How To Use A VTB To Get The Best Deal

[00:00:00] Welcome to the Canadian Real Estate Investor, where host Daniel Foch and Nick Hill navigate

[00:00:06] the market and provide the tools and insights to build your real estate portfolio.

[00:00:13] Today we are talking about a topic that becomes a lifeline when markets get rough

[00:00:19] in the banks tighten their grip and that is vendor takeback mortgages or VTBs.

[00:00:25] The topic of our upcoming free webinar which is on September 20th at 11am EST.

[00:00:31] Yeah, very exciting.

[00:00:32] So if you feel like you need more after this episode there is literally more.

[00:00:38] Head on over to Real Estate CA to get it.

[00:00:40] This is going to be a pretty exhaustive episode but you'll get a visual aid and Q&A session

[00:00:45] over there.

[00:00:45] That's about it so let's just jump in here Nick.

[00:00:48] Case of picture this.

[00:00:49] The economy is on a roller coaster and it's the first time that you ever have ridden

[00:00:55] a roller coaster.

[00:00:56] It's a little via thin at Canada's Wonderland.

[00:00:59] Man I love roller coasters but as you notice,

[00:01:01] as you get older, they make you more nauseous.

[00:01:04] Speak for yourself that's irrelevant but don't distract from my story here Dan and in

[00:01:09] 2021 we're on the way up on this roller coaster and as you ascend the hill, the clatter

[00:01:16] of the chain lift echoes in your ears and your rhythmic symphony of anticipation.

[00:01:22] The ascente slow deliberate each click of the track pulling you closer to the sky.

[00:01:28] Just like the mechanics of a roller coaster's chain lift, you're not the only one who can do

[00:01:32] metaphors on this show Nick.

[00:01:34] More his lenders play crucial role in the credit market by pulling the financial system

[00:01:39] upward during a bull run.

[00:01:42] They provide necessary capital and structure ensuring a steady ascent towards securing

[00:01:47] property investments.

[00:01:48] This upward momentum is or was in hindsight, essential for facilitating growth and stability

[00:01:54] in the real estate sector in Canada.

[00:01:55] Much like the anticipation and excitement of reaching the peak of a roller coaster ride.

[00:02:01] The world below you begins to shrink, sprawling beneath you like a miniature model

[00:02:06] your heart beats in time with the machinery.

[00:02:09] Each pulse is a reminder of the thrill awaiting you at the summit.

[00:02:14] The air grows crisper.

[00:02:16] The wind tees in your hairs, your eyes are drawn to the horizon where the track seems

[00:02:20] to disappear into infinity.

[00:02:23] Slowly pushing, up and up, prices are rising, mortgages are easy to get.

[00:02:27] Everyone's getting rich by pre-construction condos and flipping houses and taking out

[00:02:31] he locks and you're excited.

[00:02:33] Even though you're scared, and this feels absolutely nuts, you have no idea what is

[00:02:37] on the other side of that hill.

[00:02:38] And it feels like you might never come down.

[00:02:41] It's a moment suspended in time.

[00:02:44] A breath held in collective excitement as you near the crest and promise of that exhilarating

[00:02:50] plunge on the other side.

[00:02:52] Then the credit market takes a turn as Tiff McClom is standing at the top of this ride

[00:02:58] and pushes the roller coaster over the hill by firing his first warning shot of 25 basis

[00:03:04] points.

[00:03:05] As the roller coaster starts, it's this scent of world seems to drop away beneath you

[00:03:09] in the rush of wind wars in your ears.

[00:03:11] A cacophony of chaos as the tracks twist and turn.

[00:03:15] It's a heart pounding plunge into uncertainty, much like what would you make that akin to

[00:03:21] a market crash probably in the real estate world?

[00:03:25] Just like the twists and turns of roller coaster take you on an unpredictable journey.

[00:03:29] A market crash, like the one that we saw in 2022, sent shock waves through the real estate

[00:03:35] sector and across the country.

[00:03:37] Investors were scrambling and the once clear path to especially securing the loans

[00:03:42] that helped pull you up that hill becomes this maze of obstacles.

[00:03:48] But at this time, the roller coaster has so much excitement in ups and downs.

[00:03:54] If you're Dan, you might be feeling nauseous right now.

[00:03:59] You might be seeing some amazing deals come across your desk like you haven't seen

[00:04:02] years of stress properties or selling for little over half of what they sold for just

[00:04:07] a year ago and even though their prices have improved in the value you seem to be compelling,

[00:04:13] you just can't seem to purchase one of these deals.

[00:04:17] Lenders, much like the cautious riders, you and I, maybe be barfing out the side of the

[00:04:22] thing.

[00:04:22] Gripping the safety barge, start to, I mean, hopefully your lender is barfing out the

[00:04:27] side but some are honestly.

[00:04:28] There are some that are having a very bad time right now.

[00:04:30] They start to lend less money during turbulent times, tightening their criteria and

[00:04:35] scrutinizing every detail.

[00:04:37] Now this cautious approach stems from the fear of defaults in the need for safeguarding

[00:04:43] assets, leading to limited access to capital for many buyers.

[00:04:48] The ride becomes more but survival than thrill at this point in everyone braces for

[00:04:53] the uncertain future ahead.

[00:04:56] And suddenly getting a loan feels like pulling teeth, banks are tightening their

[00:05:00] seat belts, credit is drying up and you are left wondering, I'm seeing all of these

[00:05:05] perfect deals come across my desk.

[00:05:07] How do I close them?

[00:05:08] Does it sound familiar?

[00:05:09] Well, if it does, you probably have played a lot of rollercoaster tech and growing

[00:05:13] up like Dan and I did great game.

[00:05:16] Awesome.

[00:05:16] Please keep your hands at your feet inside the vehicle ladies and gentlemen and stick around

[00:05:21] for the ride until it comes to a complete stop because today we're going to give you the

[00:05:25] most important tool for real estate investors to navigate this ride.

[00:05:30] We're going to help you ride the rollercoaster, like you can play your hands up and take

[00:05:33] one of those sweet photos at Wonderland or I think if this is a map to can't just wonderland

[00:05:39] actually.

[00:05:40] Yeah, or the Rondo or Calaway Park or Playland if you grew up with me in Vancouver?

[00:05:45] And this is where the VTB comes in.

[00:05:48] You know, it has a sweet acronym that almost looks like MTV mountain biking which is exciting

[00:05:52] like rollercoasters.

[00:05:53] When traditional lenders are saying no, the vendor take back mortgage might just be the

[00:05:58] yes that you need.

[00:05:59] It is a creative solution where the seller becomes your lender bridging the gap when

[00:06:04] the banks are playing hard to get and obstructing the deals.

[00:06:08] Now, during financial downturns, credit contraction hits hard.

[00:06:13] The market can't even function properly even if it wants to.

[00:06:16] On the way up the rollercoaster, you have so many buyers competing for so few listings.

[00:06:20] During the pandemic years, supply scarcity was a common theme that you would hear about.

[00:06:26] Now just as the rollercoaster should, it flips the market almost upside down and today

[00:06:32] you have tons of willing buyers and even more willing sellers given the Canadian real estate

[00:06:38] is seen record inventory at levels to be haven't seen decades.

[00:06:43] But still, transactions are low.

[00:06:45] Nobody can buy that inventory that you're referring to.

[00:06:49] Yeah, lenders are getting cautious or approvals are getting tougher and you need to start

[00:06:54] thinking outside the box.

[00:06:56] And VTBs can offer way to keep that deal alive when the banks aren't on your side.

[00:07:03] So how does this work?

[00:07:05] It sounds too good to be true.

[00:07:07] Why would a seller agree to it?

[00:07:08] And most importantly, how can you leverage this powerful tool when the market is stacked

[00:07:14] against you?

[00:07:14] We're going to break down all of that on today's episode.

[00:07:18] So if you're navigating a tricky market or you just want to add another tool to your real estate

[00:07:24] toolkit, stay tuned.

[00:07:26] This is one strategy that you can't afford to overlook.

[00:07:30] Let's dive into the world of vendor takeback more.

[00:07:33] You just because when the going gets tough, the tough get creative.

[00:07:35] Ooh, I like that.

[00:07:37] Okay, so what is a vendor takeback mortgage?

[00:07:41] Well, I'm going to start you off with a definition straight from the dictionary.

[00:07:44] A financing.

[00:07:45] So a financing arrangement where the seller of a property becomes the lender for the

[00:07:53] buyer of that property.

[00:07:55] Okay, so it's known as a VTB.

[00:07:56] You may have heard the term seller financing.

[00:07:59] That's also what's referred to.

[00:08:00] And the key point here is the seller essentially takes back, that's the takeback part,

[00:08:06] the seller takes back a portion of the purchase price as a loan to that buyer.

[00:08:12] So how does a VTB actually work?

[00:08:14] Let's examine the mechanics of it.

[00:08:16] So the buyer makes regular payments to the seller, similar to a traditional mortgage.

[00:08:21] It can either be interest only or blended payments on an amortization schedule,

[00:08:25] just like you would have with your bank.

[00:08:30] The interest rate is typically set by the seller and agreed upon by the buyer.

[00:08:34] And it can cover various amounts from a significant portion of the purchase price

[00:08:39] to anything else that's been included in the transaction.

[00:08:43] Typically it would have a higher interest rate than traditional mortgages.

[00:08:48] The seller is basically giving you a private mortgage.

[00:08:51] So they often have a higher rate expectation that average to compensate for the risk.

[00:08:58] Okay, so let's provide an example here.

[00:09:01] Dan, let me ask you a question.

[00:09:03] Do you own any of your properties outright like free and clear?

[00:09:06] I certainly do not own any of my properties outright.

[00:09:09] Okay, so this is an example.

[00:09:11] Let's say that you paid one dollar for this property when you bought it.

[00:09:16] Got it. Great deal on my part.

[00:09:17] I don't know how you do it. It's incredible.

[00:09:19] I'm behind this property from you in this example.

[00:09:23] I don't sell my properties, okay?

[00:09:25] Okay, that's fine. Again, this is example.

[00:09:27] Please play along here.

[00:09:28] So Dan, I'm buying this property for $800,000.

[00:09:32] A million bucks are no deal.

[00:09:34] And you drive a hard bargain.

[00:09:35] Okay, fine.

[00:09:36] I'm buying your property for $1 million.

[00:09:39] So you made a million dollars in capital gains.

[00:09:43] Sounds like a good deal for me.

[00:09:44] You should really learn to negotiate better if you're going to make the living at this because

[00:09:47] you just cave down my first counter offer.

[00:09:49] You can't be financially in place.

[00:09:51] You can't be buying internet thousand dollar properties for a million bucks, Nick.

[00:09:54] I know, I know. Look, again, this is an example.

[00:09:57] Please let me get to the example portion of this.

[00:09:59] I'm going to go and give you 20% down.

[00:10:03] So on closing, I'm going to write you a check for $200,000.

[00:10:07] Thank you, Nick. I appreciate that.

[00:10:09] Then here, we're going to lend me the remaining $800,000 for five years.

[00:10:15] Whoa, whoa, hold up now.

[00:10:17] I did not agree with that.

[00:10:18] And that means that you'll be able to spread out that capital gains tax exposure

[00:10:24] over five years using capital gains reserve.

[00:10:28] Seven you hundreds of thousands of dollars in capital gains.

[00:10:31] And I'm also nice enough that I'm going to pay you a 5% interest rate

[00:10:35] or roughly $40,000 per year in order to borrow that money from you or

[00:10:40] roughly $200,000 in interest over that five-year period that we agreed on.

[00:10:46] Now, combine that with your tax savings and you'll make 300,000 or more on that sale.

[00:10:52] Oh, great. Okay, that makes it a little bit more compelling.

[00:10:55] I, well, say I agree to this now as long as your credit isn't poop.

[00:11:00] Well, first I'll give you all my documents that I would have otherwise given my lender,

[00:11:06] my credit score, my financial statements, et cetera, et cetera.

[00:11:09] And then you can underwrite me as a borrower.

[00:11:12] Okay, cool. That seems reasonable.

[00:11:14] And because I own this property and probably am biased and want to sell it,

[00:11:18] I'm probably going to underwrite the value of it a little bit more leniently.

[00:11:21] You know, like I'm not going to appraise it the same way of bankwood because I just set the value.

[00:11:26] And I obviously would be silly to say, oh, you know, I actually think that this is worth

[00:11:30] 800 so I'm only going to lend you 800 because now all of a sudden I'm telling you that you

[00:11:34] overpaid for it. And I'm probably also more likely to deem you credit worthy than the bank

[00:11:40] because I won't run you through a stress test and I'll kind of just, you know, we just

[00:11:44] did a deal together so I'm just going to look at your income statements and a couple other things.

[00:11:47] So I need to do some favors there because I'm highly incentivized to sell this property.

[00:11:51] Wow, you're a really great guy. And that is great and appreciated because look, I don't

[00:11:55] need a stress test. I'm stressed enough, all right? And Dan after five years, I'll pay you that

[00:12:01] 800,000 dollars anyways. Unless of course you want to maybe renew that VTB mortgage for another term.

[00:12:08] Sure. I mean, I would do that. We can talk about it in five years probably, but I would assume

[00:12:13] that I would be willing to do that as long as you pay me that much interest and I don't have

[00:12:17] something better I can put the money in. Yeah, no problem. Now let me ask you this. What else

[00:12:22] would you have done with that money? Had I bought the property in cash or with a bank loan,

[00:12:28] you would have ended up with a million cash rather than 200,000 on closing? Yeah, probably

[00:12:35] would have like bought a bunch of meme coins and get jacked and moved to Miami,

[00:12:39] Bailambo, start taking topless picks in front of it on Instagram, maybe selling protein powder

[00:12:45] herbal tea. I don't know. Okay, that actually sounds like a pretty sweet life. Maybe we just leave

[00:12:49] real estate and go do that and man that escalated quickly. And this is something you've put some

[00:12:54] thought into. I can tell that's my, you know, my retirement plan, man. Right now, I'm into the

[00:12:58] sunset on a jet ski like Kenny Powers. Okay, so would it be fair to say that you probably

[00:13:05] wouldn't have made good financial decisions that you would have net maybe 5% to year plus some

[00:13:12] tax savings. I mean, I'm being honest, I probably would use it to buy more real estate. So maybe

[00:13:17] I can hit that return but chances are I'd also probably spend it on some dumb stuff. So

[00:13:23] the okay, perfect. That brings us to the first part of our discussion. What are the benefits

[00:13:29] for a seller? Like why would a seller do this? Yeah, so I mean in this example, I would say for

[00:13:35] me the bet the seller, it was beneficial to me because it helped me close the deal in a challenging

[00:13:40] market. I mean, we're just talking about that roller coaster. Like it's not easy to sell a property

[00:13:44] in many markets in Canada right now. I mean if you're in like Calgary or Saskatoon or some of

[00:13:49] those markets that are still sort of in bull market territory because people are flocking there

[00:13:53] to affordability and jobs and, you know, industry. It's a little different but I think, you know,

[00:14:00] if Kenny to ends up in a recession, it would be plausible to assume that we will see difficult

[00:14:04] market and a credit contracted market in many places. Sometime over the next couple of years.

[00:14:10] And you because because you borrow money from me, because the bank wasn't there to prohibit the deal,

[00:14:16] it helped me to sell that property in a challenging market. I potentially got a higher return

[00:14:22] through interest payments, right? You said you're going to pay me 200 grand and interest over five

[00:14:25] of your period. So like that's that's a good deal for me. It could offer tax advantages. I would obviously

[00:14:30] consult with my tax professional to do that and see if I qualify for capital gains reserve or any

[00:14:36] other benefits by doing a vendor takeback mortgage and it could even be an investment strategy for

[00:14:42] me like you said because look, if you gave me a big win fall of money, there's a chance that I'm

[00:14:47] going to do some dumb stuff with a portion of it. And so at least I'm basically becoming a lender

[00:14:52] on a deal that I already believe and I already owned the property. I already just set the value

[00:14:56] on the sale and you're going to give me a 5% return on my the investment that I already made plus

[00:15:02] I get a portion of the cash out of it. So why, you know, it sounds like a good deal for me. Why would

[00:15:07] why would you do it? Why is it beneficial for you as the buyer in this scenario? Yeah, that's a great

[00:15:12] question. So let's look at the benefits from my side, the buyer. Okay. So first thing is easier qualification

[00:15:18] process, right? I'm even though I was a horrible negotiator, I am negotiating with the seller versus

[00:15:25] a traditional lender, right? Monotlander, traditional bank. It's also a lot more helpful for those

[00:15:31] that have been declined by traditional mortgage lenders. And only that it can be used for properties

[00:15:37] that are hard to finance. Okay? I think rural properties or distressed properties. And of course,

[00:15:44] it gives me the potential for more flexible terms that I can negotiate, hopefully, do a better

[00:15:50] job. But I can negotiate those with you, the seller of that property. Now let's look at some

[00:15:56] common scenarios for VTB's. Yeah, so I mean common scenarios would be, you know, let's start off with

[00:16:03] the one that you just mentioned, distressed properties, right? Properties that are more hard to

[00:16:07] finance conventionally. Like, one of the like a distressed property, especially where there's a lender

[00:16:12] disposition, right? Mixed right now, like a lot of a lot of lenders who took higher positions and

[00:16:17] you and I are doing some work in the space right now, where they're offloading some of these higher

[00:16:23] mortgages that have gone power of sale. And we already did a webinar in power of sale, and

[00:16:26] it's already available as a recording. And if you can combine these two strategies, go look for a

[00:16:30] power of sale. The lender that has that power of sale probably has a bottom line of, okay, I'm

[00:16:35] already exposed to this property like, you know, if I have a first mortgage on it, let's say as an

[00:16:39] example, Nick, you stop paying me, right? Oh, and with Ben, but all of the sudden, I've taken

[00:16:44] you power of sale and you owe me 800k and somebody comes along and they say, hey, damn, look, the market's

[00:16:50] all worth them a Nick, payed a million bucks for that. I can see that comp that he paid that before,

[00:16:54] but you know, he's not working. Yeah, and he's not paying you. So obviously, like, you know,

[00:16:58] it's probably just not that's not the right deal. They can come couldn't substantiate the price or whatever.

[00:17:02] And I say, okay, like, well, I'm already in it for, you know, in our K, like that's what he owes me.

[00:17:07] And he already gave me the 200k. So, you know, I'm pretty stoked about that. All this

[00:17:12] hold the same amount of mortgage and basically you can just come come in here. And that is happening

[00:17:18] regularly right now with mix who are working out deals where, you know, you want to go buy a income

[00:17:23] property. Like one of the ones that we're working on right now, the, the buyer basically wants to

[00:17:28] purchase it by saying, hey, will the lender stay in for a year or two while I can get this thing

[00:17:33] stabilized because it's just stress property needs a lot of work. Can I get a stabilized? Can I turn this

[00:17:37] thing around in two years? I'll refie out with with CMHC in this case probably. And the lender's not going

[00:17:42] to say no because they're not going to obstruct their ability to get out and actually transfer

[00:17:46] basically the same amount of capital like the same principle exposure that they have to the deal,

[00:17:52] just to a better, more credible buyer. Like they already want to get rid of the existing buyer

[00:17:55] because they have failed to pay. So anyone else who can prove that they can pay would be a better,

[00:18:00] would put them in a better situation and they already have exposure so they're not going to be like

[00:18:05] absolutely not. They legally have to do what it takes to try and sell these properties. So that's one

[00:18:11] good example where you can actually combine distress properties, power of sales for closures

[00:18:16] with a vendor takebacks scenario. The rest of the time is very humble. Yeah it's a great

[00:18:21] it's going to be a super killer combo for the distress market in the next couple years and I know

[00:18:25] we've been talking about it on the show for a long time. We said winter was coming and there was

[00:18:29] going to be a good deals like we're in the, we're at the point where I, I still feel there's a lot

[00:18:33] of downside risk in the market but in a lot of cases you can, you can get rid of that by by

[00:18:38] low-balling by getting properties below what they're listed at. Like if you think every property

[00:18:42] in the market is listed at market value right now and you think market value is going to drop 10%.

[00:18:46] Go low-ball everything by 10% and now you've taken the risk out of the market for yourself.

[00:18:50] Yeah I love that. Commercial properties obviously they're always exposed to capital gains and so

[00:18:54] there's instantly that advantage there anything that is subject to capital gains, residential

[00:19:00] properties in high interest rate environments. So I mean kind of like what we're seeing right now

[00:19:06] we're prohibited but where, where lenders are the ones getting in the way of the deal. You have a

[00:19:11] willing buyer and a willing seller and no willing lender that those are a great example of where VTB can

[00:19:16] save a deal. Situations were traditional financing falls through last minute you know pay seller look

[00:19:22] I'm really sorry but like I can't close on this property can you just give me a VTB for like

[00:19:26] two months so I can figure out my financing on this thing. Situations with a seller has a lot of

[00:19:29] capital gains and they'd like to create that tax advantage scenarios especially with a seller owns a

[00:19:33] property out right because they have all of that equity to be able to lend it to you

[00:19:37] you know and then they don't have a mortgage to pay out and scenarios where the seller doesn't

[00:19:41] have anything else to invest in as well right like if they don't need the cash out right away.

[00:19:46] Yeah yeah all really great points so let's look at some of the some of the risks and

[00:19:50] maybe some of the considerations okay so again me I'm the buyer in this example that has gotten

[00:19:56] way out of control because now apparently I'm not paying you I'm a horrible negotiator remember

[00:20:00] people this is just an example okay so let's look at these higher interest rates means that

[00:20:05] now I now have less flexibility on how I operate that asset okay I need to cash flow it to cover

[00:20:13] those big mortgage payments. Now it's potential for balloon payments and I also might have to go get a

[00:20:19] new mortgage after five years it's a risk that I might not be able to re-qualify for your

[00:20:26] typical A or even a B lender at the end of my term with you Dan so the another thing to consider

[00:20:33] is the seller could also call that loan now you wouldn't do something like that to me would you

[00:20:38] do you know it's interesting though like the example I'm going to use in the webinar is my first

[00:20:42] deal the first property actually that I ever bought outside of my primary and actually my my very

[00:20:48] first deal with a student rental that I did with my with my parents but my first deal that I did

[00:20:51] my own actually well I did it which I want to think Gibson he we we had a B TB and and then the

[00:20:58] seller like halfway through was like hey look I really need this money like and we had a contract

[00:21:04] yeah and you know and don't we all and so we and you know Johnny the great great negotiator much better

[00:21:11] than I am in this world negotiator yeah and he you know we negotiated some some really good

[00:21:21] reductions on outstanding interest the obviously wave the the pre payment penalty because it wasn't

[00:21:26] asking for the pre payment and so we ended up like getting a really really sweet out of a deal when

[00:21:32] the seller called the loan because we're doing them a favor by liquidating that loan and getting

[00:21:35] them and it we were an amazing interest rate environment the only mistake we made was not taking

[00:21:39] a longer term because that was like 2021 I think I remember that one here so but anyway um

[00:21:46] the so that's like that is it that's a real example and uh you make sure it's worded properly

[00:21:51] they can't recall it ideally but um you know you never know how it's structured the recoil if I

[00:21:56] wouldn't even mention is important because uh you kind of want to think about like the VTB as a private

[00:22:00] mortgage in that regard like you're doing something that's outside of the AB financing world and so

[00:22:05] you know if you buy a property with a B lender and A lender you typically can just renew the existing

[00:22:10] mortgage in most cases like you know I don't know you explained to me that you know how it looks like

[00:22:15] you your lender would just send you but is it like a renewal form yeah yeah it's pretty simple

[00:22:20] and there's just a check-abox pick your rate right like pretty much yeah so you don't need to go find

[00:22:25] a new mortgage usually if someone gets a private mortgage they're hoping to switch to a B or an A

[00:22:29] after their term which means they have to go get a new mortgage which is a whole new qualifying process

[00:22:34] rather than a renewal where again you just check that box so nobody really buys with a private

[00:22:39] mortgage thinking that they're gonna be paying 12% forever right yeah I mean that would be crazy and

[00:22:45] that phenomenon is something that we refer to as climbing the mortgage ladder rather than climbing

[00:22:52] the properly ladder which you've probably heard before now you want to be able to go from a B

[00:22:58] to an A or from a private to a B and then a normal market people are able to do that but in a

[00:23:05] market that's experiencing that credit contraction like we discussed earlier it's not that easy

[00:23:11] and people tend to get trapped with their privates or their B loans that you were mentioning

[00:23:18] Dan at you know that the nine or ten or 12 plus percent and they can't get out of them because they

[00:23:23] can't qualify for that better mortgage they can't work though we have to that next run on the

[00:23:29] mortgage ladder yeah I mean that was a huge thing when rates went out it was like you know you thought

[00:23:34] and actually the example that I was saying I wish I got a better term it was like you know we

[00:23:39] we signed on with a B and we were like oh yeah we'll renew with an A in two years or whatever and by the

[00:23:45] time two years roll the around the A loan rate was higher than the real B loan rate that we had so

[00:23:52] you know anyway so like yes it's an exceptionally important risks that you're they're outlining

[00:23:57] and I honestly in that scenario I guess I would rather be far far rather be stuck with a VTB than a

[00:24:02] private like a ten plus percent private well for sure yeah for sure and realistically as a

[00:24:07] borrower you're less at risk with a VTB than with a private mortgage because with a private mortgage

[00:24:14] each time you renew you off that to pay a lender fee which means that every year you renew you

[00:24:20] have to usually unusually lender fees or anywhere from you know on the low end 50 to 75 best but let's

[00:24:26] just call it one to two percent is kind of the average so you have to pay that lender fee on top

[00:24:31] of that annual interest rate now then let's talk about why you the seller in this example might

[00:24:40] not want to give me a VTB right you even said yourself seems too good to be true so give me some

[00:24:45] reasons why this wouldn't happen yeah so I mean the big one would be the risk of you defaulting

[00:24:51] and I now have to take back the property and you know ideally you would like not have a debt on that

[00:24:57] like anymore debt on it because you'll see people putting in seconds behind VTBs or silent

[00:25:01] seconds or trying and so and look up the reason I'm explaining his risks is because a lot

[00:25:05] of them you can mitigate away through the process that we're going to explain a little bit more

[00:25:09] thoroughly to you in this but also in in the webinar through like there's a plot we have a full

[00:25:13] clause library for you like you know if you overfinance the property if I give you just gave you an

[00:25:17] 80 percent loan to value VTB and then you go and put 200 care I find out the 200 k that you gave me

[00:25:22] came from a he-lock now all of a sudden I was getting worse and worse in this example but you know

[00:25:29] I mean those are the I'm just trying to explain the risks right and you know the risk that you

[00:25:33] transfer the property and mortgage without my consent which you know can be mitigated with an

[00:25:37] local home of clause but like you could even do that if you bought it with a core you could do

[00:25:40] a share purchase agreement and all of a sudden neck held the guarantor is like you know and like yeah

[00:25:45] sure there's a lot of legal protection that I would have like you I would have made you personally

[00:25:49] guarantee the loan but in order to enforce that I got to go to court and all of this stuff and a lot

[00:25:54] of people just don't have like you know it sounds really good on paper as a seller but then when you

[00:25:58] think about the exact like the absolute worst case scenario which is again what we try and plan for

[00:26:02] because the best case scenario doesn't need best case scenario as you pay me forever and we're

[00:26:05] best buddies and what are both getting rich together and we write off of the sunset on the jetsky

[00:26:09] but and my negotiation skills get a little bit back but you know the you know in a worst case

[00:26:17] scenario like I need to know and a lot of people aren't thinking okay in a worst case scenario

[00:26:20] do I want to spend 20 30 50 grand taking this guy to court to try and collect that or you know whatever

[00:26:26] you less liquidity right there's a liquidity preference typically if you're using VTV to deal with

[00:26:32] credit contraction environment you're probably selling a bit more of a down market or a more

[00:26:37] of a volatile market and you know there could be risk that the equity goes down and you're just like

[00:26:42] this is massive by his lunch walk away at this point the liquidity preference is

[00:26:47] is an important one as well like that I mentioned you know I'm not getting all my money I'm

[00:26:50] only getting the 200K that you gave me plus either principal payments or interest payments or both

[00:26:54] over time but I don't get all of the money and if if I wanted all of the money people typically

[00:26:58] have a liquidity preference and the example of the lender who who gave us a discount on the fees to

[00:27:04] pay him out early is is a very good example his liquidity preference was measurable based on

[00:27:09] the discount and that's a real economic principle people are typically willing to you know take a

[00:27:14] little bit of a hit on return because an investment's more liquid and then next pieces five years

[00:27:22] a long time in that regard in that liquidity preference like that's a long time to stuck with you

[00:27:27] no offense you know it's I'm tying up my capital for a long time so I'm in liquid for a long

[00:27:31] time you'll often get sellers and this is where you it's worth noting you know just as like to

[00:27:36] form the audience you get sellers who are looking for more short-term BTB's and developments based

[00:27:42] we see it a lot like where you know people do like a two year because then the developer will

[00:27:46] entitle the land in that two year period and then they'll refieo based on the new value of the land

[00:27:50] and the other piece would be like I might not have enough equity in the property like maybe

[00:27:53] you know you and our buddies neck and I wanted really wanted to sell you this property and then you

[00:27:56] proposed the BTB to me and and I was like embarrassed I didn't want to tell you that I actually had a huge

[00:28:01] mortgage on either way I don't pay that a dollar because I I levered up to buy my jet's getting

[00:28:06] lambo and you know and I am you like and now this I can't but I can't get I got to pay out

[00:28:12] that 200k loan or whatever whatever that's a price sheet for a limbo but whatever it is right

[00:28:16] that whatever that loan is on my property I got to pay that out before and if you only gave me

[00:28:21] 200 grand and I have 200,000 in debt on it now I got zero dollars on the proceeds to the sale

[00:28:25] all I did was pay out the mortgage right and now the only proceeds I'm getting is you paying me over time

[00:28:30] so yeah so with all of that being said minus the the lambo stuff but with all that being said

[00:28:36] back to our example what would happen in that example if you already had a 200,000 mortgage on that

[00:28:42] property yeah so I mean if we use that example like I'm if I'm selling your property for a million

[00:28:46] and giving you an 800k BTB so you're giving me 200,000 if I owed you and we're obviously over simplifying

[00:28:52] this like no entrance or taxes legal is blah blah blah blah if I owed 200 grand then I would literally

[00:28:56] take your 200k cash and pay off the mortgage I had on the property and I would have zero dollars

[00:29:00] on closing and I would get the rest as you pay me the VTB assuming no other costs right so I would

[00:29:07] get the rest of the principal on your monthly payments so in that case you're probably less likely to

[00:29:12] give me a VTB in that case right so it only really works in cases where sellers have a lot of equity

[00:29:19] in that property or they can at least pay off any remaining mortgage balance on that property

[00:29:26] yeah or their expectation might be that you give them you know maybe I only had 100k down on the

[00:29:31] property and or I only had 100k mortgage on the property and at least you're giving me a bit more than

[00:29:35] I also I get 100k I get to pay out the mortgage so I'm out from under that lender and I still get

[00:29:40] you know the principal payments and yeah I got a minimum I'd want to be making or I'd want

[00:29:47] you to be making monthly principal payments and that's in there on the mortgage rather than an

[00:29:52] interest only scenario like we discussed prior right okay so let's let's pause their unpack that a

[00:29:59] little bit because it's in this example that we've used when I explained the interest just as it

[00:30:05] was paid as an annual amount right so now with the interest would have been interest only mortgage

[00:30:13] which is different than of course the typical amortizing mortgages that we'd see from you know

[00:30:18] your more classic A and B lenders yeah so like when you were proposing it you didn't really say

[00:30:23] you'd pay me x amount in principle of course I'm a little sure that's a part of the

[00:30:27] average smart because you know I mean now you don't have to pay me as much you can keep that money

[00:30:31] in your pocket working for you investing it in the property or whatever right and so

[00:30:35] the interest only mortgage like you said is a type of loan where the borrower is required to pay only

[00:30:41] the specific interest for a specific period of time without having to pay down any principal and

[00:30:48] they could make lump sums or whatever after the interest only period ends the borrower must

[00:30:52] either begin paying both principal and interest to refine its loan or pay off the property entirely.

[00:30:57] Now in contrast an amortizing mortgage requires the borrower to make regular payments that cover both

[00:31:04] principal and interest from the very beginning now as a result of that the outstanding loan

[00:31:09] balances gradually reduced over the life of that loan leading to a full repayment by the end of

[00:31:17] that term yeah so you know in the example where I had to pay out the mortgage I would obviously

[00:31:25] want probably want you to be paying principal not just paying interest and I'm just sitting there

[00:31:29] with the property and handing the property over to you gradually without getting anything for it.

[00:31:34] So and let's like maybe chat a little bit about that in VTBs in today's market so there's a

[00:31:38] couple of key things here and I just want to banter with you a little bit on them so increasing

[00:31:42] relevance in the current economic conditions like VTBs I think we've seen I've documented them

[00:31:48] and that post some content on this soon I've documented an increasing amount of sellers offering

[00:31:54] VTBs because they're you know really trying to make the asset compelling they understand that

[00:31:58] lenders are the ones obstructing the deals it's massive like you talk to anybody in the commercial real

[00:32:03] estate space no deals are getting done without some sort of seller financing structure

[00:32:07] I don't know there's a potential rise in it being used as creative financing becomes more necessary

[00:32:14] and the one thing I think is understanding VTBs probably I've seen people do it for home buyers like

[00:32:22] you know they see you know an old cottage like you know where I grew up and where I still live

[00:32:27] a lot of old cottages up here and you get an old cottage and the person at in the market and they

[00:32:32] owned it cash and it's like the you know 80s or whatever and there's a 20 grand yeah and it's like

[00:32:37] you know an older lady and she got a good heart and some young couple come you know says hey I want

[00:32:43] to buy this and they say like you know we can't get a mortgage for it right now but it's our

[00:32:48] dream house and whatever and you know you pull on the hirchings a little bit and the ladies says

[00:32:53] oh yeah like well you want to just pay me out over like five years and just give me interest because

[00:32:57] it's going to put in a GIC anyway so just give me whatever the GIC interest is and so you're seeing

[00:33:03] it in both home buyers and the investor implications we obviously just mentioned prior but it's

[00:33:08] interesting to see that it's active in the home buyer market too yeah you know I think

[00:33:13] Danielle mentioned the commercial space right and I think VTBs and seller financing have

[00:33:17] been a long standing tool used in the commercial space but it's really interesting to see

[00:33:24] it kind of trickle its way into over last couple years and then go from a trickle to a full

[00:33:30] blown wave into you know MLS listings and small multi family and as you're saying even

[00:33:36] even just regular first time home buyers are trying to use this stuff right yeah it was a big

[00:33:42] theme in the 1990s like if you talk to anybody who I know you know Vince your mentor as an example

[00:33:48] you know you work very closely within the mortgage space we talked to him on the podcast and he was

[00:33:52] saying like in the in the 90s he was at at a big six bank I think and you know everybody was

[00:33:58] doing VTBs during that period of time because the banks weren't doing anything there was so much

[00:34:02] risk in the market and they were afraid to lend on anything because the market was so volatile

[00:34:06] and that's what just happened in the last year and it's what's continuing to happen and even

[00:34:11] as rates come down you'll see like I put this tweet out that said you know it's not just the

[00:34:15] price of capital that matters it's the availability like this is a matter like you know rates are

[00:34:21] we're gonna see probably within 10 days of this episode coming out we're gonna see rates

[00:34:27] with a three at the beginning of them like we'll see a 3.99% interest rate and people are still

[00:34:32] going to be like I still can't get a D I can still can't buy a property bank's are still not giving me

[00:34:37] the buying power that I thought I would get at a 3.99 rate you know I calculated that that

[00:34:41] reduction I was waiting for the 3.99 because I thought it would mean that I I impact the right I

[00:34:46] could get this much but they're not under it in me that way why because there's so much risk in the market

[00:34:50] it was that was exactly what happened in the 1990s so let's this is gonna be like the kind of

[00:34:55] part where you want to get your pen and pencil out maybe and we're gonna go to your driving yeah

[00:34:59] already yeah I guess a lot of people do that I like I listen to podcasts when I'm working

[00:35:03] out so I always got like a pen and pencil nearby but yeah don't not why you're driving

[00:35:08] just like send us into it again yeah our tender weapon because this is all going to be in there very

[00:35:12] in a you know you know off some nice visuals and and we'll have some checklist for you and stuff

[00:35:16] like that so Nick start me off here with who you need to to do a VTB yeah really great

[00:35:23] question okay so the first person and again all we we talk a lot about the who which is you know

[00:35:28] who not how which are power team members and every power team for a real estate investor includes

[00:35:35] a realtor so the first thing that you need is a realtor that understands how to put one of these

[00:35:42] together and hopefully is a better negotiator than I am in this example you know one one thing

[00:35:46] I would say is that realtor could be a approach or sorry replaced with a lawyer who understands

[00:35:51] it right if you're gonna do you have the next thing yeah if you have the next thing on the list

[00:35:56] yes exactly the next thing a willing seller kind of hard to get a VTB if no one is going to give it

[00:36:03] to you the next piece is again another another power team member that is your tax account

[00:36:10] who can help you communicate any potential capital gains savings to that seller right that's the

[00:36:14] incentive that's the pull factor that they are gonna want to hear and we have built actually a

[00:36:20] GPT calculator for this which we're pretty excited about so then of course you know more

[00:36:24] power team members down the list a mortgage broker to draft that term sheet right you know we

[00:36:29] have seen people do kind of handshake deals napkin math and you know make these VTBs very very

[00:36:36] lazy fair we would not recommend that good contracts make good friends as Dan always says

[00:36:42] and then specializing in social is my being a killer is not bad yeah I picked that up somewhere

[00:36:47] somebody's probably from me probably from me and then finally I think the last

[00:36:54] person the last person you need and again you already have this person because you've built that

[00:36:58] a power team because you're a good real estate investor that relies on other people

[00:37:02] your lawyer to register the charge of that property yeah and I think that that should get you where

[00:37:08] you need to go it it's like that's only five people a realtor a seller a accountant a mortgage broker

[00:37:13] and a lawyer and it it sounds simple this stuff really isn't that complicated you know what we were

[00:37:18] thinking about like do you know you and I've been discussing maybe doing like these one day

[00:37:22] intense is when we go to the meetups and talking to Jonathan or our events organizer basically our CEO

[00:37:28] this one I think he's a boss yeah I didn't become our boss I don't know anyway so

[00:37:33] we're talking about should we be doing like a beginner investor thing right and we talk a lot

[00:37:36] about even I about analysis process and it's like in the course there's a couple of people that have

[00:37:41] been like oh I've analyzed all these deals and I'm just like I can't pick like I don't think

[00:37:46] like I should make an offer on any of them and it's like well what's the price at which

[00:37:50] it's a good deal for you like you know they're they're all penciling out of six cap and my thesis

[00:37:55] was I needed by a seven cap it's like okay well offer a seven cap on the property and they're like

[00:37:59] well why what if the seller says no it's like well what if what if you like well that they say no yeah

[00:38:04] and now the sudden you've realized oh that's that's all the process of doing an offer is now

[00:38:09] the sudden it feels like a way more accessible thing what what if they say yes oh well then what happens

[00:38:13] okay well do you could can you write it 50 thousand dollar deposit check like you just said

[00:38:17] in the agreement of purchase and sale yeah okay I can do that okay cool well then go to the bank

[00:38:21] right to check submitted to the brokerage okay cool now do you can you go through the

[00:38:25] due diligence process can you submit the deal to your lender to fulfill the financing condition

[00:38:30] can you get a home inspection yeah I can do that okay cool well now you've gone through all the

[00:38:33] steps was there much to analyze in that no okay cool yeah all the analysis happened before you

[00:38:38] made the offer right all you're doing afterwards is about filling back filling all of those

[00:38:42] assumptions that you use in your analysis so again the reason we made it into simple

[00:38:46] list of five people it's not that complicated it's pretty simple yeah exactly okay so those are

[00:38:52] the five people that you need those are the who that's that makes up the who part but what about

[00:38:56] the what what do you need to VTB Dan yeah so you need money right yeah so that really is

[00:39:04] yeah you need money you would need a deal and then you would need a seller financing clause

[00:39:09] that proposes the vendor take back in the agreement so you know there's a handful of examples

[00:39:14] I think I think we're gonna go through them actually I think I put them in the script here so

[00:39:18] you know you your your realtor should have a VTB clause it's not uncommon most of the real estate

[00:39:23] trade associations have them actually within their pre-printed clauses just make sure they're using

[00:39:28] the right one either interest only or blended payments and you have to do a little bit of math

[00:39:31] to arrive at the payments and you have to adjust that math if there's a signed back process so make

[00:39:36] sure you do that a mortgage application or some sort of presentation like almost like a pitch to the

[00:39:41] seller and also porting documents to prove that you can pay the loan so whenever I submit a

[00:39:45] VTB this is what I do I attach an extra schedule because I do it as a schedule because I know

[00:39:50] legally the realtor has to present them that schedule because it's part of the agreement and that would

[00:39:54] have like my paystubs you know my ability to pay the anything to substantiate my ability to pay

[00:40:00] credit file etc it's in a contract so I know it's very confidential and and then I would also

[00:40:06] put that that calculation that I had my accountant provide on what I would estimate I'll say oh here

[00:40:11] I know you paid this for the property and I know and we have this this calculator in our

[00:40:15] in available for the realist members and well actually it'll be part of the web and our

[00:40:20] will teach you how to how to kind of create it on your own but I'll have that little sheet saying

[00:40:24] here's how much money that you stand to make because I'm going to pay you the 5% interest

[00:40:28] and based on my estimation of what your income is and what your capital gains exposure is on this

[00:40:33] property here's how much money you'll save on tax as well and I include all that in the offer it's

[00:40:38] nice like little pitch right love it yeah actually stuff next you need a mortgage term sheet and now

[00:40:43] they you don't need this right away when you're purchasing a property but prior to closing or

[00:40:47] on closing your lend your lawyer will prepare or if you have like John prepared our VTB deal

[00:40:55] private sorry mortgage term sheet and it was basically just like a you know a private loan term sheet

[00:41:00] and then eventually you'll need an actual mortgage commitment where you enter into a loan agreement

[00:41:04] because the VTB clause in the agreement of persons sale is not sufficient to actually like

[00:41:10] create a legally binding loan contract so you need a mortgage commitment on closing to do that

[00:41:18] so you brought up examples Danless talk about seller like the seller financing clause let's say

[00:41:23] I mean you and our both based on a terrioso look at that seller financing clause from the

[00:41:31] because we're just breeding out legal clauses but but I think this is really valuable stuff for

[00:41:36] those of you who just want to like copy them for their own offers and again yeah just just uh

[00:41:41] I know we got we got called that in a review for reading stuff allowed so just uh

[00:41:45] think like uh to this labor one more disclaimer um these are actually all available with our free

[00:41:51] resource library at reals.ca so sign up get free access to them uh as you can put away that pen and

[00:41:57] paper and just have it written front of you. I think that's called a PSA not a disclaimer actually.

[00:42:02] Isn't PSA public show of affection? No it doesn't get a PSA of affection, PSA is public service

[00:42:08] and out the announcement. Anyway the other one it's PSA or PDA because we're showing our

[00:42:15] affection for you are audience by giving you these things for free free checklist and tools to

[00:42:21] make it easier for you to go and execute a vendor take back deal yourself. Yeah it's actually

[00:42:27] wild because one of our listeners sent out to you, Jamie uh who I know he's listening to this

[00:42:33] on the construction site for sure right now and he actually joined our course so this is crazy

[00:42:36] he listened to our first VTB episode and promptly probably went and negotiated three deals on

[00:42:41] VTB like within a month then after that he joined our realist premium course to figure out how to

[00:42:52] put an absolute beauty that guy is. They goes to show that if you're bold enough to ask

[00:42:57] you can often get what you ask for. Now on that note let's go through some of the

[00:43:02] clause of the dimension dance we can talk about how to look for and how to ask for a VTB.

[00:43:09] Yeah so we'll start with the interest on the example your realtor would put in your offer

[00:43:12] term sheet or schedule A on Ontario and this this one comes from the Ontario Real Estate Association

[00:43:16] the seller agrees to take back a first mortgage for the balance of the purchase price or

[00:43:21] in the amount of $800,000 I guess in our example bearing an interest rate of the 5%

[00:43:26] that you agree to pay me per annum repable interest only monthly quarterly etc whatever the payments

[00:43:31] you and I agree to and maturing on the x day of whatever month in 2022. Whenever five years is from

[00:43:38] the day that we close the property. Now if you want it to be advertised it should say

[00:43:44] in quotes the seller agrees to take back the mortgage in the amount of $800,000 again in our

[00:43:50] example. Bury not interest rate that we agreed on then 5% calculated semi annually non-advance

[00:43:57] repable in blended monthly payments of x which includes both principal and interest of course depending

[00:44:05] on your am schedule and to run for that five year term from the date of completion of that transaction.

[00:44:13] Yeah and then the next one was like that Oklahoma clause that I mentioned to prevent overfinancing

[00:44:18] I'm not going to read this one but I think it's just important to think about like make sure

[00:44:21] you know where and banks are just getting to verify this now like make sure you know the source

[00:44:25] of the funds for the down payment and make sure that the property is in functionally 100% finance right

[00:44:32] like if if that person like Nick if you just put that 200k down because you have like a you know

[00:44:36] big limit on your am x platinum and wanted some points and now all of a sudden I'm you know

[00:44:41] I'm technically paying or so I'm technically lending you 800k and mx is lending you I'm

[00:44:47] only $800k at 5% and mx is lending you 200k at 22% or whatever we've got a potential problem

[00:44:55] right oh yeah yeah so that's a great segue into this then so as the seller you in the situation

[00:45:01] you can also sign back and ask me the buyer to warrant that they're deposit isn't from an

[00:45:08] x card or a heloc or something like that right now the buyer warns that the down payment stated

[00:45:14] in this transaction so it'll be at least 20% of the purchase price and it does not occur any

[00:45:19] payment obligations or indebtedness yeah so you know in this scenario like and and it's kind of

[00:45:26] I guess the there's like you're just making a commitment that you did that there's really no way to

[00:45:32] for me to verify that other than you making that commitment but I would probably ask you like

[00:45:37] show me all your credit card balances etc on your credit pile okay now let's take our legal hats off

[00:45:42] and let's put on our hunting hats ooh there's a hunting hat like are we wearing antlers or something

[00:45:48] I would not absolutely not recommend wearing antlers hunting hat all obviously I am not a hunter that is

[00:45:56] a it's a pretty good point not financial advice either okay so now we're going you know blaze orange

[00:46:03] bass pro hats that you know all the stuff that the casual boys wear out to when they take their

[00:46:08] their wives out for a nice dinner you know yeah exactly that's goes with the casual dinner jacket

[00:46:13] I guess the fully at dinner jacket is what I think it belongs to every small town and can't

[00:46:18] actually anyway something something like what you said for sure that would be an appropriate hunting

[00:46:21] attire okay so now we are on the hunt what are we hunting vendor takebacks now first I would ask

[00:46:29] that your realtor goes and searches the MLS for deals that have that term the search term

[00:46:37] and the in the back end remarks so you could search something like VTV or vendor takeback or seller

[00:46:43] financing any of those will populate MLS searches for sure and if you're a realtor you should be

[00:46:49] curating a seller financing list for your clients it's a great way to get like a CTA like a call

[00:46:53] to action on a social media I have one if you're listening to the show and you want to see

[00:46:59] sellers that are offering VTV's in the GTA just set give me a shout I will put a link in the

[00:47:05] show notes and we'll make sure that we subscribe you to that list it updates on a weekly basis

[00:47:11] and again any other realtor you're listening to this start doing that list and get like you'll

[00:47:16] get lots of people who want it next I would say network with real estate agents and brokers who

[00:47:19] specialize in investment properties is that they often have insights into sellers who might consider

[00:47:25] a 10 real estate investment groups or seminars to meet other investors who have experience with

[00:47:31] VTV's and can share leads or strategies on it wait a moment those two sound a lot like some

[00:47:37] of the other advice we have given many many times on here everybody listening I cannot stress this

[00:47:43] enough get out there and meet other people in the real estate industry will change your life we

[00:47:50] see deals happen every day because of these connections I've seen bigger investors in our real

[00:47:56] community sell off some of their smaller properties to newer investors at fair prices and offer them

[00:48:03] VTV's simply because they don't need that cash immediately and want to help out a beginner yes

[00:48:09] people have good hearts and want to see other people win in our communities now the easiest place to

[00:48:13] find a VTV deal is within your network and if your network isn't big enough make it bigger yeah

[00:48:20] honestly we've made this super easy for all of you listening you literally have no excuse to not

[00:48:27] have a bigger network we host regular investment meetups in most major cities across Canada

[00:48:31] including some notable additions Montreal Halifax and I think Victoria is coming soon

[00:48:36] so yeah click the meetup dot com link in the show notes and sign up and go meet some people and

[00:48:41] find some VTV's yeah I mean dance speaking of meetups you and I were literally we are back in

[00:48:46] Ontario now we were in Saskatoon Saskatchewan yesterday Adam meetup talking with people they're meeting

[00:48:53] new investors and growing our personal network so I want you to look for properties that have been

[00:49:00] on the market for an extended period of time and as these sellers might be getting more and more

[00:49:08] motivated to consider alternative financing options such as a VTV because by the sound looks

[00:49:13] of it they're not getting any action from the traditional sense exactly and similarly like

[00:49:18] contact commercial properties and multi-family owners and you know again a lot of these people

[00:49:25] are out at our meetups like you know and you know that it's a good strategy if like the season

[00:49:29] investors who are like you know and you know older and have a huge portfolio are still going to

[00:49:34] these things to get value out of it but these sellers are more sophisticated they have higher capital

[00:49:39] gains exposure and so they would be more open to a VTV arrangement to facilitate a sale if it's

[00:49:45] a good business decision they're likely to accept it because as real estate investors we are

[00:49:50] business owners right we want to look at this entry like a business from day one okay now

[00:49:56] last but very not least then how do you go and ask someone for VTV? You literally just ask

[00:50:03] the realtor would this seller hold paper on the property would this seller offer a vendor take back

[00:50:08] mortgage etc etc you know the worst cases they say no when you're in the same position you were

[00:50:14] before you asked and if you're afraid to ask then just put it in the offer and blind sign the person

[00:50:19] not recommended but it's been done before for sure and there you have it folks that so once you

[00:50:26] have them in agreement on the agreement of persons and sale though you still need to get a separate

[00:50:29] mortgage document signed by both parties where the seller is the lender and the buyer is a borrower

[00:50:35] yeah so basically a mortgage commitment right that is a formal document is issued by a lender

[00:50:40] to a borrower it outlines the terms and conditions under which the lender agrees to provide a mortgage

[00:50:48] for the purchase of that property the commitment typically drafted and forced by a lawyer

[00:50:54] details the loan amount interest rate loan term repayments schedule and any conditions that

[00:50:58] be satisfied before the loan can be finalized it is also worth noting in a normal transaction

[00:51:02] the buyer's lawyer also represents the buyer's lender in the closing transaction I know

[00:51:07] a lot of people don't know this but like if I have a mortgage now on a closing my lender is the one

[00:51:12] or sorry my lawyer is also registering the lender's mortgage and so they were actually

[00:51:15] ready to represent the transaction so if my lawyer knows I'm committing mortgage fraud which I don't

[00:51:20] do by the way they would act like they would inform the lawyer and like it was a reddit

[00:51:26] about this recently somebody's like oh I lost my job what should I what should I do and

[00:51:30] and I put in the thread like you're your lender is likely going to find out because the person

[00:51:36] basically trying to not tell the lender the lender is going to find out because your lawyer is

[00:51:40] probably going to know that you lost your job or like you know you would assume that the

[00:51:44] person would tell them that in the process and then the lawyer will disclose that to the lender so

[00:51:48] anyway thought that was interesting in this scenario the it's not the case because the seller

[00:51:53] would have their own lawyer and they the seller can't represent or you sort of your lawyer can't

[00:51:57] represent the buyer and sell it it's called the ministers yeah exactly so once that borer

[00:52:03] accepts those agreed upon terms the mortgage can commitment becomes a binding agreement between

[00:52:09] the lender and the borer and of course that is not subject to fulfillment of any specified conditions

[00:52:18] and I think that's about it other than well I guess as we come to the end of our ride today

[00:52:24] have to finish our meta-vory yeah we hope you enjoy the twists and turns of the market better take back

[00:52:29] mortgages remember just like a roller coaster the market can be exhilarating and VTBs can be a

[00:52:34] great solution but a little daunting but with the right knowledge and the right preparation they

[00:52:42] can be the thrilling part of your investment strategy roller coaster ride and before you exit

[00:52:49] the ride make sure you join our online community where we're going to have a free exciting webinar

[00:52:53] about this happening on September 20th at 11 am if you're catching this episode after the 20th

[00:52:58] don't worry you can access the recording and several more just like it in that community for free

[00:53:05] thank you so much for riding with us today remember that the best investments are safe investments

[00:53:12] until next time keep your hands and feet inside the vehicle at all times and enjoy the ride

[00:53:18] and our new custom is apparently to finish the episode of the review so here's a good one

[00:53:24] this one's great five stars from profits of doom that's the title from AJ Marx

[00:53:31] via Apple podcast hopefully not related to Karl Marx yeah that would that wouldn't be great thanks

[00:53:37] Nick and Dan for the truly original way of making real estate truly the original way of making

[00:53:42] real estate podcast the truth is hard to hear when it's bad and before 8 a.m. when I'm lifting

[00:53:47] heavy stones but I've glad you're telling it to me can you do me a favor on episodes where

[00:53:52] the economic news is bad please start to show with the clutch song profits of doom

[00:54:00] this sorry guys in banter millennial culture references get me smiling like a crazy person

[00:54:04] not work keep your sticks on the ice what a beauty thank you so much AJ I actually I know I

[00:54:10] look like I do but I don't play hockey but Dan will certainly keep his stick on the ice

[00:54:14] when the season starts back up actually it's like a horrible habit of mine so

[00:54:20] I'm hopefully gonna remember that because I never have my stick on the ice uh and on that

[00:54:24] note I'm actually gonna also assume that we can not afford the rights to that music but it's a great

[00:54:28] suggestion AJ so we will look into it somewhat probably maybe yeah thanks again AJ and uh

[00:54:40] if you're waiting for a sign to do so this is it please take a second out of your busy day

[00:54:46] and leave us a review if you can't leave us a view because you listen on Spotify go hit that five

[00:54:50] stars it really means a lot to us thank you so much we'll see you next time

[00:54:56] the Canadian real estate investor podcast is for entertainment purposes only and it is not a financial

[00:55:03] Nick Hill is a mortgage agent with premier mortgage center and a partner in the G and H mortgage

[00:55:09] group licensed number one zero three one seven agent license M two one zero zero four zero three seven

[00:55:18] Dino photos are real estate broker licensed with rare real estate a member of the Canadian real estate

[00:55:25] the Toronto real estate board and the Ontario real estate association