Rent To Own Strategies with Alfonso Salemi
This content is provided in partnership with Georges El Masri and the Well Off Podcast.
Podcast Transcription
George El-Masri [00:00:00] Welcome to the Well Off podcast, where the goal is to motivate, inspire and share success principles. I'm here with Alfonzo and then you've got to help me with your last name, Celebi Salemi. Perfect. All right. And he represents Jank properties. He's got a partner, Adam Weiss, Wissink Wissink. The last names are always hard to have our time with them. So welcome to the show.
Alfonso Salemi [00:00:20] Thanks, George. Yeah. Really, really excited. Thanks for having me.
George El-Masri [00:00:23] Any time. So Fonzo is really active in the real estate community. You've been investing for a long time.
Alfonso Salemi [00:00:29] Yes. Two thousand nine. I started really getting the bug after reading Rich, that poor dad.
George El-Masri [00:00:35] Oh, yeah, I love that book. I just read it for the first time, maybe less than a year ago. And I read it like three times in a row because
Alfonso Salemi [00:00:41] it's such a such change, so many lives. So, yeah, that's cool.
George El-Masri [00:00:46] So the way what I usually like to do is just start off by talking about your childhood, where you grew up, what you remember, like certain things that stood out to you as a kid.
Alfonso Salemi [00:00:55] Yeah, absolutely. Born and raised in Hamilton, Ontario, first generation Canadian. My grandfather, grandmother and mum came from Italy in the mid 60s, so they moved in the east end of Hamilton. So that's that's where they immigrated. And then my grandfather, through the help of friends and family, got into the real estate game, bought a house up on the Stony Creek Mountain Paramount Loop. Anybody that knows the Paramount Drive. Yeah, and that's where I was. That's I still my parents still live there to this day. So, yeah. Up on the Stony Creek mountain, things that I remember is just I felt really fortunate. I always make the joke that I had two sets of parents that my grandparents, my mom's parents that that lived with us, that were Italian, primarily spoke talian. And then my real parents that could read my report card or that spoke and understood English. But then I had the old school parents that if it wasn't a good report card, well, you know, there's the old school, I guess punishment, I guess. But so, yeah, I grew up really with, like, hard Italian roots and it always kind of being entrepreneurial. My sister and I have a younger sister a lot smarter than I am PhD. But she I would always try to drag her along and get into trouble and stuff like that. But yeah, it was good. My parents, their background, my mom works for the Ministry of the Environment and my dad still to this day works at Stelco Steel in Hamilton. So, yeah, factory worker, government worker and I through the family, I think that's where I got the entrepreneurial kind of bug.
George El-Masri [00:02:26] Yeah. Yeah, it's awesome. I just recently moved to Hamilton myself, OK? And I'm noticing there's a lot of Italians. They're like, I don't know what it is about it, but there's a there's a huge Italian influence.
Alfonso Salemi [00:02:37] Absolutely. Still to this day, there's definitely a lot. And they say, you know, like you never leave Hamilton tonight. So even myself, I moved I lived in Mississauga for a little while, but then I came back to Hamilton. Yeah, we got it. We got a strong, strong brotherhood. The bison's right.
George El-Masri [00:02:54] Right. OK, another thing we had in common that's interesting is that we both joined at one point and did some emceeing and stuff. Yes. So how did one when were you doing that? And also how did that possibly help you with other other ventures, like with your with the real estate club that you're.
Alfonso Salemi [00:03:12] Yeah. With the right club. So yeah, I, I was working at a grocery store and like I call it, the typical Hamilton Italian guy story. One of my cousins knew the owner of the grocery store got me a job at the grocery store. I was 17 years old working there and yeah, made a really good friend at the grocery store and he got offered the opportunity to do one of the managed store managers. Cousins was a DJ and he was always hanging out and needed somebody to help him out. And yeah, I my grandfather was talking about how to truck and the guy that that I knew didn't have his license yet. He didn't have his full license. So I needed a guy to bring the equipment around and and help plug out. And yeah, I watched a few times and I'm like, hey, this is kind of cool. Can I try maybe emceeing and doing the introductions? I was a huge wrestling fan growing up, so I love like the entrance is right from the wrestlers when they come down the aisle. Right. Like weighing in. Right. Like the big the big announcement. So when the wedding's that's what is kind of cool, like doing those big announcements or the introduction. So yeah, that's started. I'm seeing and doing that for a long time. And the reason that kind of helped me out is the right call. That sort of feels like it's like a big party. Right. We're there to learn and we're there network and stuff, but we want to make it fun and get the energy up. So, yeah, the public speaking kind of comes naturally for for me, this kind of forum I'm getting more used to. But yeah, definitely the public speaking that that's where it really stems from. I did speeches in elementary school, in high school as well, too, but that's what definitely pushed it
George El-Masri [00:04:39] to do that. Yeah. And I asked you when you first came, came into our office here, what was just before recording. I asked you if you'd just because I can tell from the way that you speak
Alfonso Salemi [00:04:49] the radio voice.
George El-Masri [00:04:50] Exactly. You just have like that oral history.
Alfonso Salemi [00:04:54] Thanks, baby. We got to do it said, man. We got to get spinning on the wheels and we'll see it.
George El-Masri [00:04:57] Yeah, I haven't had.
Alfonso Salemi [00:05:00] Funds themselves.
George El-Masri [00:05:02] Yeah, it's been a while, but so it's interesting that you start off doing something and then you don't realize that a few years down the line it comes in handy. And it really it's a big part of what you do. You've got like a huge sound system. You set it all up for the club and you you make it work for you.
Alfonso Salemi [00:05:19] Absolutely. Yeah. It's Ellerson. It's like when when you acquire that knowledge, people talk about what if you lose all your money in your assets? OK, that's fine. But I don't lose the knowledge and the information that I have acquired that I've learned through deejaying and the people that I met through deejaying and the people at the grocery store that I met. And you know, the different influences throughout your life, or you have that knowledge and you can definitely apply it to to what you do. And so, yeah, it doesn't I think everything is a real learning experience. If you don't take something, whether something you want to do, something that you don't want to do, then yeah, you're really missing out on the point of of going out and doing things right. Yeah, for sure.
George El-Masri [00:05:54] If we fast forward a little bit to the first property that you bought, can you tell us about that?
Alfonso Salemi [00:05:59] Yeah, absolutely. It was a rent to own and it was I had just gotten finished taking the the classes, the rich type classes, and we were looking for RedZone opportunities and through the network of people and the classes. I was on an email list from my now business partner, Adam Wissink, and he sent out a deal that was exactly the prototypical deal that we were supposed to be looking for in the classes. And I was like, we want it. So we had the mentor. We didn't have we haven't done the mentorship. I haven't done the mentorship at that point. And I said, OK, what do we do? What do I do? And he says, Tell them you want to tell me how to take the deal that you're going to do it. So I tell him. I tell them I want to do the deal. Awesome. Like, oh, crap. Now what. Right. And yeah, a hairdresser in in Thorold just outside of St. Catherine's Nagar area. Really good credit score. She had a lot of down payment because she was a hairdresser. So the whole wealthy barber type thing, it's like the, you know, the wealthy hairdresser. And she just wasn't reporting their income properly. And I had learned all the principles beforehand what the rent on what to look for, but I just hadn't applied them. And fortunately enough, Adam had done a few Renton's himself, and he really walked me through the process. I always joke around with them. He stuck with me for life now because we're business partners. But that first deal, I asked so many questions that I was probably the most obnoxious, annoying investor, joint venture partner that anybody could have. But he was really, really patient, walked me through the steps and, you know, made me feel comfortable because he had already done it. So he had kind of seen these things as the third, fourth, fifth time that he had seen these things. And that's where it clicked for me, that I was like, wow, yeah, he's already done it. So I don't need to recreate the wheel or do something special here. We're just going to follow his process. I was hiding in washrooms. My job was to be on conference calls with the realtor in the in all the different components of the deal to to pay attention and really learn. And that was like the last condition that, you know, you have your normal conditions on buying the house. And then the last condition I put on Adam was I said, OK, no problem, I'm going to do this with you. I'll put the money in. I'll put they'll be the investor. But you just got a tweet. You mean we're going to do more of these together? Yeah. And that's yeah. That was the first deal. And that kind of spawned our relationship and our partnership. He's very so talk about the he's very analytical. He's an engineer by trade. So he's like ones and zeros Excel sheets. And it makes it real simple for me to kind of explain it to people and see what those key indicators are. Yeah. And since then it's been it's been really going it's been going well. And that first deal kind of it pushed me over that edge to get me out of my comfort zone to go and do it instead of just analyzing, analyzing, analyzing, to go out and do it right.
George El-Masri [00:08:32] A lot of people get stuck in that analysis thing. Yeah, I see it all the time as well. But you're right. You just got to push through it. Just just go out there and do it. For the people that don't know much about Renton's, can you just give a brief description of what it is?
Alfonso Salemi [00:08:45] Sure. So it's somebody that can't qualify for a conventional mortgage today, right. So that means they have a weak credit score. Their down payment isn't the five or 10 percent or 20 percent that they need or their income is not being like the example I just gave that's not being claimed properly or really doesn't sustain a bigger purchase. So what we do is we look at those three components and we pretty much put together like a game plan for typically it's a three year term to say, OK, this is the things you need to fix. Mr. and Mrs. Tennet Buyer, once we have that plan, it's agreed upon with the tenant buyer. We move forward and purchase the home. So essentially we're buying a home for these clients that are going to buy it from us in three years from now. And we're getting them prepared to buy that house throughout those three years. So we started off at home and I just buying them ourselves. You had the first couple under his belt. That's why he sent out that email. He needed somebody else to qualify. And I was that person and we that I eventually capped out. So now what we're doing is also still buying them ourselves, but having joint venture partners that purchase that home. We operate the whole rent to own side of the program where we're coaching these clients through to get to the end of the program with our credit team, mortgage brokers who also have a. Usted stake in the program as well, too, and really trying to create the win win for everybody, so I hope that's a good description.
George El-Masri [00:10:06] Yeah, yeah. So basically, what would be the ideal scenario for the tenant and then also on the other end for the investor?
Alfonso Salemi [00:10:14] Yeah. So the ideal situation for the tenant is say, you know what, they they have good income. They're making let's say family income is one hundred thousand dollars a year. They have a decent down payment, it's about four or five percent and it's Kaputt and their credit score. Maybe they had, you know, blemishes. Right. They collections or, you know, not paying their credit cards on time or too many or over their over their balance, those types of things. So, you know, and all and all that they're making good income. They have a decent down payment, but they just need a little bit of credit coaching or credit help. So that's where our credit team comes in and helps them repair those credits and say, OK, you have a credit card, you have a line of credit. You have you know, they coach them to see what specifically they need to do to fix their issues and to clean up that credit score by the end of the program. So that's just one example. You know, some people that just don't have enough of a down payment, they're self-employed and they need 10 percent for a down payment. Right. But they only have five today. Right. Their income is good. Their credit scores is good enough and could qualify for a mortgage, but they don't have that extra five percent. We help them save that throughout the program as well, too. Right. And then the last piece is the income where you know a lot of people. That's why they get into those rental and situations, because they overextend themselves. But, you know, there's rules with the lenders that a certain amount of income, you know, you're TDRS your your debt to service ratios need to be in place of what you owe, what you make. And we really sometimes have to crush some dreams to say, no, this is realistically what you can qualify for in a rent to own. Once you do that and you build equity into your home, then you can kind of parlay that and move that into a larger home. But this is that bridge for a lot of times. It's not the dream home. Now we've got a bunch of dream homes and it's funny, we came across one ourselves, too, but that's not the ideal situation. Typically, it's someone for them to get back on their feet and and reestablish themselves from the credit site.
George El-Masri [00:12:04] So to to do a short summary of what you're saying, just a general description would be that a portion of every payment that they make on time of their rental payment that you make on time goes towards the final down payment that they're paying to purchase the home. Correct. In addition to the initial purchase or sorry, the option fee that they put down. That's right. So so basically, they're accumulating a bunch of money that will be used for the down payment three years down the line when they look to to purchase the home. You got it. So instead of them just paying rent and throwing that money away, at least a piece of that monthly rental payment is going to come back to them at the end.
Alfonso Salemi [00:12:40] That's right. We have a set target. We have a predetermined sale price that we're selling back to the client at the end of the three year term, for most part, three year term. So if it's let's say the future purchase price is five hundred thousand dollars, we typically like to have our client to have at least ten percent. Right. If they're self-employed, they definitely need that. We would want even more for them. But a normal client, at least 10 percent down. So they need to save up fifty thousand dollars if they have twenty five at the beginning for their down payment. Now, we just need to save up that twenty five throughout the thirty six months.
George El-Masri [00:13:12] Right, exactly. So really what you're doing is trying to create a situation where the tenant will benefit at the end. You want them to win, but the investor will also make their fair share of profits on it.
Alfonso Salemi [00:13:23] Absolutely. It's a win win. We're all pushing in the same direction.
George El-Masri [00:13:26] So question for you, do you believe that it's in the tenants best interest to go through the rent to own program from the beginning if, let's say they have good credit, good income, but they just don't have enough a down payment of a down payment, or is it better for them to wait that extra year, maybe save a little bit and just go straight into buying?
Alfonso Salemi [00:13:43] So I'll answer that a few different ways. The first ways, if they're disciplined enough to do it on their own, go for it. Do it. You know what? Have a friend and say, listen, I'm going to put you on a bank account and we have to we can we can deposit money all we want, but we can only withdraw if both of us sign. And that's an accountability person. You save up that and put that in and actually do it if you're disciplined enough. What we see is a lot of people aren't to do it themselves. So that's why it's almost like a forced down payment savings. Right? There used to be a commercial. I forget who it was for. But this if you could have done it on your own, you would have done it already. So that's the first answer. The second piece is if you don't have a lot of background, like when you were I don't even know how old you are. But when growing up, when I was going to school, there wasn't a lot of coaching or teaching about your credit and what a credit score was until I bought my first house and I was signing mortgage documents, I didn't know what a credit score was. The mortgage broker magically gave me a number and said, Oh, yeah, you're twenty. And I was like, out of what? Like, I didn't know what that was like. Is that like a batting average that like, you know, is it out of a league like I didn't know eight point two percent. Like I didn't know. So a lot of people don't know that. So if they're in that situation, this is like an added help for them as well to to get some credit coaching and credit repair. Right. Again, I. Talk a lot about like when my grandfather first came here, he did not want debt, it was debt, no mortgage backed, OK, but one of his cousins said, go, no, listen, go and buy that house, get a mortgage on it. You're going to pay it off and you're going to start get your foot into the game. Right. And he was terrified. He didn't want to do it. And his cousin said, OK, if you don't buy it, I'm going to buy it and I'm going to rent it to you. Right. And then, you know what? He kind of he manned up and said, OK, I'm buying. If you're going to put your ass on the line for me, why can't I put it on the line for me? So that's the other pieces that that coaching, that education, that credit mortgage is not bad. It's just how you manage it. So that's an added piece for them as well, too. So, yeah, if they're disciplined enough, absolutely. Go for it. I want people to go and do that. The other thing is well too, that it makes it tricky, especially in the market, especially in where we're at, where we are in Ontario. It has been appreciating rather quickly. So if if you need another six months, year, year and a half or two years to save, well, you're saving for today's price, right? Once you actually get to that accumulation in a year or two, that price may have changed. Nobody has a crystal ball. But assuming, you know, it might have gone up a little bit. Now you need to save an additional. This is almost putting a freeze on like the real estate market, saying this is what we're going to sell back to you for the you know what you're going to buy it for, right?
George El-Masri [00:16:20] Yeah. And you know what? I actually agree with you, because the first deal I ever did in real estate was with this young couple that was looking to rent. And I worked with them throughout the year, maybe two or three years later, they spoke to me. And they're like when we first rented that house, we had enough money to buy and we both were working. We had great income and now we just burned all that money. We don't have a down payment anymore. And we just we were we were out priced by the market. So you're 100 percent right that a lot of people just don't have that discipline.
Alfonso Salemi [00:16:50] That's yeah. That's what it really boils down to. And it's tough growing up. Like I was in the most discipline of my credit cards and I put my credit score through the ringer and and until I knew what it was, I knew how to manage it. It's not a bad thing, right? Like alcohol is not a bad thing. But if you drink too much of it and you go crazy on it, it's a bad thing, right? Credit debt is not good or bad. It's how you use it. Right.
George El-Masri [00:17:16] So it's actually good for a lot of people. It just like I said, it just depends how you use it. That's right. Now, on the flip side of things, as an investor, let's say somebody has some money and they're looking at this option as an investment. How does it work for them?
Alfonso Salemi [00:17:28] Yeah, so typically we try to make it really easy. And because I think we've already had the most difficult investor in our company history was me. So we try to make it real easy and I try to alleviate as many fears or apprehensions for our investors. So we'll walk them through a few examples of deals that we've actually done, real life scenarios of some of the projects that we've worked on. But ultimately, once once they're ready, they're going to have to have some type of budget themselves in terms of the amount that they want to invest in terms of capital, the the mortgage amount that they're able to qualify for. And then they'll also have other parameters of certain cities or areas that they do or don't want to invest in. Once we've determined all that, we we have projects coming through the pipeline pretty steady. In twenty eighteen we closed on thirty seven rent to own properties. I might be off by one three thirty eight but anyway in the mid 30s in that year. So there's constantly deals coming through. Once we've established all that, basically we put them in touch. We'll, we'll give them kind of a high level view, a synopsis of the tenant buyer, the situation, the area, the scenario. We don't have a property at that time yet because we've just set a budget for the client and have their background. But then the client goes out and searches with someone like yourself, a realtor. Once they find that house, that area, you're giving us a call. You're putting together the paperwork, the agreement of purchase and sale. Our client reviews it. We put in our offer. We submit the offer. We go back and forth. Negotiations get the best, best deal that we can. We do our due diligence with our home inspections and financing insurance and any other specific things for a property if there's well and septic, all those types of things, and then basically have their apps that they're bringing. We have a great mortgage broker that we work with. I worked with all of our clients and our tenant buyers. So we obviously refer our investors to them if they have their current mortgage brokers or lenders that they're working with and they like they have that agreement of purchase and sale now that they go up and virtually go get qualified and get that mortgage, we closed on the deal. We get the keys and basically we are going to manage that program for the investor. We do quarterly reporting like now we have a staff that will go out to physically to the property. Our credit team is following up with the clients as well to on a quarterly basis to address the issues that we determined ahead of time of the rent to own. Yeah, the thing that I always say to our investors is you can be as hands on or hands off as you want. If you want to be the crazy investor like me that's calling Adam or calling me. At all times, we'll give you the answer, we'll give you the best answer that we have, and if you need more information, we're going to go and get it. But if you just don't, we just send you the cash flow every month and. Yeah. And go from
George El-Masri [00:20:09] there. Done deal. Yeah. So the investor basically the ways that they make money is when the deal was first signed, you collect an option fee. So that option fee technically belongs to the to the investor. The group of investors is in addition to that, the rent is typically a little bit higher than than market rents and because also a portion of that rent is going to back to the tenant. Correct. And then finally, you decide right from the get go what the purchase price will be and when the when the tenants will have the option, but not the obligation to purchase the. That's right. So they're basically they know exactly how much money they're going to make pretty much right from the beginning. Yes. So it's good for possibly somebody who's not looking to get into something too risky. But the only risk, I guess, for the investor is if the market comes down and the tenant decides not to buy the home. Let's say they agreed to sell for three hundred thousand three years down the line of the values. Now two hundred thousand. Then the the tenant can walk away and they don't have that deal anymore. So that's the only.
Alfonso Salemi [00:21:09] Yes, and that's right. And obviously that yeah. That's a that's a complete possibility. Where Yes. The property. Not likely. Not likely. But in that effect, you know what I am part or Jeg is part of the Association of Rental Professionals. So there's rental professionals across the country. And when a W in Calgary, when the market took a big dip and rent to owns, we're coming to term and the properties weren't appraising for that future purchase price. So that agreed upon sale. Yeah, there was there was an issue. But the solution that they had and again, I haven't experienced it personally and these are just colleagues that have explained it to me. But basically, if you're up or down that agreed upon purchase prices there, if the clients if for them, they can't get the mortgage for that because it doesn't appraise, the lender won't appraise it. So whatever gap there is, you could well do. One of two things is the first one is say let's extend the program. Right. To see let's see maybe a year or 18 months or two years, then you know what values will kind of get level back out and and get to that value that we need. And then you will be able to qualify. The second part, what a few of them did as well to was just hold back like it was almost like a vendor take back where basically we'll sell you the property at what you the maximum appraisal that you got and say there's a thirty thousand dollar gap. Right. So there's a second mortgage for thirty thousand dollars on the property. Now you're paying that to to to Opta to fill the obligation of the purchase price because it's happened in Hamilton where it's the opposite for us. Where we bought the house is at two eighty three hundred thousand and we had agreed to sell back at three fifty or three sixty. But all day long these houses were going for four plus. Yeah, but we had signed that to sell back at three sixty. We said, hey, that's, that's the obligation that we made. We were we've made again, like you said, cash flow and made money through the project. We made money on the sell back of the property. So we didn't need to be greedy to say no. Now we want to sell to you what the market value. It's still this is the agreed upon sale for good or bad. That's why it's it's it's truly a partnership between ourselves, the managing company of the rental properties, the investor and the tenant buyer that all of us need to be successful.
George El-Masri [00:23:14] Yeah, yeah. It's kind of a program where it helps people who are afraid of taking big risks. You can still be invested in real estate, but mitigate your risk. So the returns might be a little bit lower in that instance. That's right. But the risk is also lower.
Alfonso Salemi [00:23:27] And it's really a bridge for for both the investor and for the tenant buyer, the bridge for the tenant buyer to get into homeownership, but then also for the investor that necessarily maybe they like their job, they like their job, that they do they don't want to quit what they're doing, but they want to make a little bit more on their returns, but don't want to deal with tenants in toilets and in issues and problems where the tenant buyer profile is. They're maintaining and managing the house. They're responsible for repairs, maintenance upgrades,
George El-Masri [00:23:57] and also because they know that they're probably going to own it. So they're going to take better.
Alfonso Salemi [00:24:01] Absolutely. Absolutely. So it's a bridge to and I'm you know, obviously my profile change a little bit from when I first started. But I was the most risk averse person you could find, like going to the casino. I would bring one hundred bucks and I would be like, oh, my. It'd be like prying it out of my hands. Right. That I.
George El-Masri [00:24:16] Now you go to the casino with thousands.
Alfonso Salemi [00:24:18] No, I still go I still won't go to the no. OK, I'll put a little bit on the roulette but that's, that's about it. But even that is that I wanted to see a clear path on how to how I could get my money back. And that's where the investors we try to live their fears. Right. It's it's the best educated guess that we have. But here's plan B and plan C and planned if things do go right. Yeah, that's right.
George El-Masri [00:24:40] OK, so question for you, as an investor, why would somebody do a rent to own versus just like doing a straight buy and hold?
Alfonso Salemi [00:24:49] Yeah, well, there's nothing wrong with that. We have a few buy and holds in our portfolio as well to single houses, duplex triplex. But what we just talked upon briefly there is the maintenance. Of the property, like I said, we go visit the properties probably three to four times a year and I think that's even overkill. But that's just, again, risk averse. We want to have our hands on the projects, but the properties are being maintained. The clients are there. They're taking care of the property. They're paying on time every month because they have a benefit. They've given such a big upfront deposit as well to. Right. So right off the bat, your cash flowing from day one versus a buy and hold. Maybe you go in there, you need to do some Renaults, clean it up a little bit, do some paint. Yeah, yeah. That's part of it. You're right. And you hold it long term and paid off. I think a good balance of the two. I don't necessarily say one or the other. It's there's a lot you can generate a lot more cash flow. And that's like I said, the first investment I did was rent to own in the second and the third. It allowed me to generate some cash flow and some capital so that I could go in and put in new money in a long term buy and hold and get accumulate a few of those. Right.
George El-Masri [00:25:51] So so a good profile for for this type investment. Investment is somebody who's maybe got a full time job. They don't want to be too hands on. They don't want to drive down to St Catherine's if they're working in Toronto and they just want to make a decent return.
Alfonso Salemi [00:26:04] That's right. Exactly. That they don't like we typically it's the 15th or the 16th of the month that we'll send the cash flow and we split it up on a monthly basis for the investor or according to what they require. For the most part, it's on a monthly basis. And and that's it. It's just like a little here's you know, here's an extra little bit of cash flow every month. That's it. Let us know if you have any questions. Yeah. Luckily, we see our investors once a year. We do an investor appreciation dinner. And for a lot of the times that's besides going back and forth with paperwork, it allows us to see the investors. For the most part, we're operating it and they know that they're in good hands with us managing it and following up on it, because I treat every single thing we do own. We're part owners with these properties, with all of our joint venture partners. So we do treat them like they're our own because they are right. So we care about them as as if it was that first deal that I did. And, you know, there's a funny story on that one, too, is the second month the the client, the automatic transfer, the payment didn't go through. And this is my first investment, right? Oh, my God. All my money that I had at the time. And I call up my partner out. I'm like, I'm going to see Katharine's. I'm going to pick up this money. You don't know. And he's like, hold on, let's give her a call. Let's find out what happened. And she just gave us twenty thousand dollars like a month and a half ago, two months ago. So because she was a hairdresser, she had a posh system and it got compromised. So all of her automatic payments, when, you know, like when you lose a credit card or something like that, they gets stopped. And it just she was, oh, my God, I completely forgot because it's only been one month. The next day she was in the bank, put the money in the account. I was like, oh, OK. And alleviated my fears. Right. So, yeah, that's what we manage that like it is our own. If there's a problem, there's an issue. Still, till recently, I'm I'm the point of contact for a lot of our tenant buyers if they have an issue or call a liaison between our credit team trying to scale that a little bit more so we can have more time and fun for for podcasts and things like this and and do more write club events. But but yeah, that that's we treat that like it's our own. And that investor is our most important client as well as the tennis player. It's a team.
George El-Masri [00:28:08] Yeah. So in that in that scenario I know that you said the lady, she went to the bank the next day. Well, let's see, you had somebody who was late on their payments maybe two or three times in a row. What would happen there with their with their initial option fee and with everything else?
Alfonso Salemi [00:28:23] Yeah. So again, that's our first our models. Let's make a call. Let's find out what the issue is, see what it is, if it's going to be an ongoing issue, if this is a loss of a job. An example is an Ingersol. There was a strike at the Camy plant and that's where the tenant fire, the main breadwinner of the home, that's where he worked. So while the labor dispute I don't see strike, so I don't know if it was one of the two. But anyway, he wasn't getting paid. He wasn't at work. Basically, we said, OK, we're going to delay your payments. You still need to make that option payment every month for your down payment saving so that it shows. But we delayed the payments a couple of months so that he could get back on his feet and still do that. So we delayed that a little bit. We've sat in clients living rooms with the investors and say, OK, why? What's the problem? And we just found out it was a matter of a date. We were taking it the day before his check came in. So it's always late, right? So we'll try to resolve the issue as much as we can move a payment date or you know what? Maybe we'll we'll ask for a few months upfront if the if it's becomes a habitual problem. But in worst case scenarios, and it has happened in one case in Stratford where the client just pretty much disappeared, we stopped getting rent payments. So one month went by. We we sent the and for and we were basically bound by the landlord tenant board. Right. So we couldn't get in there. I actually went to the property and it's there were squatters, people that just moved in and kind of just hijacked the place. And I'm like, who are you guys? And this is yeah, it was about this baby about two months, month and a half since we'd been to the place. We stopped getting the rents, trying to communicate and said, OK, let's. Figure out what's going on and we couldn't do anything at that point that day. There's nothing I could do for those people to get them out, but we had to go through the normal. And for the supporters
George El-Masri [00:30:07] to get to. You have to file.
Alfonso Salemi [00:30:10] Well, yeah, like at that point there, I like I, I wasn't wrestling them out or fighting. There was like a 400 pound guy is like you're not getting in here. I was like, all right, I got to know. I know this is on video too so this face can't get any worse. So I didn't want to make it any worse. But yeah, we went through the Landlord Tenant Tribunal, got the official was it a vacant possession that we had the home and basically we went on. So yeah, we lost two or three months worth of rent payments, but we had a significant down payment that the client had given us. And so to this day, don't know where this individual is ended up. Still never contacted them, never showed up at the Landlord Tenant Tribunal. But, yeah, you know, that's an extreme scenario. But if it is an habitual thing and late on two, three, four, five months back, really. Yeah. We're going to go through the normal process.
George El-Masri [00:30:57] So if you do evict them, do you get to keep the option payment?
Alfonso Salemi [00:31:00] Yes. Yes. Yeah. Legally, the contracts, that's how they are written. There's an example in Oshawa where it was two years into a three year rent to own and the clients had kind of approached us and said, listen, we're getting divorced. Neither of us can keep the monthly doing the monthly payments. Then neither of us are going to be able to qualify for this particular home on our own. What can you do? And because they were upfront with us in very open and allowed us to bring other people in to show for potential rent or another rent to own scenario, we said, OK, they at that point they probably had about thirty thousand dollars in credit with us. Right. So we said, OK, well, we need to clean the place up a little bit, painted, did some landscaping, all that kind of stuff, probably about ten to twenty thousand dollars worth of work. So we said and we returned a portion of it back. I think it was almost half. I think we gave them both fifteen thousand dollars back and we used that fifteen to get the property ready to relisted and get it rented out. So, yeah, we try to work with the client as much as we can. Right. But if they're not willing or able to help themselves, it's hard for us to, you know, to help. We're not a charity. We have to operate a business. But we do want to give them every benefit of the doubt that we're doing a lot of prescreening up front and trying to weed that out ahead of time. But again, no one has a crystal ball in terms of life scenarios. Right. So, yeah,
George El-Masri [00:32:15] well, I think that's the right thing to do. In that case, if somebody is going through a divorce, it's it's kind of out of their hands.
Alfonso Salemi [00:32:19] So most of the money probably went to the lawyers.
George El-Masri [00:32:22] Exactly. Exactly. Yeah. Now, another thing that happened, you recently actually rescued one of my my clients. It's a great show, which is how we actually started kind of talking a little bit. I know you from the right club because I attend. But so I had a listing in Kaledin and the house sold and they had five days to get their financing, the buyers. And on the last day, the agents calling me is like, I don't think we can get financing. I don't know what's going to happen. And later on I get a waiver. They eliminate all the conditions. And I'm like, I don't know what to tell these people. They're not going to get financing, but they eliminate the conditions. And I find out that you actually had one of these rent to own investors. Yes, they came in, we amended the deal, switched out, swapped out the old buyers and put in your investors names. Yep. And the transaction went smoothly. Everything went well. And as soon as I found out it was you on the other side, I was like, guys, we can really good.
Alfonso Salemi [00:33:15] Oh, I appreciate that compliment. That's awesome. And yeah, that wasn't the typical ideal rental scenario and how it all goes. But yeah, we've done a whole bunch of those as well to last minute where client thinks they've secured their financing and something happens on another shoe drops. The, the lender comes back with something and says we can't. And you know what, we that's typically when we kind of go to our credit team with like a nine one one, like we need a quick analysis on these people here as quick as we can. What's going to work out. And and, yeah, really, really great clients that we're working with is the awesome income, great down payment. It's just they didn't have the credit score. There's just a few blemishes that the lenders just didn't like. And we said, OK, well, we can clean that up in, you know, in a matter of three years. I think that one might even be a to a two year rent to own, actually, just because of the strength of the client. But, yeah, that's it's as simple as you just said. Right. We looked at the like the property, don't get me wrong, was beautiful. Georgia, the great job of staging it as well to I don't know if you did or not, but it was beautiful property. Didn't need to do much as a brand new building. Brand new. Yeah. But yeah, we we had the client. That's what we were looking at. First and foremost it's the house was just a number we needed to see if they could qualify. I think it was mid sevens or something like seven.
George El-Masri [00:34:25] Fifteen.
Alfonso Salemi [00:34:26] Yes, something like that. And we just said, OK, can can they qualify for this number once the Yes. Button goes through? OK, now let's go look at that property. And I remember going to the home inspection and I see your sign and I'm like, I know that guy. So yeah I think yeah we could communicate afterwards and yeah, they're there in that property. They're loving it. They have two beautiful little daughters and now that's home for them. Right. So you know, the big plans, it's a brand new build. So they're, you know, adding some landscaping elements in the back and that kind of stuff and making it home. But yeah, that was just because. The agent had reached out and it was another option and a lot of people look at that is already on is the last option, but it doesn't necessarily have to be right if they don't qualify for one reason or another. Yes, there's lots of ulterior methods to go get them qualified. Right. Like there's second mortgages and all that type of stuff. But the rent to own, it simulates that buying process that they're going to go out and pick the house themselves. This they had already picked it out. They put the offer on. They put their name, but they'd waive conditions on it if they wanted this. So for us, that's a commitment level that we see that's you know, we can't gauge that you credit score is a no income, is a no down payment is a no. It's it's black and white. It's simple. But their willingness to become homeowners. How do you measure that and how do you feel secure about that? And we've put together, I think, a pretty cool system where we're doing that, but that's just one of the things.
George El-Masri [00:35:48] So, yeah. So I was always curious, how did that how did they connect with you? Did they just did the agent know you? Did he call you or
Alfonso Salemi [00:35:56] was it one there? It was I think it was the realtor. I don't know. I've heard of us or their lender that had reached out to the lender to talk to us or something like that. And that's yeah, it's funny enough. That's how it is. It's I get that question like, this is great because, you know, hopefully lots of people listen to this and they can understand what rent to own really is. But that's like the number one question I get all the time is how does rent to own work? And those are the phone calls that I take, essentially. That's this realtor kind of was learning on the go. Yeah.
George El-Masri [00:36:28] And I knew it really seemed like you
Alfonso Salemi [00:36:30] and I knew there was and I knew you were on the other side. So I just I said we just need to change the buyer line. And I know with becoming being a realtor and all the different official, you know, license that you have to hold in all the property, we just need to get this name off your name on
George El-Masri [00:36:47] and we're good. You know, what's funny is I didn't know you were on the other side at that point. I just get an amendment with a new buyers. What what's going on? Yeah, that's. Yeah. And then once I think somebody told me they're doing I think the agent said you're doing a rent to own with this company. So I'm like, OK, and you called me and we had a conversation and. Yeah.
Alfonso Salemi [00:37:06] And that's, and that's the big thing is, you know, that's not the first time where, you know, we've taught realtors kind of on the go on how to do it and really just just trust us. It's a simple process. You guys have all the forms that you guys need to get completed. No problem. We'll fill those out, all that stuff. But we're essentially we're the new buyers of the property. The transaction now is between us, like JAG, our joint venture partner, to buy the property. Then we have another agreement with the tenant buyers that are going to follow through on their action plan to get them to buy the house in two or three or four year terms. So, yeah, it was a lot of some pushback on that. And we're just like, don't you just need to just need to change this? We're just going to and it's not you know, we're not recreating the real wheel your rent owns. Been around for a long time. Right. So it's. Yeah. Yeah, it was. Yeah. What a funny what a funny story. It was a great way to kind of connect in the first hand experience.
George El-Masri [00:38:00] I'm just glad it worked out. I was I was so relieved because the everyone was going nuts like the two sellers or you know how it is. It's a really high stress situation. I'm sure that the buyers were stress, too. Absolutely.
Alfonso Salemi [00:38:11] Well, yeah, you've waived on conditions and now your financing pulls the rug out under you and says, no, we're not going to finance it. Yeah. What do you do? Right. So, yeah, yeah, yeah, we definitely see those.
George El-Masri [00:38:22] So in the future, if somebody is in that situation, either if it is if an agent's listening or if the buyer is listening and they they think they have financing and then last minute they they can't do it and they put down a deposit of fifteen, twenty five thousand dollars, they can pretty much reach out to you and and have an option. Right. That's right. But how would that work though if they put if they're putting. No. But their deposit would actually come back to them.
Alfonso Salemi [00:38:47] Well no. The deposit that so essentially let's use that same example. Yeah. That deposit that they given your your sellers. Yeah. The brokerage or the brokerage. The broker. But they will eventually sell that that deposit gets transferred to say they are given the fifty thousand. Right. So now
George El-Masri [00:39:05] we're deposit part of things into the new the new purchaser corrects
Alfonso Salemi [00:39:08] on. Correct. And they get the credit of that fifty towards their down payment and then we're coming in because typically although if that was they had five or. Well they, I think they had only five percent. But then we're coming in as an income property. We have to put the additional to get to twenty percent. So that goes towards their credit every single penny. Right.
George El-Masri [00:39:25] So so basically it was ideal situation for them, for the rent to own because they put I don't remember how much they put as a deposit. It was a significant amount. And that gets transferred over to your investors that are now the new buyers. That's right. And they are credited that exact amount that they put down. And that's going to be reimbursed to them at the
Alfonso Salemi [00:39:43] end of the deal when the when they when they execute their option and buy at the end, that's that's going that gets return back to the Mezger down payment. Cool. Cool.
George El-Masri [00:39:51] Yeah, yeah. All right. Sounds good. Is there anything else that might be important to discuss before we get into the next section?
Alfonso Salemi [00:39:58] No, and the only thing I do want to mention is, like you said, when they get into that situation, if you do think or if you got bad news from a bank or a lender, just educate yourself in terms of why. Ask why you're not qualified. It's one thing to say, oh, I don't qualify for a mortgage, but find out why. And then, you know, then we can definitely be more helpful and bring on in for agents, like you said, that are listening. Get your clients on board as early as possible to make the process so much smoother versus when you've waived conditions and now you don't know what to do. It just lets if we can alleviate, it's going to happen for sure. Yeah. But if we can alleviate those stress moments where we can get the file early on, it's possible that we can be the most utilized.
George El-Masri [00:40:38] Yeah, yeah. And actually in a lot of cases it's probably better for that tenant to get into a rent to own it rather than wait that extra year or two, like you said, because they could be priced out of the market, which we already discussed. But that's much better scenario for them. And in this case, where with the Kaledin property that we dealt with. Absolutely.
Alfonso Salemi [00:40:57] Absolutely.
George El-Masri [00:40:58] So, OK, perfect. So let's get into the next part, which is the random five.
Alfonso Salemi [00:41:02] Random five. I like this.
George El-Masri [00:41:03] Yeah, OK. They're going to be totally random. You just got to let me know what you think. OK, I'm a big basketball fan. I don't know if you are OK. Yeah, I'm the first one. Is Kobe Bryant or LeBron James.
Alfonso Salemi [00:41:14] Oh, you know what my. I'm going to say Kobe. Yes, obviously Kobe. And can I just explain that for a sec? Sure, sure. I love LeBron. He's a great player. But just recently out in the media, he's starting to say on the greatest, I'm the greatest. Be humble. You're the you are you are the guru. But let us tell you, don't don't tell us. So I'm going to I'm going to go with Black Mamba.
George El-Masri [00:41:36] OK, cool. Yeah. Kobe was always my favorite player. Who was your favorite actor as a child
Alfonso Salemi [00:41:42] or it's a toss up as a child. But I'm just I'm going to say all the time, it's Pacino or De Niro. OK, yeah. But your dinero.
George El-Masri [00:41:51] Yeah. All right. Would you if you had just one food for the rest of your life, pizza or pasta
Alfonso Salemi [00:41:58] or pasta known as pasta.
George El-Masri [00:42:00] Yeah. Yeah. Anything specific.
Alfonso Salemi [00:42:02] It's possible for dinner. So it's like penny in the oven with like a little bit of cheese. Ground beef. Nice egg. Yeah. Why not as possible for over pizza.
George El-Masri [00:42:12] Over pizza. OK. Yeah. Cool. And what do you want people to remember you for.
Alfonso Salemi [00:42:19] You know what I want people to remember that made it work. Just made it work. You know, whether you're going to have problems every single day, there's things that are going to come up. Yeah, it's in the past, even like five minutes ago is in the past. You can't change it. Let's let's move forward and work out. And I want to help more people do that just to get past that. Don't get stuck in those things. And, you know, my mom always says that I'm a great problem solver because I caused a lot of problems. But something I don't remember being a problem, a problem maker. But but yeah, just that it made it work. And you know what? Just get that little bit extra out of yourself. And just if I can help anybody do that, that's great. Yes. I'm not I hate to say no. So even if you give me the craziest idea, I'm not going to say it's not possible to say how. So if you can't tell me how, then then is impossible. Yeah. So, yeah, definitely.
George El-Masri [00:43:11] And I think you're probably in the right business because it seems like real estate in general is a field that's full of problems. And if you know how to answer or fix problems, you're going to do really well, right. Yeah. Cool. What drives you?
Alfonso Salemi [00:43:24] What drives me? You know what is really I've been kind of quoting the phrase the laptop lifestyle and the time freedom and doing kind of what you want when you want. You got to do the things that you got to do so you can do the things that you want to do. But that drives me is that I can pick up and go to Italy for a month or a month and a half. And as long as I got some Internet connection, I can get on a phone call, we can get things done. And that's what drives me, is to continue to scale it, to put some good systems in place where I can help more people, but then really have my time to whether it is to, you know, to go play tennis or to to just enjoy with friends or family that time. Is that to own my my own time.
George El-Masri [00:44:04] Right and right. No longer having to work for money.
Alfonso Salemi [00:44:07] Just how. Yeah, I think I heard somebody say, you know, I quit my forty hour job week so I could work eighty hours a week but I get to pick when the eight hours are.
George El-Masri [00:44:17] That's right. That's right. Yeah. Yeah I'm working, working for money and then just basically trading dollars for money. That's right. Yeah. Cool. So that's pretty much it. Before we finish off, do you want to tell people how the best way to reach you.
Alfonso Salemi [00:44:29] Yeah, absolutely. Get onto the the website JAG properties dot com, send us an email, get in contact with me there.
George El-Masri [00:44:37] Manges is J.A.G.
Alfonso Salemi [00:44:40] J.A.G. Properties dot com and yeah my emails Alfonzo Alef. Oh and so at Jeg Properties dot com that's one way, another way. Come out to the right club, get on to the right club website. Right club dot com, come up to one of our live events. If you've never been to an event it's your. First event in contact with me and first tickets on me to come out and check it out, and we really love the community that we're building a lot of people. Yeah, well, it was an awesome time last night. I think we had count was around one hundred and eighty
George El-Masri [00:45:11] people were like almost not finding seats or
Alfonso Salemi [00:45:14] it was there is buzz man. There was really good buzz in the room. So yeah, probably properties that come right. Club Dotcom and yeah. Reach out, let me know what I can do to help. Cool.
George El-Masri [00:45:22] Awesome. Well thank you very much. Appreciate your time. I appreciate
Alfonso Salemi [00:45:25] you George. Thanks a lot. All right.
George El-Masri [00:45:27] Thanks for listening to this episode of the Law podcast. If you enjoy the show, then I'd really appreciate if you left us a review on iTunes and let us know your thoughts in order for us to get a larger audience. It's really important to have reviews. So your support is extremely appreciated. And also, don't forget to share the podcast with your friends and family. Until next time. I'm George Elmasry. Have a great day.