Rent 2 own is not a static model with a specific set of rules. Hence there are a variety of schemes out there, and a lot of models that are called rent 2 own. And a lot of different operators, some more reputable than others.
No wonder prospective clients have a lot of questions when they explore our program. Rightly so.
In broad strokes, though, there are two main models. One is what I would call an “investors model,” a scheme to help a real estate investor profit from a property other than just through its appreciating value and, along the way, get better-than-average tenants and possibly higher rents. In this model, the rent 2 own provider’s main interest is in the property and its return on their investment. This is not to suggest that these R2O providers have a complete disregard for their clients. Surely (hopefully), many care about their clients’ well-being.
The other model is one that I would call a “program model.” This is one in which the rent 2 own provider is mostly concerned about a program to help would-be homeowners become eligible for a mortgage by providing them with a property they will eventually qualify for. This is not to suggest that these providers disregard the investment potential of the properties in the equation; indeed the investments need to make sense. After all, the provider needs to make their living from the program.
Regardless of the model, the ultimate success of the venture is a joint undertaking, depending on both the client’s efforts and those of the provider. It would not surprise anyone, though, that the second model identified above, would have a higher success rate than the first.
But is that good enough? There is still the nagging question of whether the provider is credible, is operating ethically, and has the best interests of the client at heart. Many do. But a few bad apples, and the headlines they have produced, have caused some to be wary.
So, it’s important that you inform yourself of the right questions to ask when exploring a rent 2 own opportunity. Check whether the provider has sound lawyer-drawn contracts. Check whether they are transparent. Check whether they advise you to get independent legal advice. Check whether buyout prices are clear from the beginning, or left open-ended. Check whether the scheme they provide for you will, mathematically, get you to where you need to be at the end, to qualify for a mortgage. Check what help they promise you along the way.
Another thing to check is their credentials to operate a rent 2 own program. Rent 2 own is not (yet) a regulated industry like the real estate or mortgage broker industry. Hence, there is not standard of training or of operation imposed by law.
That’s why the Canadian Association of Rent to Own Professionals was formed. Now five years old, the Association vets its incoming members to ensure that they adhere to a high standard of conduct, operate ethically and professionally, have had some training and have the best interests of their clients at heart, which must also include a credit coaching program. While CAROP does not impose a particular model, preferring rather to vet conduct and practice, CAROP strongly favours the second of the main models mentioned above. Its members follow many creative variations of that general model.
It’s obviously in the interests of the Association to weed out any who do not operate with their client’s best interests in mind. On the one hand, they do not accept them in the first place. On the other, they do have to right to audit their members, to act on any complaints that they receive, and even to expel members, should they be found not to adhere to the highest ethical and professional standards.
Obviously, you would want to check, therefore, whether the rent 2 own provider with whom you are dealing is a member of such an association. And, if they aren’t, to ask yourself, “Why aren’t they?”
Ultimately, who would you more likely trust, a CAROP member or one who refuses to become one?
