Escaping the rent trap

[Matt Geerts]

I have a couple of very close friends that are stuck in the rent trap. They live near Toronto (Milton) and they are not high-income earners. Rents are expensive for them and they have families to pay for. Prices anywhere within a reason drive of their jobs (Oakville) are extremely high.

On a positive note they are both hard working, honest and good people. Those terms get thrown around a lot and have been watered down but if someone asked me what they meant, I'd start describing these guys. They are also from a family that is extremely handy. Their family does not hire out renovations, they just blitz them with beer and burgers for everyone.

So to the point of this... How could they get out of the trap by partnering with a real estate investor? The investor would HAVE to be someone who is looking to help them win, while also winning themselves. I don't mean Rent-To-Own because the tenants in an RTO are not adding value, they are paying for value. This misses the point.

I'm thinking along the lines of being the muscle behind an out of town flip in order to earn big returns. Say I find a deal, they work their asses off on renovation either on the weekends or taking one or two weeks vacation, we hire out electrical and whatever else should be hired out, and they raise at least a good chunk of the capital perhaps from family, bosses, their dentist, etc. Cash investors take 50% of whatever portion of costs they've supplied, so assuming that's all of it there's still 50% meat on the bone. Finding the deal is typically worth 20%, so that leaves 30% that perhaps they could split with the managing partner (who is taking care of permits, legal, insurance, all the admin).

What other methods could you propose to stick these guys into a real estate deal without them having to spend 2 years getting educated or birddogging/wholesaling in a market where the traditional wholesaling tactics don't work (there are NO lists to mail in Ontario due to privacy laws).

Lets say they need about 40k cash boost to put their DTI and down payment funds in check, but more would be better to reduce mortgage insurance costs.

[Thomas S.]

It will not likely work partnering with a investor if they are not able to work full time on a reno. Investors do not have a time line on flips that will work that way. The idea on a flip is in and out asap.

Their best option will be to look farther afield to purchase and hack.

The reality is that if they are not high income earners they should look to move away from the high cost area they are now in. There are plenty of places all over Ontario that will work.

The biggest problem with people stuck in a trap like this is they are not willing to do what it takes to break free.

Pack up their s**t and move to somewhere they can afford to get ahead. Staying where they are makes zero scenes with all the options they have being low income earners. They likely have plenty of excuses to do nothing.