Rent-to-Own Strategy Still Viable given Canada's Strict Down Payment Requirements for Investors?

by Adam
(Barrie, ON)

The landscape for rentals has changed dramatically for investors over the past few years making it ever more difficult for investors to buy multiple properties. In reading the free download of the 'Income_For_Life_For_Canadians_eBook' (thanks, by the way), the rent-to-own strategy sounds extremely sound and profitable. However, the examples given are for a 5%-10% down payment.

However, running the numbers for a 20% down payment really seems to weaken the rent-to-own strategy. Would you agree? I want you reply and say I'm crazy, but the numbers seem pretty grim.

Example:
My initial investment on a 250k property with a 20% down payment is around 57k (down payment + closing costs + advertising + 2 months carrying costs). I understand that closing costs might be able to be covered by the seller, but lets pretend that that's not going to happen.

Monthly Costs: $1300
Monthly Rent: $1600 (w/ $200 as a credit to the renter for buy-out)
Positive Cash Flow: $100
Upfront Option Payment: $5000
Market Value of House: 260K
Value after 2yrs with a 4% appreciation: $281,216
Buyout price after 2yrs: $271,416 (281,216 - 9800) (9800 = monthly credit+option payment)
Profit from buyout: $21,416

My initial investment layout is still way more than if I add up my positive cash flow for 2 yrs ($100, which has the potential to disappear with a major repair) plus my profit from the buy out.

Am I missing something? Please say that I am.

Thanks in advance for your time.

Cheers,
Adam