Alfonso Salemi is the co-owner, co-founder of JAAG Properties. JAAG specializes in Rent to Home solutions and have helped over 250 families on the road to homeownership. Alfonso loves sharing his passion for Rent to Home and the benefits it brings to people’s lives. He thrives on these interactions and enjoys helping others with their largest purchase or investment of their lives.
He is the conduit to Joint-Venture Partners, Investors, Realtors, Mortgage Brokers, Tenant Buyer Clients, as well as other Real Estate Professionals. As a true ‘people person,’ Alfonso enjoys presenting the benefits of JAAG's Rent to Home program and how it enables those who have experienced roadblocks to become homeowners. Bringing these entities together is one of the things that Alfonso values most about his role.
Alfonso also serves as the President of C.A.R.O.P. (Canadian Association of Rent To Own Professionals)
In my interview with Alfonso, we discuss what is Rent to Own (Rent to Home), why Rent to Own is more relevant now than ever before, and how to earn a great ROI by investing in Rent to Own.
Listen to the first podcast episode I recorded with Alfonso here.
If you’re interested in learning more about Rent to Own and to see if you’re a good fit as a Tenant Buyer or Investor, please email me at sean@burnyourmortgage.ca to learn more.
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Full Transcript
Sean Cooper
Hi, Alfonso, how are you doing today?
Alfonso Salemi
Yeah, doing great. Sean, how about you?
Sean Cooper
Pretty good. Thank you. It's wonderful to have you back on the podcast. It's always great to have return guests. And yes, when you suggested that we revisit rent to own, I was excited to have you back on because as we're going to be discussing today rent to own is more relevant than it ever was before. So yes, I'm really looking forward to our chat today.
Alfonso Salemi
Oh, it's a pleasure being on your show. And you know, your great job with the podcast. And there's so much great information content that is relevant in the lending world and in mortgages and everything around that. And I'm happy to be here to share a little bit of the expertise about what we do in terms of rent to own. And now we've coined it to rent at home. For all your listeners. It's a pleasure. And yeah, thank you for what you do week in and week out, and all the good content that you put out there for the real estate world.
Sean Cooper
Appreciate the kind words and yes, thank you for all the great work you do. They're helping fill the gap in terms of people who aren't ready to quite owning that property yet, but want to eventually be homeowners. So yes, let's get started with the first question. So I'll include a link to the previous episode, it was like a rent to own or Rent to Home101 that we did a few years back there. But for anyone who hasn't listened to that episode there. Again, you don't need to spend the next 10 minutes explaining it here. You can kind of do a shorter version. But could you just recap what exactly is rent to own or Rent to Home for any listeners who haven't perhaps had a chance to listen to that first episode there?
Alfonso Salemi
Awesome. Yeah. Thanks so much, Sean. And yeah, that's definitely the top question or definitely, one of the top questions that we always get is what is rent to own? In our case, Rent to Home? How does it work? Who's involved? And really, how do all the pieces come together? So kind of a quick overview, or the 50,000 foot view of what we do is we help families, individuals, become homeowners, we provide an opportunity for we call them our tenant buyer clients an opportunity to move into their home and enjoy immediate possession of their home, before they can actually qualify for conventional financing.
Alfonso Salemi
So something's preventing them from qualifying at the bank at the mortgage lender, you know, as a mortgage broker, find a solution for them to get into a mortgage. So we'll look at them from a rent to own perspective, and essentially purchase a home for them so that they can move in. We do that in through the help of our joint venture partners, investors, who are other families, other individuals that want to invest in real estate, but don't necessarily want to be a landlord, manage rents, manage properties, manage tenants, all the things that come along with that, so we provide a service for them.
Alfonso Salemi
Offering hassle free opportunities for people that want to grow or expand their real estate portfolio. And finally, the third character, if you will, is that we help our referral partners. So those are people, someone like yourself, Sean, that is mortgage professional, real estate, professional, lawyers, accountants, all different types of industry professionals that refer people to our program, whether they want to own a home, or whether they want to invest in real estate, but they refer them to us. So that's essentially how we work our program. We look for people that can't qualify for conventional financing, help them overcome those hurdles, get past the issues of income down payment credit, and eventually help them own a home. And we do that through our joint venture partners and referral partners that introduce us.
Sean Cooper
Thanks so much for the great summary there, Alfonso, and of course, like I said, if you want to learn more about rent to own, and definitely I recommend that you listen to the first episode, and again, I'll include a link in the show notes. Maybe you can just quickly go over an example about, like, credit issues like common credit issues, you see some preventing somebody or like downpayment, I mean, that with inflation, being as high as it is, and cost of living so expensive. I'm sure that it's more challenging for people to be able to save that downpayment. I mean, I know that it is.
Sean Cooper
So maybe we could just quickly do. I mean, you don't have to use some specific information for privacy reasons. But if you could just maybe just make up a quick maybe credit example or downpayment example of why somebody might not be ready to own a home and how rent to own could help them that that would be great, just so that it could kind of sink in more for people that makes sense.
Alfonso Salemi
Of course, absolutely, I can do that. There's all different types of people that qualify for our program. And it's all for different reasons. Like you mentioned, credit is definitely one of past credit issues or bruised credit, or maybe too much overuse of a credit card or too much debt in lines of credit, or you know, student loans, things like that, that add up that impacts what your monthly or yearly responsibility of terms of making payments are. So, again, I like to break it down into those three categories. They're the income, the down payment, and the credit.
Alfonso Salemi
So we see a variety of different combinations that people have great credit scores. But maybe they haven't been at their job long enough, they haven't worked long enough to establish their income. And they have somewhat of a down payment, not fully what the banks need. There's others that have more than the banks are requiring for a down payment. But their credit is not where it necessarily needs to be someone that has paid late payments on credit cards or, you know, kept their balances over, you know, what is 70 or 80% on a monthly basis.
Alfonso Salemi
So that negatively impacts your credit score, because it's a risk, it's a liability to the bank, see it on a balance sheet, that's money that you need to pay. So that needs to get paid out, or worked out over time. The income that we're seeing and credit is more situational is that we see newcomers and new Canadians entering into the country that are coming here to provide a better opportunity for their families, and they're getting jobs and maybe having some money to come here. Do you know they had to move here and travel here.
Alfonso Salemi
So it does take some expense, but they haven't built up their credit. In a new country, they haven't been at their job long enough, right? So similar types of situations with young professionals that are coming into school, getting designations getting jobs licenses and such, but again, not being at their job long enough, or they're in a rental situation, and it's hard for them to save, to build up a downpayment over time to say I want to save up $30, $40, $50 to $60,000 to go and purchase a home, it's tough to do when you have expenses, other debts, and then paying rent every month as well.
Alfonso Salemi
And the downpayment again is it's all relative, obviously, in terms of where you're looking to buy, but over the last few years, and just over the course of history, property prices in the prices of homes go up over time, and they just cost more there's peaks and dips and all throughout the charts. But over time, increases in price, and saving up for that downpayment. Whether you need 5% or 10%, or 20%, depending on what the bank or lender requires, again, tough to save up for a down payment over time, right? So all different types of reasons are self employed individuals, the small business owners, again, that don't fully claim their income, then we can show them how they can benefit from if they do so that they can qualify for mortgages.
Alfonso Salemi
So yeah, there's a whole bunch of different scenarios with close to 300 families that we've helped. There's all different types of scenarios, situations and examples of clients. But it's usually a combination of those three things, the credit, the income, the down payment, and really the most important factor is the perseverance and willingness to want to be a homeowner. That's what's really going to drive the program or the solution forward.
Sean Cooper
Now, great, thanks so much for the summary there and yes, I mean, on our conversation on the phone there, we talked about quick, just quickly, I wanted to visit this here, but we talked about the benefits of rent own, like when you're a tenant, you have to ask the landlord's permission to pretty much do everything. Whereas my understanding with rent to own is that there's more freedom in terms of renovations that you can do to the property.
Sean Cooper
Like, obviously, you want to touch base with the rental company and the investor before you start knocking out like load bearing walls or anything like that. But isn't it true that there's more flexibility in terms of like being able to do renovations to improve the space like maybe renovating the kitchen or making the place how you want it to be, whereas when you're a renter, you have to pretty much ask the landlord permission just to paint and stuff like that. And maybe you can just quickly talk about the benefits there. Because I definitely think that people who would be a tenant or a buyer would really find that helpful there. Because it can be a bit frustrating being a tenant and not being able to make the place truly feel like your own.
Alfonso Salem
Absolutely. And we think of our tenant buyers or clients now, as future homeowners, they are homeowners, they're homeowners and training in the program. So we want them to take care of the property, maintain it as if it's their own, and do the things that's going to make it feel like their home, right. So if it is painting, if it is improving cabinets, flooring, we've had so many of our clients, you know, build the man caves or the she sheds, improve the property update kitchens and bathrooms, you know, again, that makes the property their own, and makes them feel safe in their house.
Alfonso Salemi
And if they have the skill and knowledge in what to do, if they have the connections, obviously, their structure and you know, electrical plumbing things where you know, you'd want a licensed professional to make sure that it's being done the right way for longevity and to make sure that it's done properly. But again, it is their own, they are going to own the home, they are going to buy it. We want them to treat the property as if it's their own. So if it's some paint, if it's some cupboard, some flooring. Absolutely, I think it's the way to go. And we want to encourage that in our program.
Sean Cooper
Now, that's great. I mean, yeah, like definitely sounds if you are currently a tenant, and you're feeling frustrated by not being able to make the improvements that you want to make definitely rent to own, it can be a great way to be able to still be a renter, but work towards eventually owning and also have that freedom there. So yes, thanks for the overview there Alfonso. Yes, with two last questions. And these questions will take a while to answer here, but I just wanted to focus on the last two questions, they're going to be first of all, from the tenant, buyer perspective. And then secondly, for the real estate investor, or the JV partner, as you refer to CES just wanted to cover both people there.
Sean Cooper
So yes, if you're an investor, definitely keep listening to this episode, because we'll have some helpful information for you later here. But yes, starting with the tenant buyer, the renter who wants to be a homeowner one day, so can you talk about Alfonso, why is rent to own or Rent to Home more relevant than it ever was before?
Sean Cooper
Maybe you can talk about the challenges today, like with high rents in places all across Canada, especially big cities, inflation, it has come down, but I mean, inflation at 3%. I mean, the prices have already gone up by that amount. It's just a 3% increase further from that. So I mean, the cost of living is definitely more expensive, and a lot of people's wages haven't come up. So yeah, maybe you can just talk about the current realities with families finding it more challenging to make ends meet, and how rent to own is more relevant than perhaps was like a few years ago there before the whole COVID pandemic?
Alfonso Salemi
Well, absolutely. And I think it's just historically like, We're such a recency bias of everything that goes on. Just because we're inundated with so much news, information, day to day, every month, there's a rate announcement every few weeks, there's the markets up, the markets down compared to last month. But if we really pull the lens back and look at 20 years ago, 30 years ago, 50 years ago, it's increasingly harder just to be a homeowner. The numbers reflect that more and more people don't think it's possible. More and more people say that it's out of reach or it's unattainable.
Alfonso Salemi
So they don't think that homeownership is a possibility. And this is one of the biggest challenges that we have is that we're saying there is a way you definitely have to put the work in you have to do it. There's things that need to be sacrificed, you need to be disciplined and do certain things so that you can achieve that goal, but with proper guidance with proper information, is all out there, but how it's relative to yourself to your own personal finances. So I think it's more relevant than ever. If somebody is listening to this, and saying, I'm not a homeowner, but one day or I do want to be a homeowner, then it is relevant that the purchase prices continue to go up the market, the interest rates, those things we can't control, those things are going to happen. Whether we worried about them, we were happy or sad. It doesn't take our emotions into impact in our lives. It's what we can control so that we can overcome those challenges to get to that point.
Alfonso Salemi
Now, the challenges have gotten greater, like you said, the income divided. I think that's something again, historically, income never increases the same amount, that prices of things increase, right. That's just the nature of business. And overtime, I think, is boards of directors and things like that. There's just a constant drive for more, for more profit. If we did one last year, then we can do it this year, right. So banks think like that, you know, investors think like that all different types of people in the economy that that's their thinking. So to overcome. And why it's relevant is because you need to plan it, there's not a silver bullet, Sean, I don't even know how many different mortgage applications you look at on a weekly or monthly basis. But if you had a one solution that fits all, wouldn't that be the one solution that you always use, but people are different, our credit is different. Our life situations are different, our income, our deposit, all the different things that create our financial profile, where we want to live, what jobs we have, the skill sets that we can take advantage of.
Alfonso Salemi
I think that's why it's more relevant than ever, in my opinion, still want to live in homes, they still want to have a safe place, they still want to be able to, you know, get together for holidays, or see their families, we saw how important home ownership or somewhere safe was, when we were all told to stay home now, hope to goodness that it never happens like that again. But just reinforced that stability and safety of that home base. And it's something that I've been thinking more and more about lately. If you are safe at home, if you feel stability financially, the four walls, the roof over your head, and you're feeling safe that okay, I have some equity here. I'm building towards homeownership, I have something in my future, the likeliness of once you go out into society, once you leave the home, you're probably going to be a better person, you're probably going to do better, you'll be able to help other people when it's not so frantic or a scarcity type mindset when there's stability or safety. So that's the relevancy. I don't want to say we're going to completely fix society. But I think homeownership has a big, big part to play in that. And more and more people want to own their home. So I think that's why it's more relevant now than maybe it has ever been.
Sean Cooper
Well, thanks so much for the great answer there, Alfonso, and yes, if you're struggling, you want to own a home owner, but you're finding it tougher in this environment here to save money, especially with the rents as high as they are in big cities like Toronto, and Vancouver, and you just feel like your wages aren't keeping up there. And it's definitely even made more challenging with inflation going up in the last couple of years here. As Alonso mentioned, there certainly are options. So yes, of course, there has to be a path to homeownership. But if there's something preventing you, like you're not able to save the down payment, at this point in time, then definitely rent to own is an option there, because the whole idea is that you may not be ready right now from a savings or credit standpoint. But if you can be at that place to actually be ready to purchase the home in two or three years, that's where rent to own can make sense, because you start building up that equity, instead of just paying rent towards the property and making the landlord rich, you can actually build up that equity there.
Sean Cooper
So definitely, if you're finding it tough, and then you want to own a property, be sure to consider the rent-to-own model there. And as I mentioned at the beginning there, I'll include a link in the show notes of how you can reach out to Alfonso and his team and discuss it further and learn more about it. So with that, having said we've spoken about, as mentioned from the tenant buyer perspective, but I just want to switch gears here for a moment and talk about the investor perspective because I mean, I'm not going to lie in this environment here. It is more challenging for investors to find a property that cash flows, that has positive cash flow previously like before COVID there, you could pretty much buy like a turnkey property and have it at least breakeven or have a positive cash flow but the reality is with the higher home prices as well as the higher interest rates is definitely made it a lot more channel challenging to make find a property that where the numbers work, but my understanding from you is that investing in rent to own can definitely provide you with some good opportunities as a real estate investor to earn more money than perhaps you might be able to from just buying a standalone rental properties.
Sean Cooper
So yes, having said that, the question I want to ask you is if you're a real estate investor, can you explain how you can be involved in rent-to-own and why does it make sense more than ever in the current environment where it might be a struggle to find a rental property? Where do the numbers make sense?
Alfonso Salemi
Absolutely, I think, the most important part, when we're talking about it from an investor perspective, we all know that when we invest, we want a return on our investment, we want more money than we put in, that's the key thing, whether you're looking at all the different avenues that you can invest in, right, so you know, different options that people can invest, right, you're looking at the stock market, RRSPs other real estate, you know, whether that's REITs, the thing that attracted me, and it's more often than not attracts the other people that we work with that partner with us and invest in in the deals that the properties that we do is there's people that want to make an impact, they actually want to help others, they want people to also be successful that the individuals and people that we're working with have capital, they have the ability to to qualify for financing, for rental properties and for other properties.
Alfonso Salemi
So you know, the financial stability is maybe more there, or they're trying to grow that even further, by doing any type of investing. But with our rental and program, they want that as well as helping a family helping individuals get into homeownership, because they know that stability is there. So on a month to month basis, there's really no management involved. Like I said, there's no worries of the tenant management or the property management, it's all hassle free, JAAG takes care of all of that, from the standpoint of the actual investment, we're going to the property, we're interviewing and meeting with the clients making sure everything is going according to plan.
Alfonso Salemi
But to your point, it's harder to find cash flowing properties, cash flowing deals, and in a market that we're in right now. And the rent to own has continued to provide cash flow. Now there's a few reasons, one is yes, the joint venture partner the investor, more often than not, they're gonna go to the bank and get their conventional loan or financing as well. So we are again susceptible to the rates that are currently in the market. However, that's what the tenant buyers, the clients that they would have to pay. So they're uncovering that rental payment, or the rental payment is covering the investors, you know, principal and interest, the tax and insurance of the home.
Alfonso Salemi
So on that point there that's covered, the profit usually is with our rental credit. Now the rental credit is given or paid on a monthly basis by the tenant buyer client, so that they're paying that and it's credited back to them. However, that's cashflow in our pocket today that we can use to spend accordingly and how we want. So each one of our properties are cash flowing right from the beginning. Again, depending on our purchase prices, we purchase all different types of purchase prices from you know, $100, $200,000, all the way up to million dollar properties. Not quite maybe the 900,000 I think is on record our highest purchase price. But typically in the middle is our meat and potatoes. But every deal needs a little bit of capital, you know, the return on investment varies on deal to deal as well too. But it's definitely in the high double digits as well, that can bank on.
Alfonso Salemi
And again, the part of helping a family makes an impact that you're doing this, while you're helping this family, you're making your return, you're making monthly cash flow when we sell the home at the end of the term, which is typically three years. So no relatively short period of time, it's not as quick as a flip, that's three months or six months, but it's not like you need to wait 25 years to sell the property and pay all the equity down either. So it's a nice hybrid where you're gonna get higher than average cash flow, you're in and out of a project. And typically three years or so, sometimes four, sometimes two.
Alfonso Salemi
And the return on investment is there with completely hands off tenant management and property management, we report on a quarterly basis to our investors and partners so that they know what's going on with the deal in terms of the clients, the property condition, everything is kind of set up for them. And we're facilitating that. So that's some of the benefits, why I got involved in started investing in rent to own to begin with was, again, that impact factor, as well as you know, the higher than average returns and you would on say, a single family home or another rental property or real estate strategy, where again, you'd have to do a lot more work to to get that return.
Sean Cooper
That sounds great. And I really like the fact that you're able to help out a family and also earn a honest living for yourself as an investor as well because yeah, like you said, and I mentioned earlier if you're just putting the bare minimum 20% and down and rental property, it's really hard to get the numbers to work. Whereas my understanding of what the rent to own is because that the extra rent credit is based basically helping you reach positive cash flow right off the bat, whereas it would be difficult with just a standard rental property there.
Sean Cooper
So yeah, I would say for any real estate and investors listening to the show, who perhaps have decided not to invest in properties at this point in time, I urge you to look at getting into rent to own because if you previously looked at buying a rental property, and the numbers didn't make sense, then rent to own definitely that model there can make sense because the rent credit can make all the difference in terms of getting the numbers to work. Because yes, when you're buying a rental property, it's all about the numbers there. So I definitely encourage you to reach out to Alfonso and his team. And again, I'll include the link in the show notes of how you can reach out to them there and get the red carpet treatment from them there and learn more about how they're so perfect. Was there anything else that you wanted to add?
Alfonso Salemi
No, again, just yeah, really, thank you for the opportunity to share, know what we do and how we can help people from both sides, people that want to invest people that want to own their home, and, and just for being a great referral partner, a wonderful person that you're guiding people towards the strategy, this solution that can make an impact on their life. So just yeah, thank you for the opportunity. Thank you to the listeners that take the time to listen to us.
Alfonso Salemi
And if there's any other questions or anything that you feel, yeah, you know what, that sounds great. But what about this, or what about that? And that's what we're here for. We want to answer those questions, help in any way that we can, and really bring light to this industry and bring light that it is possible that there is a way that you can still achieve homeownership, it's not a hopeless cause. There is work required, there are things that need to be done, like I said, sacrifice, determination in the grit and all that, but we're there to help and guide you along the way to continue to keep you motivated. And, again, just really thank you for the opportunity, Sean.
Sean Cooper
Perfect. Thanks so much, Alfonso.
Sean Cooper
Thanks for listening to another episode of the burn your mortgage podcast. Besides being a podcast host, I'm also an independent mortgage broker. If you or anyone you know, family, friends, co-workers or neighbors could ever use any unbiased mortgage advice or a second opinion, feel free to reach out email me at Sean. That's sean@burnyourmortgage.ca or call or text me at 647-867-3711 for a free mortgage consultation. Also be sure to head on over to www.burn your mortgage.ca and sign up for my free weekly newsletter. As a small token of my appreciation, you'll be able to download my ultimate mortgage checklist on choosing the perfect mortgage. I look forward to hearing from you and helping you with all your mortgage needs. Once again, thanks for listening.
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