THUNDER BAY — Rent-to-own made sense to Kapish Limbachia.
"I was going to pay rent where I live, so I might as well rent a home which I'm later going to purchase," he explained.
Limbachia arrived in Thunder Bay in 2017 from India to study at Confederation College, and graduated in 2020.
He had been renting accommodations with friends, but realized he was going to need a larger house for his wife and other family members at some point.
Limbachia wasn't in a position yet to qualify for a mortgage, so he reached out to Requity Homes after spotting its ad on social media.
The Toronto-based company, founded in 2020 by Amy Ding, describes its rent-to-own option as "a fair and flexible alternative path to home ownership."
It buys houses on behalf of clients who provide a down payment and sign contracts to initially rent them from Requity before purchasing them for an agreed-upon price.
Limbachia gave Requity a two per cent down payment on the house.
The 33-year-old is employed as an AutoCAD (computer-assisted design) technician, but is also working at two other jobs with the goal of saving enough to qualify for a mortgage on the home in the city's Northwood area.
Under the terms of the three-year contract, he said, the price of the home goes up by five per cent each year unless he completes the purchase beforehand.
He plans to do that this summer, before the second year of the contract kicks in.
Limbachia said the experience so far has been nothing but positive.
Requity Homes began operations in Sault Ste. Marie before expanding to other Northern Ontario cities including Thunder Bay, where Ding said her company has done a few transactions so far to test out the market.
"With everything we have seen so far, we feel very positive, very bullish about the Thunder Bay market. That's why we're planning a big push in 2025 with the goal of helping at least 30 families in the city."
She said clients search for suitable homes and select the one they prefer.
"They choose any houses available for sale, and we will be able to purchase for them upfront and make them available to rent so they can qualify for a mortgage They have a lot more homes to choose from, and they actually get to be the decision-maker, picking the right home for their family."
Ding said the company also provides free credit-coaching, and reports rent payments to Equifax so clients can build up their credit score.
But she acknowledged rent-to-own is not suitable for everyone.
"If there are people who can totally get a mortgage easily from a bank or credit union, they don't need us. We're not going to be cheaper than the bank. However...if you're self-employed, have a fair credit score, or if you're a newcomer, there are a lot of challenges in terms of getting a traditional mortgage, then rent could be a great stepping-stone."
Ding also conceded the rent-to-own model "doesn't have the greatest reputation historically," because it sometimes wasn't done properly.
She said some rental firms will match a client with an individual investor who the buyer may never even get to meet.
"They don't know who the person is, and there are risks when you're dealing with a stranger. How do you know that person is going to pay for the mortgage? What if they default? What if you have a hardship where you need to be late with your rent payment for a few days, or need some flexibility? None of that is usually available in the private rent-to-own schemes. We're different."
According to Ding, her firm has secured $26 million from strategic partners, including investors such as Northern Ontario Angels.
Johnny Avella, a city real estate agent, has worked with five or six Requity clients so far.
"I think it's catching on more and more...Obviously, if they're coming from out-of-country and they're getting a new job, they don't have their two years of Notice of Assessment [from Revenue Canada] or their permanent residency, it makes it tough to get into a home. So this option to rent until they purchase off the landlord is a good option."
Avella cautioned, however, that "it definitely wouldn't work for everyone, and I think they have to understand that they're getting that increase of five per cent per year...They have to have a very thorough understanding of what they're getting into. I'm kind of on the sidelines, helping them look at the homes and deciding if they want to put in an offer."
He added that clients then go back to Requity to make arrangements "but I'm kind of the mediator on the ground to give as much guidance and protection as I can."
Avella also recommends people pursuing this option to get legal advice or talk to a mortgage agent, because some lenders might require only one year's Notice of Assessment.
He said he was a bit hesitant at first to get involved, but then looked into the model further, and believes Requity has a good system.
"Again, I don't think it's for everyone, and I think people have to be wary and cautious, and understand all the fine print and small details of what they're getting into."
The outgoing president of the Thunder Bay Real Estate Board, Wes Case, declined to comment on any specific business models, but emphasized the importance of exercising due diligence for any real estate transaction.
"We would just recommend making sure you review any kind of sales or lease contract, and bring it to a lawyer and get a professional opinion on the contract."
Case said consumers should protect themselves by ensuring they know all the terms including the buy-back options.
