in the Hamilton-Burlington area that was worth my time so went off and decided to start my own club. I contacted a couple of people I knew who may be interested and we talked about it and talked about it and finally made plans to do it. In January 2017, my wife Laurel attended one of our meetings and said you guys are all over the place and need some direction, so she joined us. We had our first event in March 2017. It has been three years and we have about 3000 people in our data base for the club. Our events usually have about 250 people. 

Melissa was at one of them I believe in February and it’s going very well. In a couple of days we are launching it national. What I mean by national I mean we have contacts all over Canada and we are going to make sure we include presenters, speakers, sponsors, contributors and members from coast to coast. Our plan is to grow this club online communicate to 100,000 by the end of 2024, that is our 5 year plan.

Melissa: That is a big plan. I know the event was pretty amazing and pretty memorable. I definitely had a lovely night. I definitely couldn’t go to sleep that night before my flight home. I know all your co founders have different specialties. What is your specialty?

Daniel: How we got into real estate actually was attending a weekend event by Rich Dad Poor Dad education and one of the strategies that was discussed there that really appealed to me was the rent to own strategy. That is what we started from day one. We just signed up two days ago our recent one, this is number 50 for us. That is our strategy. I now have a course where I teach people how to do that. It is an amazing strategy and I love it. I am going to keep on doing it.

Jenna: Can you explain the rent to own strategy a little bit more to our listeners?

Daniel: In a nutshell because I can speak at least a half hour on the rent to own strategy but in a nutshell the type of clients we attract are people who have good jobs, they have good incomes, they have a deposit but for one of many reasons they just can’t get a mortgage from the bank. Maybe they were divorced, maybe they had issues with their credit bureau, maybe they are self employed and not claiming all their income, maybe they are new immigrants, maybe, maybe, maybe. There are all kinds of different reasons they can’t get a mortgage. 

They can afford a house, they can afford a down payment, they just can not qualify for a mortgage. We take them into our program. They go shopping for a house with some criteria, we buy the house they want for them, they are tenant buyers for 3 years during which time we fix what ever issues it is that is keeping them from getting a mortgage.

After 3 years they now in a position to buy the house, they buy it from us, they are happy, we are happy and that is pretty much the rent to own program in 45 seconds.

Melissa: Do you find there is a big market for that ?

Daniel: Oh yes, I have adds on kijiji, that is mostly my source to find 10 buyers and I get 10-20 people every week asking about the program. It is getting more and more, as the banks are making it more difficult. Three or four years ago there was not this thing that even though the mortgage are at 2% they still have to qualify at 4.3% or something like that. That makes it more difficult for some people but also we expect once this crisis ends a lot of people will have damaged their credit or got into some sort of trouble especially if they didn’t work for 3,4,5 or six months. There will be a lot more people looking for our services I think once this goes back to “normal”.

Melissa: That answers one of my questions. Do you find people have issues when trying to rent to own? That sometimes people will go through the process of rent to own and when they finally go to buy the house a few years later, the home owner is not willing to sell it or things have changed and they want to charge them more? Do you run into any of those issues?

Daniel: If the home owner doesn’t want to sell it, it is what we call sandwich lease and I would never ever do that strategy. It really doesn’t make any sense to me. We buy a house out right and we own it for the purpose of selling it to people at the end. Obviously when we get to the end of the deal if their credit is fine and everything is fine we are definitely selling them the house. That is the purpose of doing rent to own. That’s an issue that has never come up and it will not come up because of the way we do it. Stay away from sandwich lease please.

Melissa: That is a good piece of advice for our listeners.

Jenna: What sort of team do you have in place for your rent to own?

Daniel: Pretty much the same as any other strategy. In order to be successful in real estate you absolutely need a team of professionals and hopefully a team of professionals who are investors themselves. Accountant, lawyer, mortgage broker, home inspector. We have the same team as if you were doing flipping or (inaudible) or any other strategy but with one exception. 

The keystone to our operation in our case, a lady named Margaret. Actually her office is in Hammonds Plains,Nova Scotia. She is a credit repair specialist. The job when I contact her and connect her to a potential tenant buyer is to analysis the situation, figure out what they can afford in 3 years, how long it will be before she can fix their credit. She will work with them 3,4, or two years to fix their credit and to get them in a position to get a mortgage from a lender at the end. In addition to everyone else you need to have a good team in real estate for rent to own, that person and sometimes it’s a mortgage broker, sometimes a mortgage broker knows how to do that but mostly you need what we call a credit repair specialist. Somebody who knows every thing about credit, budgets and can work with people and help them fix their situation.

That’s pretty much the team.

Melissa: I know you mentioned the Right Club and your fantastic events that you have monthly, what do you find is your key to success with those?

Daniel: Our core value which we wear on our sleeves community is number one. I think Melissa when you were there you probably that people were talking to each other they were connecting there was camaraderie there. Unlike some other organizations where you go it is very easily to see who the members are and who the leaders are. In our community we are among the members and nobody looks at us as if, well they are over there and we can’t go over and talk to them. We mingle and everyone mingles and we are very transparent, that is another one of our core values. 

We don’t have any secrets, if some body wants to buy me a cup of coffee and ask me a whole bunch of stuff on rent to own I will sit down and talk to them. 

Another thing that is important when you run a club like we do is good organization. I think Melissa was a witness of that. We are very well organized. We have volunteers, sponsors, and put that all together and if you are doing this for the right reason. The reason we are doing this is to build a community of people who are interested in real estate investing. This is not a money making proposition for us. It brings us a lot of contacts for sure but if you saw our budget for one month and you involved everything that is involved you will realize this is not a money making deal for us but we love to create a big community for a lot of people.

Melissa: You guys are definitely a family, every body felt comfortable going up to you. I did get that feel. The organization right down to second I think some of us moms need that right now with the home schooling.

Jenna: You do real estate here in Nova Scotia. What has drawn you to our beautiful province?

Daniel: We bought our first house there or we started our rental there in 2012, no we visited twice in 2012 the fall of 2012 and then we did our first deal January 2013 and we have done six or seven since then. We still have two in place now, one in Hammonds Plains and one in Jordans Lake. The houses are affordable, the people are really really nice there is a bit of appreciation right now and now we know a really good property manager, we have some good realtors we know, we have a lawyer, we have everything we need to build and do more business in Nova Scotia. Also for tax purposes it is nice to be able to travel there a couple times a year for business. We are going to keep business in Nova Scotia.

Melissa: I will definitely look forward to having you back and touring some of our wineries and see what you think of them. Do you have any advice to give someone looking to get into the rent to own real estate investing?

Daniel: Yes, 1. You need to understand the process. You need to understand what it is that you are doing. Who you are dealing with and what the end result is suppose to be. How the different pieces of the puzzle are suppose to come together. You need to understand the process. 2. You need a Margaret. You need a person who is going to be able to work with your tenant buyers, fix their credit, give them a budget and work with them and guide them so they don’t make stupid mistakes like go buy a brand new truck 6 months before they are suppose to buy their house and now they have a big monthly payment and that totally messes up their ratios and may have to extend the deal another year and that is going to cost them a whole lot of money. You need somebody who can keep people from doing something like that. 3. You need proper contracts. I had a person come to me one time and said, “I am in rent to own right now but it’s not working out so I want to see how you guys do it”. We met, she showed me her contract 3/4 size on one piece of paper. I am sorry that is not a contract. We have two contracts. One is nine pages and one is eight pages. Everything has to be predetermined. Everything has to be one paper all the agreements. You have to have the proper contracts. You can’t do a rent to own with all the pieces involved on the back of a napkin at a restaurant. Those would be my three main pieces of advice of advice for any body looking to get into rent to own.

Melissa: That is definitely some great advice. I have a question before Jenna asks her couple of questions. How have you guys changed during this current COVID situation? Have you guys adapted well?

Daniel: First of all our offices are in our home so before COVID 19 we spent 90% of our time in the house now we are spending 97% of our time in the house. That way it’s not a really big deal but in one way that there have been some changes is of course we had a whole slew of between March 15 and the end of June we had nine different events booked. The hotel, the rooms and everything we were going to do. Now all of that has been cancelled and all of that has been replaced with Zoom, Webinars and things like that. We do a weekly webinar now where we bring different people last week we actually had someone you know from Nova Scotia to talk about mortgages and stuff. That’s one of the changes we try weekly now to do things that can help 3000 subscribers to cope with this and get out of the situation with all their feathers as best as possible.

Jenna: I have another question as well, Can you tell us a little bit about how you tried to negotiate a rent to own deal that’s a win, win for your tenant buyers?

Daniel: By definition a rent to own has to be a win win. It has to be win for them and a win for us. We are in business it’s not charity and it has to be win for our investors. In terms of it being a win for the planned buyers one thing is we need to find them a really good house in good condition. We only buy houses that are move in condition. We have to buy it to negotiate the best price possible because we are going to take the purchase price and we are going to add a certain amount of appreciation per year to determine the selling price. Obviously the lower price we pay then the lower price they will buy it for at the end. We always sharpen the pencils and get the best deal possible. You want to buy the house at a good price to start with. We don’t charge any management fees or anything like that so that is another plus for the tenant buyers and again sell them the house at a reasonable price at the end. On average where we are  we do most of our business in Ontario we add 5% annual appreciation to the purchase price which in place like Mississauga, St. Catharines, Niagara Falls and places like that is very reasonable. But, we are making money, they are getting a good deal and our investors are making money every body wins so we are happy with that and we are going to keep on doing them. 

Jenna: Sounds like it is really working well for you and I get the impression that a lot of the tenant buyers are thanking you guys at the end of it.

Daniel: Actually a couple of them, since then one of them in particular came to us about three weeks ago, we closed their deal three years ago, and now their situation improved so much they said, hey can we be one of the people who buys the houses for you for your tenant buyer? That was really cool to see that. It went from not being able to buy a house to being able to buy a house and now they are looking at buying a house or more for some of our tenant buyers. That is a real good positive story. I love that one, it doesn’t happen often but I love it.

Jenna: That’s excellent. 

Melissa: That would feel amazing. You certainly are a wealth of information. Where can our viewers find out more about you? 

Daniel: The best and easiest is to go to our website www.sasreig.com. It stands for Safe and Sound Real Estate Investment Group. That is the name of our company. 

Jenna: Excellent. And we would love to ask you our final question of the podcast interview. Where is your happy place? 

Daniel: My happy place is anywhere I am as long as Laurel is sitting or standing next to me and I am holding her hand. I don’t care where it is, that would be my happy place. We have only been married seventeen years, we haven’t lost any of the heat.  So that is my happy place. Any where with Laurel. 

Jenna: That is really, really adorable and I am sure she feels the same way and is happy to hear that. Thank you so much for coming on our podcast. It was wonderful chatting with you.

Daniel: Absolutely no problem. Any time. 

Melissa: It was definitely great catching up with you again and hope to see you in the fall, maybe.

Daniel: That is the plan. We still have some business there and as soon as things get better and we can travel we will definitely want to go and spend a week in HRM in the fall sometime. You will be the first people to know when that starts to materialize.

Jenna: Thank you so much Daniel. 

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