Unlock Your Path to Homeownership with Rent to Own: Domenic Danino

Domenic Danino (00:00)
So you could have somebody that has an 800 credit score. You give them 100 % financing loan.

They can walk away because they know in five to seven years, their 800 credit score that was ruined by that default, they can come back and do it again. Right? And they gave up no money.

But if you put a down payment, a significant down payment, people are less likely, and especially if it was their own money.

Scott Bursey (01:54)
Welcome back to the Real Estate Pros Podcast. I’m your host Scott Bursey. And today we’re exploring one of the most innovative paths to homeownerships and investment. The Rent to Own model. Joining us is Domenic Danino, Principal at Rent to Own Homes. Domenic, thank you for joining us.

Domenic Danino (02:13)
I’m happy to be here.

Scott Bursey (02:14)
It’s awesome having you here. And for those that may not be familiar with your journey, could you tell us how you got started in the real estate career and what your focus is right now?

Domenic Danino (02:24)
Yeah, so I got started doing traditional real estate. So I come from the banking world, the mortgage lending world, going on 27 years in that space. And so back in 2008, during the financial crisis, I got laid off. So.

What I thought as that happened was I need a plan B because I can’t be dependent on an employer for me to pay my bills if something like this happens ever happens again. So that started my journey into figuring out, okay, what am I going to do as a plan B? And so I started with traditional rentals, you know, traditional put 20 % down, you’re getting financing, you put a traditional tenant into a property.

Then in 2012, I started looking for other opportunities. I got the flipping bug and then kind of went down that path. Found out that that wasn’t my genius zone. So hurting contractors like Katz is not my thing. I already manage employees at my employer at the bank and just managing contractors was just not.

We, our goals weren’t aligned as flippers ended up finding out, right? And so the evolution for me was 2018, I had a couple of properties that were up for sale as part of flips. If some people may recall fourth quarter of 2018, interest rates jumped.

not as high as they are today, but they were higher than they had normally been. That was fourth quarter 2018, and so we had basically a dead market where inventory was just not moving.

So I had properties that had hard money, right? We know the hard money game, the clock is ticking, gets expensive, eating to your profit and so forth. So I needed a solution to that problem. So I started kind of digging a little bit out there. What could I do with this, right? So some of the solutions are, if you can’t sell your property, you need a different exit, right? Either convert it to a long-term rental or Airbnb or all these other potential options. I was, so I refi, refinanced the property

into what’s a DSCR loan today, what people know as DSCR loans today. That wasn’t what it was called back then. Anyway, refining is a hard money.

Got a 30 year loan on it and then I marketed that property on rent to own on Craigslist, signs and so forth. And then just kind of opened my eyes to the opportunity where I, I got a ton of hits on it. And then at that point in time, ⁓ once you get leads or potential people that are interested, then it was about vetting them to see who I was going to place.

And so, I mean, that’s right up my alley, vetting people, qualifying people as a mortgage person. I mean, that’s right. My wheelhouse.

and then just deal structure and how am going to sell this to these people? So we came up with Rent to Own and that’s the, not that I invented Rent to Own, was just, know, it was kind of how I converted, but I use my lending background to qualify and I think that’s the most important aspect of what we do or what I do that differentiates myself versus other Rent to Own programs because people will place potential tenants or tenant buyers into a

property, but they’re not qualified who they are. And then also they’re not looking at the exit, right? Cause eventually those people will need exit financing. If you haven’t qualified them upfront when it’s time for their, their, their option basically as up, if they don’t qualify, then they’re not going to get the house. Right. And then some people may do that intentionally and that’s not what I do. I’m licensed, I have an M MLS, so I have to kind of go by certain criteria so I don’t lose my license with the state and so forth. So, so I qualify and just

says they were gonna lend them an FHA loan or conventional loan. So, requirement ability to repay. And then we wanna set them up to succeed. We wanna help them get to the end and not setting up to fail. So we’ve never put somebody in a house that, in a million dollar house that they would never qualify for a million dollars.

Scott Bursey (06:54)
That is an oats. That is a journey. That is an exciting journey. And Domenic, the rent to own space is fascinating because it tackles both the investment side and crucial social need, to be honest with you. And I want to start with the foundation challenge of your business. What is the biggest non-credit factor you look for to predict tenants, buyers success in securing a mortgage?

Domenic Danino (07:21)
Yeah, skin in the game. Skin in the game is the biggest predictor I learned as a lender. And we looked at models when I worked with the bank, we looked at models of repayment history. Who’s less likely to default? Person that has more skin in the game is as likely to default because they’re less likely to walk away from that money that they put down.

So you could have somebody that has an 800 credit score. You give them 100 % financing loan.

They can walk away because they know in five to seven years, their 800 credit score that was ruined by that default, they can come back and do it again. Right? And they gave up no money.

But if you put a down payment, a significant down payment, people are less likely, and especially if it was their own money.

I’ve also found a trend where if they were gifted that money or came into that money by accident as a gift or an inheritance, then again, they didn’t work for it. They didn’t earn it. They didn’t have to sweat. They didn’t have to put in the extra hours OT or whatever it was to accumulate those funds. They’re more likely to walk away as well.

Scott Bursey (08:24)
Great perspective. Domenic walk us through how does rent to own homes balance setting a locked in purchase price today against protecting your investors from future market shifts.

Domenic Danino (08:36)
Yeah, so again, so we, because of the amount that we take as a down payment, that kind of gives us a cushion, right, of what they owe us.

So you build in a factor in there of a cushion. So when they go get their financing in one, two, three, four, five years, let’s say even if we’re in a flat market or we had a down market, well, if they already gave us 10%, 15%, 20%, then that creates a cushion to withstand that down market. And when they go get their financing, traditional financing, if you go get FHA, you only need 3.5%. Unconventional minimum is 5%.

zero, right? And the majority of our clients are going to be FHA or conventional. So that cushion, when they go get their financing, they already pre-gave that money to us.

Right? So we can give them credit for that. When they go get their financing, we just tell the lender, Hey, this person bought the house from us at this price. They gave us this much already. We documented it again as a lender. I’m documenting, make sure that it was their funds. We get their bank statements. We get the cash copy of the cashier’s check. So we do all that documented and prepare it for the exit financing. So that way when the lender looks at it, I know ahead of time as a lender myself, what I’m going to need. So I’m setting them up.

to kind of just serve them up in the platter basically to that lender so they can get their financing. That’s basically the, to me that’s my specialty.

Scott Bursey (09:57)
Very thorough it sounds like.

That is especially to a T. Domenic, interested to know, since the rental-owned model doesn’t fit typical funding, what unique capital source has been most key to your expansion?

Domenic Danino (10:12)
Yes, so we do work with some private investors, right? So, so let’s say somebody that’s a traditional investor that has traditional tenants that buys a house and places a traditional tenant. A traditional tenant is going to have a different outlook and different care of your property.

Right? Cause they’re not intending to keep it. They’re going to be gone in 12 months. They’re going to tear it up. The dog and all of the others, all these things that happened at the traditional, in the traditional rental, rental space, unlike somebody that’s going to give us money for that because they’re intending to keep it. Right? So the goal with them keeping it is they’re going to take care of it as if it’s their own. So we, at times, we offer basically almost like an assignment.

Scott Bursey (10:54)
Thank

Domenic Danino (10:55)
to somebody say, we have this tenant buyer, they’re looking for this property. You come in, you buy the property. They’re going to make the payments to you, right? We haven’t agreed for this period of time. This is what we’re buying it for. This is what you’re going to sell it to them for. They’re going to give us this much down and this is your monthly payment. This is what you’re going to cash flow. And then I’ll take a fee for that.

Scott Bursey (11:14)
And on that note, the success of a rent-to-own program hinges on finding reliable tenants who are genuinely committed to becoming buyers. What is the single most critical non-traditional qualification metric that rent-to-own homes uses to vet participants and predict their eventual success in securing a mortgage?

Domenic Danino (12:09)
Yes, I mentioned skinning again, but then obviously anything else that’s gonna, this is gonna be a red flag for a lender, right? Obviously stability of employment, time of employment. the biggest people that have a challenge of getting qualified today are people obviously low credit and a lot of self-employed people, right? Cause self-employed people are writing off everything. They gross a million right off a million and they’re net zero and they’re broke on paper to the bank. And so they don’t qualify.

So again, we’re setting them up and letting them know, hey, we know you don’t qualify today because of these reasons. Here’s your plan to get yourself ready. You have to take action on this. We’ll point you in the right direction. We’re not going to go to your house and grab you by the hand and take you, but here’s the plan. You got to execute on this. you’ve got credit issues, okay, go fix this, go pay for this. Or if it’s just something that needs seasoning, as we call them in the mortgage space, basically the older it gets, the less impact it has on your score.

day late last month has a greater impact than the 30 day late that was three years ago. Right? So we execute our timeline to give them so that that old derogatory gets older and older, has a lesser impact, and their score goes up. Now, they go mess it up again and go do something dumb that we can’t control that, right? But we caution them and we counsel them on that and say, you got to do these things because you are jeopardizing the money that you’re giving us as a down payment if you don’t do this. Right? So we, we, we’re

We’re

very clear on that. We’re no nonsense when it comes to that. I look, you got to go do this. You’re going to jeopardize us because if you don’t execute on this in the timeline that we’re giving you because you chose not to, then you could be in default.

Scott Bursey (13:45)
The rent-to-own space has faced increased scrutiny in certain jurisdictions regarding consumer protection and predatory practices. Looking ahead, what emerging regulatory or legislative changes are you monitoring most closely now?

Domenic Danino (14:01)
Yeah, we act, I I act when I execute on this, I act like a traditional lender. So anything that’s already happening in the traditional lending space as it relates to regulations, we’re kind of covering those things along the way as well. Right? So one of the bigger one is ability to repay. And then…

And then if we have to, let’s say remove them for non-payment, then we follow the local laws. Obviously each state is going to have their own either eviction process or foreclosure process. Right? So that’s important wherever you’re operating, know your laws, have an attorney. So we have an attorney that kind of we execute that when it comes to having to remove somebody or give them the right notice. Hey, you’re five days late or 15 minutes late or 15 days late, you’re going to get

the notice, certified mail and go through that process. So you got to have your ducks in a row with that. But it’s not that hard. You just got to know what’s going on wherever you’re doing business.

Scott Bursey (14:58)
That was well broken down. Thank you for that, Domenic. And where do you see the vision of your company rent to own homes in the next, let’s say, 18 to 24 months? And then maybe the long haul as well, if you could elaborate on that.

Domenic Danino (15:54)
Yeah, so just expanding markets. Right, so currently I’m offering it here in AZ, I mean I’m licensed in eight states, so theoretically I could offer it in eight states, right, but mainly we’re doing the southwest, coast, so AZ, Nevada, Colorado, I could do it in California, but there’s some things that we gotta.

Get set up there. I have an outlet to do it in California if we needed to up to a certain loan amount and then any of the other states that I’m licensed in, I’m licensed in Illinois, New Jersey, Texas, Tennessee, South Carolina and Georgia.

Scott Bursey (16:26)
How big is your team currently?

Domenic Danino (16:28)
Yeah, I have a couple of, so I act as the underwriter or lender in the transaction to qualify them.

But I have obviously, I have a VA that helps me with my marketing and my CRM. And then I have a couple of agents in each location, right? So if we’re gonna go ahead and execute on a rent to own in a different location and we’re gonna buy it on market because that’s what’s different about our program is we can buy on market. Doesn’t have to be off market. We buy on market, so we’ll have an agent, designated agent that’ll make the offer on our behalf in that market.

So I have two here in AZ, one in Colorado.

Scott Bursey (17:06)
Is there any golden nuggets or takeaways you’d like to leave our audience with today regarding your business?

Domenic Danino (17:12)
Golden nugget is, hey, if you’re doing anything creative or rent to own where you owner occupants.

right, or what’s considered consumer, you have to qualify these people. You can’t just throw them in there and hope for the best. And then if you boot them out, you can get yourself in trouble. They have to go through a qualification process. I know some people kind of wing it and they’re not in this space. And so they don’t know what to ask or, Hey, yeah, you give me 10,000 and you make the payment, whatever. But you don’t know if they’re going to be able to exit or execute on that. And then they, you know, going through that eviction process or foreclosure process, the judge may ask and say, well, no, why did you put somebody in a house

that

you know they couldn’t afford. You’re get yourself in trouble. So work with a lender that knows how to execute on this and knows what to look for. Don’t just wing it because you could jeopardize your transaction, the down payment, or even the house.

Scott Bursey (18:02)
and any challenges that you’re watching closely. If you could elaborate on that, Domenic.

Domenic Danino (18:07)
Yeah, so right now the challenges are no perception with the market, right?

So people have a perception, hey, rates are this, can I afford it, can I buy it? And then some uncertainty too, right? There’s a lot of, you know, lot of news about AI and people losing their jobs and then some, let’s say, government employees being laid off and then geopolitical situations that are happening around the world. So I think it has people kind of a little bit on the edge. And so a lot of times people that would probably be buying now are waiting and waiting and holding off to get it.

into a house, but they don’t realize, hey, if rates are, let’s say, six and a half today, when they get, if they get down to four or three, those people are going to compete, be competing with a lot more people. And so what you thought you could buy today at 300, right, it’s going to be 350 or 400 because now you have more buyers. It’s just simple supply and demand. If rates come down, you’re going to be late to the party. And if you’re a first time buyer or entry level buyer, you, maybe you have 5 % or 3 % of the minimum.

You’re going to be competing with us, investors, that have deeper pockets or the hedge funds or any of the iBuyers like we had in 2020. So you’re going to get priced out. So you want to get in, get in now because the competition and the opportunities, there’s a little bit more inventory. And so if that happens, the values are going to go up. So it’s an opportunity to get in now at these prices. And if rates come down, then obviously valuations are going to go up. Competition is going to be tougher.

Scott Bursey (19:35)
What role do you feel AI may play in your business?

Domenic Danino (19:38)
That’s a great question. That’s a great question. I think it’ll help more in automation, right? In replying and kind of streamlining some of the processes. But I still believe that this is a relationship business, right? If I don’t know you or we don’t have a conversation, you’re not buying a house from AI.

Nobody’s doing that. Okay. Let’s, let’s be realistic. AI can help with the contracts or hey, somebody goes to my website and say, Hey, I got a question about this. Can I, you know, respond to a, you know, frequently asked questions? Sure. Potentially. Right. Can AI say, Hey, scheduled an appointment here on my calendar. So you can have a conversation with Dom, right? That’s, that’s, think that’s where it comes in. Right. But people want to shake hands and look at you in the eye and say, Hey, yeah, I like this guy. All right. Trust this person.

hey, they’re really trying to help me, right? No AI is trying to look out for you per se, right? Nobody’s saying, hey, no AI is saying, hey, you got to go fix this or go do this or any follow up check on you six months down the road. Say, hey, what’s going on with your credit? Did you get that taken care of? Hey, do I need to talk to your CPA about getting your taxes done correctly so you can qualify? AI isn’t doing that.

Scott Bursey (20:43)
The foundation of this business is on relationships.

Domenic Danino (20:47)
Absolutely.

Scott Bursey (20:47)
And Domenic, we love fostering connections here at Real Estate Pros. For the listeners who want to follow your journey or collaborate with you, what’s the best way for them to reach you?

Domenic Danino (20:57)
Yeah, I’m on those social medias. So I am Mr. Rent to Own Homes on TikTok, YouTube, Instagram, and you can look me up on Facebook, Domenic Denino.

Scott Bursey (21:08)
Thank you for joining us today, Domenic. This has been a master class.

Domenic Danino (21:12)
Well, I appreciate that. Thank you so much for having me.

Scott Bursey (21:14)
And for our listeners, we appreciate you. If you got value from today’s episode, please subscribe. We have more conversations coming up with operators just like Domenic. Until next time, keep your standards high and your vision clear. We’ll see you on the next episode, everyone.