20 Houses in USA, Looking South For Affordability & Cash Flow With Andrew Kim

Welcome to the Truth About Real Estate Investing Show for Canadians, today’s guest Andrew is Canadian, he lives in the GTA but owns 20 income properties in the US, has never seen any of them and he is the CEO of a tech based, real estate investment company called Share (links in the show notes) that helps everyday investors build a portfolio of fully managed rental properties in landlord friend States in the USA.

I’m your host Erwin Szeto, four time Realtor of the year to investors with $400 million worth of real estate transactions, 350+ investor clients, executing on BRRRs, highest and best use, positive cash flow investing experience.  My focus has been on best practices ever since I started investing in 2005 and in my experience, value investing, renovating for value for the long-term has been the best investment strategy for most people, most of the time. 

The newer, fad strategies like mid-term rentals and cottages are great for those who want to be active business operators however most investors want as hands off as possible. One of my clients has been doing mid-term rentals for nearly a decade and she has business development work to do to make and maintain relationships with insurance companies and local employers.  

Cottage investing has its challenges too: reliable cleaners and contractors are hard to come by in big cities and it’s even harder in remote areas like cottages where properties are further apart making for longer commutes.  It’s all possible with skill and hustle, we’ve had plenty of guests on this show who have, just be true to yourself how much time and effort you want to invest.

My point is there’s no free lunch, do your research, understand your own values and seek out the truth about real estate investing and find what works for you.

For today’s guest, Andrew who’s from Brampton, Ontario has 20 properties south of the border and he’s never seen them before.  Andrew also shared with me how wonderful his experience has been investing in entry level income properties in the US for $100,000 or less via Section 8, a federal, low income housing assistance program that often covers around 70% of the rent, paid directly to the landlord for a more reliable income stream.

The cash flow from these types of investments are much better than anything I’ve seen in years. Cap rates are 7-11% which are better than any apartment building I’ve seen in BC or Ontario and the investment is much smaller, these are $60,000-110,000 properties afterall for a whole house. That’s less than many renovation budgets let alone a down payment on a duplex in Ontario, BC or Calgary.

I’ve written a blog post to share my research on the subject. I’m not an expert on the subject yet but when I see great opportunities, I want to learn everything about them. Links will be in the show notes and my email newsletter.

**Blog Post**

Maximise Your U.S. Property Cash Flow: The Canadian’s Guide to Section 8 Housing

We asked and you’ve spoken, over 100 of you responded to our survey asking about what you wanted to learn about investing in the US, 93% of survey respondents went as fas as to say they want to join a webinar or workshop on how to invest in the USA. 

As Canadians look southward to diversify their real estate portfolios, get away from rent control and dysfunctional LTB or Residential Tenancy Branch in BC, U.S. investment properties have become increasingly popular. One intriguing avenue is the Section 8 housing program for high yield, cash flow investing. This federal assistance initiative provides housing subsidies for low-income Americans and offers investors consistent rental income. But what exactly is Section 8, and is it a good fit for Canadian investors? Let’s delve in.

Understanding Section 8

The U.S. Department of Housing and Urban Development (HUD) administers the Section 8 program. Qualified recipients are provided vouchers, which can be used to rent properties in the private sector. A significant portion of the rent is then paid directly to landlords by local Public Housing Agencies (PHAs).

Why Section 8 Might Mean Higher Rents

Fair Market Rents (FMRs): HUD’s established FMRs may, in some areas, align closely with or even exceed local market rates.

Consistent Payments: Landlords often experience more consistent payments, with a substantial portion of the rent guaranteed by the PHA.

Longer Tenancies: Limited availability of Section 8 properties can result in longer tenures, decreasing turnover costs.

Economic Buffers: In economically strained areas, FMRs can offer an attractive alternative to declining local market rents.

Challenges and Considerations for Investors

While the allure of consistent rents is tempting, Canadian investors should be aware of the potential challenges:

Regular Inspections: Properties must meet and maintain HUD’s Housing Quality Standards.

Paperwork: There is an added administrative layer when dealing with PHAs.

Rent Variability: Tenants’ rent contributions can fluctuate based on their income, affecting the total rent amount.

Is Section 8 Right for Canadian Investors?

The appeal of Section 8 for Canadian investors lies in the potential for higher and more consistent rents, especially in certain U.S. markets. However, the program does come with its set of challenges. Thorough research, understanding local markets, and perhaps consultation with U.S.-based real estate professionals familiar with Section 8 can help Canadians make informed decisions.

Final Thoughts

For Canadians eager to diversify their portfolios, amplify their cash flow and tap into the U.S. real estate market, Section 8 housing offers an intriguing option. Like any investment, it requires due diligence, understanding of local nuances, and a bit of patience. But with the right approach, it can be a lucrative venture on the path to international real estate success.

20 Houses in USA, Looking South For Affordability & Cash Flow With Andrew Kim

Our guest today is Andrew Kim, with ten years of real estate experience starting in the GTA, before building a portfolio of 20, fully managed properties in the state of New York, Florida, Atlanta and Dallas.  He’s a serial tech entrepreneur who’s worked in Silicon Valley startups and is now combining his passion for real estate investing with his technology.  Andrew’s company combines the expertise to handpick quality investment properties for Canadians in the US., writing offers to arranging ownership structuring, taxes, property management, financing partners, renovations and setting lease rates, it doesn’t get any more passive.

To me this is the dream, as the investor I’d have direct ownership and control over the house but passive as the property generates enough rent to pay for top notch management.

[iWIN Hybrid Workshop] How to Invest in the US Real Estate Market https://iwinworkshop.eventbrite.ca

With inflation getting out of control, rent control, uncertainty of receiving rent here in Canada for mainly Ontario and BC investors, I think it’s advisable to give this episode a listen.To follow Andrew or interested in learning more about Share go to iwin.sharesfr.com. To view current and past US deals, you do need to sign up, let them know Erwin sent you and they’ll take good care of you.


This episode is brought to you by me! We don’t have sponsors for this show. I only share with you services owned by my wife Cherry and me.  Real estate investing is a staple in my life and allowed me to build wealth and, more importantly, achieve financial peace about the future, knowing our retirement is taken care of and my kids will be able to afford a home when they grow up.  If you, too, are interested in my systematic strategy to implement the #1 investment strategy, the same one pretty much all my guests are doing themselves, then go visit www.infinitywealth.ca/events and register for our next FREE Online Training Class.  We will be back in person once legally allowed to do so, but for now, we are 100% virtual.

No need for you to reinvent the wheel; we have our system down pat. Again that’s  www.infinitywealth.ca/events and register for the FREE Online Training Class.

To Listen:

** Transcript Auto-generated**

Erwin 0:00
Welcome to the truth about real estate investing show for Canadians. Today, my guest is Andrew, he’s Canadian. He lives in the GTA, but he owns 20 income properties in the US. Funny enough, he’s never seen any of them. He is the CEO of a tech based real estate investment company called Share. I’ll have links in the show notes. They help everyday investors build a portfolio of fully managed rental properties in landlord friendly states in the USA.

Erwin 0:25
My name is Erwin Szeto. I am your host for time real truth of the year to investors with somewhere north of $400 million with real estate transactions under our belts 350 Plus investor clients who we help execute on burrs highest and best use positive cash flow investing. My focus has been on best practice investing ever since I started back in 2005. And in my experience, value investing, renovating for value. And investing for the long term has been the best strategy for my experience. And for most people most of the time. There are lots of newer strategies that are they do work. They obviously require a lot more effort such as like midterm rentals and cottage rentals. They’re great for people who want to be active business owners. Numbers are tougher than ever though.

Erwin 1:16
And my experience most investors want to be as hands off as possible.

Erwin 1:21
Why not? Why not earn money passively in one sleep, just like Warren Buffett preaches one of my clients who has been doing midterm rentals for nearly a decade. She’s extremely successful at it. For example, two of her properties are made the top five list for VRBO. In Hamilton for top grossing properties. She has to do business development work, she has to connect with and maintain relationships with local insurance companies and local employers in order to make sure that the flow of business continues to come in. She tells me it’s been tougher than ever. And that’s the truth about real estate investing. She is full. But again she hustles and she self manages and she meets tenants to him the keys for her for her Airbnb ease. Not everyone’s willing to do that. College investing no different has its challenges. Reliable cleaners and contractors are hard to come by in big cities, and they’re even harder to come by in remote areas.

Erwin 2:17
And so again, it is all possible within a skill and hustle.

Erwin 2:22
We’ve had plenty of guests on this show who have done just that. Just be true to yourself how much time and effort you’re willing to invest. My point is, there is no free lunch, do your own research, understand your own values and seek out the truth about real estate investing. Find out what works for you. For today’s guests, Andrew, he’s from Brampton. He has over 20 properties south of the border. And again, he’s never seen any of them. He also shared with me how wonderful his experience has been investing in entry level income properties in the US for as little as even under $100,000. For a whole house like a three bedroom one bath house via a program called Section eight, which assists low income housing. low income families afford housing. For example, rough the government roughly pays for 70% of the rate rent and is paid directly to the landlord, which provides the landlord and the real estate investor like you and I are more reliable in chemistry. The cash flows from these investments are typically better than anything I’ve seen here in Ontario. For example, cap rates are seven to 11%, which is better than any apartment building I’ve seen in many, many years.

Erwin 3:30
And again, these investments require a way less capital, somewhere in the range of 60 to 110,000. And again, that’s for a whole house. That’s less than many renovation budgets,

Erwin 3:42
let alone down payments for a house in Canada. I’ve written a blog post about it. And as always, I like to share my research. I’m not an expert on the subject. But when I do see great opportunities, I like to learn everything I can about them. Links will be in the show notes and in the email newsletter onto this show. Again, we have our guest today Andrew Kim. He’s got over 10 years experience investing in real estate he started in the GTA didn’t go so well because he was so busy, he couldn’t really handle manage them properly. The Cash Flow wasn’t there to afford a manager either. And then he went on to do build a portfolio of 2020 properties that are fully managed in a couple locations. Upstate New York, Florida. I think we’ve all heard of Florida, Atlanta, Georgia and Dallas, Texas. He’s a serial tech entrepreneur who has worked in Silicon Valley startups is now combining his passion for real estate investing with technology. Andrews company combines the expertise to handpick quality investment properties for Canadians in the US. Right, which includes writing offers, arranging ownership, structuring taxes, property management, financing partners, yes, Canadians can get mortgages to renovations and setting lease rates. It honestly doesn’t get more passive.

Erwin 4:55
And properties do again the generate enough rent to pay for top notch property.

Erwin 5:00
He basically it’s living the dream. In my experience, with inflation getting out of control, rent control, the uncertainty of receiving rent here in Canada, for mainly Ontario and BC investors, especially Ontario investors, I think it’s advisable even listen to this episode.

Erwin 5:17
And for those, for those who don’t know, we actually sent out a survey just last week on who was interested in receiving more information on us real estate investing 92% of you said you’re interested in attending a webinar, our workshop on the subject of real estate investing, and we collected a whole bunch of topics. So you asked, we will deliver, we are, we will be hosting a live in person.

Erwin 5:43
us investing workshop on Saturday, October 21, it’s just the morning. So it’s only three hours of your time, we will be doing this hybrid as well. So we do we are offering tickets for both in person, we are almost sold out of the in person tickets. And but again, if you for we literally had folks asking from BC as well, if we’d be if this would be available online. So yes, if you’re far away, you will have well, we will make this available to you online. So again, that’s a Saturday, October 21. So save the date, check the show notes in our website for links on how to register for that events. It’s we’re charging a mere $30. And it all goes to charity. So the content is gonna be incredible. We have, we’ll have Andrew and his team, including Carmen, who will be coming on the show. And also she is a CPA, she is a Chartered Professional Accountant on both sides of the border. So we will we will, we will be able to answer pretty much all your questions on structuring taxes. And also my friends got dealing him from lens city will be coming as well, because they just announced they’ll be offering mortgages to Canadians to invest for Canadian investors investing in the USA. So we’re going to cover all our bases. It’s just one morning your life, you do not want to miss this because again, 92% of you asked for this. So hopefully see you there. Again to follow. For anyone interested in following Andrew, we do have a website for it. We do have a shared website for it. It’s iWin dot share sfr.com. The SFR stands for single family rental. So again, it’s iWin dot share sfr.com. And you can go there to view current and past deals, you do need to sign up which is basically just given your email name and email address. They’ll ask you Where were you came from? If you just say or when are i when our truth about real estate investing, they will take good care of you. Please enjoy the show.

Erwin 7:45
Hey, Andrew, what’s keeping you busy these days? Oh, share my new company. It’s a venture backed real estate company, we try to help investors, both Canadian and American find high yield hybrid high returning rental homes in the US. And then we take

Erwin 8:03
a management role and we want to put your portfolio growth on autopilot.

Erwin 8:08
So first off, I want to say thank you for your service. I’m not military but I’ll take it

Andrew 8:14
it’s just because I know where you’re coming from. Like here in this business here I wouldn’t real estate we try to help the everyday investor as well.

Andrew 8:20
I think everyone knows the high our high net worth clients are the easiest to work with. Because they can purchase the cash right? And they can purchase many many properties. But I still want to help that pert that middle class person who doesn’t have family help. Yeah, to be able to acquire income properties. Yeah, and I understand your experience is no different. Yeah, high net worth people are way easier to work with. Yeah, high net worth people are easier to work with. You know, we love working with them. But you know, we our mission is really you know, financial security by way of real estate. And that’s why we got into it it wasn’t for the high net worth individuals for those you know, lower to middle that have are aspiring or want to target wealth for themselves and their generation after them their kids and they’ve saved up and accrued money to finally get into the real estate space. But you know, the failure rate in this world in real estate is pretty high, the risks are high

Andrew 9:18
with moderate to good returns so you know we are trying our best to mitigate those risks and actually help these individuals retail investors everyday investors Mom and Pop DIY errs to get in safely and start building their portfolio

Andrew 9:33
you know like that kind of goes back to my upbringing where it’s like I wanted to get into real estate and you know obviously now in Toronto just it’s much harder for someone to break in but I saved your millennial yeah I’m like at the tail yeah the tail end or tail the the very beginning of the millennial I think my or I guess that’s how you put it Yeah, last names Kim. So your your must be a crazy rich Asian. No, not at all.

Andrew 10:00
The I mean, I didn’t come from money definitely not low income family actually, probably what drove me to today. Parents were had some entrepreneurial attempts were not very successful and like what convenience stores? Yeah.

Andrew 10:17
I read the stereotype.

Andrew 10:20
Yeah, they added convenience store. We lived. Yeah, they first came to Canada. They lived in Rexdale, which is a Toronto.

Andrew 10:28
Toronto neighborhood. Yeah. And then I’ve gotten today. I my dad might have one we owned a convenience store. But I can’t remember but I remember there being like scares. But yeah, but in the like, they would give me this privilege kid lifelike, and all this extracurricular piano sports, you know, baseball, Kumaon, all this other extra stuff. And I’m like, looking back now that I’m a bear. And like, where’s this money coming from? Yeah.

Andrew 10:55
And yeah, like they declared bankruptcy when we were young. I remember them picking me up from like piano lessons. And there’d be duffel bags of clothes in the backseat? And I’m like, What’s this for? It’s like, just in case we get locked out of our house. Like get evicted. Right. And I was like, Okay, can we want to be Donald’s like, No, we got food at home, like, and also that was, and then as you get older in you realize that, wow, this is that that’s a lot of strife. And you’d see your parents arguing here, your parents arguing, and you’d never want that.

Andrew 11:23
To be witnessed of that and ever to repeat that. So that kind of I think, was some of my biggest drive for sure. It’s like, I want to eat McDonald’s every day.

Andrew 11:36
Exactly. I want to eat like everybody else eats out. Why do we always get to eat at home? Right.

Erwin 11:43
And you were pretty young. When you started that.

Erwin 11:47
You went to Silicon Valley, how old were you? Sorry, yeah, your first tech startup for you. So I’ve been in like, always had my foot into some sort of business online hustle, whatever it was. But my first real like venture backed like we’re outside investors tech company, was in 2011 was when I moved to first LA.

Erwin 12:07
Because we were in the YouTube Space in LA made more sense. We had a high a lot of high profile, angel investors, including like, its top executives from WMV, which is a notable like agency for actors. And then the CEO of YouTube was also one of our angel investors. So because we’re working with YouTubers la made sense. So we moved to LA and lived there for about four teen months of our family.

Andrew 12:38
So I was just married. So prior to getting married, I’ve my wife was my high school sweetheart.

Andrew 12:45
And she’s known that I’ve been entrepreneurial my whole life. And as we got serious, she’s like, You need to stop making these big, like swinging for the fence attempts, get a job, be stable, let’s buy a house get married. So quit my my first startup and then got a job. We bought a house and then my business partner reached out to me while my honeymoon is like when you get back, let’s talk. And then when he got back from our honeymoon, that’s when he had this idea. We started incubating it and then it was the same year that I moved to LA and quit my job. So she was not happy. She took the risk. So newlyweds bicoastal husband?

Andrew 13:24
Yeah, that was tough. I that’s the first I’ve heard that term bicoastal. Yeah. Because you were living on the West Coast. Yeah. My wife was in the East Coast.

Unknown Speaker 13:33
We don’t have a coast here in Ontario.

Unknown Speaker 13:36
We’re not doing it. There’s no Oh, Eastern Time eastern time zone. Because I wasn’t Victoria recently. And they call us East Coast and like, Okay, hang on. What ocean do we have? But with? Yeah. But I get it. I get New York’s were pretty much in line with New York. Yeah, New York is by different. Yeah, yeah. So she, she luckily worked from home. So she’d come out, spend four weeks and go back and forth.

Unknown Speaker 14:00
And then she eventually got pregnant. And then that created a whole new set of variables and risk. And then we sold the company. We sold the company to a company in the Silicon Valley in the Bay Area. So had to move up there. And now that I’ve sold the company, I don’t own my own schedule, I had to become an employee and then to earn out my stock because it was a majority stock deal. So I had to move up there working like six, seven days a week, 1214 hours a day newborn that’s sitting in Toronto, and you know, my wife could think Canada has 12 month parental leave, she could spend four weeks here back and forth, back and forth. But it was kind of miserable. So that’s why I said you know, screw it, it’s not worth it. I’ll build another company. So I quit left a bunch of stock and money on the table and came back to Canada in like 20 late 2014. Early 2015 Yeah, that was uh, but yeah, do have family. Yeah, exactly. Exactly. It was a hard pill to swallow because it came right back in winter. And I was like, I’m never coming back here. But good thing I kept my house good.

Unknown Speaker 15:00
You know, because it worked out for the better. Amazing. And then you you have been an Ontario landlord before. Yeah, yeah. I so my foray into real estate was just before moving to California, like the oh nine, like 22,009 2010, you know, read up among about the burst strategy found, like started looking at houses in Ajax and Barry, and at that time, you could get something like on the 300,000 price point for closed, dilapidated, put in, like 20%. CapEx, but it was work like, oh my gosh, and like, it really only penciled if you’re doing it yourself, like what I’m even doing is like self managing, like, there was no third party property manager, there was no line item for that. And my, my math was literally on pen and paper at that point.

Unknown Speaker 15:48
And I did that a few times, was intentionally maybe not looking at the numbers to tell myself I’m making progress. But it wasn’t until, yeah, I moved to California, and met my who is my now current business partner. She kind of she’s an accountant. And also in the real estate space. She’s the one that looked at my numbers like this is this is not a good investment. If you want to do real estate, let’s go look in Florida, right? And then just combine that with you’re out of town. Yeah. Young family. Yeah, you’re busy with the business. Yeah, you can’t be at an active real estate. Yeah. So I was living in California, she’s like, you gotta look in Florida, like you like, you’re here. Now you visa your tax ID number, like, it’s a lot easier for you now. And if you sell those properties, you could probably buy some of these cash and like, What do you mean, like, and it’s like, but like, how long is it gonna take for me to cashflow these things? And it’s like, well, as soon as we lease it up. So it’s like, Well, okay, well show me these properties. And you know, at the same at this time, you could buy something in Florida for $100,000. Like St. Pete’s pronounce count, like very well in our nice neighborhoods, for like, 100 110 you know, double digit net yields. So I was like, let’s go let’s do, you can get, like, over 10% cash on cash return with a 20% down. Yeah, yeah. Yeah. It’s nuts. It was nuts. These are unicorns. Yeah. So like, but no, these were all cash deals. But like, from like a yield perspective, it was very accretive opportunity. These weren’t desirable neighborhoods at that time. Right. And but what was the bonus was they like, look, I could get a property management company skimming off my rent, and I’m still not still cashflow positive, which for me, was just mind boggling. So

Unknown Speaker 17:39
knowing my typical all manner, I think you’re kind of the same way like, Oh, my God, let’s go. So to solve my units, bought a couple houses there, a few houses, and then kind of sat back. After I sold my company bought more. Now this was like, probably the my last purchase was like, 2013. And then that’s when I started moving to the Bay Area, worked with the company and then came back to Canada. 2014 15 may ask how many properties then you’re in the States? At that point? I think I had a bogey on. I remember, you’ve told me before, you’ve never seen any of them. I’ve never, ever seen. Okay. Please continue. How many houses do you hold? So now have over 20? Okay.

Unknown Speaker 18:21
20 hertz is never seen? Never, never again, how many times have tenants called you to fix something? So earlier on, it was it’s only it’s only ever property managers that has have contacted me, I’ve never, never dealt with a tenant directly. So, yeah, I’ve never dealt with 10 directly. It’s always a property management company. But even you know, even though the economics allow for a property manager, you’re still having to deal with them. And property management companies, you know, like their non razor slim margins. So if they have to go out to a house, like two times a month, it almost eats into the whole margin of that door. So you know, they don’t like going out for every single thing. They kind of like bundle it when they’re in the neighborhood, they can do that. But yeah, I would talk to property management companies, probably more frequently than I would have liked. Right. So just to clarify property management, because my experience here in Canada is it’s usually like, one person, maybe husband wife shop. Yeah. And they have some people that are may have contractors, right, like, so not people that are on staff even Right, right. But what is it more like? What’s the US? Yeah, so experience. And yeah, because of, you know, rental properties is is a major method of wealth creation for Americans, like it’s a $4 trillion asset class 88% are owned by mom and pop investors that own one to 10 units. So the ecosystem for like, sizable property managers from Mom and Pop property management’s to large institutional ones, run the gamut. Like you could throw a rock and hit two property management companies, because that’s not what it is like. Yeah, so like you

Unknown Speaker 20:00
Can like depends on how you want to search. But, you know, if you were to talk to your agent they could probably refer you to three property management company. So at that time the property management company we had there they would be considered a small one they had a couple 100 doors. Okay, there’s not that many around here Yeah, so like that would be a small and they do what’s what we do is called like scattered single family rental SFR.

Unknown Speaker 20:24
And then you know, they can move up the rungs of condos, whatever, but they those would be called your mom and pop shops then a couple 100 And then there’s a very boutique smaller it’s like a contractor but they have a software we can plug into it, I can log into the portal and take a look at things

Unknown Speaker 20:42
back then there that wasn’t as readily available, but it is today for Mom and Pop property management companies. So my experience investor with investors here in Canada is that you know, that on the on the less on the less expensive, more affordable end of the scale is like condos.

Unknown Speaker 20:59
If the unfortunately bought last two, three years, they’re negative cash flow 1000 or more.

Unknown Speaker 21:05
And then so like for example, in my business, we’ve always, we’ve always been more aggressive like so when we started back in like 2005 We bought we bought a lot single family homes, we can cashflow them, and then when we couldn’t it did student rentals and then let’s duplexing was available then we did those as well. understand all these have very significant renovation budgets, right? A basement suite apartment for example. Our our retail price retail price from general contractors has about 160,000. Right because it’s an invasive renovation. Investors market for for for that. So these houses that you own, are they what kind of properties are they apartment buildings? They they’re all single family. I got a couple of duplexes in there. But like I use duplexes loosely it’s like a house with you know, basement I guess you can call it a duplex, you know, top floor and main floor apartments but majority they’re all single detached homes and then your Airbnb in order in order to make it cashflow. Nope, they’re all long term rentals. They are the sort of single family the US single family is definitely long term rental is the safest real estate asset class in the world. My opinion.

Unknown Speaker 22:18
You know, they’re obviously got modest yields. And then you kind of got the risk level you can do short term rentals, Airbnb, higher yields, but higher risk. But in terms of plain vanila risk, and resiliency is the single family long term.

Unknown Speaker 22:33
I just find because I watched too much social media is that there’s all this hype behind Airbnb. But I don’t know if people realize Airbnb property managers usually take 23% of your rent. Yeah, yeah. And Airbnb takes them to Yeah, so like when we underwrite, like when I pencil sort of Airbnb opportunities, like, yeah, there might be some local boutique agency that will charge less but just for the sake of the exercise 20% on your revenue is kind of where you want to mark it off. Just like if you’re going to underwriting property management in like a mid tier market, mid mid cost market in the US, like you could roll with it. 8% is probably soft, right? Accuracy. Yeah. And then the alternative assets and friends who just who rented to the property management company, so they are Airbnb arbitrage the lingo. But then I’m just getting regular rent. Yeah. And still negative cash flow. Yeah.

Unknown Speaker 23:28
What am I doing here? Yeah, that’s why, like, I, it’s hard to make those things pencil. And in the turn rate is pretty high, the risk is hard, because you got very transient tenants, right? Like, it’s, you don’t know, if you’re gonna get one party in there, that’s just gonna ruin stuff. So your RNM line needs to be a little higher. And, you know, you got to be very cautious about that.

Unknown Speaker 23:50
A lot of people don’t even have proper insurance. Yeah, so they’re understanding like, they’re worried what if the insurance company doesn’t pay? Yeah, yeah. And like, and the reason why I’m like, kind of risky, but now kind of thinking about some short term rentals is one the pandemic really wanted, like, it would have been really nice to have a short term rental to kind of dip into in somewhere hot. So it’s more of a personal spend, but they did take a massive hit. And, you know, if the market goes downwards, you know, short term rentals vacation discretionary spend will go down. So that’s, that’s problematic for me, like, I don’t like that kind of risk. And then here more locally, as well as when clients who are property managers for vacation rentals and they’re sharing with me that all these all these pre construction projects that when they when the clients closing the property, they’re putting them on Airbnb. Oh, interesting. So we have because they need higher rents in order to cash flow, right. But my point is, there’s more supply. Therefore more competition for existing Airbnb, Robert Yeah. Yeah. And that’s what you saw like in Arizona to like in Arizona and Florida, certain Park pockets where there’s a lot

Unknown Speaker 25:00
lot of short term rentals, they got hit hard. Right, right and saturation cuz you got to compete now too, right? Like you go to Kissimmee, Florida and you kind of look on Airbnb, there’s like a million of them. Right, right. And then when it gets hits, it’s like a race to the bottom. We can lower the rates faster. My point, though, is that it sounds great. Yeah. But then, when you dig a little bit further, yeah, like, I don’t like competition. Yeah, it’s Yeah, exactly. Right. I don’t like people pushing my rents down.

Unknown Speaker 25:27
100% Awesome. At a stage in my career, like I like boring because I’ve done enough very invasive renovations. And, yeah, but yeah, let’s talk a bit more share in because I think the opportunity, like the opportunity today is like more important than ever. So first up, you saw my presentation that I gave to my to my meet up,

Unknown Speaker 25:48
property taxes are getting out of control. I don’t know what market is going to do. So for those who don’t know, Markham, like in New York region’s website, they shared the notes from the budget, and they’re talking about 93% property tax increase over a three year period. Thanks, because they’re blaming bill 23 I think there’s more things, because just even during the pandemic, like public transit, for example, still running during the pandemic, but they had like 10% of revenue, their typical revenue. So like, I always knew that bill is coming, the bills coming, right. And then as myself, you know, you were onto your landlord, I have a very much so in Ontario landlord, I can’t pass these inflated companies inflating costs to my tenants. So Hamilton is looking at a 14% property tax increase

Unknown Speaker 26:35
to my properties, that insurance went to $500 per year, which is about a 20% increase. And here we are in a rent control environment. And I think it’s only gonna get worse.

Unknown Speaker 26:45
Like, you were in the Toronto Star, for example, in Toronto stars, they sound very landlord friendly in the article they write. Sorry, sorry, they sound very tenant friendly talk. They call like these rent exact, like rent control exemptions, loopholes.

Unknown Speaker 26:59
The headwinds are worse than ever, for Ontario real estate investor. So

Unknown Speaker 27:06
naturally, so let’s just take a step back, when I started my real estate investing journey, I always knew the US was certain parts of the US were very landlord friendly. But then there were so many pieces missing for me to invest down there. Financing be a massive one, because of my experience, my friends who have bought in the States or internationally, it’s all HELOC, right. So basically, just you know, if the $300,000 house, they took $300, whatever, they have to convert money to us from their HELOC, and come out all at a HELOC, like there was no leverage opportunities. And then, and then all the other problems of coming, every real estate investor knows like, oh, like, Who do you trust? Finding people to find your deals? And then to me, massive risk area is the property manager, like you need the high quality property manager in order to take care of your investment for the long term. So many people are just obsessed with a deal. Yeah, like that. Yeah, you buy wrong and go really bad. More things can go bad over the long term, right?

Unknown Speaker 28:11
People need to appreciate that. So that’s what makes me really excited about share. So like even You even told you said it publicly. You guys have you guys do a lot. So I’m reading from the Toronto Star article. Your company promises to help with sourcing, renovating property management and even taxes.

Unknown Speaker 28:32
That’s, that’s, that’s a big commitment. Yeah, yeah. We know, it is a very Canadian investment as much as Canadians fear the idea of remote investing.

Unknown Speaker 28:45
So which is why we know kind of the pillars that we have to knock over for a Canadian to be able to invest in this not just Canadians out of state investors. So you know, I think Canadians from the major metros, Toronto, Montreal, Vancouver, all face the same, like issues that New York, San Francisco, you know, Seattle, all the major metros face.

Unknown Speaker 29:08
They’re trying to find affordable things out of state, you know, same problems apply where it’s like, I can’t physically get eyeballs on there. How do I do without a say taxes, cross border taxes and say same problems. So we identified each of those and said, Okay, well, we can build technology and process around each of them. At first, we will maybe refer you to a partner on certain parts like lending and then tax or whatever accounting might be, but for the most part, we can kind of box you into a very specific way to get from end to end on how to get financing as a sort of a Canadian as for national, what to think about as a foreign national and all the way to look let’s get your 10th home as a foreign national. So we decided like like that’s the place we want to play.

Unknown Speaker 29:57
You know, we get a lot of Americans but like, obviously as a Canadian

Unknown Speaker 30:00
You know, I have a soft spot for to help my fellow Canadian to get this asset class. And I think, you know, as risk averse as Canadians are they need to get in here. So let’s help them get in here. If they’re risk adverse, they should understand that the risks are being easier Ontario land. Yeah.

Unknown Speaker 30:17
It’s interesting, actually the common I asked you guys, I asked you to a different conversation. Like, for example, I literally have, I have a property manager friend who’s a professional property manager, who had IE, unfortunately, inherited a tenant. And that tenant has not paid since July last year. So even a professional tenant property manager cannot write cannot do anything about this situation. So it’s, it’s now September. So it’s been a year and a few months. And they still don’t have their eviction notice yet. They have their judgment from the from the landlord tenant board. But it’s been about two, three months. So they still don’t have their eviction paperwork, so they can’t get the sheriff yet. Right. All right. So people want to understand risk, like you and I had this conversation many times. The worst case scenario is

Unknown Speaker 31:07
here versus the landlord friendly state in the US is completely different. Right? Yeah. Yeah. I mean, there are probably loopholes in every single state. But that percentage of that, like somebody’s perfectly being able to box himself into that rare rare exception is small, right? Right. Like,

Unknown Speaker 31:27
like maybe a good percent, some, like, percent, like these are just rough numbers. These actually, this is just more of a gauge, but like maybe 10% of tenants in Ontario can box themselves and are educated enough to be a squatter, right? Whereas, and they know the rules. And because of the rules, yeah, they can box themselves in there. But in some of the landlord friendly states in the US, those rules don’t even actually apply. And maybe there’s like a point 1% of people that can actually slop themselves into the squatting exception. But yeah, we’ve not been faced with that. Exception. Right. But it’s not to say that there wasn’t one very legal savvy tenant, but for the most part, like the common problems you face, and from what I hear from the horror stories locally in Ontario, those are like eviction worthy events in the US. And you know, the turnaround time is just mainly administrative paperwork, and then we would proceed to the next level of evictions. Right. So what is your experience for an erection worthy event? How long to get your property back? Yeah, so we’ve, I mean, there’s a few scenarios. I mean, pandemic was kind of a weird one, where everyone felt that they didn’t have to pay. But also in the US, they released what a program called the E rap. So this might muddy our dataset, but you rap was like an Emergency Relief Fund program or something. So everyone’s like, our version is for Yeah, so like, they kind of but this was for 10 for landlords. So tenant tenants were like, Oh, well, I’m not going to pay my lease. And then they would apply for Iran. And then the government just give us a check. This to give it to you. Yeah, they give to us. It can’t really give the tenant Yeah, what it became an administrative headache, where it’s like, tenant, you need to sign this document. And it became an opportunity for property managers to actually cut like a little administrative percentage off the top, but the government did reimburse us for tenants that qualify for the rap program. But we did have like, one scenario of fraud.

Unknown Speaker 33:29
Somebody managed to a

Unknown Speaker 33:33
third party fraudster leased out one of our homes.

Unknown Speaker 33:39
And a tenant moved in. And then we realized it was was fraud and we had the mountain less than 60 days.

Unknown Speaker 33:47
Yeah, that’s pretty good. Yeah. But in all other cases, you know, we’ve we just kind of go through this procedure process most of its vanilla I would say like the longest turnaround we have and this was probably upstate New York and New York is not as landlord friendly as the other states we operate on and typically 90 days is not invested in New York. Yeah. And 90 days was like our turnaround time to get somebody back in out in in rare so but again, I can avoid that risk because not investing there. Yeah, yeah. Professionals haven’t said prevention is worth a pound of cure. Yeah, I would say like 30 to 60 days in is sort of get them out the door and you’re allowed to collect a security deposit in their Yellow Claw that yeah, we’ll pull that back. Yeah, we we are we all of our tenants we always kind of put up front land tenant insurance and reserve security deposit has to be there in order to come in right you know, a mentor of mine and it also was a vision from

Unknown Speaker 34:48
when as a brain Bushido when it first got your became a realtor back in 2010 was to make the process as easy as possible for the client, as in like, you know, like,

Unknown Speaker 34:59
kind of like

Unknown Speaker 35:00
Using a combo McDonald’s, you know, here’s six options which one you like. But

Unknown Speaker 35:05
the reality is that to actually execute that’s not the easiest, right? Especially with prices the way they are, you know, it could be $600,000 for home, it could be in a basement renovation for like, six, nine months. Yeah. You know, if they want to do a garden sweep and mop more cash out of pocket with, you know, hopefully a refinance in two years. Right. So we never got to that ideal situation. Now, you’ve because you’re a tech company, you’ve actually made the process quick, easy. Yeah, it is almost like a few clicks. Yeah. Yeah. Like, I mean, technology is great, because it’s an accelerant for us. So I always try to think of how we can automate people and move them through and and but they’re smarter than me. I know. But no, not at all. But, you know, we’ll really have to attribute to is the founding team, right? There’s four of us. But each of us cover a very specific part of the journey. Right? So Dimitri, he’s our head of investments comes from starlight, one of Canada’s largest private equity firms. So he brings that asset management piece, right, so he can understand how to scale that help biggest thoroughly, they’ve got a 25 plus billion dollars worth of residential real estate. Got it.

Unknown Speaker 36:21
Both here, Canada and the US. And then Carmen who is our CPA, both sides of the border. So she handles the accounting and tax and entity formation. She’s, she knows all of that stuff. So and then there’s Brandon, who’s our head, or head of technology, and then there’s me that just kind of

Unknown Speaker 36:38
gets to be on a podcast, right? So the subject matter expertise is there. So now it’s like extraction and building a platform that allows others to tap into that expertise without having to kind of bogged down the day to day, as much as I enjoy our conversations. I was really excited when I met Dimitri.

Unknown Speaker 36:57
Right? Because again, like, I’m very risk averse. I’ve seen many bad things happen. You know, I’ve, I’ve been through about five property managers in Hamilton alone, just fired my property manager in St. Catharines.

Unknown Speaker 37:09
Again, the market here is different property managers, my experience here are generally very, very small shops, right? Rare that they get to 100 doors, right? In the end, and I don’t blame them because it’s difficult. Right? If it tends not paying, how to it’s hard to bill your client for property management, or, or even just with a bit of rent control? Right. Everyone’s getting squeezed. Right. And, and a lot of people, a lot of investors have taken their properties back from property managers, because they can no longer afford property management. So PMS are getting squeezed. So it’s difficult business, just like you said, like, margins are slim. Right? Right. So I don’t fault them. It’s just every property manager I find has a shelf life. Because it’s not an easy job. Right, right. So

Unknown Speaker 38:02
Buffer, Nick. But when I met Dimitri, for example, you guys are telling me about these, you guys actually have much higher standards for who you hire for property managers. Yeah. Can you can you elaborate a bit on that? Yeah. So

Unknown Speaker 38:14
we the reason why we again, we want to be asset managers, as you know, we want to build such a aggregate portfolio for our clients that we can knock on the doors of the biggest property management companies that service typically only large institutions, because with that kind of volume and scale, they have to have certain expertise in house on payroll. One specifically we look for is like, do you have contractors on payroll that only take the 100% of their work comes from you. That way, we have control over the budget and timelines, because they’re the ones coming in doing the renovation work for us. They’re the ones setting the slot in their team. So timelines are pretty critical. And same with budgets. So the assumption is that if we’re getting them to do the rental work, they’re going to get the long the management contract. Now, when they get the manager, like, they’re, it’s in their best interest to kind of keep that budget low. And then on timeline. If they don’t, then we would walk. So we take those types of economies of scale, we pass that through to our clients. So that is sort of our core where it’s like, we need to work with reputable property management companies that have strong practices. We’ve got a good amount of team and good number of doors in that specific geography.

Unknown Speaker 39:31
I’m excited for that. Yeah.

Unknown Speaker 39:33
I think it’s a different experience of working with an institutional level property manager. Yeah. And again, in my experience, not many PMS can handle renovations. Right, because they don’t have staff. And it’s a tough business. Yeah, it’s a real contractor. Yeah. Right. And then to wear two hats, both be general contractor and be proper manager. And then it’s, it can be risks as well. Yeah, the GC side doesn’t work out. You’re over budget. You’re

Unknown Speaker 40:00
If you’re not on time, then your vacancies is longer. Yeah, clients, I can be happy. Tend to might be happy because you promised them that you can move in. But you’re pushed out two months. Yeah. Because my experience here is it’s rare for renovations to come in on time on budget. Yeah. Yeah, it’s tough to because like, when a contractor, a third party contractor comes in, they’re bidding on your business as well as 10 other businesses, and they’ll still take the highest bidding project, right. So all of a sudden, they’ve ghost you, and you now gotta you hit the Yellow Pages, if that’s still a thing, find, find another contractor.

Unknown Speaker 40:35
And then, and then you also help the client up front as well to actually acquire property. Because we were talking before this meeting, is that person owning property, personal property doesn’t make sense to buy in the States? Yeah. I mean, there’s there’s liability risk there. Yes. Yeah. I think everyone knows the Americans are extremely litigious, right? I don’t see what anyone that right mind would buy in their personal name is Yeah. And for an accounting perspective, for for national, we we advise Canadians to set up an entity corporation in the respective state that they’re buying. And we’ll help you do that. So we’ve got partners to do that. So we can actually set that up for you, and then buying the house under that entity. And then you can build your credit through that entity. And then eventually, that opens up a lot of doors. How hard is this create the entity? Oh, it’s very easy. We can set that up in under 48 hours. In most states, that’s hilarious. Yeah, it’s a tax ID number that takes a long time. And it’s the tax ID number you need to when you go for financing or refinancing or pawn sale. Because I spoke to one of your customers about this, and doing my due diligence on you. And

Unknown Speaker 41:45
he mentioned how creating an entity was like, you know, a lot a lot from work. Yeah.

Unknown Speaker 41:51
You know, that was a different time. Now we do it in house, you know, we were sending them to a partner and say, go to this website, sign up here and do this. And he’d ask questions, what does it mean for the share distributions? Like? Yeah, now we actually do that internally got through the same partner, but they’ve allowed us to, can take control of the experience. So now, because of our sort of onboarding and all that information, we already have a lot of information we need. So we’re just like, well, let us do it. Here it is, answer these questions. And we’ll tell you what these questions mean, as opposed to going online and being a number. But he was buying the property by clicking. Yeah, he has not seen it from what I understand. And I don’t think he’s either driven there visited the property. He told me he hasn’t. Okay. My point, though, is that traditionally to buy real estate investments is very different. Yeah. You got to, you know, get my client typically comes from the GTA. So they’re driving half hour, right? If there’s no traffic, yeah, it’s a Friday evening, there is traffic. Yeah, exactly. And then like,

Unknown Speaker 42:54
for a large period of time, we can guarantee we could still see the property that I wouldn’t sell and right. So I literally had had clients show up, like, sorry, it’s sold up, go home.

Unknown Speaker 43:08
And then, you know, going through the deal of going offering and then home inspection and then getting the contract to come in and you have the person come to draw, come and take measurements for drawings, and it’s like, you’re this past customers is clicking? Yes. Yeah, we aggregate we put boots on the ground. So we collate all that information, convert that information into hard, cold numbers and say, Is this what you like? Is this still good for you? So we kind of remove all that risk. But you know, it doesn’t come with some education process doesn’t mean they, they, they can just kind of show up and click they we we force them down in education funnel? Good. Yeah. So when you sign up and you’re interested, we actually send you some of our performance or underwriting and be like, this is your homework, read this through, write down your questions, and we’re going to come back and we’re going to meticulously go these lines. And so you understand how we are writing this. Understand your upside understand your downside. And when you give us the thumbs up here, then we’ll start searching. Right, right. Yeah. So education is key.

Unknown Speaker 44:12
Part of education. I think that’s incredibly important as well, because like this came like I’ve asked him at times,

Unknown Speaker 44:18
I coolants. The property, in terms of my understanding is just correct me if I’m wrong is I own the property Correct. No one else owns a property. This isn’t a fractional note. This isn’t shares of a private equity or read. No, I own it. direct ownership, you keep 100% of your upside. Our goal is to stretch that upside. So I can move into it if I wanted to. Yeah, if you wanted to, you could totally move in. You know, obviously, we have to go through the procedures, but that’s not a difficult thing.

Unknown Speaker 44:46
It’s pretty difficult here these days with tentative properties that you want to move in. Right. That’s I feel like that is one of the most clear cut ways to get a tenant out like is when to move in.

Unknown Speaker 44:56
But I’m not going to Yeah, I love Canada.

Unknown Speaker 45:03
I couldn’t I can just personally I don’t I don’t want to own a vacation property. I just don’t want to be pigeonholed into one place. So it’s not I’m just joking. My point is I have that level of control. Correct? Right, which in my opinion, is the proper way to invest heavy education, you control the asset? Because if anyone doesn’t believe me, just keep following the news on who loses money investing in real estate, right? Yeah. A lot of private lenders are getting whacked. It’s all over Twitter. Tons of private lenders getting whacked? Like their their capital is gone. Yeah, right. That’s okay. But I control the asset, right, so I can do whatever I want. Exactly. Right.

Unknown Speaker 45:43
I shouldn’t have asked this before, can I just you share for the acquisition, and then I do everything I want to, you could we do have a lockup period for our management fee. But again, it’s your property. If you decide to walk, we would just ask that you prorate our management fee from the lockup period, that lockup period could be anywhere from 12 to 24 months, right. But yeah, it’s your property, you can do what you want fire us, it’s your choice. But it’s not something I would recommend, obviously, because most your clients have do not see the property. Yeah, we’ve never actually turned over to clients. And they’re still with us. And in fact, I think majority of our clients fit over 50% of them are ready to buy another one or have already bought another one. Because I think the analogy would be like,

Unknown Speaker 46:26
I can get discounts at Costco if I tried to be my own Costco. Right.

Unknown Speaker 46:31
I just need to buy pallets of mayonnaise. Yeah. And then I can get the same price. Yeah, that’s, yeah. Yeah, you could totally under like, I think the disservice you would be doing and we should probably do the math on this is that, you know, if you take the property and run, you may lose some of the economies of scales we’ve provided Yes, right. Like the discounted PM, the discounted landlord insurance policy, because we can’t keep you on our master policy. So you’d have to go direct.

Unknown Speaker 47:00
So those cost savings will not be realized after.

Unknown Speaker 47:05
But yeah, again, it’s yours, you can fire us, you don’t like us, that’s completely up to you.

Unknown Speaker 47:11
The client experience sounds currently impressive again, because again, I can buy property based by clicking your guide me through the process of creating a US entity, you’ll

Unknown Speaker 47:20
you almost serve the function of a mortgage broker and putting me in place with and shopping your client to several mortgage companies to get them the best possible deal. You’re going to you’re going to you quarterback, the renovations

Unknown Speaker 47:39
and the property manager filling the property long term management.

Unknown Speaker 47:43
You even advised clients wanted to be ready for refinancing. Yeah, yeah. So yeah, right now, especially now, we’ll put those in the models upfront, be like, hey, look, this is the current rate.

Unknown Speaker 47:53
You know, we’ll watch like overnight, later renting different sorts of treasury like graphs, whatever. And we’ll say maybe in two years, let’s model out what this might look like at a refinancing. So you can get a better assessment on a more improved cash flow. So yeah, we do that we want to put everything all encompassing, you’re in financing your lending rate, make sure whatever your capital you’re bringing to the table, we want to know what kind of if it’s interest bearing or not. And we’ll put that into the model. Speaking of financing, what are typical terms you’re seeing today? Yeah, anywhere from Yeah, mid sevens to mid eights, it depends on sort of the house,

Unknown Speaker 48:28
your down payment size, and

Unknown Speaker 48:32
how invasive you want to get in the credit check.

Unknown Speaker 48:36
So say, for someone like myself, and many of my clients, they’ll likely listen to scenarios.

Unknown Speaker 48:44
Let’s do a scenario where someone’s coming home with some cash, because I have a number of clients who are exiting here to take profits, that they’re not worried about, like, Everything points to real estate prices going up war here in Ontario and Canada in general. Right. So But again, there’s still one take profits, pay down some debt.

Unknown Speaker 49:03
I imagine many of them will be interested in this as well.

Unknown Speaker 49:06
For all the lovely reasons of investing in the landlord friendly place with strong economic fundamentals.

Unknown Speaker 49:12
So okay, so let’s assume

Unknown Speaker 49:16
that someone with like 25 or 30%, down payment in cash, and they’re buying, you tell me, okay, well, yeah, so let’s say you, you come up with 25%. Down, you got excellent credit, let’s say 720 Plus assumed credit. The house has got in a great rental demand area, where the debt to service cover ratio is really good. Then I would say mid sevens

Unknown Speaker 49:43
only Oh, yeah. And that’s a 30 year fixed. no prepayment penalties. So that’s what we’ll say, Okay, we’ll lock that in because we can actually make that deal pencil cashflow positive, once a tenant in there, right. And then yeah, we’ll refinance that probably in two years. Right. So

Unknown Speaker 50:00
and no penalty at all to refund it. Yeah, there’s huge open balloons. Yeah, that’s that’s an American very common thing. It’s like a 30 year fixed sort of term. So it’s easy to do the math on that one. Right, right. From a cash flow perspective. So I actually do educate myself on this on us mortgages, because like, people tell me about it. They don’t really understand. Oh, yeah. 30 year amortization. I get it. Yeah. But it’s, but there’s no bass that that is the term of the mortgage. Yep. So it’s, it could be like 7.5% for the entire 30 years. Yes. Yeah. amortize? I mean, you could still like, if you want to, if you want, like, there’s so many, I think what we don’t realize, and we, in the US, there are so many different versions of this. So you get a five year term, two year term, three year term, but 30 year amortization, like there, and then there’s like step down fees, different yield maintenance. So I would say like, you can get up to like a 30 year term. But you know, there’s also short terms 2357 10 Whenever with 30, year amortization, but fixed.

Unknown Speaker 51:02
So yeah, I can’t speak for the broad nation, because again, you could walk down the street and get 50 versions of this, right. But 30 year amortization is a thing. Fixed terms can be different. prepayment turns, actually, one thing is pretty common. It’s like no prepayment. Penalties is a thing. It’s amazing. Yeah. So that’s why refinancing is so much easier. Because here refinance, we typically have to pay through an interest. Yeah, yeah, there’s no prepayment, majority of them don’t have prepayment penalties, they might have a step down, so that you can lock in for longer. But again, those are sort of the unique flavors when you go lender to lender. That sounds awesome. Yeah, it’s easy to do the math there, right. And it’s great when rates are low, and everyone’s competing against each other. Everyone’s competing against each other right now. So here’s the trick, I’m gonna say investing here is, I think the best option, the best options for investing locally are garden suites and student rentals. Neither appraised easily, right?

Unknown Speaker 51:58
All right. Okay, so I can get like seven and a half, I can cash flow.

Unknown Speaker 52:04
And I don’t mind sharing my credit. Right. If anything, if it gives me a better rate, yeah, it’ll get you a better rate for sure.

Unknown Speaker 52:12
Wow. Yeah. Because these loans, they’re meant to be non invasive, sort of, like non credit, check invasive processes. They underwrite the house, essentially. So it’s like, much like a commercial mortgage here. I guess. So yeah. Like they want to see that the rental income can exceed all your debt. And, and that personally, that if they’re, if you’re a shortfall, you can personally cover that delta. Interesting, because here in Canada, you typically have to be four to six units at a minimum, in order to qualify just on the property. Gotcha. But even still, if it’s like, many times, they’ll still want a personal guarantee. Right? Or to or to tie it to one of your corporation. Yeah, but as assets. Yeah. And I believe like, even if you were to buy like investment, like residential here, the big banks kind of limit you on how many you can buy with. But in the US with these DSCR loans, you can kind of do them over and over and over as long as the assets have well, performing asset. Well, the reality is here in Canada, it’s really hard to own five income properties, right. It’s just a lot of capital.

Unknown Speaker 53:12
And then the challenge of having enough cash flow. Yeah, right. So it’s rarely when he gets the runs up against that 10 property limit. Yeah.

Unknown Speaker 53:23
If you can win up to that 10, copy limit, let me know. Congratulations.

Unknown Speaker 53:28
You are you’re you’re you’re already are. Even in the past, before the pandemic, you were very rare. I think you were maybe 1% of the market that you could get to 10 properties. Right, right.

Unknown Speaker 53:39
More, I think that number went up to like two and a half, maybe during the pandemic, just because prices went up so much. People would got so much risk. So rich, but I digress.

Unknown Speaker 53:49
Great rental demand areas, that cash flow. Can you give me like, What are your top three? Yeah, I would say you know, the states wise, we would love we love Texas, Georgia.

Unknown Speaker 54:04

Unknown Speaker 54:07
starting to look into sort of Midwest and what we like Ohio, Missouri.

Unknown Speaker 54:13
Florida has always been up there. But you know, there’s some headwinds there because you only change Yeah, so yeah, experienced yourself. Yeah. So the insurance rates are starting to tick up.

Unknown Speaker 54:24
You know, it’s still a great investment spot is just with climate change and insurance rates. It’s kind of questionable.

Unknown Speaker 54:31
Because I’ve, I’ve, I’ve had people on the show, who, who deliberately chose something last three years in Florida, because it never got hit by hurricanes. And then those are always Famous last words. or never.

Unknown Speaker 54:47
And yeah, I have one friend

Unknown Speaker 54:51
Bonnke coral. They lost I think like 80s 80% of shingles off the roof during the hurricane. So the house flooded from the top down. Oh my gosh.

Unknown Speaker 55:00
This is just after they renovated. Right? Right? They’re just waiting. They’re at a stage. They’re just waiting for the cleaners.

Unknown Speaker 55:06
Because the house is already renovated. They’re just waiting for the cleaners to have men to have the furniture delivered. Already just been completely renovated. And like, gosh, by like the hurricane, the storm was that bad to knock off damaged shingles that a major Wall your house permeable? Right? So a flood from the from the roof down to the basement? So another good job? Yeah. All right.

Unknown Speaker 55:28
So me personally, as much as I love Florida, I I’d be very cautious. Because again, I am risk adverse. I need to know somewhere I can always get insurance. Yeah, yeah. No insurance, no mortgage. Right. So, yeah. And then yeah, mortgages are inflating across the states. I’ve done some research in stage two, I noticed a couple of the major insurers. I believe they reduced half their portfolio in Florida. Yeah, over the last like few years. And that seems to be a trend. Yeah. Yeah, they’re starting to pull back because they don’t know what’s going to happen to that’s that state and some neighboring states because of again, climate change.

Unknown Speaker 56:07
Demetri my head of investments is the best one to talk about this, because he gets more intimately in tune with that from a sort of institutional level. But my understanding is there are big notable insurers that have like openly stated that Florida is an area of question for them.

Unknown Speaker 56:25
But then, the counter argument I always hear is like, well, that opens up the opportunity for, you know, other insurance.

Unknown Speaker 56:33
How big are these insurers? Well, who’s to say that they’re just not going to disappear? So yeah, you know, it’s, it’s it’s touching go if the client really, really is adamant about Florida? Well, we’ll help you source there, but and we’ll keep a pulse on it. I think, you know, we, we want to kind of also project insurance rates as well, that’s kind of our forecasting as some of our Forte’s or insurance taxes, but we’ll kind of keep a pulse on that. But we want to educate them, we’ll give them the sort of same sentiment, as we are talking about now. And if they still want to move forward, then we’ll let them because in my research, I believe that the lead the insurer with the largest market share about 15% and of the fastest growing is a state backed insurance company, right. Backed by state of Florida. Yeah, by the taxpayer of Florida. Yeah. And I think that was a byproduct of their insurance pulling out, but again, don’t quote me on that. That’s more of a Demetri question. But yeah, I think that was a byproduct of other insurers pulling out red flag to be a complete wreck to have to back through. Yeah, exactly. I I’m not, that’s not that’s too much. That’s too much of a red flag for me. Right. I cuz, because I have, like, almost all my properties have basements. So whenever we get one of those 100 year storms, keep coming.

Unknown Speaker 57:54
I worry about my basements. Right, right. So I’ve had enough worry in my life. I don’t want to like every time I hear about a hurricane coming to Florida, I don’t have to be Googling and researching see if it’s coming near my property. Right. That’s me personally, personally. So that’s so I’m down to invest in areas where where things make sense. Yeah. Right. So let’s what what what about Texas, Georgia and Tennessee? What do we have in common? That makes sense? Yeah. So the reason why we like Texas, and we like Dallas, a lot. I mean, those like you mentioned economic fundamentals, you know, growing population, job growth, household income, unemployment rate, those we look at all of those factors, like we plug into several 100 data points.

Unknown Speaker 58:38
So we like them because you know, they’re great for it. They’ve got They run the gamut. They have anywhere from you know, your institutional grade class A, you know, these are low risk homes, in very nice neighborhoods to

Unknown Speaker 58:50
the tertiary markets where you’re looking at higher yields and lower price points. So they’ve got a good array of those both areas. But I would say Dallas and most of the pockets of Atlanta, they got a lot of great A and B product.

Unknown Speaker 59:03
And that’s where a lot of institutions are buying up in droves. They’re buying a lot of homes because they know it’s very good rental demand. Appreciation. Same with Atlanta. Lance is home to a major a bunch of fortune 500 companies. It’s a growing population. You know, you can buy something that’s you know, 2000 build 1500 square feet for under 300,000. So great product there. So yeah, it’s close to major metro. It’s like a bunch of Hamilton’s right like it’s a good city. Great economics, good job growth. It’s got all the right factors. All these are a lot bigger. Yeah, I saw Atlanta’s greater areas but 6.1 million. Yeah, yeah, like Atlanta proper thing. Yes, about 400,000 But like the whole surrounding area. Yeah. There’s such nice pockets there. And, you know, as much as institutions kind of affect you

Unknown Speaker 1:00:01
owner occupancy inventory because they’re buying up for rental. There’s some benefit there for other investors because you know, they can help boost the rental rates and stuff like that.

Unknown Speaker 1:00:14
And they tend to keep a good upkeep of their homes. So those are all positive opportunities for other investors to sort of leverage and piggyback right. Can you give a range of price points for these A B and C Class property? Yeah, so we we go from anywhere from $50,000 homes which would be like yeah, this the tertiary no parking lot is C, the C Class homes to

Unknown Speaker 1:00:39
up to like, let’s call 400,000 for a class homes.

Unknown Speaker 1:00:44
And how you want to think about it is the A Class homes have moderate to low cap rates. So there we would look at the pencil those deals to kind of break even but they’ve got pretty aggressive equity appreciation year over year and less tenant turnover, some of the cost lines are a lot lower like allocation for RNM and vacancy and probably lower and then on the sea side, lower price point, lower appreciation but higher yields cash yields and

Unknown Speaker 1:01:14
yeah, higher risk too. So it’s not to say we favor one or the other I think a well diversified portfolio should actually be a spread across that

Unknown Speaker 1:01:25
and having good cash yield sitting on that cash and reinvesting into the a it’s a great cycle or even, you know, refinancing and buying cashflow heavy homes is you know, a good opportunity to so yeah, a well diversified portfolio you should run the gamut. Each state has their ABCs but they also have their sort of micro economic factors. So that’s why on our platform we’re like it’s good idea to diversify across states right bees here bees, their bees across Sunbelt Midwest. Yeah, thank you. So red state becomes a blue state.

Unknown Speaker 1:01:57
I don’t want to get into politics or but hurricane just all of a sudden pops up out of nowhere. No. Tornado but, but again, like

Unknown Speaker 1:02:04
this all sounds great.

Erwin 1:02:08
Anything else I haven’t asked. We’re running out of time. So anything else I should have asked? Do you want to share? Oh, question was sorry. Question I want to ask is why single family rentals, right? Yeah, so single family rentals are like after the only mortgage crisis, they became quite popularized and known as like a very safe and resilient asset class.

Unknown Speaker 1:02:31
The reason institutions haven’t touched it is because it’s kind of hard to operationalize, because you have scattered that’s why they prefer multifamily condos, but single family rentals strictly because of the resiliency of it.

Unknown Speaker 1:02:43
You know, in the market, that price point typically goes up.

Unknown Speaker 1:02:48
And then down, market rental demand goes up. So your rental rates can go up. And because of law, specifically long term rental, now short term so that way you get people who are signing longer leases, you can have a dependable repeatable monthly income to ride out down cycles. And then up cycles, you know, obviously you’ve got accelerating vehicles like refinancing opportunities and stuff like that. So to replicate so yeah, after though a mortgage crisis institutions realized how resilient this asset class was and they started entering on droves. And it is still one of the most resilient ones and what makes them resilient is not just like okay, it’s a single detached home it could be anywhere now it’s it’s a certain surrounding setup. Again, economic fundamentals where you want to be outside of major metros, certain radius, drive time rental demand percentage of home owner occupant vers renters, these are all factors that go into the classification of an SFR single family rental.

Unknown Speaker 1:03:48
Manager, then

Erwin 1:03:50
I always like to give my guests you know, a chance to share.

Erwin 1:03:54
Is there anything you want us to share about anything today?

Unknown Speaker 1:03:59
Without my repre a prompting you Yeah, like, I think a lot of questions. A lot of hesitation people get it, it’s like do we buy now we wait for later.

Unknown Speaker 1:04:09
And I’ve always been a strong proponent of like, look, single family rental, this is a 10 to 15 year hold minimum. Like that’s how you want to look at it. Timing, the bottom is impossible. And supply is dwindling.

Unknown Speaker 1:04:21
We are constantly bidding against institutions. So that’s a big Nick, you can Google like, funds deploy more capital. And there, you know, a few months ago, Blackstone just announced with along with a KKR or something that that they’ve raised another 100 and $10 billion to deploy in single family rental homes. So if you can pencil the deal today to be cashflow positive, everything kind of goes up. Everything improves over time as interest rates kind of subsides so you’ve seen the worst case scenario so lock in your assets, buy them now because in 10 years you’re it’s always the same sob stories like I wish I would have bought more. I wish I would have bought I wish I would have

Unknown Speaker 1:05:00

Unknown Speaker 1:05:02
But yeah, so if you can make a deal pencil today, snatch it up, secure it, and then ride it out. Right. And that’s what we’re seeing. We see savvy investors still buying deals. And inflation doesn’t matter as much as their Yeah, this is a great inspiration. Yeah, this Yeah, this flesh, there’s a very good inflation hedge because, yeah, the rent control pieces we can raise rents and we typically pick markets where the rental demand is strong. So yeah, rent rates have gone up. And that’s why they said so far as a great inflation hedge, which is one like, I’ve seen many performance. So when I when I saw yours and I see the cashflow goes up every month, every year. I’m like, let’s let’s do this. Yeah, the rents are going up every year. And so like the year 10 cashflow numbers are sick. Yeah. And like, those are modest numbers to like, like Dimitri is quite conservative, like I’ve seen some way more aggressive, and we actually peg our underwriting against everyone else’s. And oftentimes our cap rates are about a percent a percent and a half lower than everyone else’s just strictly because of the conservative nature of it. But the low performers I’ve looked at you can basically cashflow your day one. Yes. And one example is I could cashflow $800 a month in your 10. Yeah, we wouldn’t. Yeah, we’ll never recommend like our starting point is cashflow positive. It doesn’t start in any other scenario for us. It doesn’t make sense. Amazing. Andrew, thank you for thank you so much for doing this. Of course. My pleasure. Do you

Erwin 1:06:29

Erwin 1:06:30
the landing page offhand? Yes, it’s I win dot share. S F our single family rental.com. Again, that’s I win, share sfr.com And I’ll have it in the show notes, folks, thank you for remembering. No problem. I got you.

Ewin 1:06:49
There Thank you for watching. If you want to learn how to invest in real estate from scratch, my team teaches beginners how to use the number one investment strategy that I personally use in a virtual free training class every month. Go to investor training.ca/youtube To register for our next class. Then links also in the description as well. I publish at least two to three videos a week here. So subscribe if you want to keep learning from seasoned investors like myself, my guess. And if you’re just starting out, feel free to ask questions and comment below. And I’ll do my best to answer each of those comments and questions myself. Again, if you’re ready to learn the nitty gritty about real estate investing from a professional investor register for our next virtual class. That’s at Investor training.ca/youtube. Thanks again for watching. See you in the next video.


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