Rachel Oliver’s Rent-to-Own Strategy for Reliable Cash Flow

Rachel Oliver (00:00)
it truly does filter out the operators that are here to stay versus operators that were here to profit. It’s easy to profit when everything is going up and up and up. There’s, you know, margin for error is high, but the market…

is basically offsetting all of those errors. When things shift, holy cow, that’s when it really exposes who has the true staying power.

Scott Bursey (02:00)
everyone and welcome to the real estate pros podcast. I’m your host Scott Bursey.

And today I’m joined by somebody I’ve really been looking forward to speaking with. Rachel Oliver, who’s been making serious moves in the rent-own space. After retiring from the corporate world in 2009, Rachel dedicated her career to bridging the gap between renting and owning. She is the heart and the soul of Clover properties and a tireless advocate of aspiring homeowners. Rachel, welcome to the show.

Rachel Oliver (02:30)
Thanks, Scott. Great to be here.

Scott Bursey (02:31)
I think our audience is really gonna take something away from the way you’ve been able to generate high yield cash flow without the typical tenant headaches. Let’s dive in, shall we?

Rachel Oliver (02:43)
Yeah, let’s do it.

Scott Bursey (02:44)
So first off, give us a little background on your world. What have you been up to recently?

Rachel Oliver (02:50)
gosh, I feel like I’ve just been living and breathing the rent to own investing strategy. ⁓ Basically since I landed in the world of real estate investing, I left the corporate world to stay, to be more present.

for my family. I had ⁓ one child at the time and the corporate world and the competitive climbing of the ladder just was interfering with me being a great mom. So I thought, okay, well, what else can I do differently? I thought, okay, you the rent to own strategy was going to be one that has the least amount of headaches, right? Because the home buyers that you’re working with, they handle maintenance, they handle repairs. And I thought, okay, I don’t have to be really a landlord and have the headaches. And then there’s a nice juicy cash

flow component and if I stack these properties I’m going to be able to replace that corporate job income. And that’s really what I set out to do and that was my mission. ⁓ Four properties in it worked but then the bank said hey you’re over leveraged and we can’t give you any more mortgages. So I was kind of like twiddling my thumbs what do I do? And then ⁓

The phone just kept ringing. Homebuyers kept calling to say, hey, you helped so-and-so where you heard that you can help us rent to own. And then we started basically calling friends and family saying, hey, can you take on a mortgage?

we have some families that need this program. And friends and family kind of said, yeah, we can do it. You know, the cash flow sounds good. You know, the profits ⁓ were coming in in double digits. And they’re like, yeah, but we just don’t know the mechanics. Can you step in and handle the mechanics? And we thought, sure, we can do that. We have the expertise after doing four deals. And that’s really, that was kind of the birth of this rent to own business momentum. It was very grassroots.

And before we knew it, we had a network of about 200 investor families wanting to help families get into homeownership through our program. And that’s really what we’ve been working on for the last 15 years until the market tsunami hit.

Scott Bursey (04:55)
That is awesome. It really is. What markets are you tackling in Canada?

Rachel Oliver (05:00)
We primarily operate in two provinces, Ontario and Alberta. ⁓ However, there are opportunities now as the market shifts to expand beyond those two provinces as well. So ⁓ expansion is in the near future.

Scott Bursey (05:17)
them. Love it. What caught my attention about you was the fact that you’ve been able to maintain such a high success rate. In an industry where rent to own cash can sometimes be, you know, have a bad reputation. You flipped the script and actually have gotten nearly 90 % of your clients to the finish line of homeownership. That’s not easy, especially in today’s climate.

What’s been the key to keeping your machine running smoothly?

Rachel Oliver (06:34)
Well, thank you. mean, that was one of our ⁓

I guess, objectives out of the gate. We always wanted to invest with the purpose of helping another family achieve their goal of home ownership. So it had to be win-win. ⁓ There were different ⁓ things in play. know, the market shifts, and sometimes it’s easier to get that win-win in one dynamic. But as interest rates rise, as property values rise, you have to have different mechanisms in play. So we noticed when prices started to go up a little bit, people were ⁓

that were in our program need a little bit more accountability. We always gave them accountability. I always liken it to going to the gym. If I go to the gym and I have to just account for doing certain exercises and getting out of the gym, I’m gonna breeze through it and I’m not really gonna do a great job. But if I’m there to meet a trainer, I’m going to give it 150%. I’m not gonna make any excuses and I’m gonna show up and get the better results.

that’s really kind of how we operated our program and we created accountability. a lot of investors think that the rent-own strategy, set it and forget it. Because the homeowners that occupy the property take care of all of the property management and there’s no tenant turnover, which is absolutely true, but you have to manage the people. You’re not managing the property. And we clued into that fairly early on and we put

metrics in place to make sure we held them accountable. And that accountability has evolved over the years as life becomes more expensive. After COVID especially, we noticed that people had ⁓ racked up a lot more credit.

They were living off of credit cards during COVID. I mean it was a wobbly time for everybody around the world. I get it. I was impacted the same way. ⁓ But you have to rebound from that. So how do you rebound from that? Well, we started bringing in money coaches to talk to our home buyers that were in our program that would guide them on methods that would help them get some traction with pay down faster to create more cash flow, to create more breathing room for

things that you know their family needs to do date night vacations and an overall just joy and as as as the economy became a little bit more turbulent and cost of living went up I mean no one can argue that cost of gas is crazy high no one can argue that cost of food

has gone up. know, all of these things are impacting how people manage their money. And we now realize that money coaching has to be a mandatory part of the program. So we’ve evolved over the years, but there’s always been this thread of accountability to make sure that they had the right guidance and the right support to manage their finances better.

Scott Bursey (09:32)
Absolutely, and that accountability is so critical. Thank you for sharing that. Now, Rachel, every operator I know has a moment where things got real. Maybe a deal went sideways or a time that you had to pivot fast. You mind sharing one of those moments with us?

Rachel Oliver (10:23)
well, you know, a traditional rent to own model is really anchored in, ⁓ you know, two components. One is kind of that forced savings that the homebuyer has to pay over and above the rent.

and the other is a locked in future exit price that we just kind of preset based on past market performance. And we assume, well, if the market performed in the past at 6 % growth, if we set a future price at 4 % annually compounded, we’re still going to be exiting these people below market value ⁓ and it’s going to be a win-win. So that came to a halt when

interest rates went up and demand for real estate, residential real estate went down and valuations were not coming in and because of higher interest rates that extra payment became an obstacle. So much so that the word option, know in the legal term when it comes to rent-own is that it’s an option to purchase. It’s an option credit.

And that option credit counts towards the future purchase of that home. So these words that we have been using for years, I didn’t create these words. They’ve been around since the seventies, I believe. ⁓ Option credit and option to purchase. Well, we got blindsided because home buyers decided it’s optional to pay that option credit. But as an investor, my cashflow is tied to that.

option credit being paid and it’s optional for us to exercise our option to purchase and we can just walk away and leave you with a property that isn’t coming in at the valuation set. So that was a little bit of a you know a moment that was a moment for us.

Scott Bursey (12:13)
Certainly, it’s incredible how the moments that feel like a disaster in real time often become the foundation for the next 10 years of growth. And honestly, that there is the filter. It’s what weeds out the dabblers and defines the investors who actually have the staying power to weather the cycles, Rachel. Let me ask you this.

What are you most focused on solving or scaling next?

Rachel Oliver (12:41)
Scott, just want to pause and just acknowledge what you just said. It is so, so on point that when we have these shifting cycles, shifting markets, it truly does filter out the operators that are here to stay versus operators that were here to profit. It’s easy to profit when everything is going up and up and up. There’s, you know, margin for error is high, but the market…

is basically offsetting all of those errors. When things shift, holy cow, that’s when it really exposes who has the true staying power.

And that was one of the things we kind of came to realize, like, okay, are we in the dabbler category or are we truly here to make a difference and we’re going to use this market shift to innovate?

And that’s really what we did. We started to innovate. how did we innovate? Sorry, I want to make sure I’m answering your next question.

Scott Bursey (13:44)
Absolutely, that was well said and that’s huge. You know that next move is where the leverage lives that vision that ⁓ you have it can either perfect your operations or detonate your workflow depending on the strategy that you deploy interested to know and ⁓ this is

on a little bit of a different note, but it’s been on the forefront of my mind. How do you maintain your edge when things are going well, Rachel? It’s easy to grind when you’re broke, let’s face it. But how do you stay hungry when you’re successful?

Rachel Oliver (15:00)
⁓ Well, I think you continue to innovate and never really see it as I’ve reached the, you know, the…

the height of the success that it could possibly reach because I really think it’s just a constant climb and you’re never done climbing. I think there’s always a next level for improvement. There’s always a next level of growth and there’s always a next level of impact. And I really feel that how we operate our rent to own model ⁓ reflects that. our next wave to innovate is actually a big departure from how rent to owns were done traditionally.

because we know going into the next few years that we’re probably going to be in a flat market.

At least we need to plan for it. The current rent-own model does not support that flat market dynamic in a win-win way. So we had to pivot and we now have a different exit strategy that is going to still produce great results and great profits, double-digit returns in a flat market. But it also sets us up for growth. If the growth happens to pick up in the next two, three or four years, we’re

for that and both the future homeowner and the investor are going to profit as the market increases and both of them still get ahead if the market stays flat. So that’s been the biggest pivot for us.

Scott Bursey (16:27)
Sure, staying innovative. Now, I know a lot of our audiences either earlier in their journey or looking to level up. And I think they could benefit from hearing this from you. When it comes to building relationships and growing your network, what’s made the biggest difference for you?

Rachel Oliver (16:44)
I think authenticity and ⁓ transparency. Those are probably words that I’ve carried with me for the last 15, 16 years. And I would add one more, consistency. You have to show up consistently. You have to be authentic and you have to be transparent. And at the end of the day, you’re not gonna make everyone happy.

Shit hits the fan. Sorry, am I allowed to say that? Sometimes poop hits the fan when it comes to real estate investing. It is not a guaranteed journey. There’s no guaranteed trajectory in any kind of real estate investing, unless you know something I don’t.

But you have to understand that when poop hits the fan, that the people that you’re working with can rely on you to show up and authentically try to make sense of whatever went sideways and help everyone resolve it in a win-win way. That, I think, been ⁓ something that has been near and dear to how we operate. And that’s probably why we are still working with the same people that we worked with

you know, 10 years ago.

Scott Bursey (17:55)
Absolutely, those relationships are everything and thank you for expanding on that. Very, very critical. Did you have anything else to add today?

Rachel Oliver (18:05)
Mmm.

I think one of the challenges we talked about earlier was what’s coming up in terms of continuing to…

be an operator, ⁓ continue to thrive with real estate investing. And one of the things I keep hearing repeatedly from investor partners that we work with is that the market is flat. I don’t want to be involved in real estate right now. And I just want to kind of reframe that because one of the things that we have to remember is that markets are cyclical. What goes down has to come up. And throwing the baby out with the bath

I think sometimes can be premature. Our model right now allows for significant cash flow about a thousand dollars a month after expenses is what a typical ⁓ property and I’m saying around six hundred thousand dollars that’s kind of a very common entry-level price point in the Ontario and Alberta market and as an investor I’m I don’t know I’m coming in with maybe a hundred and I don’t know

Let’s see my notes here. About a hundred thousand.

Plus, that would include about, I don’t know, $12,000 in closing costs. I’m not making money on closing costs, but I am making money on a big chunk of that, you know, the $90,000. And I’m making cashflow every month, about $1,000 a month. I’ve got these future owners who are paying the expenses on the property and they’re handling the pay down. I’m benefiting from pay down. I’m getting about $1,000 cashflow after expenses.

And I don’t know if the market is going to take off and I’m going to be selling that property to them at an appreciated price point. If the market stays flat, we extend. We renew. We both benefit from more mortgage pay down. But if the market is even 5 % higher, I’m now making $77,000 on the 100 that I invested. That’s in a flat market. And I think a lot of people have to remember that

Pay down and cash flow, it’s two out of the three if we don’t have appreciation. Ideal is yeah, pay down cash flow and appreciation, but when you have two out of three components, it’s still worth considering because where else are you going to have a guaranteed thousand dollars a month coming into your pocket where you control the asset?

Scott Bursey (20:36)
Great words. Thank you for that, Rachel, and expanding on that. All right, before we wrap, if someone wanted to reach you, connect with you, maybe collaborate. What is the best way for them to contact you?

Rachel Oliver (20:48)
They can email me rachel at hellocashflow.ca

Scott Bursey (20:52)
Rachel, well listen, I appreciate your time, your story, and your perspective.

We need more people in this space who are doing it the right way. I’m excited for you and your future. Thanks again for being here.

Rachel Oliver (20:59)
Thank you, Scott.

Thank you.

Scott Bursey (21:06)
And for those of you tuning in, you got value from this, make sure you’re subscribed. We’ve got more conversations coming up with operators just like Rachel, who are out there building real businesses. We’ll see you in the next episode, everybody.