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.