**Transcripts are auto-generated.

 

Erwin  

condos are bad versus highest and best use triplex conversions east the GTA while they’re good and actually cashflow before we get to that, what are some people being taught these days as, as your classic Asian parents, we want our kids to excel in their after school activities. So naturally we asked our kids gymnastic club. If they offer private lessons, the staff members response and note she was a she’s a teenager, okay, whatever. Let’s not practice ageism here. Her response was, that would not be fair, as my kids will have an unfair advantage over their classmates. For context, the club is so busy, we were only able to get our kids into one class per week, which is not nearly enough if you want to be in competitive sports. So we’re switching clubs, but still, what is fair have anything to do with anything? First, Clint Eastwood famously said at the end of the Oscar winning movie, The Unforgiven fairy got nothing to do with it. I could pull it off slightly. Now it’s probably pretty bad. But I’ve major grass allergies right now. Anyways, life isn’t fair. And pretty much everything I’ve done in life was to get ahead, you know, work hard, stay late, working late working weekends, go into business school, investing in real estate, investing in coaching, to coaching for myself to receive coaching, reading books, taking courses, I don’t believe in fairness, I believe everyone has opportunities, and everyone has the right to take advantage of those opportunities in life. I believe in winning as well. And getting ahead in life fair fares for communists. I wasn’t born with any natural talents. So my don’t expect my kids who inherited it. Still, they’re got to learn the grind. And that includes doing extra work, including private lessons, speak to young people, I was checking in on one of my clients who hired a new property management company. So they have a new rental property, and they hired a new rental property management company, and the property hasn’t read it yet. It’s been two months since the property’s been ready to rent brand new renovation, two months have passed. And so that’s bad. The market is telling you something two months, that’s bad peak rental season is the spring market because parents want to you know, no one wants to go looking at properties in the winter unless they have to. But generally, for most people, most of the time spring, our parents want to settle in on a place before the next school year begins. And this apartment is a two bedroom plus den. So it’s ideal for our family, I informed our client that he has only a couple of weeks until a school is out for summer. So that’s when the official summer market summer starts in my books, I reviewed his ads with him and they’re fine, they can be improved, I give some tips on how to improve them including shooting a video that includes they can just be a simple selfie camera, just use your own phone, do the tour, you don’t need to spend all the money for professional tour for a rental property, tell them how the attitude could have been better written in order to target who the target market is, and who the decision maker is, is written very little, very technical, very technical, versus I said, you know, you need to paint a better story than that. And also, the key thing that stuck out was the price was high. Again, the price has to be high, because everything was else was decent. Pictures are okay, but he hasn’t rented. So you need to do something, I proceeded to review his competition in the immediate area, let’s say to the head, you know, they’re all similar in terms of number of bedrooms and bathrooms. Also, they were newly renovated. The New Town is a small town as well anyways, so newly renovated two bedroom, his competition, they’re asking for 100 to $300 less than he is there’s no one at the same price point in him, let alone higher, somewhere even above grade versus not so not a basement apartment, but rather a main floor and second floor. If I’ve attended, there’s a new build as well. So if I’m a tenant looking for a place, I’d probably choose that over my clients basement apartment. So again, I’ve identified three direct competitors in this small town with less than 50,000 population, all brand new renovations, I explained to our client that this is a competition, who can get the best tenants who can rent first, not just anyone, but obviously the quality tenants. But my point is, is that we’re losing this race. We’re again, our client has the highest price, it’s not going to work. Again, understand my client has professional property management in place, and two months is too long before making any adjustments. So he needs to take action. So again, this property is in a town that we no longer recommend. It’s called Trenton Ontario, we don’t recommend to clients as it appears that the markets saturated as in too many investors with on rented properties. Again, there are four, two bedroom newly renovated properties apartments available for rent in a town of around 43,000. So that’s a small market. You know, we’ve had guests, we’ve had lenders on the show, for example, who said they won’t even lend in a market with that small. So yeah, affordable markets can be a double edged sword, while prices may be affordable. If the rent gets too high, it makes better sense to buy. And that’s what we’re seeing in this market. Any reasonable person knows that real estate investment, hence, the top end tenants they’re turning into buyers they’re choosing to buy instead of rent. Alright, so too much of our time Ain’t no tenant is a red flag, especially in a small market, right? If you’re renting a small market, that you need to be even more cautious, right? To price things, right? You’ve got things rented, because vacant property is risk, right? Like no one goes broke, having fully occupied properties with Tet rent coming in. So yeah, a good reminder that even if someone has has a property manager, especially a new one, you need to check in on their work, in this case, like a progress. Whenever you invest, do you make sure you focus on economic fundamentals, or other clients have, you know, we’ve been working with clients since 2010. And if you just look back, our clients that purchased 11 years ago, they have tripled in value. So any one of our clients that bought in 2012, the property of their properties have tripled in value. Also, a lot of those were single family homes, cash flow those like back then anyways. And also, none of them experience two month vacancies of newly renovated properties. And if they did something was just plain wrong. on a macro level. What a world it’s the highest. It always seems to be it’s fascinating the world that we live in the the level of history that happens, I don’t get get a world news in economics, as many people do. But just to summarise, this is just my view of things. Our friends, the Americans will raise their debt ceiling to avoid bankrupting the richest country in the world. And in response, the bond market predicts the Federal Reserve will increase interest rates another point to 5%. This July or September, before cutting closer to November, December this year. In Canada, our economy performed better than expected, causing speculation that the Bank of Canada will raise interest rates again, my bet if I had to bet, I would bet no rate increase as inflation has already slowed last few months, it’s likely gonna continue slowing. I believe that. I believe that to be great news. Even if rates go up, even if rates go up. 25%, which some are predicting? I think that’s actually great news for buyers. Yes, that sucks. But everything gets more expensive. But it also slows the recovery of real estate prices. The recovery real estate prices has been actually really fast. Yeah. And by slowing the market down with a rate increase that just allows buyers to find more great deals. And honestly, I’ll just, it’ll also push off some sellers off the off the cliff that they can no longer afford, and again, making more great deals available. In the US real estate market. We are seeing some serious problems. There’s an investor whose name is Jay get to valley. Hopefully I said that correctly. Who owns apples way Investment Group. He has a fun that’s making national headlines. The fund owns 7000 multifamily units in Houston, Texas, amazing rate, that’s much similar other buildings are being foreclosed on by their lenders. This is why I say on the show, I don’t care how many units somebody has all I care about how much money is being made, and unfortunately, the investors in these funds, so the investors of these multifamily apartment buildings, they raised a lot of money to do so. And these people are going to lose some of their investment. I’ve included a link in the show notes again, just appreciate folks, people who’ve arrived provide fake news did not provide their sources. I will always attempt to source everything. Anyways, the article mentioned that the investor the investor j is coached by a brad some rock me being nosy I crypt j is Facebook and he appears to be part of a large a large investors group under this Brad Dolman buying apartment buildings. So that sort of education group networking group. And as the old saying goes, where there’s smoke, there’s fire. So this could just be the early early days of a number of foreclosures of apartment buildings in the United States. I even watched a local news channel in Houston, a local Houston news channel report on how the mayor of Houston the mayor of the city and his Houston Texas, it’s not some rinky dink town, several heads of department, the city with both police and fire departments showed up at Jay’s property because it was so being so badly managed broken steps and handrails, overflowing garbage bins, rats brands, etc, etc. Basically my point is that there can be some great deals on the horizon. For those with deep pockets and know how. Here in Canada we have lots of groups that promote investing in general and real estate and also multifamily investing. And as a result, a lot of my longtime apartment building friends across the country, you know, good friend, Pierre Poulter, John, you know, Michael Ponte, who was just recently on the show they’ve shared with me, you know, off the record, there are many apartment building listings, with multiple offers on them where their winning bid often makes no sense makes no sense financially, time will tell if we see the same level of problems here in Canada in the apartment buildings. Not to say all investments are bad one just has to, you know, put in the time and effort to find the good deals as passives guests of the show have indicated have shared how to write it gives you a check. You know, we just had my Graco lawn and yet Michael pani again. So from what our clients are seeing on the streets, we have coach Steven Phillips here to share what our clients are experiencing both the good and the bad deals and what our clients are are acquiring these days. The focus, more recently shifted away from Some smaller towns, smaller markets like 50,000, population, some 50,000 population to places like Kingston, Ontario. And Steve is here to explain why, with Bill 23. The more homes build faster Act and the densification that we’re seeing in lots of cities adopting the adopting Bill 23, allowing us investors to create more housing. So the point of il 23 is to reduce red tape, we’re just building dividend charges, so that we could build houses faster. Anyways, it’s working, the bill is doing its thing. And between just our experience and of all the education that we have done in the past, we tend to know what the highest and best use investments are, which the find the properties and line them up with the investors or investor clients to connect them with the ideal properties for highest and best use investing. Have you met Steve Phillips. He’s a member of my team at the four time award winning Iowa and real estate team. Right out of school, he worked for one of the largest law condo management firms in the GTA. So he knows condos very well. He still condos in the past as well. He’s a serial entrepreneur. He’s had a construction business. Real Estate runs to the family at the Mississippi as a designer as well. Steve is well known in the Durham Region, lots where he grew up. Also, having been coached by him taking courses by Quinton D’souza quince stuff is fantastic. By the way, if you know Steve, like I do, He doesn’t sleep well until his clients have a great deal under contract. And he’ll be sharing how he’s been doing. Doing. So along with the numbers behind the deals that we’re transacting on in Kingston, Ontario with our clients, you can reach out to Steve at Steve at infinity wealth.ca If you’d like to book a call or tour again, that’s Steve at infinity wealth.ca Of course, links and I’ll have more contact information in the show notes. Please enjoy the show.

 

Erwin  

Hello, Steven Phillips, what’s keeping you busy these days?

 

Steve  

Hey, what’s up, man? A lot of things, a lot of new projects, a lot of happy clients just getting ready to start some new projects. So it’s been a lot of fun. A lot of good deals.

 

Erwin  

So you’ve been in real estate a really long time.

 

Steve  

Yeah. Thank you for Ageing me. Yes. Yeah, I’m 40 years old. And I’ve been in real estate in one way or another since I was 2317

 

Erwin  

years. That’s a long time. Do you share with the listeners where you started from real estate? Yeah, so

 

Steve  

I came out of school in whatever year that was, Oh, 304, whatever. There’s somewhere around there. I can’t even keep track. But I wasn’t doing marketing. Just keeping mark. I was doing marketing. And I always joke that I took marketing, got out of the programme. And then eight months later, Facebook was invented. And so that kind of ruined everything I just learned. So yeah, so I I ended up my father in law. My wife, my now wife, my father in law owns a property management company. And Marco has done so for now, almost 38 years. When I first came out, he was in need of help. And so I fell into condo management as my very first job out of school. So I was running properties, townhomes, low rise, some seniors living and a couple of high rise properties when I first started, and I just jumped right in, I was doing about 1200 doors are about eight to 10 condo corpse as my portfolio. This was, you know, before a lot of the new rules and changes and everything. But it was after the condo Act had been put in place. So everybody was kind of just learning the condominium act. So that’s where I kind of cut my teeth. I learned a lot about real estate that way because the condo corpse got to hire very smart people as accountants and engineers and architects, there’s reserve funds studies going on and lawyers are involved in so I got a lot of time with some very, very smart, talented people that had to teach me everything that they needed to know. And that I needed to know. So it was really cool. Crash Course and condos right away.

 

Erwin  

Sounds like a whole bunch of red tape, but probably very well needed. Red tape. Bureaucracy. What do you mean, you need an engineer? What do you mean, you need a budget and the accountant, the auditor, this stuff. Sounds good to me.

 

Steve  

There’s a lot of people that forget that condominium corporations are a legal entity. They are after the bank, the only one who can take your property away for non payment. They can enforce a sale or a power of sale on your property. If you don’t pay your management fees, your maintenance fees, your condo maintenance fees. And so as a result, I mean they hold a lot of weight. They’re very political board of directors are very intense. And running. Board meetings can be very intense. And we would spend I mean, I spent many, many, many nights running condo board meetings and annual general meetings and all of those things. So yeah, they’re legal entities, they need to be run correctly. And so people forget that. You know, those status certificates that you order in a condo sale that just become like, yeah, who cares? We don’t need to see that or I’m sure it’s fine. Those things things. Those things are like, so important. Realtor now and I’ve dealt with so many realtors are just like, Yeah, I just I waive the status certificate condition. And did you read it? Like, did you at least read it? So yeah, I mean, there’s a lot of things that you can do with condominium corporations that you need to be aware of.

 

Erwin  

I remember one condo building I was doing listings out of and Hamilton they have a leaky parking, underground parking doesn’t have a deal right.

 

Steve  

Now, those are crushers those are instant costs. So when you look through condo corpse and you’re trying to figure out like, where’s the risk, everybody that you know, run into is always talking to me about the amenities. They’re very obsessed with the amount of pools and bars and the rooftop patios and all of these things. But as a condo manager, you know, you cringe, because those are all things that are now on your reserve fund study, or reserve fund study is going to take your costs for the next 30 to 50 years, and make you force you to start saving for those items. So you want a whole building worth of glass, beautiful. Canada, eventually all that glass has got to be fixed, repaired or replaced. Eventually, maybe not in your lifetime, but it will be a done an issue. You need to start paying for that. All your boiler systems, all your mechanical systems. Just think about people on apartment buildings, they frequently look at a 20 year old boiler, you are doing the same thing. When you move into condominium corporations, you inherit everything that is in that condo Corp. It is now a portion of it is your cost. Sounds like fun.

 

Erwin  

You’re taking all the fun out of condo ownership.

 

Steve  

No, I mean, listen, at the end of the day condos are not a new idea. They’ve been around for a very long time. It’s a means of property developers fractioning up of one single piece of property and selling it to many, many people, it makes a lot of sense on a lot of levels. So it creates a lot of housing. A creates a lot of units and everything, right? But the problem is, is that you know, when you actually manage 800 people or 1500 people living in one structure, going up the same three, or four or five or six elevators coming off the main levels coming out the same exits, humans just don’t operate or live that way naturally. You just have to remember that right? Like we didn’t come from wherever we came from the starting out wanting to live on top of each other. That’s not how this is sort of meant. So it’s not a natural process. So you’ve got to get people used to it. There’s noise, there’s fights. There’s been plenty of times right calls over disturbances and domestics and all of those bad things. And so, you know, you end up in a very tight living quarters. And so you got to learn how to live with other people. And some people are good at doing that. And some people are and so it’s a process. It’s definitely a process.

 

Erwin  

Yeah, I love where I live because I back on to a pond. So I have no back neighbours. And part of that also means I don’t hear many dogs bark, right? Because Because dog barking was designed to wake people up.

 

Steve  

Yeah, alert. Yeah, I have one of those. I have an alert system built into my house.

 

Erwin  

Yeah. So I love living in the house. I don’t think I could ever live in a condo because I don’t want to be that close to people.

 

Steve  

This I look, I’ve managed condos. I’ve sold condos. I’ve lived in a condo. I’ve been a board member of a condo, I’ve managed board members of condos. I’ve worked for you know insurance companies that were in charge of fixing the condos after fires and floods and kind of help them out. I’ve I’ve seen a lot of things kind of consulting with people and helping people manage how these condos operate. On paper. They make

 

Erwin  

miserable and around. Yeah, all GTA Oh, GTA including downtown.

 

Steve  

Yeah. So somewhere out of the suburbs of you know, Mississauga, all the way through to Oshawa, and somewhere in downtown Toronto. But ultimately, yeah, ultimately, they all have the same issues. All right.

 

Erwin  

So can you share how many condos Do you still hold? And how many conferences? Why not? Absolutely not. I get emails like every week about this great project coming up and all this cash flow would be made.

 

Steve  

Listen, there are a lot of people who have made fortunes in Toronto condos. So by no means am I here to tell you it’s it’s the worst thing you could ever do. It’s not but personally for me, what I talk to my clients is that we focus on highest and best use. There is nothing you can do with a box in the sky. There is nothing you can change to it you are completely stuck as whatever its current use is one bedroom, two bedroom you can try to squeeze and listen. I’ve gone into units that were student rentals by without for landlords even knowing and sheets were being strung across lines. And they were all separated into like seven or eight living quarters in a one bedroom unit. So I’ve seen people get creative. But that’s not the point. You know, as a landlord, you can’t do that. So you’re in this spot where you’ve got one use for that thing, it goes up as the market goes up. And as we’ve seen in the last few months, it will pull back or months years, it will pull back as the market pulls back, and it will rise again, as the markets go up. There is a shortage of units in the city. That’s a very valid fact. But the problem that I foresee is that you can never get the numbers to work anymore. Because the average price per square foot to purchase is between, you know, 1000 to $1,600, a square foot, and the average rent is sitting somewhere between five and $8, a square foot at $10 a square foot. So you’re in a position where this you can’t make the numbers really work, you’re going to negatively cashflow month over month, that means the only play is speculation, that is not a real estate investment that is just speculating that the market will go up. Therefore, I will make more money when I sell it. But until you sell it, you’ve made no money. You’re losing money month over month,

 

Erwin  

I literally had a conversation with a newer investor, just two weeks ago, their condo is worth about 500 right now. It was at the peak, it was 550. They’re currently negative $1,200 a month. And we got on a call and they asked me should I sell? And I don’t know how much of a filter. So I said, apparently this is a good thing. Good friends don’t have filters. Don’t dance around things. So I said, I can’t believe you have to wait for this call to ask me if you need to sell this is a simple math, simple math because it may be in two years to get back to peak. So maybe it was a 50 grand. But in the meantime, that was two years. Your oblique close to $30,000.

 

Steve  

Yeah, no, that’s fair. I mean, that’s what the numbers say.

 

Erwin  

Right? You’re gonna guarantee bleed 30,000 For a chance if it made 50,000 to go out 50,000 students a chance you’ll net 20

 

Steve  

Yeah, that’s it right. Like, listen, I remember speaking with very heavily invested real estate, you know, condo investors from foreign, you know, typically they were the ones I dealt with were out of country, I would run into them once in a while, they would come and see their portfolios, and I would meet them. And one of those investors one time told me that they treat Toronto condos, similar to a safety deposit box, they put a bunch of money into them, they hold them, and they know that over time, it’ll be protected in a go up. And that makes a lot of sense. Okay, that makes a lot of sense.

 

Erwin  

First of all, cash,

 

Steve  

deep pocket investors, right? Like deep pocket investors, you can make a tonne of money, and you really don’t want cash sitting around nowadays. So, okay, that makes sense. If you’re a deep pocket investor, good for you. That’s a good play, buy something that’s always going to be in demand in the neighbourhood makes sense? I find that a lot of the time the people that I’m running into are looking at condos like a get rich quick scheme. Oh, no, I add on spec, they buy it on spec from the builder, they wait in the lineup, they get the red dot down. They tried to then flip the property back out on paper and assignment sale before anybody has to close on it. They take the capital off the top, like those things, again, have worked. But when you don’t have a lot of leeway or play in your investment portfolio, I mean, that can be very punishing when the market slips on you. You don’t control that. So deep pocketed investors

 

Erwin  

different which is where we are now the market slipped and people are looking at taking baths taking haircuts.

 

Steve  

Yeah, maybe not on all their court. Maybe not every condo unit people are taking a bath. But no, no.

 

Erwin  

I mean, like this. I remember I knew that. Right? I mean, like the assignment, the assignment market. Yeah. And just to be clear for for listeners, like the assignment market means you’ve already bought like pre construction, you’re like, contractually, the buyer, you haven’t closed yet. And there’s a lot of them. So from what I’m hearing from our friends in this market, is there’s a lot of look people looking to sell their contracts. So they’re trying to assign them. And so if you’re a buyer, there’s probably less of them with REITs being high, and also with large appraisals are coming in for pre construction condos when they do close. So buyers are looking for deals, which often I think the starting point that I’m hearing from people is for the seller to lose their deposit. That’s the starting point.

 

Steve  

Eight or 900,000 That’s a chunk of change. Yeah,

 

Erwin  

that’s a chunk of change. All right. So and Steve, like you’ve seen entire construction buildings that are completely investor owned, have you not? Yeah, so

 

Steve  

like I’ve taken it In a few properties through the first year audits, and the second year audits and the Terry on warranty process and, and getting those corpse through, you know, what was what was happening more and more. And I mean, it’s not rocket science not breaking, you know hotcakes here. 90% of the buildings are investor base, right? So you’ve got a lot of tenants living on top of it. Yeah, each building is different. But you know, generally speaking, most of the projects that have been sold in the last five to 10 years have been investor heavy, it’s just what they are,

 

Erwin  

can you speculate as to the ballpark? How much or that’s foreign versus local investment,

 

Steve  

I can only speak to what I ran into, and it was some years back. Now, I’ve been out of condos for the last, you know, 567 years as we’ve been doing more and more conversions, but in my experience, going through the process, had no put a number on it 60 to 70%, were foreign at any given time, I think the laws have probably changed a little to make that a little less,

 

Erwin  

this is free. This is pre 2017. Seven,

 

Steve  

tax. That’s right. But I mean, for the most part, it wasn’t uncommon to be dealing with one realtor who represented 20, or 30, or 40. Investors. And he, he or she were the point of contact for every unit. Because there was no address or direct contact for anybody else in the unit like loan, the properties

 

Erwin  

and the climate speak English. I have a contact, you know, as your Mandarin.

 

Steve  

But, you know, I think that ultimately, you know, at the end of the day, the bigger problem with condos is not so much for me personally, it’s that I can’t change the use, I can’t do anything more with it. And now you can I find a ticking time bomb, because the fees only go up. And you know, sometimes you run into these condos, and it’s like, but the fees have been at this rate, you know, 1% increase, or 2% increase for seven, eight years. Right. My very next question is, how many special assessments have you done? Because the trick is if I cap your fees, and I just do an incremental and minimal inflation rates, you’re still going to have a shortfall most times and that shortfall then gets split out amongst the the amount of owners there are into a one time special assessment fee. If I want to sell my unit, I just pay off the special assessment before I sell it. And that does not apply to my status certificate, and therefore the unit is just the maintenance fees. So it’ll have to be told that there was a special assessment but at the end of the day, it’s an encumbrance on the new owner, I can take care of it before I sell it. So it’s just one of those things, if every year you’re being special, assessed 10 or $15,000 a year, then your maintenance fees aren’t real, your costs are actually much higher. And people don’t take that into account. They just look at the number that’s on the listing page and say that’s, that’s what I have to put into my sheets. That’s what I have to put into my numbers and spreadsheets. You don’t know that look at a reserve funds. They’re pretty accurate when your next payment or bills will be.

 

Erwin  

Okay. It’s good to know that the statements are accurate though. They have to be

 

Steve  

Yeah, the reserve one studies there’s engineers on the other side, they’ve got no choice but to be very accurate.

 

Erwin  

Very cool. Very cool. So Steve, you’re saying today in today’s time condo, not good investment.

 

Steve  

I’m saying that I would advise my clients that there are better options. And optionality for investor to get into a marketplace other than a condo. All right. Yeah. So

 

Erwin  

what do you like? So?

 

Steve  

Yes, so I’m big on the density right? I’m big on density. I think that density is the future I think that all of these things that we’re seeing, you know, if you look at it, go with the river go with the flow of where the politicians are pointing you and pushing you because you won’t have as many obstructions to your plan that way. You know for a while Airbnb and we’ve done talks on Airbnb so Airbnb ease were very much a good avenue for investors, they may still be one of the city centres, you’re going to find it complete uphill battle in every large city centre to kind of get your Airbnb through for the large majority of them. It’s not the way the rivers flowing. What is flowing is increasing density on existing infrastructure. So we’re seeing people being able to do 345 units in Toronto, on existing properties. You’re seeing people be able to add garden suites and then to laneway housing. So finding investment opportunities where you can take a current property that is at the end of its lifecycle, and increase its density, although this is very much a cost and capital intensive. idea, if you are willing or if you believe that your speculation in condos is that the market will take these prices higher, I would encourage you to look at other opportunities and properties in that same market space where you can buy in, find a strategy that will hold you over and pay your bills. And if you don’t get too close to paying your bills, with the intention that as the equity goes up, you reverse that equity back into the property and increase the density, maybe it’s 2345 years from now. But the reality is, is that you at least have the ability to do it, you can change the use, if you buy a condo or a box in the sky, you have no choice. If you buy a property that has, you know, a 30 or 25 to 45 foot frontage and some depth to it, depending where you are, obviously, you can increase the size of that property right or the density within that property. So that feels like a more strategic play, then it just becomes where do you do that? Where does that make the most sense?

 

Erwin  

I don’t know, I want to start to see where it doesn’t make sense. And don’t even touch on where it doesn’t make sense.

 

Steve  

Where where it doesn’t make sense is when you’re in a bunch of new construction. So anything that’s been built in the last five years, those houses for the most part are in very tiny, small, lots really, really big house very small lot. So right now, I don’t know how that makes sense. Yet. It feels like that’s just not going to work. For the time being plus the purchase prices are very high, you’re paying up in the $900 million, depending where you are across the GTA. So that’s kind of tough, that doesn’t really make sense.

 

Erwin  

I’m sorry, just add to that a lot of these houses with attached garages, there’s no basement underneath those garages. So we actually lose the last square footage of again, the business model doesn’t really seem that often makes sense for what we’re trying to do. We want to get size basements, because that’s what tenants want.

 

Steve  

Yeah. And I think ultimately, like people will start to solve that problem as time goes, but you’ve got other it’s like an apple tree. If you’re looking at the apple tree, you go and pull the best and the rapist first, why waste your time pulling the one that’s not ready to be eaten yet. I see those properties as part of like that unripe and not ready to be eaten yet, portion of the tree. There are way more opportunities right now because we’re at such an early stage to this new strategy, that there’s no reason to go force yourself to make something very complicated.

 

Erwin  

Where does I speak to novices all the time. It’s only because we’re in this industry doing this regularly every day. I got chirps on the weekend for calling our strategy boring. Because for an offence is actually quite exciting. To us. It’s like we like boring. We like repetitive. We like low hanging fruit.

 

Steve  

Yeah. Okay. So where are you? We’re chirped is kind of important to write. But I think ultimately, look, here’s the deal, right? A lot of people get into real estate investing. And sometimes they’re not going into it necessarily with eyes wide open. Sometimes you need to look at it like what’s best for you. You really want to own 100 doors. There’s a lot of people who tell tell me at least I talked to people and they tell me they want to own 50 to 100 doors. And then when they actually wrap their head around what that means they take a beat and they think about it. They’re like, actually, I don’t know, maybe I don’t, I don’t think you do if unless unless it’s like, you know, most of the time those people are that’s a business, you’ve created a business structure and your business needs to have a lot of moving parts, you need to be able to manage it, you need to be able to find it, fund it and all these things.

 

Erwin  

It’s a new career. It’s a new career.

 

Steve  

If you have a real job right now, like a lot of the people we talk to, you know, they’re they’re executives, they’re marketing people, they’re doctors, they’re lawyers, they’re people that our careers are already established,

 

Erwin  

the career wise are already in their highest and best use. Yeah,

 

Steve  

there’s no reason for them to be taken out and try to figure out how to start becoming a real estate entrepreneur. In that degree.

 

Erwin  

We’re not saying don’t do it, it’s just that for most people, most of the time, I’ll be

 

Steve  

your highest and best use,

 

Erwin  

I might not be your best. And also you’re risking a lot.

 

Steve  

You’re well I understand. I understand that you’re taking on another job. I think that’s the biggest thing, right? You’re taking on another job.

 

Erwin  

You’re you know, I was talking to a multifamily investor for example, like say your negative $200 per unit. I was talking to an apartment building investor a pretty good one. And he said you’re negative say you’re negative 200 bucks per unit enough. You have like three duplexes, right, you probably survive that your negative 200 across 100 unit portfolio. So each unit you are doing

 

Steve  

and not to mention, you’re probably not sleeping, your stress levels are high, your family life suffers.

 

Erwin  

The timeframes are very different.

 

Steve  

What are you accepting by doing it? So sometimes it’s ego driven. Sometimes it’s driven by FOMO Sometimes it’s driven by the seeking of cashflow, just like they’re like I just want, I just, I’m just looking for cash flow, and I can’t make the cash flow numbers work on a duplex. I totally understand that. For me, I always tell my clients, the number for me when I do the math is usually like 650,000 to 700,000, it gets really tough. After you get over that on a duplex or single family that make anything makes sense, I get that. But this new avenue and what we’re seeing, as far as Bill 23 is concerned, as far as the City of Toronto doing their density, bylaw changes, other cities are following suit, I think you really need to reassess or look at whether multifamily and large apartment buildings is actually what you need. Maybe you just need two, or three or one really, really good conversion project that kicks out a good chunk of cash flow for you, and has a minimal management occupied quality to it. It’s very simple to manage, there’s only three units or six units, you don’t have to manage 600 and still generate in some of the numbers we’re seeing, you know, 1500 to $2,000 a month of cash flow, depending on how you’re buying them.

 

Erwin  

And Steve, you’re actually politics the listener I know, Steve well, so actually, no, you’re finding cash flow?

 

Steve  

Yeah, no, I am. And I don’t put people into that. Now, at the same time, I’m very much encouraging my clients to get creative, because this is going to be not the common thought process. For a lot of people. They’re not looking at it the same way. But I am walking them through these processes to show them and kind of, I don’t know, if it’s just take a lot of the fear away of what a renovation construction project could be. If you’re adding these densities. It’s not easy, right? It’s not finding an apartment building, that’s not on MLS that has good cash flow and return zero ze

 

Erwin  

months and years of process to get those deals come to you

 

Steve  

that work and like it’s like, Nothing’s easy if it’s worth getting, right. So at the end of the day, I just really want people to start to look at these projects. And I’m here to kind of work with my clients to break down the fear hurdle that they have to get over. It’s mostly fear. There are professionals like architects and planners and designers and high level contractors and things like that, that are going to do a lot of the heavy lifting for you. You just need to be able to kind of know the vision and know where you’re going. And that’s mostly what we’re doing for a lot of our clients jumping into this strategy.

 

Erwin  

And since your clients are my clients, what I tell clients is like, I have a question all the time, like wanting to buy apartment buildings. And I explained to them the stabilisation period is five years, right? Yeah, money’s going out the door for five years. Like for many, they’re paying tenants to leave, and then they’re renovating. And so you have like 10 units, you know, every few months, you’re renovating a unit, that’s this money going out the door. Right, versus I invest in most Banagher clientele invests as what I call a side hustle as a part time thing. And so you know, even though it’s not easy, per se, but our renovations are usually done within six months, right? And then I’m done. I can wipe my hands clean, my properties rented, and I can go back to living my life. Alright, so another lucky three months, but again, I don’t have to worry about it, versus like a five year stabilisation period. And so for most people that are in their highest and best use career, right, get back to living, get back to your career about your day job and get back to living and just let the market do its work.

 

Steve  

Yeah, I would just add, you’re also now new construction 18 Rent caps are subject to change, right? You’re not following that older thing you might survive brand new, typically brand new, brand new everything in a rental, you know, if you do a renovation project, for the most part, you’ve updated that you know that that property inside and out. So you’re not absorbing any old boilers or any old systems that are going to break down on you. There’s really no surprises once you get through a project like this, you know, their permits,

 

Erwin  

permits, we have independent city inspectors come inspect it. Right. Yeah.

 

Steve  

And you problem solved any solutions that need to be done. So I think ultimately, there’s a lot of tangible things that happen and there’s also some non tangibles that are all benefit to the strategy. So So where does it work? That was the question you’re asking me so for me, I’m out here on the east side. I like to to put my clients into the mindset of having a bit of exposure to larger market appreciations. It’s just facts, they’re gonna run up faster when the market starts to climb. Larger city centres with higher populations are gonna rise faster. And then we Catalina we kind of add to that and we put in some smaller markets that make a lot of sense as far as fundamentals are concerned with job opportunities or location. And then we put that into play as well so that they get some there’s some higher cash flow from those smaller markets because The prices are cheaper. So right now for me, it’s Kingston as my big city and Belleville and Quinny west as my smaller markets, maybe Nappanee, maybe Ottawa is kind of also on my my mind. I’m looking at it a lot right now, the numbers are, are significant and they’re high in Ottawa. But I have a lot of my clients actually calling me from Ottawa. So, our clients are calling from Ottawa. So what I’m looking at when I’m talking to Ottawa people is like, they’re like, I just can’t make anything work in Ottawa. So I’m looking for a new market. Well, then maybe your smaller market is Kingston, but don’t give up on Ottawa because I think if you can get the Capitol together and get some of the properties in some of the prominent neighbourhoods of Ottawa, you’re going to do a lot of big numbers there in Ottawa, I think we’ll have to follow suit to what Toronto is doing. Very soon its population is exploding. And they’ve kind of sprawled to the far reaches of bar Avon and Ken Kannada, Streetsville. And anything they get their hands on, they’re expanding very quickly. So Kingston for me right now is the is the prominent city centre that I’m looking at. And the last four to six months have been very Kingston oriented for for our clients.

 

Erwin  

Can you walk us through some recent deals that you’ve been doing with clients in Kingston?

 

Steve  

Yeah, so the way that I’m looking at this market, you know, obviously, I’m not by no means that I grow up in Kingston. It’s not a market that I’ve been there for, you know, a decade. So I put it in the perspective of I like markets that I haven’t grown up in, I’ll tell you why I come in them with open eyes. And I don’t have recency bias, I don’t have location bias. So I’m not looking at that property that’s there. And remembering when that property nostalgically sold for $400,000, that happens to a lot of people, when they when they’ve grown up in a town, they can remember what it was, they can also remember what that property is always been used for. So I don’t come to cities with those perspectives, what I do is I spend about six to eight months really diving into a city and learning the ins and outs in the streets. And then I take the strategies that I know from other larger markets that I’ve worked in are working, and I start to figure out how they can apply to this marketplace. So I’m now into this Kingston market for a substantial amount of research and time, what I’ve found is that the best avenue is to kind of be close to the university for some of those density projects. Queen’s University obviously is in Kingston, I’m looking at the southwest side of Kingston, you know, sent the city centre for those density projects, they tried to increase units within those footprints. For the most part, a lot of our clients are seeing the best avenue as additions and bump outs and things like that on a lot of those properties. If they do have an existing garage, which we’ve just had one, I think you showed it on your student rental webinar a few weeks back, it already had a 900 plus foot square foot garage on the backside of one of these properties. So we’re going to use that structure and go through the process with that structure. But that structure is going to come with some variances and some things that go along with it, which is just, you know, part of the process. So ultimately, we’ve been looking at those as our main deals the last couple of weeks, and if they are existing student rentals. I think it’s worth noting that it’s getting harder to finance student rentals and lenders and the banks are not so happy. They’re not jumping up and down to get student rental deals right now. So getting those main properties to be duplex or triplex and then looking at adding units in there and garden suites or additions is kind of the angle there to the suburbs. Kingston we just had a deal closed on a property that we’re going to probably do some content on very soon. Our clients again coming from the Ottawa area, purchased a bungalow raised bungalow with a walkout basement to the back on a 80 by 176 foot lot and it had a garage that was built by a gentleman that had his dream of having this like perfect man cave shop garage. So the garage already had toilets in plumbing already had 100 amp panel already has a basement, which is very uncommon. The back half had a basement included, which you’re not going to use as living but it’s good for mechanical rooms and things like that. And this property was purchased for under $650,000 In a fantastic neighbourhood. We’re going to duplex the main house and we’re going to convert the garage into a garden suite unit. When all of a sudden down we’re looking at somewhere around 2300 on the top floor. I know you like numbers so I’ll give you some numbers 2300 on the top

 

Erwin  

our listeners like numbers. This is a quick comment about numbers. I like dollars all right. Dollar numbers I think the whole like like with with all these new influencers out there. They’re the worst I got a units or I don’t know, whatever number, I can’t remember profits, I care about cash flow camera profits about improvement to your net worth, those are the numbers that matter to me. I don’t care about any other metrics.

 

Steve  

Sorry, continue. Okay, so we’re seeing like 2300 is probably the number that we’re going to be getting for the top floor,

 

Erwin  

plus, plus a plus some utilities,

 

Steve  

plus some utilities, probably hydro at the minimum, but we’ll say plus some utilities for the time being lower level, probably somewhere in the neighbourhood of 19 100, is what I’m hoping for that it’s a big unit. And it’s got very high ceilings and windows and a rear separate entrance, the property itself, far off at the back of the property has some, you know, really nice, like, there’s no neighbours directly to your earlier point, there’s no neighbours directly behind this property. So there’s a lot of space, it’s just a really good environment. So 1900 is more than reasonable out of that basement, and then the garden suite, we’re going to be pushing into a 2200 2100 at the minimum, plus utilities because it will be separated off. So we’ll have that kind of structured that way. So

 

Erwin  

for the listeners benefit a garden suite is essentially like a tiny house on the property in the backyard.

 

Steve  

This one’s actually adjacent to the to the main house, it’s like right beside it.

 

Erwin  

My apologies. This one existing garage will be

 

Steve  

garage. Sorry, my apologies garage. Yeah, no, I might have been not clear about that one. Garage suites.

 

Erwin  

That sounds like a terrible name. You’re gonna advertise a garage suite? No, I’m gonna call it tiny home. I’m gonna call that tiny home. Okay, it’s pretty,

 

Steve  

you know, this is the thing that when you’re looking at these projects, every city is going to call them something different. Kingston is unique, because they’re three unit bylaw that they passed last year has numerous names for the structure. This one is going to be probably an adu accessory dwelling unit. Some can be called tiny homes, some can be called Garden suites, it actually depends on a lot of nuance within the building of the structure as to what it gets. But for this particular one, it’ll be adu. And yeah, so it’s a pre existing garage, we’re looking at a build out cost very similar to what we see in our duplex conversions. Somewhere around 125 $240,000 Is the budgeted number for both the basement conversion and the garage separate so double that 120 to 140. But when all is said and done, the numbers are there to support it. It’s in a very, very good neighbourhood. And we anticipate the values to only go up as appreciation and market increases.

 

Erwin  

So I’ve run the numbers and the cash flow is quite significant. Assuming you’re paying a lot of cash, the amazing thing was, even if you’re paying entirely home equity line of credit, you actually have a you have a chance to be slightly positive still.

 

Steve  

Yeah, yeah, I would agree. And I think that for a lot of my clients, what they’re doing is, is this, this is the time period in which we anticipate or, you know, smarter people than me are anticipating that you’re gonna see a dip in interest rates probably into next year.

 

Erwin  

We’re gonna midterm long term. Yeah, I

 

Steve  

think I think ultimately, there’s a refinance probability into this time next year of where the clients are going to look to pull some do readjusting and probably not just pull some cash out, because you know, pulling cash out kind of kills cash flow, but restructuring debt, so that it is carried correctly, I think that’s more an accurate way of describing it. Just to help the cash flow numbers go. And all of all of our clients are not taking a very short, narrow approach to this, there is a very long 510 15 year horizon on these investment strategies. Because they’re, you know, listen, like you’re in your your late 30s to mid 50s, you still are actively working, you’re still making income. You’re hoping to have something put aside for future use and for family. You’re creating revenues through a business that you have, these things are all still happening in your life. Most of our clients are not on the sidelines of their career, living on beaches, that’s not my typical or are typical client, they’re still actively working. They just are trying to put some really good hard assets together so that they’ve got something put away for when the day comes that they want to be on a beach.

 

Erwin  

And then what about tenant profile? We mentioned the Queen’s University is nearby everywhere the students are renting to we’re renting to.

 

Steve  

So here’s my approach to all of this. I think that students are always going to be a demographic of tenant profile, right? in Kingston and in Queens. I always remind my, like, my clients or anybody who’s talking about student rentals, like when these beautiful homes were built in the 1920s 30s 40s 50s. Like if you had told the person who built these houses that you were going to chop up their houses and put it you know, five to 820 year olds into these houses. is still in fear, they would have burned it down themselves, you know, like they would never have allowed this to occur. These homes are beautiful. They’re like great neighbourhoods with big old trees and things like that. So students are a profile. Yes. But I think it is becoming increasingly more beneficial to create, as opposed to just chopping up bedrooms, creating duplex or triplex units with unit mixes of like three bedroom, two bedroom, two bedrooms. Kingston, for example, as an eight bedroom cap on every property. So you can never put more than eight bedrooms on any property in Kingston as as of their new bylaw. Before you could now you can’t. So you need to find a unit mix within those eight bedrooms, that gives you the highest cash flow potential out of each unit. I think that that then allows when you start to separate the houses up that way, it allows you to be a little bit more diverse in your tenant profile. You could have some students, you could also get some grad students, you may get a young professional or two if they’re not all having to live like dorm styled, you know, sharing of one kitchen type of house. So chopping up the houses also expands your profile your tenant profile into a different tenant use mix. Kingston as a city is young because of this vibrance of the university. You know, anecdotally I’ve been talking to a lot of people you know, I live in Prince Edward County way. Talk to a lot of the people that live here business owners, prominent people, a lot of their teenage children go to Queens just happens to be the the generational process. I’m hearing more and more from these people that their kids just aren’t coming home from Kingston, they thought they would finish school and come home. And they’re just now 2223 Living with a couple of friends, they’ve got jobs, or they’ve got a job in Kingston or remote, you know, and they just like the city, it’s a really pretty city, if you’ve never been there, it’s a really beautiful, pretty city prominent waterfront, just really good, great energy there. It’s a bigger city. So it’s got, you know, a bit of things you got to live with, and places you don’t always want to go. But for the most part, very, very, very pretty city and safe. So people are just hanging out and they’re, they’re staying there. So I think you’ve got a mix of young professionals, you’ve got a mix of students, grad students, and then you’ve got the hospital there, and you’ve got nurses and doctors and things like that as well.

 

Erwin  

Now my experience in the, for example, my St. Catharines properties have a similar experience. I’ve seen some I have some graduated students who stay with their friends in the property, which I’m fine with, you know, they make an income, I still have their guarantor form signed, and their parents. So you know, I’m fine with that as well. But yeah, things are changing. Things are changing in terms of

 

Steve  

listen, I think you nailed it. I think if you talk to the people that are in the educational system, I think the education system is changing. I think universities are going to be changing over the next 1015 years, I think young people that are looking to enter a job market are changing. So I think all of these things kind of have to be taken into account, the only thing that’s constant is change. And we are in a very, you know, Pivotal change. Right now you’ve got a lot of things happening on a macro economic level, a lot of things happening as far as tech is concerned. And I think just in general, as real estate investors or as people working with real estate investors, we have to keep remembering that just because you’ve done it for the last 25 years, you may have to find a new way to kind of deliver.

 

Erwin  

I’ll say two things about that. One thing that hasn’t changed is I don’t know when real estate hasn’t been a good investment for the areas that we operate. But I had something that I haven’t told you about yet. This past weekend when I was at the conference. At a conference I met a custom homebuilder who just launched a product line of modular homes, specifically tiny homes. And nice. I asked one of the one of the executives there. I think to the executives were there, the operating out of Brampton, I asked them Can you give me a ballpark price on a two bedroom, bathroom? Two bedroom one bath, tiny home garden suite. Don’t do it modular they’ll pour the pad to switch between this the 600 square foot house in the pad at the ballpark me 175,000 column on Oregon. I was meant to mention to your political visit them. In case you’re interested, sorry, listeners are having a private conversation. Next week they’re actually breaking ground. He was saying they’ll have their permit in week and they’ll break down two weeks for the very first one. But this price point is so for listeners benefit again. And then they said like utility hookups. Still, we still need that. So they’re saying I can range between 10 and 35,000 but still we’re talking about like 200 And somewhere around 200 grand for a tiny house, versus if you were to build it from scratch stick frame. You know, the prices we’ve had folks talk on the show is like, high two hundreds, maybe 300,000 We’re looking for

 

Steve  

and take into account the rent rates, right? Like we’re seeing very strong rent rates on these things just because they look and feel like your own personal space. There’s no noise transfer, we’re not dealing with like feet steps like footsteps over top of you. You’re not dealing with like low, shorter Windows darker feel like it’s your own place. So yeah, I think this is very, very much front edge thing, significant thing that’s that’s occurring in our marketplace, I think you need to be aware of it. I also think that the term gardens we is also, as a person looking for highest and best use, I am finding myself that I’m getting tunnel vision. So I’ve worked very hard in the last few, maybe six weeks to not just get so Uber focused on certain parameters that have to be on a property in order to get a garden suite onto it. Because the way Bill 23 is written, it’s looking for density on existing infrastructure that can be within the same footprint, or an additional footprint of the house. So depending on what market you’re going to, you may find it easier or even within the city, you may find it easier to do an addition than to do a garden suite. Maybe that’s the truth. But you just don’t want to get such tunnel vision that you’re like, I gotta fit a garden suite on this thing. I am now looking at certain parts of the city with the mindset garden suites work here. And certain parts of the city that say maybe, but maybe it’s an addition. And I think that being able to be a little bit more flexible is going to help you as well. Always thinking is use just highest and best use all day long. All day long, right. And kudos to all the smart people. Brian Carr, especially who pushed that through my brain over the years, I think that it’s it’s a smart thing to do. And ultimately, it is your future. There’s no way you can make three, four $5 million houses, if that’s what it will be in 1015 years from now, how do you make that work for the average person, which is not going to happen? So you need multi generational income coming from the same?

 

Erwin  

A great point. So you’d like it, we’ve focused a little bit too much time on garden suites garage suites. But I can I cannot agree more. We’re at a higher level, you and I are always thinking about like, How can I add anything? I can add in a second suite, a third suite of force we even fifth? Right? They all have different complexity. It’s not the easiest for beginner. But again, because we’re living breathing it. And also because we’re friends, we’re all doing it. That’s a little bit easier for us to to understand. So can you be given an example of a property you’re looking at? Or just we’ve done recently with a client?

 

Steve  

Yeah, so we have a current student rental that we’ve just firmed up on. You want to be a student rental, you want to do a duplex I just used duplex the last two weeks ago. So we have a student rental that we’ve just burned up on. It was a very long due diligence process for this property for us and our client, but it’s gone really well. And by doing it, we’ve really, you know, look through this property with very close, close eyes, it will be on Union, which is a main thoroughfare in Kingston. It’s a beautiful old red brick home, and it will be an addition put off the back now there is existing students coming in with that deal. So we’ve got some time, you know, there’s some revenue coming in. That’s going to buy us some time now. But there isn’t a good example, in the case. Where is that revenue from this student rent positive on this property? The answer is no. It’s not theoretically, in its first year it will be cashflow negative. That is just the facts of that property.

 

Erwin  

It’s not uncommon for a development project. No. Cash flow state one.

 

Steve  

Oh, right. So like that’s the thing, you’ve got to get your head around. Sometimes I know for a lot of people that’s determined. It’s like how do I carry all of these things. But if you have the the means and you’re able to see the long term, you know, for our client, it’s like look, you’re going to be doing an $8,000 All toll at the end of the year. It’s an additional $8,000 You’re going to be paying on this property that’s just built into our budgeting and our scheme. And it’s part of the carrying to get us into April of next year. The good part is is that there’s no way that we’re doing this renovation, the actual construction needs time, it’s going to need some some really good planning and some time to put through. There’s no point rushing that so this project will allow us to take the next three, four or five months to get all of our ducks in a row. Get all of our professionals in line, submit to the city have our conversations gives us lots of time to do everything we need. And we hit the ground running in early 24 to get This project built out with an addition on the back half, which will turn it into a complete triplex.

 

Erwin  

Sorry, is this the one that you’re going? You’re just putting an addition on? As you call it bump? That’s right.

 

Steve  

Yeah, yeah. So it’ll probably be, you know, I, it’s hard to say specifics, it will be its own separate unit two bedrooms scheme with one bath, two bedroom, one bath, full kitchen off the back, the second floor of this current house, and then there’s a loft on the top. So those to the second floor in the loft will combine to unit number two, and that will be a three unit property. And then on the main floor, we will be doing most likely a two bedroom, one bath mix on the main floor of the house, they fall works out what am I at that’s 237, if I can fit the other one bedroom or the extra bedroom on the main floor, which is the plan so that we have a three bedroom on the main floor three bedroom on the second floor and a two bedroom on the addition, that would be ideal that would keep us within our eight unit cap or a eight room cap. And that’s kind of the plan. But we just got to go through the logistics of how that all lays out plays out.

 

Erwin  

Can you explain that to the listener the benefit of doing an addition versus a separate structure, like a garden suite or

 

Steve  

so for this particular property? What made sense it could have, it could have had a garden suite, we by all accounts could have done a garden suite, a lot of these cities are using a 10% lot coverage equation. So if you want to build a garden suite, and your property has a total square footage, so your frontage times your depth, let’s say your total square footage is 680 square feet. After you take that, or 600 partners 6800 square feet, after you take out the coverage of the building and the coverage of any other structure, you’ll have an idea of how many square feet you can build your garden suite. So let’s just say for an assumption, it’s 630 square feet is what you’re approved at, after you’re 6800. Because we’ve had to reduce a couple things. So it’s not a straight 10% equals what I can build. But that’s the idea. In this particular property, we got more use from the existing lot. By making it an addition than we did from putting it as a garden suite. We could cover up to 70% of the property roughly when we were all said and done. And our setbacks on either side of the property were more favourable than if we did it as an addition than if we did it as a garden suite. So there’s a lot of like moving parts.

 

Erwin  

So Steve, just just for listeners benefit setback is how far

 

Steve  

or how far? That’s right, how far the new structure has to be off of your property lines on all sides.

 

Erwin  

Right. I mean, to me, in some ways, there’s penalties extremely restrictive, I believe one city to the north of us has has like a five metre setback.

 

Steve  

In this particular case, you know, it was a 3.6 aggregate setback aggregate meaning that the combined distance on either side of the addition had to be 3.6 metres. So that’s very favourable compared to what we were looking at with the gardens we which was I believe, 1.6 on all sides and, and just different things. So it just made more sense. It’s easier to build it out just easier. Yeah,

 

Erwin  

yeah, easier return on investment, like be higher,

 

Steve  

and you’re adding to an existing beautiful building a new addition that will fit in line with this old Victorian home. So it’s one of those things where the actual value of the property just, it just all makes sense. The Golf term would be you’re playing it as allies. We showed up. And this is what was here. And it’s been there for 100, almost 100 years, this is how we’re going to play this hand.

 

Erwin  

Yeah, it’s the highest and best use of the hand we’ve been dealt. That’s right. But you did choose your hand.

 

Steve  

Very, very, very specifically. There’s a bunch of properties, right? Like we looked at properties in and around this house. For the last three, four months, we’ve been watching houses all around this property. But for one reason or another, they just didn’t equal what this property had to offer. And it’s not because it’s, you know, the best property, it may not have been on certain features. But when you take it as a whole, the deal makes the best sense for my clients moving forward. And so that’s kind of how you’ve got to look at it now. You have to depend on your designers and your planners and your architects. So having that Power team built into our system helps because we can get very, very smart educated people that are very familiar with dealing with the city to give you opinions on what is most likely possible, which is

 

Erwin  

generally more better in my opinion, because I don’t trust anyone. I Take that opinion over a commission salesperson. Let’s just remind everyone that even though we are commission salespeople

 

Steve  

as, as the commission salesperson in there, the problem that I have, you know, with just pitching a deal and running away, is that ultimately, I can’t sleep at night like that. So when I’m talking to designers, you know, I’ve done as much research as humanly possible, other than being going to school to be that designer going through going through the planning, going, meeting with the city, fully doing the research before any clients were involved. That’s the due diligence that the Commission salesperson has to do, you have to go and find out all the information so that while

 

Erwin  

you’re on Steve property, that’s what we do. We just furthers

 

Steve  

I have no intention to speak for anybody else. What we do is to make sure that you’re taking that that due diligence period that study time, looking into everything you can possibly look into, you’re not perfect, but you need to at least be you need to at least do the things you got to do to understand the plan for the city.

 

Erwin  

OSHA says we’re working with the consultants, the plant the designer, the plant slash planner, to know that we can get our permit. And that we can close our permit before we would ever wave conditions on a deal.

 

Steve  

And or just as to add to that, and or we’re very clear of the not all I wouldn’t say risk, but of the avenues or channels that we have to take if there is a hurdle. So nothing ever works perfect, right, you may have to get a small minor variance on a setback on an existing structure. Nothing is perfect by the garage that we’re talking about for the other property that we said that was existing 900 plus square feet. That is not part of the bylaw. But we’ve spoken with the city we’ve gone through with the planners, we know what is going to be asked of us to get through the process. And we’re very confident that we can get to the other side with the people that we have on our team. At that point, it’s on the buyer and the purchaser and the investor to do a risk analysis, risk reward analysis and understand if this is the opportunity for you. Are you accepting of these terms, and if they are, then the least they have all the information they can gather, they’re not making an uninformed decision, they have considered everything that they can. And that is the goal to give everybody as much information as possible.

 

Erwin  

Speaking as much information as possible to the listeners benefit understand, we can make almost double the commission selling a pre construction condo. And it’s way more or less effort for us.

 

Steve  

Boring, you want to talk about boring investment.

 

Erwin  

But we made the point though, neither you or I just sleep at night, knowing that our for our clients like negative 500 $1,200 cash flow and I per property. Yeah, I wonder how these pre construction condo agents are sleeping at night, knowing their clients are just bleeding. And they themselves and those clients are likely losing sleep

 

Steve  

on piles and piles of money. I don’t know. I think everybody look, everybody is business. It’s capitalism. There is a need and there is a desire and I’m not, you know, not trying to poopoo on anybody. But I just feel like if you come at it with what is that intellectual honesty, I guess is that the term author, if you’re if you’re coming at it with that type of position, I believe I believe in the strategy. I believe heavily in this strategy. I believe that it is the future. And I really, really, really think that people need to start to consider it with more tension, because it’s definitely the only thing I can see that makes sense. The numbers that we’ve heard from from the builders is that it can take up to nine years to get a piece of property, from ground rod dirt, all the way up to a condo high rise turned over and occupied. In these these deals, we’re talking about 24 months to get eight to 10 units in the city of Toronto to bring three to four units, it could be only seven to eight months. I mean, the volume doesn’t you can do more volume this way. It’s the only way that the numbers make sense. And I just believe wholeheartedly in one that this is the way to go.

 

Erwin  

Speaking numbers. Can you walk us through the the numbers on this Bumppo project on this edition project?

 

Steve  

Yeah, so we’ve got the property under we’ve purchased that around, I believe it’s 845 is the purchase price. We are fully anticipating a construction budget somewhere in the neighbourhood of 400,000 to 500,000. The current value of the property when all said and done will be right around that same number of 1.3. After the pullback we still are seeing 1.2 to 1.3 for a property like this fully converted. Rent wise we’d be probably looking at currently student rental per room rents in Kingston are anywhere from 900 to 950. A room for a nice one for us.

 

Erwin  

I’m sure there’s cheaper for crowd.

 

Steve  

There is definitely by all accounts, there’s a lot of cheaper, I’m talking about just the specific. And generally, we’re going to be looking for our same general mix of 2000 2000 to 2300. For these units, when they’re all said and done, utility separated.

 

Erwin  

Fabulous, Steve. Alright, Steve, I’ve taken up enough of your time. Any final thoughts? First of all, where can people reach you, if they’re interested in learning more about

 

Steve  

Instagram, at I went on the east side, under scores are in there. So you have to reach out, you know, and sometimes I’m guilty of not checking all of my like message folders and Instagram, I’m not the best at that. So if you do reach out, I’m in there. But you know, reach out to our team, I would say it’s a good option Calendly links, and all of those things are available. QR codes are available, we have a upcoming, or we are always doing our coaching. Meetings monthly, right? By so they can always reach out through those. And generally, just I’m not hard guy to find a guess you can find me.

 

Erwin  

I’ll put your cell phone number in the show notes. Don’t worry.

Yeah, exactly. Give away all of my home address

 

Erwin  

everything be great. Yes, a number. Yeah.

 

Steve  

You asked me for parting thoughts. I’ll give you one parting thought before I go. I think that and you and I talked about this before we went on negative voices or just negative things that are going on, it’s been a year of a lot of negativity, the ergonomics? Well, three, again, I’m already at the optimist,

 

Erwin  

the gold standard ended in 1971. All right, continue, sorry.

 

Steve  

My personal view is that I’m working very hard to embrace the opportunities and try to get to the point where there’s you can see the positivity, because I know that there’s a lot of bad things happening. But there is also opportunity everywhere. And I think that if people are open to it, this could be a really good time for you to start to learn and start to get into it. Start to take control of your own destiny and start to look at options that may help you. Maybe not today, but within the next three to five to 10 years. So reach out and find good people and start to look for things that may push you out of your comfort zone, but may help you in the long run.

 

Erwin  

It’s good point. Yeah, I remember when I started doing duplexes, we started doing basement conversions, and we’re way out of our comfort zone. A big renovation budgets opening permits, we weren’t sure if you know, yeah, because there’s a new frontier.

 

Steve  

Yeah, yeah. New Frontier.

 

Erwin  

35,000. Budget. That’s crept up a little bit. Today, but yeah, I

 

Steve  

think that I think that at the end of the day, right, like, if you’re ahead of the curve, it’s going to be complicated, a little bit more than when you’re at the back end of the curve by then everyone’s figured it out. So

 

Erwin  

the prices will be a lot higher, What’s everyone’s figured it out? Everyone will

 

Steve  

be moving on, and everything will change. And they’ll have something new to talk about. But yeah, for sure.

 

Erwin  

Yeah. Cuz like when we started, like, again, our client owns a very first duplex in Hamilton, Ontario, for example, right now, there’s probably like, 300 of them, just in that one city. And yeah, prices have gone up significantly since we started. So yeah, and again, like properties are valued based on their income. That’s part of the factoring as part of the factoring. So if we’re forcing our if everything goes to plan, which we’ve already been doing it, either get in now and pay today’s prices, or you’re gonna pay tomorrow’s prices, which will be probably component of $1,000 more

 

Steve  

or focus on your business. Here, I don’t know if that’s true or not, I’m just blurting something out. But focus on whatever it is that makes you money personally, and put attention there as well. Because you need to figure out you don’t want to be using other people’s money is a dangerous term because it’s true. But sometimes you get caught up very overleveraged. And so you got to watch yourself with all of these things. I think that’s that’s just human nature and taking care of yourself and pulling back and focusing on yourself to is good,

 

Erwin  

right. And like Steve saying we have opportunities for folks to focus on. We do a free webinar at least once a quarter on how we’re investing when our clients are investing and we offer educational tours, usually at least once a month, as well as educational tours, a nominal fee, 20 bucks, plus taxes and fees. So we’re not selling like five figure coaching here. We’re offering people opportunity to buy the same properties we buy for ourselves. Alright, thank you, Steve. Thanks for doing this.

 

Steve  

Appreciate you. Thank you so much.

 

Erwin  

Before you go if you’re interested in learning more about out an alternative means of cash flowing by hundreds of other real estate investors have already then sign up for my newsletter find out for yourself but so many real estate investors are doing to diversify and increase our cash flow. And if you can’t tell I love teaching and sharing this stuff.

 

 

To Listen:

 

On iTunes: https://itunes.apple.com/ca/podcast/truth-about-real-estate-investing…/id1100488294

On Stitcher: http://www.stitcher.com/s?fid=87335&refid=stpr

On Spotify: https://open.spotify.com/show/6Z8yd37AQfQI5DK0J0Xwzz

On Google Podcast: https://podcasts.google.com/feed/aHR0cDovL3d3dy50cnV0aGFib3V0cmVhbGVzdGF0ZWludmVzdGluZy5jYS9mZWVkLw

Youtube: https://youtu.be/57Qw6_79Glg

 

**Transcripts are auto-generated.

 

Erwin  

Hello and welcome to the truth about real estate investing show. This is the show for Canadians I am Canadian born and raised. My name is Erwin Szeto, and I’ve been a real estate investor since 2005. Full time in real estate since 2010. Since then, we’ve helped investors transact on over $420 million worth of income properties, including about 100 Small multi families and another 100 or so student rentals. For those new to the podcast. This podcast is a true seeking journey with over 300 episodes each an hour long, generally have been successful investors on different investment models, that what it took for them to become a successful investor also how they fail. I personally never believe anyone who says they’ve never failed at anything. So that’s why real estate investing anyone who says I’ve never failed before the physical transfer line, there’s a good chance it could be lying, but our successes as well, the lessons learned. So we’ve learned all these lessons together. So we meet together and continuously improve on our investment businesses and in our lives. On this show, we explored what makes people tick, how much time it takes for them to do what they do, the amount of effort the resources they have to invest in order to obtain the results that they do. My intention for you the listener is to learn and find an investment model that suits your own values, style resources, so you may model the success and avoid landmines that like the pros do. One thing I’ve noticed many beginners and some pros miss is the understanding of why we must invest in hard assets, especially during inflationary times, which is in case anyone thinks this is the only inflationary time understand, you know, real estate prices have been going up about 7% in Ontario for quite some time. Anyways, mainly focused on things like supply or lack of supply of housing in the bottom, the impossible demands caused by on our housing supply the impossible demands caused by our immigration, then they can’t explain why house prices have gone up so much. Because there’s actually some examples around Canada, including in Vancouver where they’ve created button submission supply. But yet house prices still have gone up. One thing causing inflation is the growing supply of money. And we can thank our government for that the amount of borrowing but they do the printing of money. Plus low interest rates cause our banks to lend like crazy, which again creates more money in the last 10 years especially I’ve uh, I’ve supplied a chart in the show notes on website truth about real estate investing.ca. And if you’re on our email newsletter, you’ll see it in the email as well, the chart that I post, in the last 10 years, Canada’s money supply. So the amount of money made are Canadian dollars in the entire system, you know, so that includes in your savings account in all the businesses savings and checking accounts, you know, the dollar bills you have stuffed in your mattress. So if you add up all that money in the last 10 years, it’s actually gone from $1.2 trillion to 2.4 trillion. So it’s doubled, the amount of money in Canada has doubled, including a significant ramp up since the pandemic and it has not slowed down the pandemic money supply growth, the money supply has not slowed down, which goes against what the Bank of Canada is trying to do. While the federal government’s stimulating the economy and causing inflation to bank Canada’s trying to do the exact opposite by raising interest rates. So that’s kind of interesting how our government chooses to operate anyways. And then, do you ever see this not happening anymore, where the federal government actually reduced the supply of money, like the Americans actually did? For a few months, they actually did. Now with with their debt, heading towards the debt ceiling, they’re gonna start creating more money as well. So again, there’s a chart in the show notes. And I was explaining this to a roomful of Toronto real estate investors just last week, and also some novice real estate investors as well. Because again, it’s not something that’s commonly known why real estate or hard assets, why they go up in value. And based on the increase in money supply, hard assets, such as land, which is, you know, there’s land under all my income properties that should in theory have doubled in price. Looking back 10 years ago, we were buying detached homes in Hamilton for 290,000. And since then, they’ve tripled in price. So they’ve got they’ve more than doubled. And they’ve increased Yeah, exactly. Again, the triple. Same for St. Catharines. We were buying detached homes, St. Catharines, we were buying for just over 250,000 We were paying about an average of 255,010 years ago. They’ve also I’ve nearly tripled in value. This is important information when forecasting what will happen to real estate prices in the future, knowing how central banks are including the Bank of Canada, they will always continue to print money, how the housing crisis will only get worse as the builders in the last four months they’ve been they’ve been off not all of them but many of them are not building because they’re not selling you know there’s not much appetite for pre construction houses and condos houses more so in like really small markets. But anyways, the supply the supply of pre construction condos and houses has to be absorbed first before it makes sense for generally for builders to continue building. In the in the trend also is for more immigrants each year. Add in how interest rates they’ve likely peaked. We may see another quarter repeat quarter point interest To increase, which I actually think is good news, right or wrong, I still think again, a quarter point increase would be nice, because it gives my buyers my clients more time to be able to buy properties and take advantage of the most of the last downturn. So and then based on economic fundamentals, it still makes a lot of sense to buy and hold quality investment properties. Note mine and my clients experience of generating wealth and real estate is not the same for others. Not all real estate goes up. For example, I had at some friends visit to shoot to record a podcast just two weeks ago, there Calgarians. And I’ll take their word for it. They live in Calgary, their real estate investors, they shared how their market has only gone up 20% In the last 17 years, 20% in 17 years. So some might think that’s good. I believe they have not kept up with inflation. So that’s actually a poor investment.

 

Erwin  

Therefore, yeah, it could be worse though. If you invested Sadly, in Calgary commercial office, that’s down even more. And I don’t have the Edmonton stats offhand. Anyways, yeah, yeah. What does the future hold? Nobody knows. But for my clients tonight, we will continue to write this trend of a market appreciation through owning quality investment properties until it ends investor market update wise, we are picking up some great deals thanks to the recent downturn. And as mentioned several times already, we are well past the bottom based on what we’re seeing. The bottom I believe was August last year. Last week, we had a client pick a newly renovated duplex in Kingston, Ontario, for less than the seller paid. Unfortunately, the flipper the seller slash seller, they bought near the peak they paid and then they bought a house and then they renovate they had to renovate it if the Turkmens single family home into a duplex, and now they sold it to our client, somewhere less than 150,000 than what they invested. So they’re probably going to take us close to a $200,000 bath on this, while our client is of course, ecstatic, as she picked up a great deal that will cashflow. And again, it’s a newly renovated duplex. So unfortunately, that’s how the cycles work. If you invest poorly, you’ll be shaken out of the market. Hopefully, this flipper was a regular regular flipper. So they made lots hopefully they made lots of money on the uptrend, and they’re just taking a decent sized haircut on this one, also. So thanks to the downturn, we’re picking up bigger and better properties with development options, thanks to Bill 23. Both in the East End in the West End, we’re picking up a lot of houses with detached garages. So we can convert those garages into apartments to increase cash flow. And of course, our property values, it is actually a good time to be a buyer, it’s actually possibly the best time to be a buyer in quite some time. So if you’re interested in working with a team of professionals, if you enjoy using professional services, ours is particularly award winning. For those who don’t know, we are the four time Realtors Of The Year Two investors, we are investor focused at realtors. I personally am the I’ve been an investor focused agent since 2010. So if you’re interested in working with one of us, contact us and I went at infinity wealth.ca Again, it’s IW i N i win at infinity war.ca. If you’re more interested in improving your education at this time, you’re not ready to jump in. We are hosting an island mastermind tour east of the GTA on Saturday, June 3, starting at 10am. We meet for coffee and we do obviously do some networking. Then we tour some houses usually to usually a duplex conversion or garden suite slash garage conversion. And of course, we always provide handouts with cash flow analysis and some design drawings if applicable. And then we’re off to lunch. So Coach Steven Phillips, who is hosting our tour, he actually has a commercial property where he’s renting out his parking lot to two food trucks. So it’ll be both learning. It’d be both educational and a bit of commercial real estate investing, as well as enjoying local food truck and supporting local. These events are fun filled with networking, high quality tactical education that I wish existed when I first started. But like I’ve been saying, it’s never been a better time to learn how to invest in real estate quality education has never been successful. But also on the other hand, extremely poor, overly expensive education is also available. So if you’re interested, do not delay. We do have a hard cap of 30 attendees have the spots already sold. The cost is a whopping $20 plus taxes and fees. Clients, you are our guests so you do not pay. And also all proceeds go to register our registered charity that happens in basket brigade. I mean, yeah, I’ve shared the link in the show notes. Yeah, again, linked in the show notes, www dot truth about real estate investing.ca and stay connected about our events. I can’t recommend it enough that you subscribe to our female email newsletter. We’re about to announce our next tour in the West End which will likely be Hamilton possibly Nagar region. So we’ll announce that also in an email newsletter as well. So you do not want to miss that. So make sure you sign up for our newsletter on our website just about real estate investing.ca name and email on the right side and you’re good to go. onto this week’s show. We have some great guests who have just launched their new apartment building a REIT, a real estate investment trust. If you don’t know what that is, it’s a fun down the line. investment is a bunch of park buildings and regular investors like you and I can invest to own shares in the fund and participate in the investment. Mike Rocco and Mark Baltus are our guests today. They are the founders, owners of peak multifamily investments. And I’ve known Mike a long time, we met somewhere around 2010. As we were both members of the same real estate investing network. I know I talk like an old person because I am, but I knew Mike when he was still in school. But thanks to some, a lot of hard work, surrounding himself with go getters, some great mentorship, he’s been full time in apartment buildings for several years now. And again, he’s now a co founder of a REIT. He’s come a really long way. He’s quite a successful individual. On the show, we discussed the journey. And we get a bit detailed on things like when to set up a REIT, the cost to start a REIT, who they need to hire a partner with raise capital. We touched on securities regulations, which anyone listening who raises capital should pay special attention to if you want to stay out of trouble with the Securities Commission, you Please do stay out of trouble with US Securities Commission. We already have folks in our community who have been shut down by their local Securities Commission. Anyways, if you’re ever looking to partner as Mike and Mark have, they share how their partnership works, their roles and responsibilities, how they organise their business, organisation hierarchy, and they describe where who owns what. And of course, we break down some recent deals, we discussed the makeup of their portfolio, cap rates, how they increase values, suddenly, I want folks to pay attention to his cash flow. And I want to thank Mike and mark for being so transparent on where the cash flow actually comes from. And that’s not where most people think to learn more about their business peak multifamily investments, you can go to peak multifamily.ca As we are discussing a securitized investment your accounts a legal disclaimer, the Information and opinions expressed in this podcast are solely for educational and informational purposes and should not be considered as investment advice. The hosts and guests of this podcast are not licenced financial advisors, brokers or registered investment advisors and their comments should not be construed as recommendations or endorsements any any specific investment security or strategy. investing involves risks, including possible loss of principal. Before making any investment decision. You should conduct your own research insulted licenced financial advisor to determine the suitability of any investment for your specific financial situation investment goals. The host and guests of this podcast make no representations or warranties as to the accuracy, completeness or timeliness of any information discussed on this podcast. The podcast is not responsible for any errors or omissions, or the results obtained from the use of this information. This is our advice to use their own judgement and seek the advice of professionals before acting on any information provided in this podcast. The podcast shall not be liable. I guess I’m not be liable for any damages including but not limited to direct, indirect, special or consequential damages arising out of or related to the use or inability of use or reliance on the information provided in this podcast. This is a really great, great episode. So for anyone interested in learning about large scale investing, please enjoy the show.

 

Erwin  

Mark, Mike, thanks for coming in. What’s keeping you busy these days?

 

Mark  

Thanks for having us. Well, we launched the a REIT and we’re just talking about so that’s keeping us really busy has for the beginner what it is a REIT. So okay, so it stands for real estate investment trusts, it’s really an investment vehicle to kind of simplify it. So read essentially is a company that buys operates owns real estate is kind of specific to real estate. So that for the purpose of appreciating and cashflow that’s kind of what I read is the structure the legal structure allows people to invest, you know, with a company with a REIT in a passive way and can be registered funds, non registered funds. So the REIT structure allows typically allows again, not complete expert but we’re going through this well we’ve gone through it right now. So so fairly fresh allows people to use registered funds. That’s one of the big benefits. I think that why we went down that path is it it opens it up to registered funds, which is fairly significant in Canada and the US before 1k, although we’re not in the US, but registered funds is really underutilised here and as a pool of capital in Canada,

 

Mike  

just for some clarity, there is one step further like we opened a mutual fund trust, you can do a REIT that doesn’t allow in registered funds. So there’s another step to become registered to take in that RSP and TFSA capital.

 

Erwin  

So as to do two steps before you get to before you can accept register money. It’s a whole separate document. And you know, this is done over a weekend with a lawyer and just lock yourself in a room and hammer out some paperwork. And

 

Mark  

if you if you have Chad GPT you can probably do in a weekend. This was this was months and months, like almost a year, probably almost

 

Mike  

a year. Yeah, probably about eight months from when we said okay, let’s go a couple of months prior with some consultants and kind of figuring out are we going to do this? Are we not going to do this? But yeah, it’s a lengthy process.

 

Erwin  

I mean, you mentioned lawyers, they’re not cheap. You mentioned consultants, they’re

 

Mike  

not cheap. Not cheap at all. No.

 

Erwin  

What’s the ballpark?

 

Mark  

I think set up like without any marketing, we’re probably in about 150 to one seven. Five to kind of get very serious decisions. Yeah, you know, you might, you might hear people say, well, guy can set up a fund in for 30k. I’ve heard that a lot, you can set up a GPL P for 30k. Check a general partnership, limited partnership, that could be a fund that that’s probably one way to structure a fund the path that we took it a little bit more complex, but the complexity allows us to expand our reach, essentially. And that was really the purpose of the whole exercise.

 

Mike  

I think, too, because we’ve heard this lots is building in Olam. An offering memorandum is about 30 grand. And for someone to draft it, you probably can draft it right for that 30 grand. It’s everything else that comes along with it and DD checks and lawyers reviewing it. And getting on the shelf of an exempt market dealer. You know, dealing with Olympia Trust and their review. Total cost puts you well above 100 grand, right? But you hear people me and Mark now look and say, Oh, they’re in the early stages. Someone saying oh, that’s expensive. I was told I can draft it for 30 grand, right? That’s just one part. One step. And you can kind of now we’re able to gauge Oh, they’re just kind of exploring the option.

 

Erwin  

Interesting. So to the ignorant person, like offering memorandum, you can just get like a template? Yeah, you can. Because your business is similar to other real estate investment trusts. Yep. Right. You can, you know, I’m always looking for. Yes.

 

Mark  

So let’s say so offering memorandum was kind of just by way of example, it’s a document essentially, that outlines the nature of the business, the risks, there’s a whole bunch of stuff that goes in there, right, the legalities how investors can come in how they can get out the, you know, redemption, the whole bunch of stuff that’s important to people. Right. So let’s say it’s 100 pages, you know, 80% of it’s probably templated. Right? Maybe more actually exists? You’re right, because, you know, obviously, we’re not the first you know, this is a it’s a model that’s work, where I think the time, at least for us, anyways, was deciding what does the investment product look like? Like, what’s the returns? What’s our performance fee? How much are we sharing with investors in terms of equity? Do we have hurdle rates? So like, basically, one of the consultants we worked with and still work with and helped us develop this? He called it kind of investment product manufacturing, right? So you’re creating an investment. But there’s so many variables to it, there’s the rate of return does the you know how long you get paid? So there’s all these things kind of features? That’s, that’s I think what took a bunch of time for us is figuring out what what does the market want? Or right? What does the market want? Let’s craft something, okay. Can we develop? Like, does our business model suit that that’s a big time consuming component, as well as like, can our business model deliver what the market wants? You know, there’s a lot of due diligence that gets into that. And there’s, you know, we had a bunch of people help us along the way.

 

Erwin  

It was like, I’m really, I’m really digging, you know, I’m a bit of a real estate geek. I don’t know if people know that. What does the market want in terms of return risk profiles, or other sorts of things? Like we were mentioned, talking about before recording, like, there’s all these courses being taught out there. One of the biggest mistakes I see with with novice investors and people who are being coached is, they don’t know what a deal looks like, as in like, they don’t have enough information to decide if that is actually the right deal for them. Yeah. So I think by asking you like what your preferred term profile has to be, I think that’s probably a good baseline for most.

 

Mark  

Yeah. So okay, so you get into any market segments? Right. So I think there’s the retail market, right? So the people that may be investing in mutual funds, perhaps stocks,

 

Mike  

even like people investing their self directed like self directed RRSPs? What are they looking for? What type of revenue they bring in? Yeah,

 

Mark  

call every day, at least this is how we look at it in a really broad spectrum. So there’s a retail, and then there’s like, I think there’s the more sophisticated, right? And the more sophisticated our listener Yeah, yeah. Yeah, I think I think it would be your listener because they understand real estate and how it works probably a little bit more definitely do more than the average person, right? I think the average person when you think about real estate, at least my hypothesis, I think that the housing market, right, and that is real estate, but it’s only one sector and real estate, there’s so many other different categories, multifamily self storage, industry and such. So typically, when we like when we started peak multifamily number years ago, we were working with more sophisticated investors to come into our deals, more sophisticated investors typically want a higher risk, return profile, right? 15% Plus,

 

Erwin  

what we should be fifth percent over what term

 

Mark  

over per year over our product for typically five to seven years, right, turning over building and such. Okay, as we started to learn more about kind of the retail market, you know, when you’re quoting rates of return, and you were north of 15%, that also raises flags in terms of risk, right? It’s a very high number, right? Like you think of a stock that might do 15 to 20% is probably a lot of volatility to earn, right. And so don’t we all know that right, so So a big learning for us was that, you know, so the appetite of the market doesn’t necessary. It’s not always about the high number, right, the asset class that we’re in is multifamily, it’s typically more a little bit more stable, right? It’s a little bit kind of maybe more boring than other asset classes. And so people kind of coming into that sector investing in that sector don’t want kind of these crazy returns, because crazy returns also mean that there’s risk, right? So I think you kind of have to put two and two together. So yeah, so what we’re learning is that, you know, people are in this asset class for stability, right, when the when the stock market is doing what it’s doing right now, a little bit of volatility, they know that their capital in an asset class, like apartment buildings, isn’t doing that today. Right. It’s also not mirroring the single family market, which is also well, maybe going downwards a little bit more than most. So it’s, yeah, as we’re understanding kind of the risk appetite and the risk return appetite right now. So long winded answer,

 

Erwin  

the soundbite soundbite for me would be like, people are like 50% return where five, seven years is kind of like a place to be,

 

Mike  

I would say, in that sector in that market of retail capital, it’s high, you know, dealer reps will kind of perceive that as a riskier product. Right. And the question that came up to us is, like, when you’re looking at other products, you’re looking at some of the bigger REITs in the space. It’s like, well, how are you guys doing better than they are? What are you guys doing? Right?

 

Erwin  

Is in the paper today? A very, I won’t name names, but very large REITs just cut their cash distribution by 70%? Because they have a lot of office. A lot of office. Commercial. Yeah, I think we all know, like, return to Office is seeking to hit Yeah, but a kid right. So yeah,

 

Mike  

yeah, sorry. And just going back to like manufacturing that financial product. It’s like all the fees that come along with it. Right, like, financial audits.

 

Erwin  

Thank you very much. Yeah. Just everything else,

 

Mike  

like annual offering memorandum updates and stuff like that, figuring all those fees associated with it. And then kind of analysing the properties that we’re buying and kind of fitting them into this financial model to create a return that suits that retail capital. Right. And that’s where the lengthy you know, kind of process comes as how does the market perceive this? If we’re coming out saying 15 to 17% return? How is that perceived in the market?

 

Erwin  

That’d be crazy.

 

Mike  

What we, we probably wouldn’t have exempt market dealers raising capital for us, like they would raise more if we were to say 10 to 12. Because now we don’t believe you.

 

Erwin  

But just hilarious because if you say that in a court, but you’re offering your course people sign up.

 

Mark  

Yeah. And he says My point is like to the segments, right? There’s the retail and then the more sophisticated, like the more sophisticated can go probably do it on their own, or might have the network to get more private investments or joint ventures that will probably do more. Right. But there’s also more risk associated with it. Right? Like there has to be there’s got to be a trade off for it. So

 

Erwin  

yeah. Which again, was kind of the point of the show, because you guys have successfully done so you’re sophisticated investor yourself. You didn’t start right away. You weren’t you weren’t born into this business, right? You weren’t born owning apartment buildings, right? Yeah, you have to do it yourself. So it is possible. But it’s not that common, right? Because like you guys have been community forever. How many people said they’re going to open a REIT? How many people actually sit actually did? Yeah, not common? Some have gone under? Like we have mutual friends whose whose REITs have been they’ve sold them? Because they fail? Right? So it’s not it’s not all sunshine and roses? Yeah, no, it’s where it’s work. That’s a process. It’s work its effort. So this is actually a very complicated topic. I don’t know where my listener wants to go next. But we will get to your background. I just don’t want to leave this just yet. But you mentioned exempt market dealer for the beginner. What is that? Like? You’re not out there knocking on doors selling selling shares yourself? Have you read?

 

Mark  

No. So it’s, it’s funny, we just we just published an article on our website, what is an exempt market dealer? Because we’re getting that question a lot. Because Because because the whole and I won’t do it justice, but I’ll kind of do my best. Right. So the exempt market kind of by definition is also called the alternative investment space, right? So these are these are investment opportunities or products or things that people can invest in outside of the public markets, public markets, buying things on the stock market, right. And so typically, these private investments were only available to the ultra wealthy, right through connections or whatever maybe credited investor credit investors a number of years ago, and I don’t know exactly when, let’s say 12 to 15 or so years ago, the exempt market space started to kind of be created, if that’s the proper word, you got bigger means we’re getting richer, yeah, get bigger. And so there was a need for one issuers, like companies like us to raise capital, but also there was an appetite to invest in private markets. And so the exempt market dealer, the role of the mark exempt market dealer is to kind of connect, you know, companies like us with retail investors. But the important part of that is that they’re registered and they’re they’re certified and they’re educated enough to determine whether investment is suitable for an investor. Right? So they’re kind of the intermediary that connects companies like ours REITs private investments with investors. And so that’s the role. Right, right.

 

Erwin  

So securities, exactly. Their job is to screen people to make sure those, this is right for them.

 

Mike  

So even when we are raising capital, ourselves, it still goes through them. And they’re the back office doing everything. So it’s not just us, okay, we’ve raised capital, they raise capital, it’s us, you know, getting the interest of people and then pushing them to the exempt market dealer to make their final decision with them.

 

Erwin  

Right. So this is actually really good discussion, because before we’re recording, we’re discussing how many people are doing this wrong, and they’re doing on social media publicly available for everyone to see. Yes. Like, for example, discussed a company that went under Yep. Because they had they had the trigger. They were gonna go under no matter what. But the trigger event was the rumour is a competitor filed a complaint with the provincial Security Commission, then the company that eventually went under, then had a cease and desist order. Right. That’s why you don’t air your dirty laundry in the public, right? Yes. Yeah. And by by me, me saying dirty laundry, like people are I see people raising capital on social media all the time, even taking sponsored ads to do it. And they’re not licenced

 

Mark  

ice cream. Yeah. I don’t know. We talk about it often. Because we see it, we’re on social media, right? Like, I mean, we’re there promoting ourselves, but also seeing what’s out there. I don’t know if I, I’m surprised that that many people are doing it. But it’s surprising. And these are not stupid people. They’re smart people. So it’s either there, they really just don’t know that they’re in the wrong or they know they’re in the wrong but are trying to still do it. I don’t know. It’s a really interesting thing. I don’t know. I mean, for us, that’s pretty risky. Not just for us, but also for investors. Like it’s very risky for the investor. And I think one of the one of the things that investors really need to think about when they’re partnering with someone or investing with someone is are they doing it legitimately, right, the deal could be sort of two things. They could be operating a great business, right. And raising capital incorrectly. There’s a lot of risk there. Right? The business model may work. But if the situation that you just mentioned, if they’re off side on the capital raising side that shuts down capital to your business, which needs capital to run your business model kind of falls apart. Yeah.

 

Erwin  

Because real estate understand is pretty capital intensive. Yeah, yeah. And

 

Mark  

so I think the, you know, people have to really think about how risky it is for them and their investment, if the company, the issuer, the whoever the person is operating, it is not doing it properly. So they you know, there’s probably some more due diligence that they should be kind of undergoing to make sure.

 

Erwin  

You know, I’ve asked my lawyer, yeah, I’m sharp telling people either have an austere lawyer, or they’re going Yes, or lawyer’s advice, or they’re just willing to operate in the grey, or they’re asking the wrong lawyer.

 

Mike  

Yes, good, Lord, that was just gonna say that make sure it’s securities lawyer, right. Like when we’re talking about investments and agents and all that stuff, you’re not going to use, you know, your residential agent, if you’re looking for an industrial property? Well, same thing when it comes to this, you’re not going to use a, you know, a real estate transactional lawyer, if you’re talking about securities now. And you see that a lot happened in the space. And we’ve asked for years, and we’ve always got answers that weren’t clear. Can we do it? Well, I don’t think you can. Or maybe you can, how many years? Have you spoken to lawyers, and no one gives you a straight answer. Even when you

 

Erwin  

call CRA it’s hard to get a straight answer. Back, it’s a different answer.

 

Mark  

This came up the other day, because we were we were with our exempt market dealer. We’re having lunch just kind of talking about kind of the future and growth. Some lawyers will also say, Yeah, I can advise on this, but they may not be experts in that area. Right. So So buyer beware, I guess, right? Like you could ask your lawyer and they might provide advice, it’s still up to you whether or not that advice is correct or not even know if it’s coming from a lawyer like I know when we ask our lawyer stuff about real estate, I don’t know. It’s like go ask a real estate lawyer or if we ask our real estate lawyer Hey, what do you think about glass your securities lawyer so that’s what a good lawyer should do is like defer to the expert and not just kind of take that so I think that’s yeah, get a really watch out for that kind of stuff.

 

Mike  

And just because we’re really can’t put out any marketing that that we want, like our exempt market dealership has a compliance officer and every bit of marketing we put out we have to send to them get it approved them put it out and a lot of times it’s like, Oh, you guys need to put a disclaimer here. Or can you switch this around and add this there? Right that’s typically what happens even though we are a REIT, right? We can’t just pump up mark but you see it a lot over social media guys just pushing all this stuff out. Right? So even you know being registered we’re still very wary of what we can do and what we can’t do because it’s not just a free for all. Marina pump out the marketing doesn’t work that way.

 

Erwin  

She had a discussion did DM discussion over Instagram with a mutual friend of ours? I told him he posted something he was raising capital talking to his phone on Instagram Story video, whatever. I say can you just do me a favour and please Run up by your lawyer to just take it down while you do that. All right, then he took it down. And he asked me the basis, everybody else is doing it. I’m like, Yeah, doesn’t mean that’s right. And this is the Henson, he asked me, How do you do it? I said, What do you think all these people are selling coaching? Right? Because you’re selling coaching, you’re not selling securities. You sell coaching, right? You teach them how to do the investment. Right. And then allow them raise capital from there. Yeah, no, I’m saying I’m not saying that’s completely. That’s wrong, because I think it can be done properly. Yeah. Yeah. Right. It’s just like, like multiple representation in real estate. One can represent both the seller and buyer properly. It’s just not common. Right. Right. There’s conflict of interest. Yeah. So again, it can be done well, it can be abused, and it probably is abused a lot.

 

Mark  

I think so. I don’t know. It’s hard. Yeah. It’s hard to say I don’t know what advice people are getting. It’s interesting to see like that kind of stuff. Like, you know, we see it all the time. And you wonder, it’s like, I don’t know what kind of advice they’re getting, maybe they’re getting proper advice that it’s hard to say

 

Mike  

the question is, is how are you providing the best interest of the investor? When it’s your investment product? Right? You’re looking at it from your best interest and saying, No, you should invest in this project, you don’t know what’s right for them. Right. So you’re essentially convincing them to invest with you, regardless of their situation, because you have that vested interest in them, right. And that’s where kind of it gets, it gets really tricky, because it’s not at best interest for them. While you’re technically in the raw, like, buyer beware, I

 

Erwin  

literally had a school teacher reach out and she’s in she some financial difficulty, a mortgage representative would recommended that she put money into a syndicated mortgage on a development. And for where she find the money. He got her a home equity line of credit. So they got paid on that probably got a referral fee on referring her to syndicated mortgage. And that developer went under a very public shoot. Very public bankruptcy. Yeah. All right. You guys probably looked at the properties. They were fire sailing. I did. I’m sure you guys did. But yeah, like buyer beware, like there are sharks out there. Yeah. In some people in nothing the mortgage person was was evil, you might have thought it was actually a good deal. Right. But again, like you’re this is conflict of interest. And you’re exposing everyone to more. Well, I would never do a syndicated mortgage on our development property.

 

Mark  

Yeah. Right. That’s interesting. That’s, there’s so many stories like that.

 

Erwin  

So sad. Yeah. Someone who’s mortgage free now has a big mortgage now. Yeah. All right. In no return coming for return. Pretty sad. Yeah, very beware. And I think that’s probably a red flag right there. If someone does not know how to comply with securities law, in their coaching and social media advertising, that’s a huge red flag, huge

 

Mark  

red flags. And but I think like, I was telling the story before we went on air, right, like when in one of our projects, if someone to come in, they weren’t a credit, no problem. Hey, hey, the REITs coming up, that you’ll probably be okay with that. Talk to her AMD, if that makes sense. Makes sense. And then the response I got was good. Why don’t you just say that I’m a family and friend. I’ve been in other investments like that. They just say that I’m a family and friend, but we’re not like the OSC has a criteria of what a friend is. Right? You know, the one that gets described to us a lot by our lawyer and EMD. In fact, these exact same examples, so I think they’re probably right is like four friends that I’ve probably been in your house, I probably know the colour of your kitchen and your bathroom. Like that’s, we’re friends. We’re probably friends. Right? So I think just yeah, and there’s a lot of benefits hearsay, but that, well, other people are doing it must be okay. I think that that’s where things start to really

 

Erwin  

vary as well. You guys been around a long time, lots of investors did nonconforming properties non conforming Maltese, yeah, like Toronto, for example. Doesn’t seem to really care but until they do, yeah, Hamilton for forever did not care until they did right.

 

Mark  

And I guess that’s okay. As long as you know what the risk is like it’s okay, one day down the road if they decide they start to care, here’s what’s gonna happen and if you’re okay with that,

 

Erwin  

yeah, budget for it and go for this fire escapes and whatever you need to do whatever else. But it’s expensive. You know, you guys know first keeps saying smokin cheap fire shutters,

 

Mike  

we had to put in a few different things, fire separation and logic rooms and things like that.

 

Erwin  

Anything could even change from like, you can no longer do what you had to do steel and then the cost went up even more.

 

Mike  

But that goes back to proper budgeting and knowing what your risks are, essentially when you’re underwriting deals, right, and it goes back to what you said like as long as you know before, I mean, you’re fine with it. You’re either taking the risk or you’re not it’s the investors that aren’t aware and then say, Holy shit, I got a $30,000 bill to do all this. Where am I getting the capital from?

 

Erwin  

So for the listeners benefit to explain where you guys are coming from before we start to read like how many how do you describe your portfolio? I mean doors, I mean buildings, I mean doors and buildings.

 

Mike  

Okay, I’ll start I started way back with duplexes and triplexes moved into apartment buildings in 2014. I think we’re up to about 140 units that we Manage, I also have another 100 and change where I’ve invested in projects as well say a couple of buildings, I think it’s another 140 or so units, which I was a realtor on. So no the project while decided to invest in these properties. So total to add, I would say 140 that we manage ourselves as asset managers, not not property manager ourselves. And well whereabouts are they, Mississauga, Hamilton, Barry Kitchener? And now orange, but we have one under contract in orange,

 

Erwin  

what’s in common for all these places that you chose to invest in them? That I asked because you guys been around, you’ve probably seen the same thing. It’s like people are are investing in towns you never, I always happens. Only when I got into real estate that I started learning about Ontario geography? Yes. In terms of all these small cities I’d never heard of before. These ones I’ve heard I’ve heard of before. And have friends that live in them?

 

Mike  

Yeah, I was just gonna say it goes back to the rain days. All good, you know, economic fundamentals, you know, where’s population going? You know, what industries are there? You guys you mentioned, you see people investing in these small towns where they’re like, dependent on one industry, that industry goes under slows down what happened? I’m not willing to take that risk. But at least not yet. Or, you know, for investing, you know, other people’s capital friends family, I was never willing to take that risk. So I just wanted a good solid market. And that’s pretty much where we decided, we also see as you you invest in Hamilton, St. Catharines, a very good increase in rents paternal, right. So we’re also looking for that lift, because we are a value add company. But yeah, the economic fundamentals of the city and you know, population GDP growth, all that stuff is primarily what we’re looking at.

 

Mark  

I don’t think it’s Yeah, I think it’s, I like to think of like, there’s no bad strategy, right? There’s no like going way Northern Ontario or the smaller town, it’s not like it’s good or bad, right? It depends on what you need. Right? So those in those markets, the cap rate is going to be higher, right. So your cat, you’re probably going to cash flow out of the gate. But you also so the other thing to think about, or people know about cap rates is the higher the cap rate, essentially, it’s a risk premium, right? So if you’re getting a higher yield investment is riskier. That’s why you’re getting a higher yield, you know, lower cap markets, GTA Hamilton, right? Lower cap, yes, you might not cash flow out of the gate. But it’s also there’s a lot of security around it, right, where, you know, there was investment transit and such, right. So, especially now, when the economy is doing what it’s doing. The markets we’re in are moving like, they’re, they’re, they’re doing better. Right. Whereas the smaller markets like Mike, like Mike said, if there’s if it’s tied to one industry to industries, there’s going to be some issues there long term. So but I think it’s, you know, people just need to understand what their risk profile is, and what real estate needs to do for them today, right? If it’s cash flow out of the gate, yeah, then maybe in northern Ontario market, as long as you know that it’s some volatility there, or could be. But we’ve Yeah, we’ve stayed away from those.

 

Erwin  

Because you’re almost you’re almost GTA with all these detailed descriptions always changing a GT Ha, maybe, plus. They’re doing that we’re sure Orangeville fits in. But you know, besides the point like, rather than some sizable still a sizable city,

 

Mike  

I think one of the primary reasons were there is I live five minutes away from there from this particular building. And I really understand the area. There’s also a couple of bigger players in that space that have just moved in over the last handful of years. But it really understand that market, I see where rents are going. And one of the guys I know that personally owns upwards of 1000 units, said to me a couple years ago, he goes oh, my building in Orangeville. He’s like that, that buildings blown my expectations out of the water, I didn’t know it was such a great city rents are through the roof. And now living there, I really start to see that zoned in, something happened to come available. So we jumped on.

 

Erwin  

So I want to ask you, but we were talking before we were recording about like how much effort is it to get here? Get it to work, get to where you are? Because that’s that’s what I want. The show is called the truth about real estate investing. So I always ask people like, what is it like to be an apartment building investor with 142 units, whatever it is, like, What is your name and effort? Because again, I literally told someone the other day, just two weeks ago, a young guy, smart kid has his MBA. He’s like he kept asking me all these opportunities from different influencers. Right? And I said, start watching Social Media. Turn that off. You’re already on the right track. Right? Don’t be chasing these other shiny things. Right. Yeah. So that’s my point. So anyways, what’s your week look like in terms of workload? And then what fills it?

 

Mark  

Yeah, I think so right now with the launch of the fund and the REIT, a lot of it is to I guess, just split it up into so we split up our business in three buckets essentially, just kind of how we manage our time and our resources and our even our way we kind of collaborated in status and such. So bucket one in no particular order, capital raising capital raising marketing. So what do we have to continue doing? Because we, you know, we still have to put a lot of effort into capital raising. Yes, we have the help of an end now, but it’s still in the capital raising conversation, or decisions today versus five years ago are different, like it’s under it’s I don’t know, if it’s more sophisticated, but just different, right. The capital markets are with operate within capital markets. So there’s capital markets, then there’s acquisitions, right? So you know, with Mike’s background in acquisitions, and its connection to the network, that’s, that’s a continuous effort. And then operations operations is, you know, property management, we have property management and the majority of of our units, renovations and turnover and such. So, our time is split amongst those things. refinances. If we’re going through a bunch of refinances right now, so that’s that’s effort. A lot of effort right now. So it’s not, we’re not hands free, at all. Like, I don’t know if that, oh, four hour workweek, yeah, no, not a four hour workweek.

 

Mike  

Not a 40 hour work 40

 

Mark  

hours. So it’s, we’re not a startup, because we’ve been doing it for a while

 

Erwin  

you guys are retired. That’s the opposite of retired.

 

Mark  

It’s 100%. The opposite this is like, so I was in a startup before. And it’s exactly the path right? It’s a shit tonne of effort. 100 bucks, where it’s a lot of effort. Right? It’s a lot of it’s a lot of effort. resourcefulness is a key component, meaning that not just your time. But can you leverage your network around you. Now, I think we’ve decided to do that, though. Like we’ve decided to continue to grow if we decided to not continue to grow. Yeah, maybe we have less time to spend on this. I don’t know. But we’ve decided to continue to push and grow and expand. Yeah, it’s more than a nine to five for sure. It’s a nine to nine, nine to 12. I don’t know it’s present. So I’m retired.

 

Mike  

The one thing I will say it does allow a little bit of freedom of time, in a sense, where you can take the kids to school, you can pick them up, you can, you know, take them to hockey, you’re just now working a little later or choosing to write how fast you want to grow. What do you want to do? If you were to say you want to get to 100 units, because that 100 units to cashflow? Well, you know, sustain your lifestyle, you could push to get to that 100 units, and then probably work a five hour work week, if you’ve implemented proper systems in place, you have your property management running them. I mean, you might have some months that are more intensive through reifies. You may have a month or two where you don’t need to do anything, essentially, right, you can live on the beach with your cell phone, just maybe take couple zoom meetings here and there. And that’s it. But if you’re looking to get there, zero to 100, and you’re looking to do it within a certain period of time, you’re pushing, right. If it’s not the acquisition, you’re looking for its capital, where are you raising capital? How are you marketing for cap, right, and things like that. So there’s always something on the go. And when you get to that size, there’s always tendon issues that you’re dealing with construction management, deficiencies and properties, something is always coming up.

 

Erwin  

Even with systems in place, stuff comes up with systems

 

Mark  

systems in place, although less though, a little less, way, way less for sure. There’s definitely more of a buffer now, which is

 

Erwin  

nice. One thing that always kept me away from raising capital was was the investor relations is what I think the term is the formal term, because basically managing your capital partner, where does that fit in with your three buckets? Operations, capital raising,

 

Mark  

that’s going to capital is that investor relations like in that bucket? It’s it’s kept raising, but also communication, not to investors, for reporting tax lips, like all that stuff is kind of in that bucket. Anything to deal with investors, I guess, in there, you could probably put in, you know, also lender relationships and financing like that, in itself is is it’s like, so it’s capital capital is a big bucket, and there’s a lot of spokes to capital. I think that

 

Mike  

like the lending part would go there and under operations as well. Because you’re always dealing with, you know, new rent rolls and stuff and sending that to lenders and Okay, let’s increase so it’s kind of mixed between both buckets. Doesn’t sound like you guys are retired. No, yeah. No.

 

Erwin  

What do you think the expectation should be then for? Because we were talking about like weak people that take weekend courses, for someone to take a weekend course, for example, to go to zero to 100 units successfully? Because I think we’ve all seen like, we’ve all seen deals people shouldn’t be doing. So those will not bring people closer to their goals, but say they do actually find deals that we should be doing. How long do you think they should take? They’re working on nine to nine.

 

Mike  

Okay, so this comes back to back to capital raising, at least in my opinion is okay, you want 100 units? Where do you want 100 units? Right? And then we teach a course and first thing is your why? What are you looking to do? Do you want to invest? You know, close by Do you want to invest? You know, in another province? What do you need real estate to do for you? Once you figure that out? If you can get a value of those 100 units say you’re buying at 300,000 a unit Any 100 units will know how much money do you need to acquire that? Right, regardless of acquisition. So some people have a good network, some people been working, you know, on Bay Street maybe, and been in the, you know, financial industry for a long time, and they have family with money, a big network of accredited investors, maybe they can raise that two years, who knows? Right, but someone just coming from my normal corporate job making 80 grand a year, I’m going to assume that they don’t have a big network of investor capital, especially in the accredited investor space. So regardless of finding these properties, how are you purchasing them? Was what? Right. And that’s, that’s what it comes down to? I don’t think there is a time limit mark may be able to do it in three years might take you five, maybe 15? Who knows? Right? It’s very difficult to say, because just because I’m working nine to nine, it doesn’t necessarily mean I’m, I’m attracting the right capital partner. Right. So it’s kind of an open ended question. And it’s tough.

 

Mark  

If you see assets, let’s say 100, let’s say you’re doing even a building a year, a building a year is a lot, like for a for a person, or maybe a building a year, like 20 units a year, maybe two, you got to find the deal that makes that makes sense. And now, like I think we’re coming out of a period where and we’re talking about 2020, and 2021, where you can buy a building barritt in 12 months, and you have all your money and do it again, like that’s not happening anymore, that those times are gone. So if you’re searching for those, I don’t even know if you’re buying a building a year, because those are hard to come by. Right, especially with tenant laws now, tightening up. So if you think a building a year, 20 units a year, which I think is aggressive, if someone’s starting on their own, that’s five years to get to 100. I would say some people can do faster, some might take longer for some people, but five buildings or 100 units in five years. I don’t know. That’s probably a target. I don’t know if it’s a fast target.

 

Mike  

Okay, so we bought our first building together 2018, we’re probably together at about 100 units or so. Ish. And that’s five years of going like going full time. But to partner right,

 

Mark  

we had an early start. Yeah, right. Yeah, we’re doing two

 

Mike  

partners with with an early start, and where they’re at the five year marker. So that’s actually

 

Erwin  

I think that’s really helpful to know, like you’d have running start to be five years to get there in partnership. So

 

Mike  

technically, it’s 50 units. Right? And it’s not 50 units. So we have partners on those as well. Right?

 

Erwin  

So can you retire?

 

Mark  

Could you retire? We sold everything.

 

Erwin  

So it’s an equity thing?

 

Mark  

Yeah, I think if we sold everything for sure, like if sold everything. And sometimes, you know, this crosses the mind. Sometimes you sold everything for sure. Yeah. It would be good. Oh, yeah.

 

Erwin  

I’ve crossed my mind. Everything

 

Mike  

a couple of times here across my desk. I just bet but sometimes, obviously, you go through it. I’m sure you hear this a lot. But people are like, Oh, I’m done. You go through those stressful moments. I think that gives me personally a peace of mind. Knowing I could if I wanted to, I know I’m going to be working till I’m 90. I’m not going to stop. It’s just something I enjoy doing. But I like knowing hey, if I needed two months off three months off, whatever I could take that, as well as if I just had enough money through a breakdown of some sort, I could retire. So we were talking about before

 

Erwin  

we’re recording, what you’re saying is you can’t live with the cashflow of 100 units, even though I’m gonna guess you guys bought pretty well.

 

Mark  

So right now, so there are different stages. So some buildings aren’t CMHC. So at like 2%. So those are those are cash flowing. Some buildings, we’re just like we’re in the process right now of refinancing, three, three apartment buildings into CMHC. Those will cash flow. combined the whole portfolio. Yeah, off cash flow, we wouldn’t be able to live off cash flow on all those buildings. We have investors on some of them. Yeah, no, I mean, we wouldn’t unless we sold a building or refinance the refi. Although refinances have helped so refinances and equity takeout that gives the most capital, way more capital than than a cash flow. So we’ve been able to refinance a few times over the last couple years. And that’s that’s given a significant amount of capital way more than cash flow.

 

Mike  

Do we want to go down the rabbit hole of buying a non cash flowing property versus a cash flowing property?

 

Erwin  

Sure. Because I’m sure you bought and projects if you got like a nice, tasty disaster project that’s like 30% vacant, there’s no way no way. No way. It’s cash flowing?

 

Mark  

Most that’s all we’re buying. Right is except for well, one, we actually one we bought CMHC out of the gate that cash flows, that cash flows, four to 5%, you know, on an annual basis,

 

Erwin  

sorry, 4% of what said cash on cash or cash on cash. Yeah. Okay. So for like for listeners benefit. So you put in 100 grand your cash flowing? Or 4000? Yeah, a year a year. Yep.

 

Mark  

But our strategies value add. So maybe that’s the context Australia’s value add. So these things are by definition, underperforming, right, they’re not cash flowing, the debt coverage ratio app purchases under one so that means that the The income to support, there’s less income than the service of the debt at the outset of the project. And so our job is to turn that around and reverse it. Right. So at the outset, all of these do not cash flow. And that’s where the value is, for us, at least in our strategy.

 

Erwin  

And this isn’t going to get all investors need to understand like, investment is so diversified. Yeah. Like, for example, the land investor does not cashflow. Zero. Yeah, not saying it’s a bad investment. Because there’s always reporting we know plenty of rich builders. Yeah, like I believe the person who owns the most expensive house in Ontario is Matt. And so the owner Mattamy. He’s apparently worked out worked out cash flowing on land for a while. But yeah, so you do take this, but you’re playing for the longer game?

 

Mike  

What does the thing we don’t want to Yeah, we don’t need the cash flow today. So what we’re doing is we’re looking at cash flow in five years, seven years, 10 years, what is it looking like then. So if I were to buy in a cash flowing market, that doesn’t appreciate, say, somewhere up north, and it’s providing me 5% cash flow, if I’m not looking for cash flow for five years, I would prefer to buy the value of that property in, you know, a more populated area that has the economic fundamentals, put it through the stabilisation process, get the rents up, sit in cash flow, right, because I’m gonna get my value, I’m gonna get my cash flow, that’s probably going to be more than an order market in five, seven years from now when I need it, right. So a lot of times I get newer investors asked me that question is we were taught not to buy a negative cash flowing property, like we stay away from it. It’s like, Yes, I understand

1. Yeah, absolutely. For sure. But

 

Mike  

what are you what are your goals? Like? That’s the other thing too, if you can’t afford it, definitely don’t get don’t get very, very fast. Right. But I mean, if you can, and you’re looking at cash flow in five years, are you planning to retire in 10 years, maybe a building today, that doesn’t cash flow, and you’re gonna put it through that stabilisation process is the better way to go, I

 

Mark  

think your ROI will definitely be stronger. You just against risk reward, right? So your ROI is stronger, but you are going through a little bit more risk, right? Because you’re buying something that’s underperforming, you got to weather the storm for 12 to 18 or 24 months. So you have to budget for that. Whereas Yeah, if you’re buying some is cash flowing out of the gate, the benefit is your cash flowing out of the gate, but long term ROI is probably not going to be as strong. So it just depends on what yet and then what the person needs. And when.

 

Erwin  

So I imagine you guys understand this, the answer to this question is, one thing that’s coming out of multifamily is just how difficult it is to find a deal. So where do you find a property worth buying? And the last right ca?

 

Mike  

So I’ve spent at the weekend course, we’ve actually bought the first building off that will ask you to, to at least to two for sure. Off MLS Yeah, I spent probably the last five years or so really looking at who sells majority of multifamily buildings in the areas that I’m looking at whether it’s through a real track or not, and really building relationships with with a lot of these brokers in this space. So I don’t technically go out to building owners directly, which which I have we St. Joe’s project it was but primarily is building relationships with these larger brokerages that sell majority of the building. So a lot of times I’ll get a call to say, hey, we’re working with a building owner. We haven’t signed the listing yet. I think it’s going to fit what you guys are looking for. When I get the numbers, I’m going to send it to you guys in a position to buy. And a lot of times it’s like yeah, when you get it let me know. So I’m hearing about these things, sometimes three, four months before these brokerages even sign the listing, right are kind of prepping who’s my you know, buyer database? What can we do what, you know, what do you think you would buy? Sometimes I’m getting prelim numbers from these guys. So they’re probably going back, but you realise that a lot of you know, the acquisition side is very relationship based. Right? And the reason, the main reason why I went the broker route, and prefer to go the broker route, is because a lot of the bigger buildings that I think we’re going to get to in a short period of time, like right now we’re buying, you know, 15 to 25 unit buildings, but when you’re looking at larger buildings 40s 50s 80s You really start to see the efficiencies. Right. So that was another reason why we went you know, the fund and REIT route is to raise enough capital to be buying these bigger projects. Well, these bigger projects know there’s a handful of brokers that do a billion plus worth of sales for me to come in and try and compete and get that listing or buy it directly is slim to none. They’re gonna go to the Colliers, they’re gonna go to the CBRE. Right, so if I can just manage the relationship with some of these bigger brokers and have the inside deals, that’s where I want to be. That’s where I want to be positioned. And it was lucky enough to you know, work for another REIT in the acquisitions Department led the acquisitions department, and that’s allowed me to build relationships with with a lot of these brokers before we got to that space. Right. So that’s where a lot of the deals are coming from a lot of these you know in house brokers Sometimes they don’t even sign a listing to like, just bring me an offer, the owner doesn’t want to sign a listing. So we got a little bit of an in house and we got to pay the broker direct. That weren’t real deal actually, that we’re purchasing never got listed, just the broker ended up talking with with the owner direct guy didn’t want to list it. But we ended up bringing it off or through, ended up working, working through it and getting getting the deal across. We’re firm now. So bearishly across the finish line.

 

Erwin  

So sorry, I don’t think we’ve covered that in the show for a while. You had to pay the broker directly, a

 

Mike  

lot of times in multifamily. The purchases are paying the broker. So there’s there has

 

Erwin  

to be a good relationship. They’re there for them to tell you about our property. They don’t have under contract.

 

Mike  

know for sure, yeah. 100%. But also,

 

Erwin  

you can’t screw me because but but

 

Mike  

we’re not in that position. I think we’ve done now I’ve done deals working for, you know, another mutual fund trust. So that relationship is there. But they also know that we’re younger in the industry, and we want to grow. So if we start screwing up relationships, and I’m trying to save 100,000 on commission, I’m never getting any deals again. Right. Right. So yeah, there’s

 

Erwin  

that trust factor there for sure. That’s awesome. So a couple of things are a lot of things. So I know, it’s easy. How the logistics work for you paying the broker for putting the deal together, you pay them on closing. You have it’s in the agreement, it’s an

 

Mike  

agreement, it’s done through closing both signed Co Op agreement, I will just say that sometimes they’ll have their own like Co Op agreement, I’ve done it to where I’m brokering out where it’s like a separate contract is I guess it’s a commission Trust Agreement, or essentially, which is just me and the broker saying on this deal. They’ve referred me to this client and the buyer is willing to pay X amount,

 

Erwin  

right? For the listeners benefit. why would why would an apartment building owner not sign a listing agreement?

 

Mike  

For two reasons, one they don’t really care to sell. Right? So I think when you see paper in front of you, and over the last couple of years, you know uncertainty in the market, they start saying oh, maybe I should maybe I shouldn’t. But I think it plays a psychological part in the sellers head to say, oh shit, we have something here that serious? Should we should we not? For example, just think yourself you’re not selling someone brings you a good offer rates are going up? You mean two months callback, right? I’ve submitted like massive offers on stuff on portfolios that me as the buyer for, for a client, and the broker know that they’re not selling for 234 years down the road. But he wants to put it in their head that when they do think about it, they’re calling him first. Right? So I think that’s that’s one reason. And one people don’t want to exclusivity. So as a seller buy may come to you and say, Hey, you have buyers, bring them forward, I may go to three other agents in my office, I may go out to a bunch of them and say, Hey, bring me some offers. Right? And not really. And you can probably negotiate commission that way, because no real marketing is being put in place. But they know these bigger brokerages have big buyers, whether there’s, you know, full fledged marketing plays are not. And I think they believe they can potentially save that way.

 

Erwin  

All right. So then how does it beginner break into this market? To get the same deal that you would get to see the same deal, you would get

 

Mike  

very tough, very tough, and we’ve had some of the guys on our podcast as well. And they described it as like, like an old maths or an old boys club. Like just everyone wants to stick together. Because if I know you’re a buyer, he’s a buyer, and I have a building come up. But I’m saying you have five or 1020 on your list that are seriously looking. Why would I even consider bringing someone new in there, I have a relationship with you. We’ve been doing deals for 10 years, I don’t care if someone who’s coming in, I don’t even care if the price is higher, because I want to know that, you know, he can close and I have 20 people that with reputations of closing, my seller has an expectation. And if you guys are all meeting that expectation, I’m not gonna bring him in but for right so it’s very hard to crack in. I would say it took me two years before I really started building these relationships that people say, Hey, let’s go for a beer. Hey, what are you doing? Let’s come let’s let’s go for lunch. I did it through. People laugh at me. But I enjoy FaceTime. Like, if I can drive to Toronto, because I know someone’s going to be there five minutes at a building. I’ll go down there. I’ll go down there and say, Hey, what’s going on just to build that bit of relationship? Right? I couldn’t crack through it online and email a phone call. People don’t know who you are, they don’t see your demeanour.

 

Erwin  

So they don’t see your Instagram stories, and then press move Spanaway

 

Mike  

on top of all that I just I do think that plays a part while you’re building relationships, right? Like we started running and things like that and I’ll get calls Oh, that was a good run because they have the relationship now. They’re also seeing the social media right or becomes an easy conversation like one of the brokers I know is into sports caught a wind early on that he’s into sports Big Blue J fan, right so when I would see him, you see the Jays game last night, right like small things like that to build a connection outside of Real Estate. He’s like yeah this guy’s a good guy I want to pass him the next deal right in front of people of course entertaining and that’s that’s how I’ve done it I’m sure there’s multiple ways but but yeah it was tough the first couple years no deals nothing I’m like this is tough and that’s where the consistency comes in.

 

Erwin  

Yeah sounds like no returns are like poor returns for a while nothing was so when you mentioned you bought you did buy two properties off realtor dot Sears and like that was that early days and then what was it about how did it make it how did you make it work because again those properties likely slips through went through many people before you ever saw them.

 

Mark  

So I think probably the profile of this seller or at least eight I mean I can speak to this better than I can but the two in particular there were not commercial brokers or commercial Realtors right so that’s an advantage to you know, guys that goes by they might not be able to value it properly are they negotiating Yeah, so that’s it so the first one was it was on for a long time like the building was these buildings were on for 400 days I think it was right Holy Cow it was wrong was it so one of the pricing was not right. Right so pricing was an issue the buildings were fine we’ve had in the portfolio now for five years or so it fell through twice and so I think the the advantage of going after realtor deal or realtor.ca or MLS deals let’s call it if you’re a serious buyer is MLS deals may not attract serious buyers they may attract people that are kind of thinking they are first time buyers for example first time building buyers and first time dealing buyers might not know how to finance it properly or not be able to close and so in both situations actually we were not the first to the table the deal had fallen threat the first one the deal have fallen through like twice maybe three times and then finally we were able to close on it the second one this was a kitchenette same thing fell through once maybe twice once and so once it fall I mean you know this like once a deal falls through the cellar is like really sceptical now and like really kind of worries up and and so

 

Erwin  

yeah, cuz they’re getting grief from their tenants and grief in their property manager. Yeah, so especially didn’t want to sell in the first place.

 

Mark  

Yeah, so I see as a benefit actually going after MLS deals because either the realtor usually the realtor are not commercial because if they weren’t and they wouldn’t be an MLS right and be sold it would be sold already. And it’s attracting you know, a wide array of buyers some serious maybe some first time and so at some point the seller or the agent is going to get fed up right and so I think with a track record like ours or you know brand and you know, the ability to close puts us in a better position

 

Mike  

I would say I’m access to 15 years so 15 and under yeah is where you see a lot of that happening because people aren’t familiar in that multifamily space anything bigger you’re getting more educated buyer usually crossed the line or how often do you see like a 40 unit building on MLS anyways, doesn’t usually happen but yeah, the smaller ones is

 

Erwin  

very interesting. Remember like 10 years ago like one of the really dominant realtors in Hamilton had like a pretty sizable building on the market and this is where the market was getting on the way up so it was really early on the way up and so like you guys were probably there I was there all of our mutual friends were there going through the property it was hilarious the lineup was like you know like this you see it on I never do these things like those those lineups of Realtors for condos. It was like that was all investors. So like we saw all of our friends were all going through the property we saw like we all we all went through everybody went through like three suites or something like that it was that much of a production but I think that was the last one because there’s like there’s way too much demand we don’t need to do these things. Everyone was pissed tennis were pissed property manager was probably pissed for that many people went through and to deal with all this crap right

 

Mark  

but also also like from the seller point of view not all sellers and I would say probably more more so than not don’t want their tenants know that they’re selling right? It doesn’t sell right or like it just causes you know creates questions and so kind of you know the idea of being off MLS and going with these brokers is easy you kind of have a secrecy too right like so it’s there’s no sign in the front right not posted everywhere.

 

Erwin  

Lots of serious buyers this serious buyers out there like this pretty competitive isn’t not a good building. Yeah. And then negative cash flow and stable it

 

Mark  

Gee well there’s more demand for those right it’s more demand for the value adds razors that you know you can add value right so

 

Erwin  

and the yields are coming down have a night like actually once you’re stabilised What is your yield? What is your cap rate roughly?

 

Mike  

It depends where it depends where I understand

 

Erwin  

like very different than orange

 

Mike  

stabilised now in and around five cap. Wow Yeah. Portfolio stabilised was considered what’s considered stabilised now. That’s the thing like people look at all our left. That’s now a little slightly lower cap rate or there’s no lift on it. It’s fully stabilised. Right so the cap rates are gonna adjust slightly From that, but I would say somewhere around four and a half to five, right?

 

Erwin  

So so the reality is people really, really cannot live off the cash flow of these things easily. No, no,

 

Mark  

you have to have fairly big portfolio.

How big? Well, it depends. For people

 

Mike  

were buying something stabilised, like, sorry, unstabilized. And we’re going through the stabilisation process, and then just reifying out the current debt we have on it, then your cash flow is going to be significant. Yeah. Because if you’re buying a 3 million, for example, you put a million into your 4 million in but now your value is seven and a half, and you only have four and a half million of debt, your cash flow will be probably upwards of 5% cash on cash. Yeah,

 

Mark  

right. Yeah, it’s true. So yeah, I think a lot of the conversation around kind of, you know, burning and taking all your money out while you’re taking all your money at the trade off of having lower cash flow in the end, like you can cashflow significant if you don’t take all your money. So it depends on what the equity take. Right? So I think that’s, but it goes back to what are the stack of bricks need to do for you. Like if you’re going to take that money, and that’s how you’re living or you can take that and reinvest or, or you just leave your equity in there. And now you can live off. Who knows, I don’t know. 20 units, 40 units and you don’t need you know, you don’t need a tonne, right.

 

Mike  

Look at the new moi right CMHC. It’s a 1.1 debt service. So as long as your expenses which I would say in a lot of cases, they’re probably slightly more you’re probably just over one and a debt service. So you’re not really cashed

 

Mark  

right and taking out a lot more but you’re not cash flowing it.

 

Erwin  

Yeah. And you guys to work pretty hard. Like for example, you mentioned like in your course you say like what are your goals? My goals? I like being a side hustle investor so I’ll stick with my duplex triplex student rentals, right, because I don’t want to be 99 like you guys, young guys really a time, but usually you have the Canadian real estate multifamily was limited podcast.

 

Mark  

Investing podcast. Yeah, that’s a mouthful. You know,

 

Erwin  

I can just call Eminem. Eminem reads like literally today? Yeah, they’re probably some issues. Talk to your lawyer.

 

Mark  

That’s a different law trademark lawyer, I think all separate, like as a new engagement. Yeah. In getting rap battles? You know?

We also,

 

Erwin  

you know, I’ve had a lot of questioning, what is it? What is it ultimately that you guys that you guys like about what you do? What drove you to do the wreath? And where’s that gonna take you?

 

Mark  

I think so the setting like mentioned it, like the scaling aspects, right, like the ability to scale, I think it’s two components. One is scaling. But also just to be louder in our marketing, while remaining compliant scaling capital, so that we can scale the portfolio, because there’s definitely benefits in number of units from an efficiency standpoint, you know, a 50 unit building operates more efficiently than a 20 unit building, and to build yet to continue building. I mean, I personally like business building like, this is it’s an it’s not always nine to nine, right, but just this idea of, or this process of creating something from scratch growing it that in itself has intrinsic value. Like I enjoy that. And the financial benefits kind of are there. But yeah, I mean, I think our goal is to really just kind of scale this, how large it’s going to be, I don’t know, it’s like it’s a $50 million fund right now, meaning $50 million in capital, which will buy us probably $130 million of buildings 130 150 or so give or take, depending what the values are. And so that’s step one, is let’s get to $130 million portfolio there.

 

Mike  

If we have some time here, you asked the question off camera that I think would benefit the listeners about partner, to partner and you see a lot of partnerships happening where there’s just a synergy, but you look at them. And so you guys have the same skill set. Like why would you guys partner together? Right. So that’s always been a topic. I was

 

Erwin  

someone just like them? Yeah. Which is not what you’re supposed to do.

 

Mike  

Yeah. And I mean, at the beginning, there’s obviously synergies. Everyone’s excited. Yeah, let’s partner Let’s buy a building. But I think for me, and Mark, it works well, because I have that acquisitions background. And he’s got that marketing and sales background, where I’ve never really been interested in raising capital. I’m not good at it. It is not my thing where Mark enjoys that marketing, building funnels and things like that bringing people in. So it works well in the US. But can you go back to the three buckets? I mean, he’s capital raising I’m acquisitions in our operations kind of works together. Like we’re both in and I think operations at some point in the near future, when we’re when we’re large enough will probably be held by in house property management, maybe a manager of property management, something like that, where we won’t be putting much effort, but I mean, just having two totally different skill sets really, really complements the business where, as mentioned, you see that like, I have friends that are partnering to them like why don’t you just pay him like a consulting fee or something like there’s no need? Don’t get back with the person

every 15 Send of the business, just pay them for the job. The other thing I think about your pay your contractor, you don’t give them equity. Right? Yeah. Yeah.

 

Mark  

The other thing I think about partnerships, too, is like, what’s the role of partnership? Right. I think, you know, with Mike and I, and I think this is important, too, is that we debate a lot, right. We don’t see eye to eye on everything. And I think that’s super important. I think that’s, you know, I think if, if you agree on everything, I think that’s probably a red flag at some point, right? I think the fact you can have a debate debate challenge, when you see the challenge, that’s super important, not just for partnership just for business growth, right. Like, I think we’re challenging each other all the time. And we have different perspectives on things, right. And I think that, you know, if you didn’t, then one person’s enough to grow something, but you know, if you have two different angles at it, and that’s super, especially now, right, where we’re options, the number of options matter, right, like in terms of, you know, where are we growing? Next? How are we refinancing, there’s so many ways to slice and dice, all decisions, right. And so having multiple brains on it is super critical. We also have a board advisor as well, that provides another perspective to beyond just kind of ours, which is, which is helpful.

 

Erwin  

So she interesting, brought up the board of advisors, because I wanted to ask a question on competition. And because I find a lot of people out there do this wrong. I’m gonna guess you guys do it, right? Because I’m gonna guess in your board of advisors is probably your previous employer. No, it’s not. Oh, Saudi. How do you guys how do you get along then with your previous employer? Might are

 

Mike  

more looking at my previous employer? In what sense?

 

Erwin  

Oh, you were doing acquisitions for you were doing requisitions. Were another read? Yeah,

 

Mike  

well, that was kind of like a subcontracted job very well, I’m still there working. We understand all the conflict. I’m on my way out, in a sense, they want someone full time in house where I couldn’t commit. But the relationship still still there. If I get stuff that doesn’t work for us, or too large for us gladly pass it along.

 

Erwin  

Right. So that’s actually I think that’s really important to know, is that, that relationships can be maintained. Because what I find is like, again, I’ve seen out there in the market, literally people steal from other people. Yeah. Right. Like they’ll take their their course or their take their book, and they’ll they’ll just rip it off. Like you learned a lot. You have you have like long time relationships where it used to work. Yeah, right. And you you’re able to keep it, you’re able to maintain a healthy relationship.

 

Mike  

Yeah, it goes back to like childhood days. It’s just, I think, the understanding right from the beginning, the expectations were set out very loud and clear. So it’s been great. And we’ll be continued to be great. Her.

 

Erwin  

I think we’re also because you both have you both had that abundant abundance mindset going in? Yeah. And you knew that about each other, versus, you know, some people are just just all about themselves. Yeah. Versus they were, I’m gonna guess that they were they knew that they’re, they’re happy to help groom you to be on your own.

 

Mike  

Yeah, that relationships different. But yeah, I’ve just came from a very, very young age. So it’s different than most? Yeah.

 

Erwin  

I’d say you’re lucky. Any final words? Where can people find the podcast? Where can people learn about the fun because they go to the end to learn about the fund or what is

 

Mark  

known, they can go to our website, peak multifamily.ca, there’s info there, fill out one of the forms, and there’s a lot more info that they can have, like frequently asked questions that, you know, the overview of the fund, like the facts of the fund. And yeah, and you know, anyone’s interested in learning more even determining if it’s right for them, then yeah, we’ll put them in touch with our end or dealing representative, and then they can have that kind of financial conversation with them.

 

Erwin  

Fantastic. And then, you know, selfishly against someone who’s cheap, I’m gonna watch your social media to see how I can stay on the right side of the Security Standards Commission. Okay, so that’s how they said it.

 

Mark  

Yeah, yeah. Yeah, it’s actually you know, what’s interesting is, you actually do a lot you can actually do and say a lot, right? You know, there’s a couple of rules of thumb, right? Again, not a lawyer. But here’s what we’ve been told, right? You can talk about returns, right? But they’re not guaranteed, right? You should have a disclaimer, there’s a bunch of things that so it’s actually I don’t know, it’s been a little bit more liberating. In fact, through the process, we’re realising that we can say a lot more than we thought we could. I think we were probably just conservative in general before and just worried that we’re gonna get in trouble. But we can do a lot more than we originally thought. I think we’re a little more confident because we have a chief compliance officer that reviews it. And so gives us I think, a little bit more confidence to say what we’re doing, but you can, you can say a lot, as long as your back end processes, you know, set up properly and how you’re vetting investors and determining suitability and you don’t need an EMD to raise capital. You don’t need that either. But there’s certain rules that you do have to fall, which sounds like a lot aren’t following, right. But to scale up, it’s necessary. Yeah, yeah. Fantastic. All right. And where can people find the podcast? Is the Canadian multifamily investing podcast? You can find that anywhere? Yep. And all the all the platforms typically if you search Canadian multifamily

 

Mike  

podcast, Apple podcasts. Spotify showed me on all the moves on Amazon. I

 

Erwin  

was listening to see if any new ones that I’m not on. Yeah, yeah.

 

Mark  

We weren’t on Amazon or audible. But now we are. I think as of this, we just released a pot an episode yesterday, and to our editor like, Hey, are we on Amazon? Or we’re not on Amazon. Okay, I’ll get you on Amazon.

 

Erwin  

Right? Yeah. Yeah, but if you don’t know about if you only just recently found out about audible, how many people know audibles does podcast?

 

Mark  

Yeah, I never. I don’t even know if I’m audible.

 

Erwin  

on Apple podcasts and Spotify. Yeah, yeah. Those are my two. Yeah. Cool. All right. Thanks so much for coming in. Appreciate it. Thanks for having us. Good show chat.

 

Erwin  

Before you go if you’re interested in learning more about an alternative means of cash flowing like hundreds of other real estate investors have already then sign up to my newsletter. Sign up for yourself what so many real estate investors are doing to diversify and increase our cash flow. And if you can’t tell I love teaching and sharing this stuff.

 

 

To Listen:

 

On iTunes: https://itunes.apple.com/ca/podcast/truth-about-real-estate-investing…/id1100488294

On Stitcher: http://www.stitcher.com/s?fid=87335&refid=stpr

On Spotify: https://open.spotify.com/show/6Z8yd37AQfQI5DK0J0Xwzz

On Google Podcast: https://podcasts.google.com/feed/aHR0cDovL3d3dy50cnV0aGFib3V0cmVhbGVzdGF0ZWludmVzdGluZy5jYS9mZWVkLw

Youtube: https://youtu.be/Gq92LxvAVGw

 

**Transcripts are auto-generated.

 

Erwin  

Real Estate is booming. You can win big, but you can also lose. There is risk with real estate investing. And that’s the reality no one’s showing about, learn about how everyday investors lose as well as win here on truth about real estate investing show since 2016, nearly 300 episodes all over an hour long. And before that I was blogging since 2010. Weekly, the market has done a very good job of taking care of us longtime real estate investors with over 10 years experience of actively burning, besting continuously improving, it’s honestly the truth is it’s only the recent high leverage get rich quick schemes that have caused investors to go bankrupt, including going bankrupt in 2021. Before the market even downturn, so their own investing Operations, Business Operations failed them, not the market, not interest rates, nothing like that. And the organisations that those coaches students belong to, they simply slap them under the rug. Fortunately, there are many good people out there and good investors out there who are willing to share what works and doesn’t work on this podcast. And also understand that we do have off record conversations as well, which really helps me filter out the noise as to which courses coaches strategies are good and which are not. And the whole point of the show is to highlight how to achieve predictable repeatable success in real estate investing versus the hype in shiny objects. Also keep you updated on current events relevant to Canadian real estate investors. For example, in the US, all eyes are on regional bank PacWest, whose stock has collapsed 75% Since March 75%, they’ve lost three quarters of their value since March, as there’s fear that this is the next bank that will fail. There’s a couple of other banks that are in similar situations. What do banks in the US and internationally have to do with us? Traditionally, bank turmoil leads to bailouts paid for using debt, government debt and cause falling interest rates. I’ve included a chart in the show notes of the show. So to explain what I wanted to highlight in the chart, if you look at 2020, so only three years ago, before the pandemic, the US federal debt payments, so interest expense related to their debt has increased 50% In just over three years. 50% from 600 billion to 900 billion currently doesn’t interest payments. Keep in mind, when governments have excessive debt, investors best defence is hard assets, my clients and I choose real estate income properties. And doing so we’ve made millions of real estate investing. When interest rates decline, we’ll see more fuel to the fire, more fuel added to the fire and the real estate markets and properties we already target where everything is already selling quickly. We are in a pretty heavy seller’s market already. The bond traders that predict so I use a tool called the CME group’s FedWatch tool. It aggregates and analyses what the bond traders are doing. And bond traders in are predicting rate cuts by the US Federal Reserve starting in September of point two 5% and subsequent point two 5% cuts each meeting after that, for a total of 2% and cuts by the end of 2024. Identically included a chart in the show notes as well. Again, this is what the bond market’s saying. These are my predictions. I use a piece of information like this to form my own opinions. For those on our email newsletter, the show notes and charts will appear in your email inbox. If you’re among the already 10,000 Plus Canadians who already subscribe. Sign up today to receive timely updates on our new podcast episode, episodes and you’ll be the first to know about upcoming events like Ireland free trainings and mastermind tours. But you do not want to miss the tours especially they sell out usually within just a few days. And those are really highly valuable. Our newsletter is the best way to stay connected with us to stay informed about all the exciting things we have in store. So don’t miss out, sign up now. Join our community of engaged and informed 17 listeners. And if you’re new to the show, or the show, we do have a few more than 17 listeners, we’re actually closer to 20,000 downloads per month. So if you’re interested in joining the community, www dot truth about real estate investing.ca And then you’ll start receiving our newsletter to be informed about real estate investing in the events that we have going on. www dot truth about real estate investing. Enter your name and email address on the right side in your skin. You’re good to go. As always, we will tell you how it is to be an investor of Canadian real estate. onto this week’s show. We have Matthew Lee in England, the owners of a full service real estate business called coalition properties. They happen to also host the largest meetup in Toronto and if you can believe it, them in their community successfully invest in Toronto, mostly small multifamily again so we’re not talking about condos we’re talking about small multi families you know duplex triplex four Plex five Plex is about and do understand they do require significant renovations. Significant renovations required Have you no capital to invest? Preferably cash. And so Matthew and link detail how they add apartments to existing buildings, including laneway suites. And they’ve been doing all this since 2012. If you invest in the right way since 2012, in downtown Toronto, you know, if you’ve avoided all those shiny things about other countries and provinces, including ones that are oil rich, if you compare an orange province versus downtown Toronto investing, well, yeah, there’s really no comparison. You’ll likely be very rich like these guys are and their clients who’ve collectively added over 100 billion to their net worth. Position offers advisory services, investment Realty Services, designing renovation, and property management services. Yeah. On top of that, these guys both have good sides, portfolios, wives, young kids, how they do it. I don’t know. Obviously, it’d be pretty boring. So let’s find out together. If you enjoyed this episode, volition is hosting a meet up on Wednesday, May 17. Doors are at 6pm I don’t think the meeting starts to like seven ish. It’s on the Danforth. So if you’re downtown, you know, you’re on the dance floor. I think that’s pretty easy. I’m not trying to lie, but I know enough. I know it’s pretty should be pretty accessible by subway. Link is in the show notes to register. And the keynote speaker is someone you do not want to miss link, again is in the show notes later on in your email newsletter. Then you’ll see it there. So please enjoy this. Oh, gentlemen, what’s keeping you busy these days?

 

Ming  

Jeez. A lot. We’re actively trying to run this. Toronto investment. Realty business. That’s got me working 12 hour days, 14 hour days. 1414 hour days.

 

Erwin  

Has a half that time, so I’m only like, especially since he lives out in the boonies. Actually, yeah,

 

Ming  

I live out in Aurora. But he said I’m a country boondocking type person. So you drive into the city to work. Okay. I don’t go into often maybe like two or three times a week. Yeah. It’s a long time in the car.

 

Erwin  

So it’s been a lot of times to see you guys in person. I think it was before the pandemic suicide last night in person. Yeah,

 

Ming  

I mean, all our hair colours have changed. Since we last saw each other. I’m heavier, you’re used to look good, do

 

Erwin  

I eat less? That’s all I can afford it. If he’s interested, he can afford to eat

 

Matthew  

more bags under my eyes since we last saw each other too because of a couple of kids in tow now,

 

Erwin  

story assures that before kids, I always get carded. As soon as the kid like I was 33 when I had my first kid. I’m a kid getting carded. So yeah, my kids a little bit older than yours. But yeah, so

 

Matthew  

I’m still weapon bombs. Yeah. And that’s my own actually.

 

Erwin  

Be glad you’re still young enough to wipe your own. Safe. Are we?

 

Ming  

Two minutes into the podcast? Are we off the rails?

 

Erwin  

We lost like, at least half of our 17 lives. But they should listen to this because you guys have been actually making money in Toronto.

 

Ming  

Yeah, I mean, it is. And we’re starting to see Toronto proper,

 

Erwin  

not GTA business. Nothing. No, we’re talking about, actually, what are your boundaries?

 

Ming  

So streaming? Yeah, generally, we’re staying in Toronto proper. So that is like the original Toronto borough, not North York. Not, you know, Scarborough. We dabble in East York, like we do. We’re kind of in East York and the central of Toronto, but we won’t go out to like a telco this for investment purposes, right. But we are very centrally located. And that’s driven by the way that we approach things like we started, when we started the business. We were all investors and other places. We were doing like, admittance and SunBreeze. And, you know, you name it, whatever was flashing at the time, we were investing there.

 

Erwin  

And then lots of flashy things. So there was lots of shiny, shiny objects,

 

Ming  

and we were chasing all of them. Right. And, you know, we were looking at, like the returns, and also the tenant profiles. And I think it was through year, we started listening to a bit of Grant Cardone. And like, I remember thinking myself, how can I text this business? And then I’m like, do I want to Texas business. I was in Waterloo at the time and I was like, I had 20 Something doors and I was like, I don’t want more of these tenants. I can’t manage it, like it was already working so so much to try to manage that portfolio. So we started focusing more on Toronto, and that was more in our wheelhouse. 10 profiles, which is easier for us to manage. We started looking at what they wanted and developing a business model behind the tenant profiles that we wanted. And yeah, that’s how we landed in the city.

 

Matthew  

So that’s generally how we volition as a real estate investment. advisory in realty business. We looked at things a little bit differently. Most people are chasing ROI, the chasing cash flow, the chasing returns and and what have you. And of course, ROI is a really important component to consider, but not in isolation. So it’s really funny in finance, there’s this concept of risk adjusted return on capital Roc. That concept for whatever reason doesn’t exist in real estate. So what volition aspires to do is actually bring a risk adjusted return on investment mindset to our investing as well as a headache, adjusted return or on investments.

 

Erwin  

I jokingly call it return on grief and either a high number of

 

Matthew 

headache, grief, it’s all the same thing. If you’re spending time energy headspace effort, dealing with tenants, LTV, whatever the lower might return, actually. And so what that’s all culminated in is the volition investment business model, which is heavily predicated, as you guys were talking about in and around the downtown core. In a nutshell, essentially, we have a business model that actually works in Toronto. It is a multifamily small multifamily business model, acquiring freehold houses multifamily in the residential neighbourhoods adjacent to the downtown core. So it’s yes, this is very much Toronto proper 416. And, you know, in these really, really cool funky neighbourhoods that are gentrifying, that are super hip and super attractive to this young tenant demographic, professional millennials, university educated two to five years of school making 60 80k Working at a big company in downtown Toronto. Yeah. So that business model does work. And we’re one of the few investment Realty teams that doesn’t make it work here in Toronto. Not here in Toronto, I guess here is Oakville now, but

 

Erwin  

we are we’re in the CN tower right now, a nice view of the investment model has changed through time, right? Because when you guys started, I’m sure the property that you targeted in Toronto was different than what it is now. But can you start with what it was when you started? Yeah, it looks like what it costs.

 

Ming  

I’m sure very much parallels your own investment journey. When you were doing like a duplex and you’re paying like, you know very little for it for us. I think it was probably starting at around like six 700,000 When we first started getting into these things, and a duplex with cash flow back that if you’re in the right neighbourhood. Now we have I mean, now kind of the minimum is a triplex but we have a lot of clients doing more advanced things. So let’s say buying it residential is for adding units exiting on commercial financing with CMHC CMHC. Yeah, CMHC financing, better rates, longer amortisation and

 

Erwin  

that programme that everybody’s talking about the CMHC the MLS? Let’s Yeah, everybody’s talking about it. Yeah, we

 

Matthew 

have. Yeah, we have a client right now he’s doing exactly exactly this taking small multi families or even single families to turn them into five plexes that can be four plus four Plex plus a laneway, for example, and then exiting on commercial CMHC financing memulai slots, and EMI select is getting 4.34 on the interest rate in a 50 year AM. Once you’re into those types of numbers, your cash flow goes through the roof. So this is why like you have to be a little more sophisticated. Yes, we help people find turnkey, too, but turnkey has a lot of competition has certain limitations. If you’re a little more sophisticated, and you know how to make Toronto work. Toronto can work for you.

 

Erwin  

What are the how many doors you need to have for, for CMHC. This like programme,

 

Matthew 

you need minimum five, five. And then part of it is you have to hit like 100 points, combination of energy efficiency improvements, as well as affordable

 

Erwin  

housing. So if I was a brand new investor, and I wanted to do one of these, see, I had the financial capacity for this. And that meant because

 

Ming  

that was my first question. You know,

 

Erwin  

I’m a millennial. Yeah. Instead of 100. Grand. rubbed all my pennies together? Yeah. 100 grand? No, I’m kidding. Actually, no, it’s actually good question. What should to be successful ternal investor which they come to the table with in terms of resources?

 

Ming  

Yes, it’s a good question. I mean, we get people coming from all sorts, everything from like, you know, C level executives down to you know, somebody fresh out of school. And, you know, one of the things I think we pride ourselves on is we’re not a traditional brokerage that you know, you want to go buy a condo, here’s a condo, we go through an advisory process, which Matt runs and sit down and kind of devise a plan, depending on where you’re starting and where you want to get to and how to actually get there. Real Estate’s involvement in that. So it’s a bit of a wishy washy answer it depends. What we’re trying to get people into is eventually Single Family Housing single family with multiplex right not to be investing in condos though that may, may be a step for them along the way. But I look back to like one of our staff she started off in a condo then went to live in a triplex refinance that triplex got into another triplex. So now she’s got to refinance. One of those got into Another house for sale, which is now turning into a duplex, bought another condo along the way, and that was in about five years. So that’s like, you know, we help people graduate through the properties that way, because otherwise there’s no other way to do it. It’s not like people are saving up hundreds and 1000s of dollars. It’s all about the equity, right? So as accurately grows within the property, getting that back out, so you can go acquire something else.

 

Erwin  

Because we all come from the same, the same learning that it’s all about cash flow.

 

Matthew 

Those days, rainy days, cash, remember, there’s the 10% rule. There’s

 

Ming  

I remember so one of the stories that really sticks in my head one of my like life lessons was I found a property in Waterloo. And the typical cashflow Ford is looking at the time was like two 300 bucks and I found this place was was cashflow like five or 600 bucks. It’s like double the cash flow, right? And I was like, super proud of myself. I took it to my mentor. I was like, hey, like, look at this deal. I found I’ve beaten the market, I found more cash flow. And he turns me he’s like, great, what you’re gonna do with that you’re gonna buy me dinner. And I was actually like, really taken aback because I’m, like, really proud of myself found out. And he’s like, so what? You’ve got an extra 200 300 bucks. He’s like, is it in the right locations? He started just drilling me like, What was your time profile? What’s it going to look like in 10 years? What’s the transit going to be in the area? And I was like, Whoa,

 

Erwin  

real estate spreadsheet? Yeah.

 

Matthew 

And that’s, I think that is the good quote. You should trademark that. But as we’ve matured in our strategies in our thinking, it hasn’t matured past just cash flow. It’s funny. I’m looking at that book by Julie bribe. Cash Flow. Yeah. Is it is it really broad? You wrote that? Yeah. So like, I remember reading, reading that back in the day too. But really, it is more than just cash flow. It is really about equity. And it is really about understanding. So I get a lot of people come to me I run advisory so I got a lot of people to meet come to me and they asked, I asked him, What are your goals? And they come to me and they say, I want to 10 properties like you’re no no, I didn’t ask you how many properties you wanted. I see what your goals were. Here’s what we do at volition what we do during advisory is we want to understand where people are at their starting point. We want to understand where people want to go and then help them build a plan to get there. Which is a lot different than excuse my vulgar anus throwing shit against the wall and seeing what sticks I think that’s what how most cuz we’ve tried all that lots of shit and then we like play in our shit. You know, throw shit try to justify our shit. And by selling it

 

Erwin  

divesting

 

Matthew 

Yes, yeah, but we get we get a lot of people who who just say like I want 10 properties or I want maximum cash flow. I’m like no, no, no, no like it first of all,

 

Ming  

for them Derman.

 

First of all, if you’re looking at Toronto, there are those concepts here. But, but generally speaking, it’s really understanding where people want to go because there is no one size fits all investment. Even even in Toronto, as much as we have this multifamily business model triplex for plexes, maybe laneways, catering to a specific tenant profile, and all the rest, there still is no one size fits all type of investment. And so it’s really about understanding what their goals are. And then once I understand what those goals are those life goals, I’m talking about what we used to call Belize back in the day, we can translate those into financial goals in support of those life goals. And once I translate those into financial goals, I can translate those financial goals into real estate goals, and I can help them build a real estate plan to get there. And so that’s all part of our advisory process. But one of the concepts I want to narrow in on is what you were just talking about, that we were discussing, actually, in the preamble beforehand. It’s around equity. And that’s not a concept that was taught to us back in our education days, where we don’t have the cash flow, we like all cash flow. And then it was it was okay 500 bucks per property. Okay, if I want $5,000 That means I need 10 of those properties. Like that literally was the formula back in the day, we teach something a little bit different now. And what we teach people is

 

Erwin  

just part of their, it’s not like, it’s not like $500 $5,000 cash flow is bad thing. This is not realistic. It is like basically, without a tonne of cash

 

Matthew 

in base in you know, which, you know, like you’ve done the concept of joint ventures because you’re gonna get tapped out and all that other stuff. But yes, absolutely. Like, we think of things a little bit differently now. And the way that we think about it is in terms of equity, and it’s really understanding the relationship between equity and cash flow. And that’s not something that we understood back in the day. So what I like to ask some clients now you advise your clients is okay. What does Albert Einstein have to do with real estate investing?

 

Ming  

I have no idea. I don’t I haven’t gotten through one of his advisors session. For

 

Matthew 

a long time, what does Okay, so what does Neinstein theory relativity has to do with real estate investing equals MC squared? What is the stand for energy? What does M stand for? mass mass? What does that equation actually telling us?

 

Erwin  

To move mass to create energy,

 

Matthew 

it’s saying that matter and energy are two forms of the same thing. And through this relationship equals MC squared, I can transform one into the other. Now, similarly, in real estate, if you understand the relationship between equity and cash flow, you can actually transform between the two. So if I built up a whole bunch of equity, that I can then translate that into cash flow. And so one of the ways that we do this is we have the volition multiplier effects for very sophisticated and seasoned investors do not give me anything new. But we show start off with media Toronto $1.5 million triplex making sudden $500 in rent, and basically cash flow neutral at 5% growth, which we think is fairly nominal for Toronto spend less interest for inflation the way it is, right. And you know, that’s, that’s actually less than the Canadian average over the past like 3040 years, right? 5%, we just model it 5% At 5% growth in four years, you built enough equity in that property to do a refinance equity takeout and go buy another like property. And both properties are worth about 1.8 at that point in time in four years. And then rinse, repeat, keep on doing that. Imagine you reach a certain point, you’re 12 and you’ve got money at these places. Great, right? Then what do you do when we say okay, maybe we wait how long we wait maybe six years, why six years, in six years 5% growth reach a magical number 50% loan to value 50% loan to value means that I can solve for those properties and have the mortgage the other four, and now I’m left with massive and life changing cash flow, not the couple 100 bucks here and there to take your Metro for dinner. Yeah, this is massive life changing cash flow to the tune of in the volition model will kind of explain all this, but to the tune of $500,000 plus cash flow per year. And then we’ve started the levelling up, you can pass that now we’re teaching clients. So I sold a few properties for the first time I’ve had now have, I had money for the first time in my life, every time I had money, I would always go into real estate. So I was always poor, all of us were

 

Erwin  

poor. So I’m not even gonna look skinny.

 

Matthew 

But what we do now is we actually take the net proceeds from our sales, instead of paying off the mortgages of the other half of the properties, we on boarded with private wealth the first time ever, and we discovered that, wow, private wealth has access to financial products that normal retail investors 20 have access to one of those things is structured notes. Structured notes offers a double digit return, fixed income return. And essentially we put we take those proceeds, putting them into notes that in this volition model, it would boost cash flow from about 500 grand to 900 grand a year. This is all a framework. This is not any one particular person’s plan. But to illustrate the concept of why equity is so important and focusing on not instant gratification. Now a couple $100 cash flow now it’s about the massive life changing cash flow later. And that’s where Toronto comes in. So Toronto offers a vehicle to allow this to all happen. Because really, it’s about just buying solid risk mitigated properties that are low headache, that allows time to do its thing. And then it’s time to do its thing, it can be the vehicle to help you reach those life goals.

 

Erwin  

I actually know quite a few investors that bought in like small town Ontario that neither of us have, none of us could name. And then their regret greatest regret was I wish I bought near a bigger centre. Because even though they got cash flow, or 300 800 a month or whatever, they missed out on all the equity gains that we all got

 

Matthew 

at the equity gains. It’s also the risk mitigation. When you’re buying in a small town, one of the biggest challenges is what’s going to happen to this town. So if you look at industry over time, and how our economy is changing, you trenching heavily into a lot of professional services, types of industries, and then it may not be the sawmills and auto manufacturing and stuff we used to do in the past, you know, moving toward the future. And this is why when we start looking at Toronto, there’s you know, the the Microsoft’s and the Amazon has wanted to come here and so on so forth, the Googles and what have you, and those knowledge workers, the professional, professional employee base, really, for us, it makes sense because they’re all coming to Toronto where their headquarters are there and that risk mitigation is therefore in place for Toronto. And it’s really funny because if you talk to a non sophisticated investor, they’ll look at a price tag of one Point 5 million and go, Oh, that’s too expensive. Therefore, it’s too risky. Actually, sorry, dude, that’s not how risk works. Actually, price is what you pay value is what you get. Yes, it’s an expensive price. But it doesn’t mean it’s risky. That’s not how risk works. So that’s part of the risk mitigation strategies that we employ at volition when we’re looking at these types of investments. I remember

 

Erwin  

talking to novices and like they want to buy and like the crappiest part of Hamilton. And ask them why? Because it was cheap. Yeah. 60 grand for a house. Like, yeah, but your risk, your risk is way higher. Yeah, absolutely. Property Managers won’t go in that neighbourhood. The worst tenants because you’re next to the next right next to the steel mill. Right. So your vacancies gonna be high.

 

Matthew 

A lot of our clients, so due to the fact that it’s Toronto, and the price tag, the barrier to entry is obviously higher. Generally, our client bases a higher socio economic demographic. So, you know, senior directors and VPs, and CCS execs and partners or senior partners at consulting firms, accounting firms or small business owners. And so a lot of these people understand the relationship between risk and reward. So we don’t have to explain it. I mean, probably less headaches, and they want less headache as well. And so you know, the the business model accounts for all of that, right?

 

Erwin  

Can you share with the audience like how are they financing properties? Are they still using HELOC? So these guys are these guys are that rich, cash rich.

 

Ming  

And it comes from a variety of sources. Usually, the majority of our investors are between kind of 35 to 45. So they’re not early career and they’re not early to investing in general. So they’re sometimes playing them from stock portfolios, a bunch of our clients have stock portfolios, and they may be boring against that stock portfolio, for example, with the bank,

 

leveraging it against the portfolio, not having to divest the portfolio, if you’re in

 

Ming  

private wealth, you can do stuff like that. They’ll you know, some depending on what you’re invested in, you can get like 80% loan to value and you start to

 

Erwin  

come up because it’s all it’s all real estate.

 

Ming  

Yeah, like, you know, that that’s, some people are doing that some people have primary residences that they’re pulling money out of, some people do have a lot of cash. But most people are leveraging something, either real estate some other way that made money. There’s,

 

Matthew 

there’s another one. So I work with a lot of clients who, again, are profiles, you know, 35 to 45, maybe 50. And they themselves are part of this kind of sandwich generation. We’re all most of us are part of the sandwich generation young kids ageing, parents, let’s focus on the parents for a little bit. So one of the questions I normally ask clients is who, like if you’re, if you’re not one of these people who have, you know, $350,000 you can’t find it by reaching down into your couch cushions and finding that that type of money, then, you know, your stock portfolio or whatever is not the place where you can come up with the capital available to invest one of the solutions, and it’s pretty funny to think about this, if you’re in your 40s that mom and dad but not bank, a mom and dad in the same way that a young 20 Something millennial would would ask that woman died 20 Something millennial and let’s go buy the first condo and yeah, but actually, one of the ways one of the things we’ve been thinking about is utilising a boomer parents primary residence, and the primary residence of that Boomer, call it in Toronto call it a $2 million house that’s paid off, right, just for ease is not, I think average probably closer to 1.5. But let’s just use 2 million for for shits and giggles. So imagine they bought this, you know, 4040 years ago for like 40 grand, right? That’s it’s funny.

 

Ming  

I mean, parents like this, by the way.

 

Matthew 

Anyone anyone willing to do. But boomer parents, there’s a really interesting financial product out there that might be of interest and boomer parents, who have a property that’s been paid off for a long, long time. Now it’s worth 2 million, let’s say there are there’s a product called a reverse mortgage out there. And the reverse mortgage has a really, really, really bad rap in the States but operates a little bit differently here in Canada. I won’t get into the differences, but I’m gonna talk about the merits of it and how this actually works. Are you familiar with it? Have you come across it just what

 

Erwin  

I’ve read, like generally people are a bit on the elderly side. And they’re retired no other income?

 

Matthew 

Yeah, that’s that’s a pretty typical example. So using it to supplement income imagine you know, you had an old Italian grandma who had a house in the annex, and now it’s worth like two and a half million dollars and she can’t even afford to pay on property taxes, you know, that stuff like that. So it’s it’s use very typically in examples like that. Drawing equity over the home in order to subsidise a lifestyle, maybe subsidise the pension, maybe to allow people a more comfortable retirement and maybe pay for care as They continue to age and advance on inheritance. Yeah, yes, exactly. But the way that we’re looking at it is through an investment ones. And so an opportunity like this could be very substantial. Actually, quite a few of our clients are employing opportunities like this. What it is, is a boomer parents home costs 14 million, say that their age is over 65. I forget all the exact LTVs. But if I recall correctly, I think 55 Age 55 and above, you qualify for like, I’m going to say like 30% LTV or something like that. And then 60 qualify for like 40%. And like 65 is like 50%. I might my LCDs are a little bit off. But the point being that’s pretty conservative. It’s very conservative. And when you the kicker is no mortgage qualification. If you’re if if a boomer parent wants to qualify for a mortgage and do an equity, takeout or HELOC, generally it’s very, very, very difficult for them because then they don’t have an income. Right. And so that ends up being really difficult to access the equity in their own home. You know, people will say, Oh, can’t eat equity, can eat equity can eat equity. But like that, yeah, exactly. My

 

Erwin  

heart I bought was No, I can’t eat it, but equity paid for it.

 

Matthew 

So I thought you said that you were eating like Kraft dinners and stuff.

 

Erwin  

But it’s been coming up very often on the show, like real investors, people we all know from the community, and it’s coming up regularly, no one’s eating cashflow, because no one’s got it. Right, because like you’re the proxies for talking about it to do like a like to renovate a four Plex and build a garden suite. There’s money going out the door all the time, like who’s eating on the exit

 

Matthew 

on the refi. Right, but the opportunity grandma’s house,

 

Erwin  

the eating on the reef on the mortgage on the

 

Matthew 

its equity, it’s still it’s still the equity that they’re drawing out. This is just a really well off of it. This is just a very sophisticated way to access that equity. So a few of the key points here you can get up to 60 50% loan to value with no mortgage qualification. So 50% loan to value no more qualification. Here’s the kicker, no more monthly mortgage payments, no monthly mortgage payments, all the interest is capitalised until passing. So think about the opportunity here. If grandma or I guess it’d be not grandma just mom for our kind of like Gen Zed type, not Gen Z Gen X type client base, their boomer parents or our boomer parents would could access a million dollars of equity out of their property no mortgage qualification no monthly mortgage payments yes the interest rates a tiny bit higher it’s like some some percents of like 6% or something like that but not all not overly not overly burdensome not too far off like the lender rates right? So can you imagine take a million dollar takeout if they were to hand that money? This is not bank a mom and dad in the traditional sense salute Hear me out. If they’re gonna take that money hand it to their Gen X kids, those Gen X kids maybe if they’re having problems problems come up with the down payment and or add or mortgage qualification for a $1.5 million triplex maybe they can still qualify for a $500,000 mortgage though not a not a $1.2 million mortgage. So that million dollar takeout becomes a massive downpayment towards that $1.5 million. triplex $500,000 mortgage, massive cash flow because the financing is so low. And if you work out the math, you know, call it $7,500 in rent and call it up maybe $1,000 of expenses. So you know, $6,500 left, call that mortgage payment, like I don’t know, three grand, something like that, right? You still have like 30 504 $4,000 a positive cash flow, that positive cash flow can be kicked back to the boomer parents to subsidise subsidise their lifestyle and their retirement, right. And so it can be a win win. structuring it like a win win is the key. So it’s not just the handout from bank bank of mom and dad to the Gen X, their adult children, structuring it like win win. And so the beauty of this is that, you know, all this is gonna go to the kids typically anyway, upon passing, the interest gets accrued, and then the reverse mortgage just has to be paid out upon passing. And really, it’s just going to be an asset handed down to the kids anyway, normally, you have an appreciating asset, the family home is going to depreciate, yes, you’re gonna have debt that’s going to continue to accrue but more importantly, I was able to acquire another great asset and have really great cash flow and helped my parents at the same time right and potentially house hack. You can house hack it you can live in the truck triplex you can generate additional rent, you can subsidise during the live cost of living there’s lots of great opportunity to hear the triplex

 

Erwin  

now you can Airbnb the other suites I don’t even know I’m not a Toronto person.

 

Matthew 

There’s some restrictions here. Airbnb but but generally, but generally speaking, house hacking is one of the ways that a lot of our clients are get onto the property ladder as an alternative to a condo. And we’ve we’ve shown that it is viable alternative to a condo, same down payments and closing, same carry costs. And then

 

Erwin  

the cost of the grandma, grandpa, everyone in the globe mail just few months ago, I’ll find you that article as well. But it’s the cost to them is the same if they give it to you today versus they give it to you after they pass

 

Matthew 

1. One of the things if you talk to wealth planners and private wealth managers and stuff like that now, one of the things that’s starting to come up and I appreciate this too, because my wife works and she has a PhD in gerontology. And so she works in with ageing and care. And one of the things that’s starting to come up for these ageing parents is a living inheritance. So you mentioned you refer to that earlier, rather than just upon passing. Give it to them now, so that they can see them enjoy it and appreciate it now rather than later. And then in the context of real estate, real estate is going to be more affordable now than later as well.

Erwin  

By sharing my story on the show, like my each of my kids have a house already about the metre how we train I bought the metre house before their turn one. But then like just don’t know more recently, I thought about it, I’ll probably get a pretty decent mortgage on it as well. So at least at the pay, like two grand a month or something instead of what it would be if they bought it would be like six 8000 Right. So they have some sort of pain, some some responsibility. Yeah, cuz like my mortgage is big in front of a friend of mine in Toronto has bought a house 2.8. So his mortgage is gonna be like, five digits. monthly payment. I mean, that’s crazy. So, you know, my point is that when I wind that down to like two gradients, yeah, you know, something more digestible, like something that you know, that’s always like a break them

 

Matthew 

with a Bill Gates say, I want to leave my kids enough that they enough that they feel that they can. So they feel like they can do anything, but not so much that they feel that they can do nothing. You know what the amount was? 10 million. For him, that’s a drop in the bucket.

 

Erwin  

Can you walk me through like a recent Toronto deal?

 

Ming  

Sure. So right now, we did one just a couple of weeks ago, downtown near kind of DuPont and Dovercourt for those who are familiar with the city. Turnkey four Plex, very nicely renovated. We picked up for just under 2.5 million. That is and that was trading at a 5.2% cap.

 

Erwin  

As is or you did as do work to it, turnkey? Did they advertise it as 5.2?

 

Ming  

They did. And we did all our due diligence, and we took it at just under 5.2. When all sudden then.

 

Matthew 

Oh 5.2. Okay, I’m getting the digits mixed up. The purchase price was 5.5.

 

Erwin  

How often does that happen? Well, their account numbers accurate.

 

Ming  

It doesn’t it’s not super often because it is not because the cap numbers aren’t accurate. It’s because true turnkey is not really turnkey, right. Most of the properties that we look at which are turnkey, are really like 70 to 80% Ready, and you still have maybe 40 5070 grand to put in to really get it maximised. Not a bad thing. Because sometimes that means a better deal for you. But yeah, if they do occur, we did one the month before that, which was actually an even higher cap, that house had more problems, though, like, bathroom needs to be fixed stuff like that. But they exist, I think we’ve seen a rise in trading caps, because of interest rates, right? Like houses aren’t going to trade if they’re in the low fours right now. Nobody’s gonna buy them, especially if your investment properties, right.

 

Matthew 

So investment. residential investment, real estate was in around the four and a quarter 4% You didn’t like 3.7533 quarters. But then, you know, with with the change in the environment in the real estate market, we are seeing kind of high fours

 

Ming  

are trying to get, you know, trying to buy these directly from developers now because we have clients lined up. We’re looking to buy if we can, if we can find something that’s in a five cap there, they will happy to buy it. So there any developers on the show want to hit us up. We’re always happy to talk.

 

Erwin  

So these are small, tiny developers. Yeah, we’re

 

Ming  

not looking for big stuff. It’s usually people looking like you know, four, four or five, six units Max.

 

Matthew 

Usually, hopefully still with residential financing. Because that’s usually advantageous. But if you you know, we can make it work even on on commercial As we know how to get to, if it’s not legal, we know how to get to legal so that we can get it to see much commercial financing CMHC and then CMHC insured without the MLA select programme is about four and a quarter on interest rate and 40 gramme not a 50 around. So it’s, it’s still pretty good. It’s just not quite as good as the NY slap programme.

 

Erwin  

So how much for this? fourplex? That’s right, you said two and a half? Yeah, just kind of down payment of some of the brain for that.

 

Ming  

He put 20% down.

 

Erwin  

That’s it? Yeah, so

 

Ming  

maybe not a typical deal, then because you know, he’s doing well. So he can qualify under regular residential financing.

 

Erwin  

Not like they’re not trying to live off this cash flow. No,

 

Ming  

because even at even at that cap rate, cash flows, there’s very little cash flow there, right? It is minimal. It really is about acquiring a turnkey property. He’s a super busy guy. So he doesn’t have time to manage it, he wants something that is gonna be trouble free for his property management company, therefore trouble free for him. And to let it build

 

Erwin  

equity over time, his property management service costs in Toronto,

 

Ming  

we have a really good deal that we have with one of our partners, we’re paying 400, for

 

Matthew 

monuments, but it’s actually flat rate. So typically, in smaller towns, eight to 10% of rents is pretty typical.

 

Erwin  

Or it’s gone up a lot, though.

 

Matthew 

So we’ve negotiated, we have a flat rate, actually. So think it’s like 325, for triplexes, and 395 390, and 40 bucks, for four classes, it ends up being like 5%, less than 5%, or less than 5%. In a lot of instances, wow.

 

Ming  

They don’t take on any property though. That’s because we’re giving them volumes volume, we’re also giving them a certain type of tenant profile, because everybody who’s, you know, spending three grand on rent in the city is a certain type of professional and whatnot, they’re not trying to scrape them,

 

Matthew 

but they so they, they follow the properties that they taught take on happened to be properties that we they follow. They’re very similar ideology in investment business model. So they want headache free, as well as much as possible. And so all the properties that have to be located in a certain area catering of a certain quality catering to a certain tenant profile, very rare. And so that’s why they’re able to keep their rates and that lowers because of the headache factor.

 

Erwin  

Go back to this four Plex example. The inherited tenants, you kept them all?

 

Ming  

Yeah, yeah. In this case, we did. Usually we don’t. Most the time you want to make it was because typically, it’s under, you know, they’re under market. But in this case, we did like we did some due diligence. And we decided to inherit all the tenants,

 

Erwin  

the due diligence, due diligence, we able to do that during a conditional period or anything like that. Yeah.

 

Ming  

So you know, this was about a month ago, before things started getting really crazy in Toronto. So we did have a conditioner period to do all these things. Yeah,

 

Erwin  

the nice days, they went away fast, very fast.

 

Matthew 

So a lot of a lot of clients now crying over spilt milk. We told them last year by you know who you are. We’re like, you know, everyone’s like, Oh, I don’t want to catch a falling knife. And like, the thing is, like, you and us, we know we studied like economic fundamentals, we understand. We understand that interest rates are just a market influencer. They’re not an economic fundamental. Most people don’t understand that though.

 

Ming  

stocks.

 

Matthew 

And so like I spent a good part of last year talking people off the ledge. Basically, everyone’s like freaking the hell out. They’re like, Okay, we got into this business model for a very specific reason. And the economic fundamentals are there and the long term prospects haven’t changed. So I forget to have it right. And so we talked we last year was a lot of talking people off the ledge, and then a lot of people were apprehensive even though the it was presenting a really incredible opportunity. We knew that this this was going to slam shut once there was stability back in the interest rate environment. And so not that we had a crystal ball but we said once once back Canada wants to back when, like, you know, which they say okay, things are gonna we’re gonna stabilise interest rates. What’s going to happen? This is where the most newspaper headlines got it wrong, not wrong, incomplete. They said, Oh, the higher payments are making people not want to buy. That’s only partially true. The other part that they neglected to mention is that buyers did not want to buy in an environment of uncertainty. They didn’t want to buy in an environment of uncertainty. So as soon as we got back to more stable environment from an industry perspective, that immediately got reflected in the real estate market. So the 40% less sales volumes and transactions last year, those buyers at the end of the day was still Toronto, those buyers didn’t disappear. They just moved to the sidelines. And as soon as they saw stability back in the market, they all jumped back in, not, let’s say all the 40%. But a crap tonne of those 40% of people are back in that market right now. Which is why we’re back to point two offers. In the last six to eight weeks, it’s been a hellish environment, operating

 

Erwin  

and listings are way down.

 

Ming  

This is one of the I guess, I don’t really want to call it an advantage. But when you’re dealing in, in properties that are kind of the two $3 million range. The majority of people are transacting on that stuff, right? Especially if it’s an investment property. So we do have a little bit more time we do have a little bit more grace, than if we’re fighting over like, I don’t know, like a $1.1 million investment property. There’s tonnes of people that are after those kinds of things. But when we’re we’re playing around the two and a half, three and a half. There’s time for negotiations for that way.

 

Erwin  

That’s nice. Well, I’m

 

Matthew 

well I mean, we have sometimes not all the time, but we have a $3.8 million I flex listing right now it’s a pocket listing. And, you know, awesome runs like a two and a half $1,000 of rents cash flows as is. Yeah, so anyway, the point being is that there still is stuff that the competition isn’t necessarily there for this type of product. So you can still find really good stuff

 

Erwin  

just to highlight you’re allowed to solve real estate publicly because you’re licenced Realtors as well.

 

Matthew 

Yes, we are licenced realtors.

 

Erwin  

Breaking the law like some other people do.

 

Matthew 

He’s had a realty so you should talk to him. Don’t talk to me. Yeah.

 

Erwin  

So. Oh, can you uh, what were the rents on this? Two and a half million dollar four Plex?

 

Ming  

I don’t remember them off top my head 12 and a half 1000 Matt matzo was really good with numbers off the top of my head. I’m terrible

 

Matthew 

in names, and then he doesn’t he barely remembered.

 

Ming  

Yeah, I’m glad it says your name everywhere in this room. Otherwise,

 

Matthew 

his name is Mr. Hamilton. According to that licence plate. Yes. Expect to see that on the car. I see. See that is dented. So who did I think

 

Erwin  

it’s actually just kind of get it off? Because it’s old. Yeah. Yeah, I don’t know what else it was. It was just like stuck on.

 

Matthew 

He’s bad with faces. Now. He’s done with names and faces. So together we make a really bad one brain.

 

Erwin  

Also, we have a green plate on the car on the new car. So Oh, yeah. That green plate, you know for each morning driving HOV. So I can reuse this. Like doesn’t that didn’t give me a job.

 

Matthew 

People don’t recognise that Tesla already means Green

 

Erwin  

Point. I don’t know. Yeah. volts. Think about that. Like, no, no, it’s not green licence plate, but

 

Ming  

it’s a pretty recognisable electric car.

 

Erwin  

Yeah, good point. I’m gonna stick it back on them. But yeah, here’s a little thing that they will play. So we don’t want to throw shade at any other people’s investments. But Matthew, before we were recording, we’re talking about investing in Alberta because it’s a hot topic, because I don’t know you mentioned before we’re recording you don’t spend much time on social media. But there’s a lot like this. It’s been in the news by BC in Ontario. People are leaving to go Alberta makes sense. I think Calgary is beautiful. Little too cold for my liking. My family’s all here too. So I won’t go anywhere personally, there are people flying to invest in but the you have experience. And the reason why I also pick on you as well as because I think it’s always wise to speak to someone who has nothing to sell you in Alberta. Right? Because literally I have Alberta bulls in the show. Right? And they’re not hiding anything. They have whatever to sell. It’s totally cool. Nothing wrong with selling stuff. We all sell real estate here. Yep. And we meet people a lot of money. Right. So it wasn’t a terrible thing that we advise them to purchase real estate that we earn commission off of. So what was your experience? Like, you know, Berta

 

Matthew 

years ago, I think when I was younger and very enamoured by the shiny objects, you know, we all of us here and a lot of the people come on your show are going to be old part of the old rain guard. And so one thing that ranged the tote a lot of was cash flow, cash, cash flow. Back in my earlier days, I think Oh, Reagan used those put those Top 10 Top 10 towns right, and I haven’t seen one of those in a long time. But Edmondson, topped the list. There was top 10 Alberta towns, Ontario towns, BC towns and Canada. And Edmonton was at the top of the Alberta one and the candidate when I was like, oh, there we go. Let’s go target

 

Erwin  

was number one, number two on both as well. In Alberta and Canada. Yeah.

 

Matthew 

And, and so and, you know, a lot of rain top brass invested there. I’m like, Okay,

 

Erwin  

well, just to give context for the listener, like we’re talking about, like 2008 doesn’t last for many years. Yeah. Many years, so I don’t think anyone needs to know the market that well to know like those markets were all decimated.

 

Matthew 

Yeah, this is this is years ago. So you know, chasing the shiny objects. I went to a lot of different places and to invest and Edmonton was one of them. And you know, like you said, I want to throw shade in anyone else’s investments or anyone else’s business models. I’ll just speak from my own experience. I purchased it a block of four townhouses. So I basically went in and monopoly terms, I went straight for the, I guess, the red hotel. And so I bought for the block and for townhouses, a number of years later, I went to divest them, I do other personal considerations, and I wanted to bring back everything to Toronto and everything like that.

 

Erwin  

Coming to us to do holding them five,

 

Matthew 

five years, we were what year you

 

Erwin  

got in, because I’m going to ask you how that can work compared to a local piece of real estate. I know this, this is the truth about real estate investing. Right?

 

Matthew 

This is yeah, I’m trying to remember exactly when early 20 2010s like that back in those days,

 

Erwin  

held. So that’s after the crash to as if I

 

was at it was actually after the real estate crash in 2008, when she wasn’t nine. So you still turned it right. And it didn’t work. You know, even from a timing standpoint, it was not that bad. Let me think that 2014 Way worse, if you if you’ve been way, way worse. I know a lot of other horror stories. I also know, the type of asset I was buying also gave me a little bit little more protection. I know a lot of people were buying really, really, really cheap condos for like 180 grand. And like, I know that people got decimated with not just the market, special assessments, and stuff like that. So anyway, let’s refactor and talk about what happened. So I got these blocker for townhouses, five years later went to sell them, sold them for the exact same price, I bought it for five years earlier. And it took me over a year to sell it. Couldn’t even find a frickin buyer.

 

Ming  

And I couldn’t properly sell with an APS and

 

Matthew 

I couldn’t even sell it. Normally, I had to offer an agreement for sale, I had to offer an agreement for sale as part of the as part of the offering in order to make it enticing enough for someone to come in and buy. So you know, if you’re a little more sophisticated, you were you know, if you know anything but agreement for sale, if your sales still essentially means I’m in the deal. I’m down on title, I’m down on mortgage, you’re still the official I’m still the official owner, the other person takes control of the property. And the person dictated to me the amount that they want to put down as a as a deposit. I couldn’t even access all my own equity. Because I only got the little pittance they offered me

 

Erwin  

how much a couple grand

 

Matthew 

like for the you know, a 20% down payment or 20% equity ahead. I think they came in less than less than 10%. So like half my equity was still locked up in this property and I wanted to get out couldn’t get out. But this is this is the realities of, you know, some markets that are very, very boom and bust. And so a

 

Erwin  

small market we’re talking Calgary here, Edmonton, sorry, Edmonton. Yeah, a small market,

 

Matthew 

not a small market. And you know, it’s just it wasn’t the same experience as I’d had here when I was here in Toronto. Anyway, who made money on this on that deal? pesky real estate agents on acquisition on the disposition agreement for sale real estate lawyers on the acquisition on the AFS and on the closing

 

Erwin  

for legal fees to pay

 

an eye for legal fees yeah times this is all times for because I had four smaller properties

 

Erwin  

right so I started some by all four so we came in and bought

 

Matthew 

bought the block of four Wow Yeah, and then so yeah,

 

Erwin  

so the so the lost money after all, because all the fees you have to pay how this played

 

Matthew 

out was the logical conclusion actually was they couldn’t get financing at the conclusion of the AFS. So I stayed on mortgage because all I had to do was call up my lender and say, hey, I want to renew this for a year and then I was able to get a an extension fee. So that’s the only money I made in this whole deal because I actually only they only broke even after holding for five years, not through appreciation through mortgage pay down cashflow I managed to break even and then that small extension fee was the only thing I made an entire deal. But I ended up holding mortgages even longer and not accessing my equity for even longer right so

 

Erwin  

while inflation did oh yeah, I

 

Matthew 

lost money. If you if you look at on a real basis

 

Erwin  

for listeners both inflation was higher than the Matthews returns. Yes. So in real terms, you lost money.

 

Matthew 

I lost money. Yes. If I had just put it under my couch cushions alone. Yeah, I would have done better.

 

Erwin  

While I was headed to this probably advisory centre, how to hide money? Coach? Yeah, different yourself. You don’t spend it. So I said I would ask, what would you bought instead in Toronto?

 

Matthew 

What would I have bought? Or Or should I have bought?

 

Erwin  

Did you have anything in Toronto for example? Yes, yeah,

 

actually, here’s the here’s the ironic thing. My very, very first investment property was in Toronto. And I didn’t know anything at the time. I was working corporate I you know, I graduated from engineering at Waterloo. And then after that, it worked for a bunch of tech companies on the business side. So here, I was working in Toronto, and I thought I was gonna do what everyone else is gonna do, which was buy condo, let’s move all my friends are doing so seemed logical. Okay, I guess I’m gonna buy a condo. And I was talking to a buddy of mine. He’s like, why you can buy a condo? Why don’t you do it? I’m doing like, what are you doing? Like, I bought a duplex. I’m like, What’s a duplex? And then he’s like, Oh, it’s two units in a house. I’m like, why would why the hell would I want a house? I remember growing up mowing the lawn, and you know, all the crap that comes along with us, right? Somebody who show shovelling snow and everything, all the problems associated with it. Why would I want a house?

 

Erwin  

Because no one taught us hard assets in school? No.

 

Matthew 

Here’s the other ironic thing. My parents actually invested in real estate when I was young. But I was born and raised in Belleville. And that’s where they invested. And they had a hell of a time. I know you’ve we’re widespread audience. So we’ll make sure to change. Right. So yeah, coming back, was gonna

 

Erwin  

sort of actually help topic was belvo Back then, because I think it’s 50,000 to

 

Matthew 

50,000. Now, it was, it was 37,000. Back then. If you kept the boundaries the same, it’s still 37,000. The reason it’s 50,000. Now is because they amalgamated with the surrounding communities is not a growing market, actually, from a population standpoint. But anyway, that aside, so when looking for a duplex, and because my friend told me it was good idea, and he’s like, Hey, I live in one side in one unit, I rent out the other and helps me cover my costs. I was like, Oh, that’s pretty interesting. All you do, all you did was allocate your capital in an intelligent way to bring down your living costs. I didn’t do that. Cool. So I went, I went shopping for a duplex and then I and then I accidentally bought a four Plex. And that was my very first investment property. I still own it to this day. And that has been still my best performing property. It’s a four Plex in the annex. And I lived there for many, many, many, many, many years. Gives me the need my girlfriend turned into a wife and then turned into one kid and turn to another kid living with two kids and 750 square feet is

 

Ming  

that was delayed moving into his giant custom mansion. That’s why

 

Matthew 

it’s not a custom mansion. It is a normal sized Toronto home.

 

Ming  

It’s a nice place.

 

Matthew 

Why didn’t you know, it was anyway, delayed gratification. I was part of it, too. But yeah, that was that was the first investment property that that I had bought. And so Toronto was the first market I actually I’ve ever entered.

 

Erwin  

So this fourplex in the annex, there was there was something you had to do a lot of uplift to, or the market is take care of you. The

 

Matthew 

so we purchased it. It was this was many years ago. So we purchased it for was listed 799 It was already renovated. Turned into Florida units. So I came in not knowing anything. There was an offer date, there was no offers. So I thought oh, let me you know, we’ll get this for under market or under the list price. So when like 768 rejected or offer 788 rejected or offer 800 or 79 ad list rejected or offer. And they listen, you just said we want a 10 so, lo and behold, I gave me time. And meanwhile I was kicking myself. I was swearing at my real estate agent. I was like what the hell? How can we good going over ask on there’s no other offers? Like what the heck, I’m overpaying for this thing, right? That $10,000 Now, as we all know, is a rounding error. Right? Like it’s less than a rounding error or

 

Erwin  

someone would gladly pay you temperature $10,000 for this property, right.

 

Matthew 

Yeah, probably. They would probably give you

 

Erwin  

fair market value and 10 grand for your pain and suffering that property off your hands.

 

Matthew 

Yeah, I think 10 grand would probably get the closet me less than the closet. The so yeah. I mean, I’ve refinanced this multiple times over the years and you know, market that is always much higher than that. And it’s requiring four flexes.

 

Erwin  

What do you think roughly? The market value is? No.

 

Matthew 

I’m not a real estate agent.

 

Ming  

You should be getting in if you renovate it. So it’s it’s nicer. No, as is Come on, as is. Low twos.

 

So that should be that should be I refinanced. I refinanced it. I think it appraised that 2 million, like four years ago. So it’s worth more than that. And it needs a bit of work. Yeah, it’s a little it’s, it’s a wonder for a few. Yeah, so more or less, no, but like, the, the thing is, is looking at this upside potential, I can build a garden suite on it, no one knew what I know. Now, I knew nothing back then all I knew was, you know, I knew how to work, I worked in business. So I knew how to run like a business case and business model on it. I know how to run financials on it, but didn’t know anything else. Knowing what I know. Now, I can look at look at the zoning on it, for example, the density is 1.0, not 0.6 0.6. Typical in most residential areas, 1.0 gives me the ability to do a lot more with the property, I can add a lot more square footage as of right, I can I can go up, I can go back, I can build a laneway suite on this thing. So now with a more sophisticated lens, I can recognise all this upside potential. And this is the type of stuff that we try to do with our investors as well we look beyond just you know, there’s so many people who call themselves employees, you know, you must see this all the time, too. You know, you see you have all these people who call themselves investor realtors. And really they’re like, Okay, Mister client, here’s the income, here’s the expense, here’s cash flow. Wow, I’m an investor realtor now, and the reality is much different. There’s, you know, legal status and permitted use, there’s zoning, there’s, you know, building code. First. There’s, there’s 1001 things that go along with this. And so that’s, you know, realising that kind of upside potential or being able to recognise it as part of

 

Erwin  

a part of our agenda fourplex, that the fires the fire safety standards is like, the most people have no idea. And then,

 

Matthew 

you know, part of part of what we do with clients too, is we we have advisory on the real estate side. But one thing that’s unique is we offer also offer advisory on the construction side. So a lot of our clients who have the financial means and the wherewithal, let’s say, to want to go through a single family to legal luxury triplex or legal lottery, four Plex conversion, it’s not a trivial thing. Like it’s not like you just, you know, get some plans and submit them to the city where you go, it’s not that simple. And so, you know, a lot of it, you know, navigating CoA, getting the right architect to add engineers, surveyors and understand understanding things like side setbacks, and minimum basement ceiling heights, and two methods of egress and fire separation and, you know, the 1000 other things. So one of the things we do is we handhold clients through that process. So, for instance, the head of our construction department, and she offers a construction advisor to help people step them through that process.

 

Ming  

And even at acquisition, you get some of these things wrong. Like you get, I don’t know you’re looking to a fourplex version. You don’t know that right now City’s pushing for for an amp service on anything. If it’s four units and up. You start to have to upgrade your gas, your electrical unit, your estimates can be off for like 5060 70,000

 

Matthew 

amps, you have to bury. You can’t run that in the air like 200 amps

 

Erwin  

on a regular residential HMO know this. Yeah,

 

Ming  

you can’t get that wrong. You get it wrong. It just kills your business case, right?

 

Erwin  

Well, no, the novice buys it and then they find out later. Don’t be left on the bag. So Toronto is definitely possible. And then I jokingly asked at the beginning. So you guys have kids in Toronto.

 

Ming  

So we did so we have a house that’s technically for our daughter did life plan was actually for us to move down into that area at some point in time. Because it’s in a really good school district. The reality is I’m you know, antisocial country bumpkin. I like being far away. We didn’t bring

 

Erwin  

the farm capital of Aurora. Yeah. Oh, dude.

 

Ming  

There was a point in time where we were living a place with well water and you know, septic systems. I love that. Like I love just sleeping with the windows open and hearing nothing. But I didn’t want like me. Oh, yeah. Oh, man. I didn’t want my daughter to grow up to be socially awkward. And have no friends like that, that like that. Like, oh, we better move into this city. So Aurora is are moving to the city. But yeah, we technically she has a place downtown.

 

Erwin  

Oh, man. We haven’t covered it yet. She’s running on time to. It still makes sense to buy in Toronto, because you know, you’ve seen the same headlines for the last. I don’t know how many years Bubble bubble. Everything’s a bubble.

 

Matthew 

Even a broken clock is right twice a day, right?

 

Erwin  

Which is funny because I feel like sometimes I’ve been right. Oh, I was right. Of course I was. It’s been like once in 12 years. before?

 

Ming  

So, I mean, the short answer is yes, the long answer is, it depends on where you’re investing, right? So if you are buying, you know, a heavily non cash flowing place in a part of Toronto that is not going through gentrification, we don’t have the infrastructure programmes happening, then that’s a bad investment, then you’re just paying inflated values right now. So I think more than ever, like, it really is location, location, location. And, you know, I’ve always spent a premium to get the best locations because that’s, that’s how your real estate improves in value, right. So

 

Erwin  

well, here’s a quick question. For example, like, how big is that four Plex? How many square feet? Roughly?

 

Ming  

Each unit is about 11, or 1200. It’s pretty

 

Matthew 

big. That’s unusual. Yeah.

 

Erwin  

We’re 4000 square feet.

 

Ming  

It’s big. It’s a two and a half million. Yes,

 

Matthew 

my four Plex is not like that. They’re like 800 square feet of

 

Ming  

floor shows three bedrooms plus a common area. So

 

Erwin  

I’m the Asian that field math. listener, I’m sitting across from two Asian engineers, so they’re laughing at me that I have my calculator. The worst businessman

 

Matthew 

you can’t do that that far.

 

Ming  

Gives me a hard time is I’m the one with a math degree and I can’t do mental math, like 625 square foot.

 

Erwin  

That sounds about right. Yeah. Why would someone buy a new precondition condo for like, 1700 square feet or whatever?

 

Ming  

We don’t advise people to do that.

 

Erwin  

Usually triple that, almost triple that and not that much more rent your first four foot.

 

Matthew 

Yeah, yeah, you’re honing in on a very steep concept. And that concept is, Toronto is a very big place. Toronto is not You can’t just say I invest in Toronto, because Toronto, there’s literally we did. We looked this up. There’s like 151 neighbourhoods, 156 neighbours or something like that. We, I think was like a year ago. So we run a monthly meetup group. It has now grown into the largest, the largest real estate Meetup group in Toronto. We have like over 4400 Members, I think it’s the second largest in Canada now. The largest one is run by a buddy of mine out in Vancouver. He doesn’t keep up with it. So which means that we might overtake him wonder. Your largest active, largest active one? Yeah, yeah. Let’s start using that. Yeah, I just that. So but Toronto is a really big place. So I think about a year ago, we delivered a meet up called, I think was entitled, Toronto’s next hottest neighbourhood. So we literally went through a bunch of different neighbourhoods looking for where the opportunity was. So we’ve analysed all these, so you don’t have to, because Toronto is a really big place. So you know, oh, Lee sides a really nice neighbourhood. Does that mean I invest there? Mount Pleasant. Davisville is a really nice neighbourhood dominio investor Yonge and Eglinton insert nice neighbourhood here. Right? You know, we there’s a lot of people or a bit another big one Willowdale Oh, I see a whole bunch of people not buying a 50 foot bungalow, and then knocking down and then building some is that that’s a good investment. Right? Those are not investments. Those are speculative, at best, those are the same as the same as going to Vegas and putting it all in black. Right? Because you’re you’re basically banking on, you’re just hoping for the best essentially. And so those are not investable business models. In our opinion, those are speculative bets. Good investment, good investments entail. You know this, at the end of the day, actually, investing is the wrong word. We are running real estate businesses, every single property we buy is another business. And so due to the fact that we’re buying businesses and operating businesses, we need to know everything about that business, we need to know sales and marketing and advertising. We have to onboard staff and property managers, we need engineers, or we need real estate agents, we need mortgage brokers, we need real estate lawyers, like you’re running a business. If I if this was, if this was purely just an investment, I’d be buying a share of Apple or Google and letting Tim Cook on the show. Right. But this is not just an this is not just an investment. So as a result, you really need to hone in on exactly where an investable business model actually works. So to cut through all the crap, the short answer is in the residential neighbourhoods surrounding the downtown core, so downtown core, all condos, so according to kind of the evolution mindset and where the opportunity is, it’s not in condos, necessarily. It could be a stepping stone but you want to get to land why land is a valuable asset. There’s a tonne of things that go along with this Bilanz that are not making any more of it or whatever whatever it is you want to insert here but land is valuable. And as the Manhattan association of Toronto continues to occur many More condos can go up. But if you own a good parcel of land in the in proximity to the downtown core, that is, that has a lot of upside potential over time. So what you want is a business model that allows you to own land. The problem with owning with real estate is that you also, the land itself is not an income generating asset. So you need a building on top of it, the building is actually a depreciating asset. I mean, you know this better than anywhere else due to the fact that your wife’s an accountant, right. It’s a depreciating asset, but it’s a it’s a necessary evil to make an income producing asset. So what do you want? What do you have to do is put a building on the land or buy a building that’s on the land, and then getting into a rental business model. But the reason we have to get into we have to get several units under one roof is because of densification. The economies of skill allow us to get to cashflow neutral in Toronto, that’s you asked this earlier and you’re like, hey, you know, what is it that people used to buy back in the day, people could buy single families back in the day they could buy duplexes back in the day, those days are long gone, we have to get to triplex and not a lot of high flexes don’t work either the right triplex triplexes fourplexes. The densification is the key to allowing us to generate the income we need to hold the asset over the long term to let time to do its thing. Great. Now, the question is who to read this out to we told you the professional millennials, two to five years at a school, university educated all the rest, right? You know, a good job working in that in Toronto. Why? Because those people pay their rent. It’s highly unlikely that a consultant at Deloitte or an accountant at PwC doesn’t pay their rent to the point where you are getting a court order to garnish their wages and you’re calling up HR and asking them that generally never happens. They pay the rent. Number two, they tear up their credit. Sorry, they care about their credit. But their credit, the reality is these people have the money to pay. The reality is they’re eventually probably going to be homeowners or condo owners themselves one day, right? So the second thing is they take care of their place. They take care of the place. Why this profile, they want nice things, they want it now and they’re willing to pay for it. Do I think that they should pay $2,800 in rent, I don’t think they should, but I’m not their financial advisor. The reality is they do they do, they will pay it. And they want a nice place. They want a nice place they want it now. Because they want to be able to have their friends over and entertain that host and, and they want to impress their girlfriend or boyfriend. So they want a nice place and they’re gonna take care of their place, generally speaking. The third reason is because they’re very transient and profile. They don’t stick around 1218 Master 24 months, they’re moving on life changes for them, right, they’ll move for a job, they’ll move because they’re moving in with a boyfriend or girlfriend or whatever, right? They’re moving on their lives versus lifers. People have a sort of, generally speaking very broad strokes, but people have a lower socioeconomic demographic tend to stay much longer. Why is this important? This is important because as street rents are going up, five, eight, 10%, whatever the number is, we model at 3%. But you know, we know generally it’s a bit higher than that. As street rents are going up, we want to capitalise on those higher rents. Is it because I’m greedy and I just want higher rents? No, actually, if you look at the for example, avulsion business model, part of it is that in every sophisticated investor out there is gonna understand this, you’re gonna want to refinance, do an equity ticket, when you have equity, take out your mortgages, higher mortgages, higher and mortgage payments are higher, you need the higher more you need to hire brands in order to capitalise on the refinance. Otherwise incremental cash flow negative territory, right? It’s not available with a condo, none of this works in the wrong business model in the wrong areas catering to the wrong tenant profile, catering to people who don’t move. Right, right. And so the who we focus on then are the 20 to 25% of those millennials and Gen Zed profile who don’t want to live in the concrete jungle. So in the residential neighbourhoods surrounding the downtown core being being annex Little Italy, Trinity Bellwoods, little Portugal, Dover calls Emerson Dufferin, Grove, Lansdowne, Ron see some of those areas. On the east side, it’s the East York, the river Dales, the Riverside Leslieville, later states, beaches, upper beaches, a bunch of those areas, these are the areas that tend to want to be in. And we know that we know everything about these tenants, essentially, every time a tenant applies for my units, I do the equivalent of a financial rectal exam on them. Right? I know more about the finances than they do, actually. And so I know, I know who these people are, I know what they want. And really, it’s just a matter of understanding who your tenant profile is, what they want, and then giving it to them, and then wrapping that all in a business model that actually makes good financial sense. So that’s essentially the abortion business model. In a nutshell, it is a little bit different than how most people invest where I would say, you know, they throw it up against the wall, see what sticks. This is really the same as in business. And when you’re developing a new product or service, it’s identifying your customer first and then building a business model or product or a service around them, as opposed to just buying hoping for the best It has been a very thought through approach and a very comprehensive business model that accounts for a lot of these different things.

 

Erwin  

In the business models change. We mentioned how single families used to rent out. Last time I had been on the show we talked a lot about triplex conversions. You buy like a two and a half storey semi, you dig out the basement, we’re talking about four plexes today. What’s next? Is there any opportunity for for example, to come to condominiums and these Maltese or or what is next six flexes? So seven blocks?

 

Ming  

The interesting didn’t wasn’t

 

Erwin  

just passed recently like five Plex spire five Plex, right right in Toronto.

 

Ming  

So fourplex by right okay, but one of the my drawers doing a lot right things to make the most progressive Ontario by far. Absolutely. Like it was just yesterday, and I haven’t caught up to see what happened with the bill. But it takes a lot of red. Typically it takes away appeals, it takes away new development charges, all stuff within the city’s control was excellent. Does not sidestep some of the building code stuff. I just want to emphasise that for people who are thinking about doing this, you still have to make a safe property. Oh, it still has to be. And it still has to be serviced as required. So to answer your original question, which is like, what’s next? I think we’ll we’ll continue to see a trend to densification triplex is still make sense. So they’re still within the realm of possibilities. But we are sliding, more more more density, I think maybe 10 years from now we’re going to be into five, four or five, six, that’s going to be the sweet spot. I’m not sure what’s going to happen beyond that. Because I think if if there’s not changes to allow a regular residential purchaser of higher unit properties, you won’t have an individual who’s buying homes anymore. Customization, I think we’ll start to see more popularity of it. We already have clients who are asking us to walk through that process with them. We’re not condemnation experts ourselves.

 

Erwin  

So people have people been doing it in Toronto. Yeah. Yeah. Yeah. So so for the listeners benefit. That means they’re turning like I’m talking about specifically to small multi like a triplex for example, and then turning each unit into a separate land title in terms of making it a condo ownership for the building. Yeah. So

 

Ming  

we’re working with one of our clients on just that right now.

 

Erwin  

Yeah, we’re talking with way bleeding edge then. So you don’t have constant

 

Ming  

weight waiting. There’s a excellent way of putting it because, you know, some of the work we’re working with our artists, right to try to figure out ARV sale prices, that kind of stuff. We tax evading

 

Erwin  

the idea with the property taxes. And it’s very early days. She’s working through it with architects, right. But this was benefit, one of the reasons one would want to call minimises generally reduces the property tax on the property.

 

Matthew 

Yeah. And allows you a way to its exit. Yeah, exactly. It’s lift and exit, because you’re essentially creating more affordable housing for owners, not just for as rentals. Yeah, see where

 

Erwin  

saints we’re like, we’re looking people we’re solving we’re solving.

 

Matthew 

We’re doing God’s work here. But actually just just add on to a couple of things I was saying. So, a little while ago, we were tapped by CMHC as kind of local boots on the ground experts to understand like, basically see me she’s sitting in some ivory tower somewhere. And they’re like, Hey, I

 

Erwin  

remember, the CEO CEO was saying before the current one. You guys know what I’m talking about. But yeah, continue.

 

Matthew 

So they came to us, and they’re like, We have a mandate, I forget the exact number was a 500,000. Or turn it up anyway, they had this mandate, they’re like, We have to create, we have this mandate to try to create, here’s the like tuner 1000 500,000 more units, because of their housing crisis. So like, in from all they can do is financing. Right? So like, you know, that’s their mandate. So like, our mandate is to get money into the P into the hands of the people to develop these things. So they’re like, who’s developing these things? Hundreds a cost, what are your problems? What are the opportunities, we went through this whole thing? And we’re advising, like, it’s basically we’re providing some consultation advisor to CMHC. So, you know, hopefully, it makes it easier to get financing to try to create, you know, secondary suites and stuff like that, really, we’re talking about this whole missing middle, right? The problem in Toronto is, as lots of people know, you basically have this yellow belt, which is a bunch of single family homes. And then you have a whole bunch of 7070 storey towers, there’s nothing in between. And you know, we’ve been fortunate we’ve lived in my wife and I’ve lived in lots of different places around the world. And you know, you’ve lived in Europe, and we lived in Asia and in Australia, and all these other places all have four six storey walkups, maybe with an Audi or something like that. We don’t have that here. No wonder we have a housing crisis, like and so the

 

Erwin  

densification it’s just been setting in Singapore. They have 80% of their population lives in government housing, subsidised housing. Like what As our percentage is, like, single digit, I think

 

Matthew 

it’s very low. And it’s very, it’s, it’s because we push that problem down to the private sector, essentially. Right? And then they create a whole bunch of landlord tenant laws, which make it really unappetizing for, let’s say, for big developers think developers

 

Erwin  

think HST

 

Matthew 

big institutional investors, like they don’t want to dabble in this in this stuff a lot. And there’s a reason that developers haven’t they build condos instead of building. Right? Like, it’s we all know this.

 

Erwin  

They’re all investing the states. Yeah, like even government institutions who run pensions for like, Canadian employees. Yeah, they don’t want invest here, they invest in the States, maybe we should stop as well. We’re going to California. We’re investing somewhere else.

 

Matthew 

But it’s funny like this. So like, we see what’s on the forefront, we see what’s coming down the pipe, we see what even government institutions are trying to do to promote stuff in certain areas, you know, missing middle densification we see all this. So, you know, we saw this with CMHC, for example. And, you know, whether it actually leads to anything we don’t know, but we’re we gave him some insights. But to answer your question, you know, condeming realisation this is one country realisation of multi families. We know a whole bunch of people are doing it, a few of our clients are doing it. But here’s the other one. We talked about this very quickly, we kind of glazed over it, but I want to I want to shed some light on it laneway suites and garden suites. That is a massive opportunity. So in Toronto, there are laws places in the burbs, you normally pull your car into the driveway, and you that’s where you park your car. That doesn’t happen downtown Toronto, in downtown Toronto more often than not, if there’s parking is in a laneway. And so for those of you don’t know what a laneways, it’s basically a lane that goes down the back of the house, and you park just off of the laneway. And so that’s where parking is usually you know, they can be just a parking pad, it can be a garage. But what we’re what the city has allowed as of right, according to certain restrictions in the legislation is the building of a laneway suite. As of right, you don’t have to go get variances you don’t have to ask for crazy, whatever it’s like a tiny house to the back of your property. It’s a tiny house, but doesn’t have to be a tiny house in the garage we we’ve seen but the suite on top, we’ve seen lots of variations, one of our clients, we help them build one with a with a garage with the length the suite on top. But generally speaking, from the economic standpoint, from the financials, it makes really, really, really good financial sense. Generally speaking, if you can build a 12 to 1400 square foot tall for a 1400 square foot laneway it would cost you between five and $600,000 to build and it would generate you between 4040 $500 in rent. So eight to 10% Rule back in the rainy days. Holy crap.

 

Ming  

This is actually field tested. We have clients who

 

Matthew 

actually so we know we know this is not theoretical.

 

Erwin  

So it doesn’t appraise

 

Matthew 

this problem is gonna get it’s just gonna get it’s just gonna get

 

Erwin  

we’re talking bleeding edge

 

Ming  

still. Yes. Sure, like a year ago, bleeding edge stuff.

 

Matthew 

We just talk to Tony or Craig

 

Erwin  

nice. But again, we’re still talking bleeding edge. Yeah, it is very, very much cool. People aren’t flipping these things, or they’re doing this to their home. No,

 

Ming  

no, we have a list of properties that have sold Yeah, have laneway Suites have sold it’s like this long that list. So

 

Erwin  

like to two inch lists, you Angeles, six data points.

 

Matthew 

The fun of finance stability standpoint. So we’ll talk we’ll switch gears and talk about that a little bit. So you know, we’re even working with like Dahlia, right? So Dahlia has experience doing garden suites out and like Berry and stuff like that. So we’re working on a pilot programme with Dahlia with one of our clients to try to actually get we’re literally pioneers trying to get stuff refinanced, you can build it. So first of all, how do you build it 565 to $600,000. You know, if you can’t reach into your couch cushions and find that kind of money, you have to pull it from a HELOC or get construction financing right. But even if you can’t get construction financing, which is going to be challenging, but even if you can the problems is going to be on the refi your question was the suit was a senior appraiser what the problem was appraisers are enough data points there are enough comps, appraisers are being are conservative. lenders don’t know how to finance these things quite yet. So literature can tell them what it’s worth. And last, but generally speaking, like we can take we have a couple of data points where we can kind of back it out. So we for example, a home with a laneway suite gets sold. We know what the home’s worth because we can do comps on the home and then we can then figure out what the laneway suite add on is I’ve worked with essentially, and so generally, you know, there is an increased value, it can increase the value, probably some 800,000 on a $500,000 bill. So good lift, generally good lift, but the even from just the economics, this thing is a massive cashflow booster massive. So if you pay a slight premium on the land, call it 10% for something that has landlords, we potential, right, we didn’t really have that premium too much before. But now laneway suite potential means 10% increase value, or let’s say premium that you up on acquisition. But you know, the land basis is very little generally speaking, but then the build, if you put it all together, this thing boosts cash flow through the roof. And once lenders and appraisers can figure out how to appraise and refinance these things, you’ll get your money back out, and you’ll still have massive cash flow.

 

Ming  

And that that’s happening that we have two clients with laneway suites who have gone through appraisals, which got very favourable appraisals for their belts.

 

Erwin  

Right. So this is get better. We’re still talking bleeding edge.

 

Matthew 

We’re very much on the forefront here. So and then, you know,

 

Erwin  

we try to do on the show. We’re truthful about it. We are leading edge. Yeah, that’s a perfect,

 

Ming  

absolutely, yes, you could go through this process and not land with the right appraisals. And

 

Matthew 

generally speaking, this will just be a matter of time, though. You know, if you we don’t know if that’s going to be six months, 12 months or 18 months, how long it’s going to take before we can start getting these refinances through and stuff like that, but there’s no long period of time. It’s not a long period of time especially it takes four months to build when

 

Erwin  

rates are high anyways, leave some cash on the property. It’s okay.

 

Matthew 

Exactly. And so you know, and you were talking about multi conversions so yeah, we still a lot of our clients that have a whole bunch of clients are still doing you know, single family the legal literature triplex the Goolge, four Plex, we’re getting now clients who want to get up into commercial at least five units in order so that they can refinance using CMHC on the commercial side, higher lower rates longer AMS in order to boost cash flow. Here’s the other thing that are written for time over way over five minutes or 45 minutes isn’t a short source be 45 minutes Yeah 40 minutes.

 

Erwin  

Okay, for me this far,

 

Matthew 

the last one that might be of interest to your listeners is going to be around mixed use residential commercial. So one of the things that one of the ways that we can start densifying is by buying in the right zones in the right zones especially if you’re near major third ways. The way kind of zoning works is cities have particular they use zoning to influence the development in particular areas which is why residential you’re gonna get residential zoning a whole bunch of residential houses, no brainer mixed use residential commercial along like bluer or big streets, you’ll get densification usually retail storefronts, or offices on the main floor, and then upper you’ll get residential, usually two story maybe three story but if you look at the right zones, and you look at the zoning for the area, there’s a lot of places and this is this is like ninja level shit, right so if you pull up the Toronto zoning map and you start looking at it and you know if you can learn and decipher what it says there if it says like our zone are what typical typical would be like are and then in parentheses like D 0.6. That means residential zone and the density is 0.6. So a normal 20 by 100 lot in Toronto is 2000 square feet applied density factor point six to 1200 square feet, that’s when you get to 12 1200 square foot home essentially 600 square feet or main floor 600 square feet is like a very typical home three bedroom, nice little home in Toronto, right in some of these mixed use residential commercial zones, you can get density 3.0 so CR zone 3.0 You can get three times law coverage on same size lot you can get 6000 square feet until sort of 1200 square feet and the ninja level shit on top of that is looking on the zoning map use the height overlay and then you can see the height restrictions as well. And so you can get height restrictions of like instead of like 10 metres and get 16 metres 16 metres means you can build up to five storeys instead of three storeys. So all of this means you can build this stuff as of right you don’t have to ask for permission you’d have to go to COA you don’t have to get these crazy ass exemptions and variances you can do this as of right right so it all makes the deal better It all makes the deal better you reduce risk because you don’t want people objecting or appealing you at CoA and all that stuff. Although that seems to be going away now is a fairly recent phenomenon. But it cuts down on your development times too if you don’t have to go to COA if you don’t have to, you know you when not waiting six six months for for COA dates and stuff like that. So anyway, the point being, so we have a lot of clients now who are looking for We’re stuff like this and land assembly of like, mixed use commercial residential, not just buying one of these things, you might be buying three or five or six of them, assembling them. Because even though if the height restriction on this is normally go up to five metres, if you could assemble six of them, we work with an architect who’s one of the bests. And he has he’s told us like, under the right circumstances in the right areas with this with in the right way areas with the right city councillor who supports development and densification. Not necessarily kind of minimization, but rental units, let’s say, you know, they’ll allow you to go from five storeys up to eight storeys and make the business model even even more attractive. So that is probably gone

 

Ming  

a long time.

 

But anyway, we’re just gonna give you a sense of like some of the other avenues that are more sophisticated investors with deeper pockets and who have a little more expertise. They go into other stuff than just buying a condo standard by class.

 

Erwin  

But those things are only available in heavily urbanised areas.

 

Matthew 

My caveat is that this works in Toronto, I can’t say it works anywhere else.

 

Erwin  

Just my experience, it has to be pretty as the high traffic area. Yeah, absolutely. So you mentioned you guys have a meetup, where can people learn more about it?

 

Ming  

Best place is to go to our website. That’s www dot volition, V o l i t IO N, prop PR o p.com. And there’s a giant blue button that says, join me join meetup.

 

Erwin  

Need a red button to go back to? Yeah, your parents afford it? You can afford a house too

 

Matthew 

many we don’t hire you as our marketer, and then you can renew our website.

 

Erwin  

Just keep going and everything will be okay. For the blue button. And yeah, that’s how people actually make money.

 

Matthew 

But yeah, depending on when this airs, we have absolutely no idea. Funny enough. We have a meet up tomorrow. And it’s a street smart tour. This is probably not going to go out. But you know, we often have you know, guest speakers. I think you’re coming out to one of ours and me Alexei.

 

Erwin  

Not me. Okay. Well make sure this gets up for that. But yeah, that may 17. May 17. So may 17. is huge for me then.

 

Matthew 

So if this goes up before then it probably won’t. Right. Okay, so it goes up before then then, you know, you can come and see your beloved hosts here up on stage, right,

 

Erwin  

but only like five minutes. I’m sure if you want to learn more about Toronto, whatnot. And where else do you do much on social media?

 

Ming  

We have a semi active Instagram accounts semi active being non active. We’re not we are that age where we’re not very good with social media. But yeah, you follow us on volition prop on Instagram, that’s probably our most active

 

Matthew 

evolution properties and properties.

 

Erwin  

I’ll get it right for the listener. Thanks.

 

Matthew 

Yeah, no, no, we’re not very active on on social, but we our meetup is very active. You know, it’s a great place to come out and meet other Toronto, crazies. Yeah. And and a lot of our clients come out. So you know, if you need some social proof, or you want to talk to other people who are literally doing this stuff that we’re talking about, our clients do come out to that end, you know, if you become a solution clients as well, we have an inner circle, where it’s like, I know, but 100 or 100 of our investor clients, constantly talking about real estate to the point where like, I mute the chat, because I’m like, I need to get real work done.

 

Erwin  

Right. And then like the advisory services, for example, they can find that on the website. Yeah, yeah,

 

Ming  

like, I guess so. Information is there. And you know, if anybody wants to reach out to us by email, info at volition prop.com Happy to answer any questions.

 

Matthew 

Yep, advisory services. It is a an area of the company, I think that differentiates us from most, whereas I think, you know, most I feel, most investor realtors, or most realtors are like, Hey, let’s go buy that condo, we want to help you actually make a good sound investment decision based upon your goals. And and you know, we go pretty deep in advisory, I’m not a financial planner. But we do do a very comprehensive financial overview to see where you’re at, and then see, we want to go and help you build that plan to get there.

 

Erwin  

If our thoughts he hasn’t been around a long time. Any final thoughts for being

 

Matthew 

around here a long time to 40 minutes?

 

Ming  

No, I mean, I’m sure you get

 

Erwin  

some common questions from novices. For example, what would you say to them?

 

Ming  

You know, I think that it goes without saying to take action and do hard work. But I would add on don’t beat up yourself when you make mistakes, because, you know, we’ve all gone through there, there’s an element of luck to right to any success. And I think that that’s also to keep in mind right? Sometimes you can you can do the best due diligence and do the best underwriting right Search and still ended up sometimes in a place you don’t want to be. So try to mitigate that as much as you can. But don’t beat yourself up when it doesn’t go. Well.

 

Matthew 

I’m gonna add on to the whole luck thing. So one of the things I think about when I, when I think about luck, is luck is really when opportunity meets preparedness. And I think that if you, you know, things can go awry. But I think that as long as it’s a risk mitigated approach, I think that’s the difference between a sophisticated and astute investor in one who just pushed against the wall, see what sticks are someone who chases maximum cash flow, maximum cash flow to the detriment of all else, because if you understand that it’s not just about ROI, it’s about risk adjusted ROI and headache slash grief adjusted ROI, if you will, if you understand those concepts, I think they’ll help guide you towards the right investment decision. And, you know, it’s part of the reason that when we talk about our business model, publishing business model, we liken it to blue chip, stock investing, if you will, right. You know, obviously, there’s differences and people will go, Oh, my God, how could Toronto be risk mitigated? How could Toronto be equivalent to the blue chip investing, but that if you dig deep into economic fundamentals, and you understand the fundamentals that actually underpin Toronto’s a market, I think we will come to a very similar conclusion that actually it is risk mitigated. So what I want to leave people with is this is a different concept. And what I want to leave people with is, it’s not about buying cheap. It’s about buying smart, buying cheap, cheapest, cheap for a reason. And I think that if you approach things in a more sophisticated manner, and a little more holistic of a manner, or well, a little more strategic, a little more sophisticated, a little more well thought through, I think it will lead to better investment decisions. Not to say that some of these other models don’t make sense. If it is part of your aspiration for maximum cash flow, and it’s part of your operational excellence, to be able to mitigate those risks and handle those headaches. Great, go do it. But if it’s not, and you’re just chasing maximum cash flow, because the guy over there did, I think that could lead you arrive. And this is unlike stocks, where it’s in stocks, it’s very easy to unwind a position. If you’ve made a you know, a bad call. In real estate is a lot more difficult. There’s a lot more friction takes a lot more time, a lot more energy. And so start Do yourself a favour and start start off on the right

 

Erwin  

foot and run your own numbers. Don’t believe anyone elses? Absolutely right? units don’t matter. Someone tells you that 100 units doesn’t mean they’re making money because we both we all know people who’ve lost our shirts, owning 100 properties, you’re better off Owning nothing.

 

Don’t don’t get enamoured by that don’t get enamoured by, you know, people who have all these doors and stuff. Really, my metric is actually Oh, how it’s not so much I have X number of properties or doors. It’s how are you doing with regards to your own path of success? How far along are you on that journey? Because everyone’s metrics are different. Like, you know, I know people who want just a couple of properties, a couple of really good properties, and those couple of really good properties by other metrics, it’s not very sexy, but really, they did everything right. They built the equity, maybe they maybe they had downsized to those two properties after having a larger portfolio later or whatever. But to those two properties are really helping map to their success, right?

 

Erwin  

Rather than talking about someone who’s like free and clear $4 million. That’s a lot of money.

 

Matthew 

Exactly. Right. So it’s it’s a different it’s much Yeah, exactly. And we all know now that through this conversation, it’s really understanding the relationship between that equity and cash flow, you can turn equity into cash flow. And so understanding these kind of concepts and I think you’re doing your your listenership a really awesome service in helping raise the bar and elevate everyone around you in terms of the financial education because you don’t learn this stuff anywhere else. You don’t learn it in a book.

 

Erwin  

You don’t hear from some songs, something you don’t

 

Matthew 

Yeah, I mean, you’re not gonna learn for your financial advisor. Right, like there’s everyone really has an agenda. And so I think something that, you know, what you’re doing here having a wide breadth of different people come in, yes, you know, people obviously have certain things that they want to sell, but generally speaking, it’s very unbiased. Generally speaking, it’s very widespread with a lot of different perspectives. I think that that type of education I think, is what levels everyone up right so you know, I in transparency

 

Erwin  

When you show properties and you give them the numbers, and you expose people, you connect people with your own clients, that’s very transparent. Absolutely. Right? Absolutely. Because not everybody does that. And I know lots of people who are very quiet about their losses.

 

Matthew 

It’s not not the sexiest thing to talk about. No.

 

Erwin  

And then just just can use just want to be nice. They don’t think it’s their fault. Leave it at that. Thanks so much for coming in. 

Ming

Thanks for having me. 

 

Matthew 

Thank you. It’s very nice to catch up with you after all these years, and you have way more dark hair than I do.

 

Erwin  

Before you go if you’re interested in learning more about an alternative means of cash flowing like hundreds of other real estate investors have already then sign up for my newsletter. Find out for yourself what so many real estate investors are doing to diversify and increase our cash flow. And if you can’t tell I love teaching and sharing this stuff.

 

 

To Listen:

 

On iTunes: https://itunes.apple.com/ca/podcast/truth-about-real-estate-investing…/id1100488294

On Stitcher: http://www.stitcher.com/s?fid=87335&refid=stpr

On Spotify: https://open.spotify.com/show/6Z8yd37AQfQI5DK0J0Xwzz

On Google Podcast: https://podcasts.google.com/feed/aHR0cDovL3d3dy50cnV0aGFib3V0cmVhbGVzdGF0ZWludmVzdGluZy5jYS9mZWVkLw

Youtube: https://youtu.be/NpXg-SeDsGA

 

**Transcripts are auto-generated.

 

Erwin  

Greetings from investors I trust you all had a great weekend. I know I did is we here at the iWIN real estate team hosted a sold out iWIN mastermind tour in Hilton this past weekend, I met some really nice people cuddling with several listeners of the show we met up for coffee and baked goods. And then we toured a four Plex conversion, which is special because it will likely be the very first of its kind in Hamilton following the built me three more homes built faster act that was came out last year. We congregate in the living room while my associate Chris the Captain Hook walked us through the story of the property, how it was acquired, the the numbers, the rental plans, budget, etc. As a real estate investor geek myself, I found the tour highly educational, as I hadn’t been through this property before. Nor had I seen the designer drawings, which were nicely provided in the handout and printed in colour as well. That wasn’t all. The next test we toured was our bread and butter strategy of bungalows, except this one was special as it had a two car garage, detached and that garage had a nice concrete pad floor. And it was already roughed in for electricity, water, sewer and natural gas. So not common at all. There’s even already a working furnace in the garage. And what I found hilarious was that, you know, with a group of 30, standing in this two car garage, you know, it’s roughly 600 square feet. And it’s not the nicest thing. It’s not the nicest place to hang out. But nonetheless, real estate investors they love to network and people were chatting it up as if we were at a some sort of high end events. But anyways, yeah, for those who’ve been following along for a while, or clients or attending our events, both in person or virtual, you know, that is what money looks like to a real estate investor the opportunity for a detached garage that we can potentially convert into a garage suite, and then rent that out for somewhere over $2,000 a month. Next, we went for lunch. Many of you had questions about past episodes and guests, especially the more controversial ones, including what are the commonalities red flags to watch out for? I’ve mentioned it before here. And I’ll mention it again, investors with multiple vacancies, meaning no renters coming in add to that a dash of aggressive investors who borrow at eight to 12% interest rates. A lot of these folks are newer, the ones that do end up in ruin. So they don’t understand that delays do happen and renovation and construction, especially major ones, there are contractors, there’s history of contractors who do disappear, or even worse, go bankrupt. And then when you have a project where you’re completely over leveraged, and you have multiple vacancies, you’re destined for bankruptcy. I’ve heard it all over my career of being a full time since 2010. And also I have family in the trades. I had family in the renovation business, they’re still alive. My ex family anyways, they were in the renovation, renovation and trades business. We’ve had hundreds of clients execute six figure renovations. I’ve seen a lot. I’ve seen a lot. I’ve done a lot as well. You know, my property has been over over my history over 40 properties. Several of those properties require six bigger renovations as well, including a top up IBEC basements, you know, I’ve used my own hands removed plumbing stacks. Anyways, another tip is that I advise tour attendees to ask if someone’s trying to sell you something sometimes if you’re not even sure they’re selling something, I think it’s reasonable Ask, ask them, how are they getting paid? I find me as Canadians, including people who interact with me, they’re often just too shy to ask, for example, on occasion, and this is usually only about my clients, maybe one to 10 times. On occasion, they asked if I’m being paid referral fees from home inspectors, designers, contractors, property managers, famous people, plumbers, whatever whatever have you. The answer is no. And I’ve had offers many of them have offered me compensation as I’m basically doing their marketing for them. And so instead, I asked that my referrals, which are my clients, to these professionals that they receive special treatment or reduced pricing. Special trimming can be just priority, but please prioritise them over other people, right, pardon me if I’ve said it before. But I jokingly refer to what we do as that we are in the business of manufacturing successful real estate investors, a successful real estate investor execute as smoothly as possible at generating cash flow, and then they’re buying more properties from you. They also refer their friends and family knowing that this is how this is the easiest way to build wealth. And then that’s how we make money selling called income properties is where the seller so remember, in real estate in a traditional property has been listed. The seller is paying little commission to the buyer agent. And that’s typically how we make the majority of our money that pays for our time and effort and our coaching so no need to hire a 10 to $30,000 coach out there or coaching programme. We have all the experience we need here. And I’m not saying we’re perfect, but we’re always getting better. And we have all the Power Team connections any of our clients need to turn anyone into a Millionaire Real Estate Investor. We currently have over 45 for them self made real estate millionaire investors and among our client roster and we’re always looking to grow that number If you’re interested in starting to improve, starting or improving on your investor journey, I’m hosting and delivering a free training event. To answer the number one question I get around what’s the best investment. I’ll cover most of the active investing as that is the only way to become wealthy. passive investing is more for the already wealthy and for registered funds in my opinion. So I’ll share what Jerry and I do for passive investments as well with our registered money. If you’re on my email newsletter, then you already looped in along with the other 10,000 Plus hardworking Canadians on latest news and the events around here at Island real estate. If you’re not, well, that’s honestly too silly. Sign up today to receive timely updates on our new podcast episodes, and be the first to know about our upcoming events. That’s really important too, because our events have been selling out, especially our tours because the members have a hard cap at 30. So yeah, like I said, you don’t want to miss this. Our newsletter is the perfect way to stay connected with us and stay informed about all the exciting things we have in store. Don’t miss out, sign up now and join our community of 17 engaged and informed listeners. To this week’s show, we have Matt Bigley with us who has done some very profitable investing in Windsor, Ontario, and he now has amassed a portfolio of 31 doors. Now just just to take a pause there. I know a lot of investors like to focus on doors, but I purposely mentioned that math is profitable. I think that being profitable or cash flowing or making money that is a much more important metric than how many doors one has the people who focus on doors. I don’t know. It’s just my opinion. Matt also owns some waterfront properties, and that he’s doing some small development work on them, and including luxury short term rentals among within this portfolio. So KineMaster journey is our successful partnerships. So we do spend some time on how we identify those strategic long term partners. Matt describes himself as a lucky husband, a girl dad from a family of all boys, a reluctant investor, who once had a chance to be on an HDTV show. He’s a history teacher, once named the best teacher in Ontario, but he couldn’t remember the names and dates. He’s a top bass Windsor Essex based realtor who got his licence as a side hustle. He quickly became a top earning agent and an experienced investor with Airbnb. And as I mentioned, 31 long term rental units. He hates flips. He actually goes we actually go through the episode why he hates flips, but he was still dumb enough to do them. Anyways, I’ve been there too, despite telling his wife prior to getting married that he didn’t like renovating he wants lived in six, six forever homes and eight years taking on massive renovations, which his wife Leslie documented on her way to amassing over 60,000 Instagram followers and appearing on Better Homes and Gardens magazine, also the Toronto Star and other top design sites. Matt is a big believer in the power of partnerships. As I mentioned, he would not have been able to scale this portfolio without his partner Kyle Pierce and their company nostra properties. In 23, wham he was invited by Doris Pictou Windsor realtor to partner in the creation of the real group, and they are one of the top agents in the area. Matt loves to learn if he can’t tell. He’s a former teacher. They have a podcast as well. And we go through all that in the show. Please enjoy the show. Hi, Matt. What’s keeping you busy these days?

 

Matthew  

Hey Erwin, And I love that question. I actually just returned from my very first vacation and a number of years. It was a vacation for my family. But for me, I went with one of my best friend but and my real estate investing partner, Kyle. And so it was the perfect mix. We got to talk business and investing the whole time and the family got to have fun. First time on a cruise ship. And I can’t help but wonder about the physics. It’s so easy to tip a canoe. But how does the night team story cruise ship float? I just don’t get it.

 

Erwin  

Yeah, I have lots of questions about those things.

 

Matthew  

It was mind blowing. I’ve never even been next one before it I just I couldn’t the whole trip. I’m like, How are we floating right now? This is insane.

 

Erwin  

And they have a crew of like almost 2000 people. That’s right,

 

Matthew  

like 6000 guests 2000 people and to be honest, you know after a while you’re like I’m in a little bit of close quarters here, especially the day I got food poisoning, and I was just in the foetal position in our tiny little cabin. I felt bad for my family to say the least.

 

Erwin  

airball or get a bigger unit it was our first

 

Matthew  

time it was our first time the next time that at least a balcony we did not we did not so that was maybe one of the lessons I’m calling you frugal I actually think I maybe none of the none of the Lambo ahead of you know, but I like I like my nice stuff. I like my nice stuff.

 

Erwin  

Not a balcony apparently.

 

Matthew  

Kyle planned the trip Okay, I’ll blame him Kyle planned a trip he’s the frugal one for you on or should we not? We were it was it was called The Carnival celebration. I mean, this thing had a coaster basketball courts, like it was It was wild. And you know, these cruises I think are really about families and families having fun and feeling safe doing so. So that part was was amazing. My kids at the time of their life.

 

Erwin  

Amazing. Amazing and I’ll just I’ll just make the point that I’m a very pragmatic person because we’re talking before we were recording about being mean being frugal, like my you call it fake magic. I call it frugal. I think it’s a little bit of both, like for example, cruise lines have very high food and safety standards compared to a resort and Say Mexico or even in the Caribbean, right. So the incidents is like you got unlucky. But generally, my experience has been extremely good versus I always got travel sickness whenever I was in a Caribbean resort, versus that promotion never happened to me. And I’ve been cruising about 13 times. Right? Wow.

 

Matthew  

Well, my food poisoning came from some savich questionable savich out of Dominican Beach, not actually on the boat. That was the fatal error like

 

Erwin  

this, both pragmatic and frugal. I don’t eat off the ship. I returned to the ship to where

 

Matthew  

I needed that advice. I needed that advice about a week and a half ago.

 

Erwin  

For food safety, pragmatic and for fruitfulness. I don’t want to pay for food I’ve already paid for. So I go back to the ship and eat.

 

Matthew  

I love it. I love it. Good tip. I’m gonna read that for sure. Two big takeaways from today’s podcast. Thanks for coming, everyone.

 

Erwin  

So Matt, I know you’re big time into investing in Windsor. Your journey, your career journey is actually fascinating as well. Can you share with the folks what you used to do for a living before he got full time into real estate?

 

Matthew  

Yeah, yeah, absolutely. For for 17 years, I was a full time high school teacher. And don’t get me wrong. I loved teaching. I still love teaching. I started off as a history teacher, and I was someone who was climbing that ladder was really on track to become a principal. In fact, I did all of my principal qualification courses and got to the very last one. And I just had this like moment of pause where I was like, Is this really and truly what I want to be doing? Or is this what I’m supposed to be doing? And I said to myself, there’s so much more accountability and responsibility at that level, and I respected but I made actually a sharp left turn at that point and decided not to do that last course to become to get my principal qualifications. And instead, I ramped up my real estate investing. So that was one of those TSN turning points in life for sure I was, again, I was passionate about teaching and became a guidance counsellor. In fact, in my early days of teaching, I won this award for being the named the best teacher in Ontario, which, you know, maybe it was arguable. But I was, I was recognised that at that level, I wrote textbooks, I wrote a civics textbook and just had a real passion for helping kids, which has turned out to be neat crossover to real estate. I joke now with my clients that I used to help people with the most important thing, which was their kids as a guidance counsellor. And now I help them with the second most important thing, which is, you know, the real estate decisions.

 

Erwin  

I won’t get into that. I think it was like one one you can argue is both are valuable. Yes. Yeah. One is more rare than the other. This is true. This isn’t the availability of getting.

 

Matthew  

Yes, yes. Well, listen, I just certainly there’s a there’s maybe a big gap between those two. But I think the crossover just comes from the helping the guiding the teaching, the learning, like those are the parts that I’ve really, truly enjoyed. Like I’ve really, really enjoyed helping people. And that was the part of teaching that I think has crossed over into real estate. And some of my clients would probably call me still a teacher, because I enjoy helping funny where people are on that spectrum, whether it’s investing or shopping for a home or selling a home and then helping them through to you know, successful successful end,

 

Erwin  

primary. I’m like the flip side, I started as an investor, and I enjoy teaching, but I was never a teacher.

 

Matthew  

I think you’re a great teacher, and I don’t think you need qualifications to become a teacher. And I think that’s one of the challenges. The education system really confuses us. You know, we’re supposed to do this, that this this, but I think, you know, we’re moving into a world where, you know, university isn’t a prerequisite for success by by any means whatsoever. But I think that myth continues, and I was a guidance counsellor. So I was helping students and families decide what they were doing after high school. And so you know, to me, it was less of a straight line from A to B and more of a zigzag. And but parents don’t necessarily like to hear that, you know, I actually created a programme that was called entrepreneurship in science, technology, engineering, arts and math. And it was a programme designed for kids who wanted to be a doctor wanted to go into computer science or engineering, all those careers are the ones that every parent wants their their student to go into. We tried to marry it with entrepreneurship, because there’s all these soft skills that kids aren’t necessarily picking up through just their academic studies.

 

Erwin  

Right. Wow, we could talk for a while.

 

Matthew  

I love this stuff.

 

Erwin  

I didn’t know that you were a guidance counsellor. So I have lots of questions around that we have over here. I have a question just to show us culturally about real estate investing. Yeah, I think part of the investment decisions have to come from people’s incomes, for example. So can you give some transparency? For example, what does a What does a 17 year teacher what did they make in salary and what’s what’s their pension? What does it pay? And what’s the principal? What is the principal get paid? It’s like to your point like principals are responsible for a lot.

 

Matthew  

They really enjoy the manager. People have budgets of our local school board has a half billion dollar budget, like you imagine that we have educators controlling that kind of money, like it’s pretty mind boggling, pretty mind boggling things. So we Really, it’s almost like we need business people almost. I’m talking maybe at attorney here, but it’s almost like we need people with a business background to be running, you know, budgets of that size, but their

 

Erwin  

clientele is very passionate, both teachers and parents. Yeah. Easy audience.

 

Matthew  

know for sure. There’s lots of stakeholders. And so, again, I think the crossover from teaching to real estate is there’s so much dialogue that goes on, there’s so much problem solving and troubleshooting in schools. And it really comes down to relationships. I always had such good relationships with with families and parents and took the time to talk things through. Because yeah, there can be a lot of frustration when it comes time to your, to your kid. And so to your question, the golden handcuffs is the golden handcuffs for a reason. It’s, you know, across policing, and firefighting and nursing and teaching as a tenured teacher, I’m not a tenure teacher. But at the top level of the pay scale, you’re making over $100,000 A year 102 105, you know, sort of independent, of course, you’ve got your you’ve got your time off. So you’ve got a shorter work here than in maybe a typical employee, and then you’ve got that pension that’s being accumulated for you over time as well. So all of those things are tremendous benefits, like what fortunate people are, go into that teaching profession, you get a rewarding career, and you get rewarded for it. Here’s what’s interesting. Now, I don’t know too many teachers that live all that high on the hog. And a lot of that’s probably a lifestyle choice. But similarly, in retirement, you have a defined benefit pension plan, which is amazing, because most people don’t. But I have a lot of retired teachers who are incredibly frugal. And again, maybe it’s a lifestyle decision. But that’s part of what led me to investing my investment partner is also a full time teacher as well. And we wanted to enhance our retirement, we wanted to leave some generational wealth for our kids. And we just really wanted to learn about something that was fun, enjoyable, and for us kind of became a side hustle that started as a side hustle. And eventually just grew to a point where I couldn’t ignore the economics of real estate, you know, as compared to that teaching job, which was terrific. But real estate has just blown up for me in such an amazing and incredible way that I’m so grateful for that it’s just become so, so lucrative, and also so rewarding.

 

Erwin  

Amazing. Well, thank you for sharing the reason I’ve Googled it, I’ve Googled what is the teacher’s pensions worth? Because what I was trying to draw for, like my listeners, and my clients is trying to have like a kind of like a baseline, what kind of nest egg folks would have for retirement purposes. And the Google results a little bit fuzzy, but I think a teacher’s pension will be worth somewhere between one and a half to $2 million. Sound fair?

 

Matthew  

Yeah, it’s annually, you’re looking at, you know, low 60s to mid 60s. Of course, that’s fully guaranteed. Here’s what’s interesting about, you know, the teachers pension plan, you could log on any teacher today, you can look at exactly what your pension will be. But more importantly, exactly when you’re going to retire. So my retirement date was supposed to be November 1 2035. Now you think that’d be motivating for people. But in fact, it’s a bit of a mind trap. Because the countdown to retirement begins almost as soon as you see that number. And I think psychologically, that messes with you a little bit like, I’m telling you, us any teacher experiment with this as any teacher what their retirement date is, they will be able to tell you precisely and I don’t necessarily think that’s a good thing. Like I’m someone who really enjoys my work. And I saw myself working well past retirement like that would have been I would have been 56 in November of 2035. I always found myself working well past retirement. And that’s one of the attractions of real estate, you know, with real estate, like it’s one of those professions you die at your desk type of thing, you know, you don’t ever have to stop. And that was actually an appeal to me rather than having a set retirement date.

 

Erwin  

So thank you for sharing. So my baseline my challenge to all investors with DB then to match something similar to like a teacher or firefighters pension to try to get to try to earn something around 60 $65,000 per year, then for husband, wife, whatever it is, I think that’d be a good place to start in terms of a target. Now, before we start recording, give me that it’s a common goal but people approach me with a novice investors is they’ll say to me, my objective is to they usually don’t say the number they’re usually saying their objective is to usually retire their spouse and then retire themselves. Sometimes the opposite but usually it’s retired or spouse is almost the number one goal have any anyone I’ve spoken to both women and men.

 

Matthew  

good people, good people share the same goal. Yeah, very kind. That’s very cool. I love that quality of life conversation.

 

Erwin  

Yeah, quality of life. But it’s not just about their partner’s quality life, it’s about their thinking with their kids. They would like someone to be able to spend more time with the kids, something that’s been lost with since since we’ve left the gold standard. But that’s another that’s another conversation. So very often, novices will ask me, like, tell me, my goal is to make 10,000 They don’t usually say it but like I said, if they’re looking to retire their spouse, and they’re trying, for example, and they’re trying to mimic a teacher’s pension 60 65,000 Is their pay in retirement? Right. So basically, it’s 5000 per person. Right? Hence, I think that’s where they got to goal of 10,000 per month in cash flow. So,

 

Matthew  

yeah, you know, I think it’s such an interesting question, because I think one of the fascinating things to me about real estate investing is there’s just so many different strategies. Like, for example, I hate flips, I hate flips. I just actually, I have a flip closing today that I didn’t want to do, but I did anyways, that’s maybe I just got too good of a deal with this property. And then he needed too much work, of course, three months turned into six months cost overruns, you know, you’re chasing contractors. Now I’ve done a lot of flips. And I’ll chat a little bit more about my wife and I’s experience in flips of forever homes, maybe a little bit later in the conversation. But people like flips because they’re big chunks of cash. So my point here is, I think it’s a matter of deciding what your intentions are maybe what your y is, like, I love how Don Campbell calls it your personal beliefs. So what is your goal? What is your why, what is your long term why, and then maybe experimenting with some different investment strategies to figure out which one works for you. So for me, personally, I know I don’t like flips, capital intensive, too many variables I can’t control and I just, I don’t like them. I don’t think they’re, they’re what I want. So for us, we buy multifamily buy and hold long term, so that we can take advantage of those three silver bullets of investing, you know, you’ve got your cash flow, of course. But here in Windsor Essex, you’ve also got appreciation now in Windsor in the GTA, it’s almost all appreciations and possible to cash flow. And then of course, you’ve got mortgage pay down as well. So I recognise those three things at work. And I remember going to my very first real estate investing workshop, and hearing those three things, and it was just like a light bulb that went off like you can make money three different ways in real estate. To me that was so fascinating and amazing. I also own an Airbnb, which was previously a personal home, but it’s not even so much about the cash flow with the Airbnb ZZ allow you to buy nicer properties and keep them like my typical multifamily rentals, I would never live in one I’m actually living in my own Airbnb right now, while I await my next home that I’ve purchased. So I think for me, I would direct the question more to a, what is your purpose. And I think that a lot of novice investors get trapped in trying to come up with these huge numbers and huge dreams. And they actually then get stuck in that analysis paralysis, and they don’t start. So I try to start my investors who are new to the game, you know, small with lots and lots of support, so that they can then scale that up. Any investor is going to diversify. Like we’ve learned a tonne from you through stock hacking, for example, you know, we took multiple courses from you, that was really interesting to me, it wasn’t the stock market, it really intimidated me prior to that. And listen, it still does. Some of those advanced courses are just over my head, my my partner, Kyle, he loved that ate it up. But for me, I really had to stay at that, that novice level. So getting into those equities, like I sold some options on Carnival back in the pandemic. So it was fun to be on a boat saying and made some money off these guys. Now giving them some money. We can write this. Well, I did go with my investment partner like I did my best and partner note that

 

Erwin  

note that we’re working on location. Yep. Working on location, exactly.

 

Matthew  

We did talk a lot of visits, and then a whole life insurance well, not an investment. Again, Kyle, and is well ahead of me in that regard. But you know, I’m working my way towards my first whole life policy. So I think it’s about diversifying. And I think one of the again, crossovers from teaching to real estate investing is just that learning, like I stopped listening to the radio in the car, only listen to podcasts, my family hates it, it’s so boring for them. But I only want to learn I love to listen to audiobooks, podcasts, because there’s such an array of expertise out there. And it’s literally at your fingertips if you’re willing to access it. So for me, I don’t think I’ve necessarily nailed exactly what it looks like. My active income has now become as a real estate agent, but that side hustle income, that extra income from real estate investing, that will of course, do those things that we wanted to do, it’s going to make a really sweet retirement for us. It’s going to create some generational wealth, we’ll be able to share with our children similar to what you enjoy you’re doing for yours. And in the meantime, we’re having a whole lot of fun learning about it. And more recently doing some jayvees welcoming other people, you know, into these opportunities that are, let’s be honest, pretty intimidating to get started with for a lot of people,

 

Erwin  

but you did it.

 

Matthew  

Yes. And that’s that’s the advice get started, get

 

Erwin  

started. And to clarify, you do have another career as well. Oh, we really touched on that. So to go with the question, what keeps you busy? Because you’re you became a realtor as well? Yeah,

 

Matthew  

yeah, I did. I initially got it. It was my new year’s goal, New Year’s resolution of 2020. Of course pandemic hit. We’ve been buying investment properties. We’ve been doing this for about seven years now. So we actually bought our we just closed on a nine Plex. But prior to that our last purchase was March of 2020. Just before the pandemic get these numbers, we bought a 10 unit building six residential for commercial for $469,000. That’s unheard of. Unheard of it so we’ve been investing in real estate and always, you know, we had bought and sold some of our own homes and my background with my wife is really interesting. My wife has I guess we would call her a social media influence. got almost 60,000 followers on Instagram. And her name is Leslie her handle is the Leslie style. So she started sharing our renovations we would take on these crazy like absurd just ridiculous renovations, where we transform these these houses into what became literally magazine worthy projects like she was she has been in house and her or Better Homes and Gardens in the Toronto Star like all over the place. And she really this originated from her just wanting to share the work that we were doing. And it blew up to the point where at one point, we had a TV production crew come in from New York and film this whole pilot on you know, trying to pitch us to networks and being a flippers but we weren’t flippers we were both full time teachers at that time. But to make a long story longer. Real estate was just so ever present in our lives as an investor and in buying and selling on our own. Like we’d moved six times in eight years. At one point my wife and I that getting my licence became a no brainer. And then when I got my licence to success if out as a realtor, which certainly was due to the market, but I think just also due to this great, these great crossover skills I had as an educator, just made real estate, something that I couldn’t not do full time I was invited by a very well known realtor locally named Dorsa Pico to become her partner, she she had sold one of her houses, she called me up said, Matt, I need a partner and it’s going to be you. And I said, Oh, that’s funny doors, you know, I’m just getting started. She said, you have all the qualities that I don’t have, we’re going to make a perfect match. And the rest is history. Last year, we were the top team in our brokerage eliminated 12 months, you know, we sold almost $60 million in real estate, we’ve now built out a small team. But we have continued to just grow and to grow our brand. And we’re just having so much fun helping people and of course, selling buckets and buckets of real estate you’re

 

Erwin  

using. So you’re doing really well.

 

Matthew  

We’ve been incredibly blessed. And I think we work hard, but we have so much fun doing it that that’s the neat thing about real estate maybe as compared to teaching, I don’t have any bosses, I don’t have anyone directing me what to do. Education is very top down, the ideas come from the top with real estate, it is all you it’s make it or break it, you know, I’ve hired an amazing coach, we have the same coach Marian Gillespie, who’s who’s incredible, who’s a great driver for me, but it’s all self motivation. And with real estate, what fascinates me is you can literally work on self improvement, which I love. I’m a big self improvement junkie. So becoming the best version of yourself, and also creating a great business. And I think those two things are what really drive me that business end. And that self improvement.

 

Erwin  

Something key that stands out about your story that’s unique in terms of the show is that you joined the team, what I often find is a lot of folks getting into some sort of professional real estate, anything like say for example realtor or mortgage agent, they’re usually trying to do it on their own, like from the ground up. Versus you joined a successful team already successful agent broker, what’s the experience been like? This is something you do over again, I’m guessing you would

 

Matthew  

say that the biggest mistake that new real estate agents make is that they see real estate as a lifestyle rather than as a business. Real estate is a business, you know, people want to focus on the pretty on the marketing end of things. Real Estate really comes down to a set of very repeatable behaviours that you need to learn and execute before you ever almost have to get into the marketing that and that sort of maybe lifestyle end of things. So I actually started with a team very briefly when I started real estate and I was blown away by their training by their processes by you know, just how well organised they were. And I actually left that team because they were they were actually located in Hamilton and expanding down here to Windsor. And it just didn’t work as a new agent, I needed more support than that I then went as a solo agent, and was able to partner up with Doris to then create a team. So my advantage was in joining someone at her level, 25 years of experience, you know, top, top five, top three agents in the city great reputation, I was able to get that endorsement from her, which in the eyes of then, you know, the real estate public at large. I had legitimacy because I had that great endorsement. So from the team perspective, I think that’s huge. And I think that teams can bring tremendous value in terms of training support, they can help really flatten that learning curve, that when you first get into real estate, I mean, you get your licence, and then you say like now what how do I sell houses? How do I find clients? How do I make money? Once I find clients? How do I convert those clients? It can be pretty intimidating, pretty intimidating. I think that’s generally misunderstood probably from the propensity of, you know, real estate shows and that sort of stuff that really depict that lifestyle part, but almost really leave out the business part

 

Erwin  

of it. And just the lifestyle part with the affordability of the way it is like for example when I started in real estate, it was operated mainly in Hamilton. So it was rare to see a Toronto agent showing property leaving business cards in a Hamilton listing to fast forward to today. So that was that was 2010 very fast forward to today, all the time. I see business cars from like Richmond Hill, so agents that drove over an hour to show a listing in Hamilton. Wow. So the lifestyle is very different. And even you know, early days when I started, divorce rate was very high among Realtors and the pressures are only getting worse.

 

Matthew  

You were sitting in your car last night on your birthday, reading a counter offer in the front seat with your laptop, which I have done before. But there’s a lot of there’s a lot of creep of real estate into your life where it’s absolutely, you know, on my kids birthdays, I’ve been trying to work on deals on the side, like real estate just seeps into all of your life. And you have to be very deliberate. And I’m not good at this. Like I often work seven days a week, I am trying to work six days a week, but as you know, it’s it’s just tough to do. And so you have to be very, very deliberate. And that’s, that’s where the coach comes in. You need that outside voice to like, give you a pole or a tug or a push. You know when you need it. And I see agents driving down to Windsor from Toronto sell it, I’m saying we do a tonne of referral work down here. Let us take care of your clients at a high level. Let us get you paid through that referral fee. Like what are you doing? This is a crazy waste of your time.

 

Erwin  

Trust my real estate? Oh, I think we added over 12,000 realtors, just last year in 2022 alone. And even before that, you know just about real estate investing? Statistically 02. Okay, so over 50% of Toronto agents do zero to one deals per year. Right. So a lot of people do are not making enough to live make a living

 

Matthew  

and I wonder But Windsor Essex Yeah, you’re right. And I think there’s been a lot of new realtors. And that’s not a bad thing. I think that can make us more competitive. But let’s be honest, most of those realtors are not going to be successful. You know, I had a veteran agent call me recently an assassin. He said, You’re well trained, you know what you’re doing, you’re incredibly hungry. He’s like, I worry about the agents on my team, you know, compared to you because you just have this drive. But you also are learning this skill set. And then so I said real estate assassin, I kind of like the sounds of that, you know,

 

Erwin  

I was actually talking to another team leader who’s feeling the pressure to grow his team. And I said to him, you know, it is really difficult to find someone with the drive, the IQ, the high IQ and EQ, and you EQ interpersonal skills are incredibly important. Yeah, be a successful realtor, and then know enough about home constructions. Your client, and we’re not even talking about investor agent yet. Right? That investor agent needs to understand financial analysis, right? Yes. And the business, the business of operating real estate investment property, they don’t tell you. But this is for listeners benefit, especially anyone who’s new, an investment property is a business. Right? So to be an investor agent, you need to know a lot. And honestly, I’ve seen many people fail it.

 

Matthew  

But how can you sell an investment? If you don’t own any? How can you call yourself an investor agent? If you don’t own any investment? Or never have like you understand investments? Yeah, exactly.

 

Erwin  

That’s the key for courses.

 

Matthew  

So true. So true,

 

Erwin  

is especially we’re laughing, but it’s true. People do it. Versus in my experience, like I’ve learned entrepreneurs organisation. When we speak to one another, we’re not allowed to give you when we’re speaking to other members. We’re not allowed to give each other advice. Right? It’s our training, instead of giving people advice we share with them our experience, it has to be our experience. Right? So for these novices, we took a $50,000 course $30,000 course whatever, speak, how do they speak to their experience of evicting a tenant, a screening attendant, showing properties to a tenant of you know, managing contractors, managing a renovation project of structuring a deal and presenting it to your bank. Right for both the getting the mortgage and also for the exit the refi whatever it is, right. These are, these are not skills that have to grow on treat us.

 

Matthew  

Yeah. And you’ve spoken so much about these, I don’t know what do we call them charlatans? You know, we’ve made real estate investing sounds so sexy, and I think a lot of speculators are probably feeling that the crunch right now. So it goes back to that education, you know, on the streets. In fact, listen to all of that I would call speculative money like we had, I would get dozens of calls a weekend from Toronto agents who were driving down totally unprepared. They didn’t get themselves access to our local lockbox freaking out they couldn’t get into properties. But with clients, it was caravans of people coming in. They have all but disappeared which makes Windsor Essex such an interesting investment landscape right now because we’re seeing like last month there were more duplexes sold than any month dating back to last May so we’re seeing some of the investment money come back in but let outside money which really was part of that push of average home prices up so so high in Windsor Essex, it’s all gone in terms of my at least anecdotal experience recently.

 

Erwin  

So what’s duplex go for now and Windsor? sure what it was like at the peak and then what’s the comparable we’re going for today?

 

Matthew  

Yeah, so I mean, listen, I just sold a beautiful duplex in up a plus neighbourhood for you know $611,000 Which which was the most expensive duplex sold this year in Windsor Essex $611,000. So you can get yourself a duplex for you know mid fours would be would be a solid duplex for sure. We just picked up a really nice Nine unit building for a shade under one five. So, you know, that was on the higher end of where we’d like to spend. But it was also a completely turnkey, you know, the nicest property we’ve yet purchased. And for Kyle and I, we really started to think about, you know, a price versus cost. So we would always get the cheapest, you know, just lowest price properties, and then have to, it would cost us a lot of money, we’d have to dump all this cash into improving them that that 10 unit $469,000 building, well, here we are three years later, still dumping money into it. So in terms of that quality of life, or that maturity as an investor, we’re willing to pay a little bit more, you know, to get better properties. And in this case, seller held 70% of the mortgage at 3% interest only for five years, which made it a more attractive purchase as well. But a few years ago, Kyle and I wouldn’t have been mature enough as investors to get why that was such a good buy.

 

Erwin  

Right? All right. And then what versus like Grant Cardone buys really nice stuff.

 

Matthew  

And Airbnb is can be like that, like people are buying really expensive houses that Airbnb is again, I own one. But I only own an Airbnb. Well, there’s a couple of reasons. One, I could keep a house that I bought for $300,000 in 2017. And last year, the appraisal is gone down, I’m sure what was appraised for $950,000. So 2017 to 2022, five years, tripled in value. So it’s allowed me to keep a nicer property than any of my rentals. But there’s also a nice Joy factor in the Airbnb, like you’re welcoming people to your town, I live in this amazing town called Kingsville bubble. It’s like nothing ever goes wrong here in Kingsville. It’s just a magical place on Lake Erie. And it’s really fun to help welcome people. And so to to your point about buying really nice properties. I think we see a lot of that in the Airbnb realm. Although I’m not always sure that the promise of major returns on Airbnb isn’t necessarily there just because you’ve got higher operating costs. And generally you’re buying more expensive houses.

 

Erwin  

Are you managing your own Airbnb, like who’s dealing with the day to day on that.

 

Matthew  

So the nice thing about Airbnb is it’s all through an app predominantly. And of course, I’ve set up all these systems. So that works really well we’ve got an AI pricing tool we use so that the pricing is taken care of. And then we have cleaners and so the cleaners are terrific. And they would manage for us. But I’ve got to be honest, I love being that front facing customer service point of contact for the clients because I can ensure the highest level of service. I think a lot of Airbnb managers when they manage 1012 30 properties, you just can’t expect them to deliver that level of service to your own guests. I call them clients but guests and so I’ve continued to do that. It doesn’t make any economic sense for me to do it. In fact, that when we’re really busy, which is summertime, there’s moments we have a pool at the property which is a big draw, but also the bane of my existence in the summer because it requires a lot of maintenance. So I need to take what my advice would be to my own Airbnb client and say leverage some of this stuff out you know, your your time is too valuable to be like cleaning the pool or, you know responding to people in the Airbnb chat. But although it doesn’t necessarily make logical sense. It’s what I’ve decided to do for now anyways,

 

Erwin  

is their insurance pretty steep, you have a pool, like for example.

 

Matthew  

So a pool, it’s a historically designated home as well. So the replacement value is like unbelievable, like through the roof. So yes, insurance is definitely high. Now I’m going to speaking of best uses of property, I’m actually going to fill the pool this year, I maybe shouldn’t tell my future Airbnb guests because I’m severing 60 feet off the back of this property. In order to do something, there’s some purpose built rentals build a semi my real estate partner, her family owns a custom construction companies were talking about that. So this same Airbnb property that’s tripled in value, I’m now going to sever off 60 by 120 and do something with that it’s still a little bit up in the air as to what that looks like. So the pool is gonna be filled in which will hurt our business, but will improve my own quality of life dramatically and become such a value add to this property for having been able to sever that off and do something with it.

 

Erwin  

It’s a big property. It’s a big property and everyone back.

 

Matthew  

So I’ve never been back although I am living here now. It’s a corner lot. It’s right in the heart of downtown I joke with guests that like kings was really renowned for its restaurants. So I say you can walk to dinner and stumble home you know, you never have to get in a car and that’s part of the draw of our property. It’s beautiful historical, we do a lot of weddings here. Brides take their pictures again. It’s been all over magazines and my wife’s Instagram feed gets tonnes and tonnes of traffic. So people you know, it’s a draw for all those reasons, but it’s such a deep lot. It’s a 220 feet deep 120 feet wide in the middle of this downtown of this small town that that extra property that we really just I’d never even go back there except to cut the lawn although I don’t even cut my own lawn anymore. I’ve also leveraged that out so it was sitting there. I said I’ve got to do this. I’ve got to separate I’ve got my real estate wheels turned and I said there’s a big chunk of property waiting for something great to be done with it just a matter of figuring out exactly what that’s going to look like.

 

Erwin  

It’s a big walkway 60 by 120 Then, yes exhibit 120.

 

Matthew  

So the recent legislative changes will help I think in terms of what we end up putting there and debating like, do we build something to sell it? Or do we build some custom or not some customers and purpose built rentals? Got to explore that a little bit more before we make a decision.

 

Erwin  

Now I want to roll into I should know, before we move on, actually on the subject, you mentioned speculators and we’re the markets that I think most people who monitor like the preferred investment areas, like a well in like an Oshawa like a Hamilton like a Windsor. They rose like crazy. And, and peaked in February 20. It’s only been wildly but it hasn’t even been that long. Uh, Pete 2022. I know. It’s funny, because I have I have interest rate conversations with people every day, like, when is going to cut coming? What’s coming? Dude, it’s been, it’s been 13 months since we had our first raise. Yeah, yeah. It’s been a month since we paused brainstem rate increases. hasn’t been that long. Maybe we’re like every day. But sorry, my point was that the markets gone up and down a lot. Like you mentioned, like your dad was do you see your typical duplex? It was in the four hundreds.

 

Matthew  

Yeah. So we got you know, today, you could get it typical duplex in the foreign just like when we look at average, you know, price points from I look from sort of where we were pre pandemic. And of course, we had that big climb from March of 2020. Like we essentially doubled, almost doubled average home prices in Windsor Essex, you know, up to that peak, and we’re down about 27%. If we look at March, I just took a quick peek at March numbers this morning. So we’re you know, we’re down about 27% from Peak but I think there’s still such value here. Like I had clients in town the last two days who spent most of their professional life in Oakville, Burlington, and they just said Matt, this place is a secret like first of all, let’s not tell anyone and everyone I helped move here session same thing. I believe you got you got a fort like this is the primary reason people move here is affordability like you’re able to sell in areas like that move down here and put a tonne of dough in your pocket. So affordability number one, and I said them I toured them around the area. We went for a great lunch show them the wineries, the beaches, you know the lakefront the all the pretty little shops and microbreweries that we have here. And I said listen, we can make you fall in love with this place. But I recognise the number one reason you’re moving here is because you want to be mortgage free debt free move here. But some of the side benefits are just quality of life. Anyone who comes from the GTA says the same thing. I get back so much of my day and my week because I’m not stuck in traffic to go from the south shore of Essex County to the North Shore is about 35 minutes. That’s the longest drive you’re gonna have in Windsor Essex really.

 

Erwin  

Life is amazing. Small town.

 

Matthew  

Yeah. And you’ve got an internet like we flew out of Detroit, which was an hour from my door to the Detroit International Airport. You’ve got all the major league sports teams, they’re great concerts, amazing culture, food. And then they call this region the sun County. So it’s called that because we are remarkably warmer than the rest of Ontario, even London a few hours down the road to get absolutely demolished in winter. And so there’s a quality of life aspect to come here that people find but again, largely an affordability these these clients from a town were blown away by what they could get here. They were looking at the higher end they were they were looking over over a million and there’s no we sell a lot of homes and a million we do a lot of that luxury real estate. million enough. But they said compared to what we would get back home, it’s inconceivable that people would just be blown away. So let’s try to keep that secret the best we can.

 

Erwin  

Oh, how is the how is the over million dollar house like the million note and over market has a comeback. Just to give some context for the listener back in 2017. Anything that was high end was hit the most as it fell the most like it fell from the peak high end. Now high is different for every market, right? So for example, high in in Oakville in 2017 was around one point around 1.8 Right 1.8 inches that that probably dropped around 30% from the peak of 2017 but it’s recovered probably by 2019 but two years to recover. So what high end isn’t is different for every neighbourhood for example, I’ve shared before on the show my cousin lives Young Street South of 401 so that neighbourhood for example high end it starts at 3 million wow he’s but he still tells me anything between two and 3 million flies gets listed imagine imagine like four or five offers sold and flown in 48 hours you know, usually in competition. So that’s more like the that’s like the active area and then anything under two will fly. That’s that’s all starter market for them. I’m talking about houses of course. So yes, a million is a million Exactly. It’s probably quite high for Windsor, always.

 

Matthew  

Yeah, average home prices. You know mid fives the busiest segment of the market for the last number of months for sure is kind of that low fours to mid fives and we certainly operate there but we really do a lot in the higher end. And I think there’s an interesting crossover between luxury and investing because of course, lots of wealthy people have gotten wealthy because they’ve invested in real estate. So you know, we help them with the purchase and sale of their homes, and we also help them invest in real estate. So I walked off the plane from the cruise ship last Sunday night and into multiple offers on a million dollar listing I had, so we close that. And while I was away completed a deal for a $2 million property. So it’s nice to see some of the higher end things moving even my own personal property, we sold it last July, listed at $2.1 million. At a beautiful lake house, one of our massive renovations sold it same day, under asking that sold it the same day we listed it. And for the region, that would have been a very expensive property, something listed over two and our team, I personally sold three of the four most expensive properties in in along the lake, where I live on the south shore of Essex County last year all let’s see almost 181975, and then 2.1. So those would certainly be considered here, that kind of ultra luxury. And we’ve seen a lot more million dollar houses pop up. By large, I think those were out of town buyers coming here saying a million dollars is nothing, you know, I just sold for two and a half in Burlington. So we’re seeing that average price point push up, like much to the notes, it’s a challenge for locals who maybe haven’t necessarily had a house to sell elsewhere and come here with all that equity for themselves.

 

Erwin  

And that’s the sad thing about this world is that everyone’s pushing other people out. Yeah, yeah,

 

Matthew  

I agree with you. And then I also think, like, do something about it, though, you know, in a sense that, you know, I’m not, I’m not one to, like, in my own mind, like, stay a victim for very long and not to say like not to call housing affordability, you know, say, you know, victims are victimless. But you know, what, what can we do? Is it a is it a side hustles. And another opportunity, not everyone has the ability to do that. But I just believe in being so resourceful and working so hard to do what you need to do. So, I mean, I think we all have origin stories of financial challenges as, as kids or from our parents, or whatever that might look like or even from ourselves. And I love stories of people overcoming that, no matter what their background to become something may be greater than they could have ever imagined. So not to be dismissive of that, but to, to just say, like, instead of, you know, focusing on the complaining part of it, and the lamenting of forces that we really can’t control. These are global economic forces, you know, what can we do to improve our own personal situation, and that of our family and

 

Erwin  

community? That’s why I buy houses from my kids. The situation so bad. There you go.

 

Matthew  

Yes. And you’ve spoken so eloquently, that’s, that’s been inspiring. Like, so much of what I learned in my early days of real estate investing was from listening to podcasts like yours, like, I think I’ve listened to every episode of your podcast, you know, some of the other great ones out there as well, like you can learn from someone like you who was doing it before we were doing it. And that was a big message that you shared often about having houses for your kids,

 

Erwin  

Mr. ESP real estate savings plan.

 

Matthew  

I think it’s brilliant. And for our kids to be able to afford houses in the future, who knows what that’s gonna look like, it’s gonna be absolutely bonkers to think what a you know, what a single family home is, is going forward and, you know, 15 years when my kids are ready to maybe get into the housing market.

 

Erwin  

And just point of clarification for the listener, I bought these houses. So a minimum as a hedge on the real estate market, should the market get away, because I thought that was mostly what was going to happen. So that way, you know, my, my kids have a foot in the market already. So that they can hopefully afford a home by the time they’re old enough to own a home. Okay, so, Matt, you put on your guidance counsellor hat on. Sure, sure. Okay. Just a continuation of what we’re just talking about people who, who haven’t gotten into the market yet, either for their home or the first income property, but your guidance counsellor had on, what should they do?

 

Matthew  

If they haven’t got a home or hadn’t gotten from an investing standpoint,

 

Erwin  

almost all of it. So for example, if I’m talking to a high schooler who’s lost, this is just me, I’m not a guidance counsellor. I’m not professionally trained at all. Right? If someone feels lost, I encourage a lot of people to learn how to use the tools. Alright, yeah. Because I’ve, I’ve met too many people who are good on the tools, who become successful, including a good friend of mine was a lawyer by trade, honestly made more money for him and his family, by working on developments, including being on the tools.

 

Matthew  

I’m not surprised, I’m not surprised. We talked about the stigma around, you know, the trades and that everyone thinks they have to go to university in order to be successful. And I think one of the chronic misunderstanding societally this isn’t just in school is just about like, kids want to focus on being rich, getting money. And so they think there’s certain pathways to that. And I think, you know, as parents, we don’t necessarily focus on the getting rich part, but we want our kids to be nurses and doctors and computer scientists and engineers, because in our mind, maybe there’s some status associated with that, or that’s what our definition of success looks like. And I think we almost need to change the way we define what Rich looks like. It’s really about living your best, most authentic life, whatever that looks like, you know, whatever that looks like, it’s all about choices if you want to buy the Lamborghini and that’s your golden buy the Lamborghini, but if you’re okay with, you know, the Honda Civic and that’s your best life because you’re using that money elsewhere then do that. So I think that’s part of what we’re not teaching kids about. I think that

 

Erwin  

oh, that I think you should understand who the Millionaire Next Door is.

 

Matthew  

Yeah, it’s great book. It’s a terrific book. Because really next door, I love that book.

 

Erwin  

If to drive electric cars, it’s likely used. They do. And it was a good chance story paid off. Millionaire Next Door does not own a Lamborghini. Right? And before on the show, like, among my clients, my clients are generally The Millionaire Next Door, they’re very successful, they’ve earned over a million in real estate. And generally, they do not drive a luxury vehicle. And if they do, it’s paid off and they bought secondhand.

 

Matthew  

Yeah, this is not about I think, you know, becoming wealthy is not about the status whatsoever. In fact, like, to me the pursuit of wealth, it’s almost like wanting to gamify it. So it’s almost fun. Like, of course, Listen, everyone needs to have their basic needs met that that is, you know, that goes without saying, but I’ll say it, you know, if you don’t have food, shelter, those sorts of things like that economic basic economic security, I get it once you’ve achieved that. And that’s what teaching allowed me to do like to feel safe to feel as though I was going to always have an income growing up. My dad was in retail really tough sector at points, made a lot of money and at points lost his job that was that was tough for our family. So teaching was that safety net, but above and beyond that, that’s where the fun comes in. Like how can it make money we learned about options trading, we dove into that, that was really interesting. Now we’re learning about whole life, different facets of real estate investing, we tried to flip some of them went terribly, you know, we learned from it we move forward. So I think it’s like, there’s been moments in life where I’ve reflected too much on failures or things didn’t work well or, you know, falling outs with, you know, people in life and, but I think it’s almost like we overthink it that’s maybe like our ego. It’s almost like, we delve too deep into that and trying to extrapolate meaning from it. And it should really just be like taking it as, as the learning it almost seeking curiosity and saying like, that didn’t work out. I’m going to try this next. And that’s where the fun of this comes. Because real estate investing is really quite boring. But I think having like a partner to do it with like, Kyle, my partner, we talk every single day. We talked all throughout the cruise, it’s so much fun to do it together. But you have to find those those right, right people like minded people.

 

Erwin  

So that actually brings up a really good lesson. Because in the background quietly, a lot of these companies, a lot of these gurus are coaching or weekend programme graduates or you know, they belong to the paid whatever an education, a lot of these folks are failing. And when I mean failing, they didn’t just lose money. They lost their shirts, like some of these folks are going bankrupt. For example, one company that I studied, it was just a bad partnership. As in, and I mentioned it during like the Ben Bergen episode. For example, all businesses hard, all businesses hard, like Apple nearly failed many times, Tesla, SpaceX nearly failed many times. But one thing one lesson I refer back to often for Apple, for example, is you have Steve Jobs and Steve Wozniak, their skill sets couldn’t have been more complementary, right? There was almost no overlap.

 

Matthew  

Right? The integrator and the visionary though, concept,

 

Erwin  

right? And Wozniak was just more more than the integrator, he could do everything. In terms of integration in terms of like he built their first computers. He had all the engineering, early engineering expertise that they needed to at least create the prototype jobs. I don’t know how many years would take him to be able to do that himself. But jobs could sell, right jobs can market, he could sell a vision, he could recruit people, right? Like those skills are extremely complementary. In conversation with Kyle like, it seems like it’s the same way as with yourself and your investment partner.

 

Matthew  

Yeah, yeah, very much. So I think you need to have complementary skill sets. And I think those those two roles are integral. It’s the same with you know, Doris, and I in real estate, we have really complementary skills. And we recognise that so the value proposition for Doris and I and in our real estate team and coloniser real estate investing, is, it’s something that gives us just confidence, we understand it, there’s never there’s never a gripe, there’s never a wonder if it’s worth it or not. It’s just such a beautiful marriage of differences. And, you know, to relate back to your question about kids and how to guide them, I think, you know, those are the types of things that we don’t really recognise or realise and we talked about EQ before, like, how do you get along with others? You know, we were all selfish shad seed in my young young kids who are still learning this and learning how to get along with others in elementary school, it was young ages. And then the other thing is just like to be become mentally strong in our in our mindset, like It amazes me as an adult. I’m 44 years old, how much effort it takes to maintain our mental health, physical and mental health. And I think that’s a message lost on or not taught explicitly when we’re younger. I They’re like, I just feel like I’m sort of surrounded kind of constantly by people who are in crisis, or having an having a challenge in life that’s really taking a toll on them, or, you know, if succumb to some sort of an addiction, or, you know, my own brother took his life during the pandemic in 2021. And it was, I think, in part to do with his mindset, that eroded you know, pandemic related some other challenges with with addictions. And I think that ultimately, maybe some some mental illness, but you know, coming out of that my approach to grieving was to learn how to grieve. And I really, it’s something that I worked through, but in reflecting on his passing, and he was a carpenter, incredibly talented carpenter. And reflecting on his passing, it’s just that my takeaway was, we need to maintain our physical and mental health, above all things, we need to become mentally resilient, we need to have outlets for when we are feeling stressed, or under pressure, and it were all a work in progress I’m far from from being perfect. But through having that just like in real estate coaching, I got a grief coach or a grief counsellor, and she was just really able to help help with a perspective that allowed me to actually move through that grief and not cling to it, not hold on to it, you know, so that it actually curtails you know, your life. So kind of going off on a tangent here, but I just think so many real estate investors, successful real estate investors, and I think I see this new, we don’t know each other well, but you seem to have amazing resilience, a great support network, and a lot of habits you put in place to keep you mentally and physically healthy. And I think that’s, that’s so integral to success in life, whatever your Pathways,

 

Erwin  

thanks for the compliment. It’s a good point to bring up. Resilience is incredibly important to be any successful investor. To get him to be successful in anything in life is how much shit and you deal with. Yeah, we deal with shit. Like we got tenants, we got renovation projects, we got points that are being broken and timelines that are being better going. But you mentioned years went double plan three months, they went to six months like these are difficult and stressful.

 

Matthew  

And when we save our kids from from experiencing any stress, or having to navigate through challenges, when we save them from that when we come in and rescue them, I think is their natural instinct, as a parent, as I saw it at school a lot, you’re actually hurting them. Because the time to save time to learn about all that is while you’re in school, my advice for kids was like, take opportunities, try different things. It doesn’t matter if you’re the worst person on the team or that club, like just gather experiences. That’s what my advice would be. But as kids like our confidence is so fragile. We all just want to cling to whatever niche we’re a part of, or whatever one good thing we’ve been told we’re good at. And I think we just need to have far more range. This whole culture, my kids are dancers are eight and 10. They danced six days a week. I’m like, we don’t have time for Girl Guides. I’d love that. I’d love to do hockey or soccer. And so I think is as parents, helping our kids gather experiences is integral to making them have that resiliency talk about when we’re when we’re older.

 

Erwin  

My kids are in competitive public speaking. I love that. I love that. And their classmates, when we see them in competition where they are so polished. versus my kids are like usually the bottom quartile. Because honestly, cheering are really busy. And we’re not going to handhold them through this. So they get their butts kicked. But I think it also is that other parents are doing a lot of the work for the kids. coaching the crap out of them. Right like that is like their focus is they want a winner, competitive public speaker versus for our cheering. We just want our kids to be comfortable speaking in front of a publicly, right our goals are very different. And it’s funny because cheering made an observation at a certain age. I forget what she said someone were like 1315 the quality of the talks just fell apart compared to the younger, because there seems to be an age where the parents stopped helping. I would see like a 12 year old would better be better, better than a 15 year old.

 

Matthew  

I believe it like I taught at all three of my schools had specialised programmes. My first school was a specialised arts programme. My second school was an enriched math and science programme like kids would come from China specifically to come to the school in Windsor. It was crazy. And my last school I helped create this specialised programme for kids who wanted to go into medicine, computer science and engineering. What you would see though, is when kids got into those latter years of high school, the pressure just got to the point where they were just crumbling. Some of them I saw a lot of really high end kids get burnt out at 1617. And you’re like, oh my god, your 20s is so much harder, like, like what happens next? And so to your point, I think that and listen, parenting is so hard. I am far from a great parent and really very much figuring it out. But I think we have to let her kids Doris my real estate partner says it all the time her kids are in their 20s You have to let them struggle. You have to let them experience struggle. And I really reflected on that because my A instinct as a parent is to swoop in and say, you know, and that’s actually the maybe counter intuitive to what we are counter to what we should be doing, like, Let them struggle, let them learn support them. But but let them enough participation ribbons, right? I mean, they get lots of lots of encouragement. And I think feedback as a teacher feedback is really interesting. I don’t think we do it really well. They talk about descriptive feedback. So instead of saying, like, Great job, like, it’s more like, I really liked how you structured this paragraph, and that you made these three great points over here. It’s about really giving people descriptive feedback that they can use, because great job doesn’t really help me. But we feel good for getting that giving that, you know, Pat, on the back type of thing. So I think feedback is so so important in those points of maybe reflecting with your kids and having those conversations so that they’re even learning from what they’re what they’re going through and recognising that that learning. That’s where that EQ I think is, is part of that that growth is so integral.

 

Erwin  

Matt, we’re over time. Thank you for being so generous with your time. I’m sure. Josh, I’m pretty sure your hourly rate is very high.

 

Matthew  

I’ll be sending an invoice after this.

 

Erwin  

I can’t afford you.

 

Matthew  

I just send you a referral. Send your referrals don’t drive down here. But if you do, I’ll give you a great tour of the

 

Erwin  

region. Matt, where can people connect with you? Where can people follow along? Well,

 

Matthew  

I, Kyle and I and another one of our partners, John have started a podcast called invested teacher. So our audience is really aimed at you know, those that are baby benefiting and doing well in life already. But when it go that that next level of exploring investing from that standpoint, so the investment teacher.com in the invested Teacher Podcast and grown Episode 15, or 16. And having a tonne of fun sharing that my real estate team is called the real group, you can find us at the Real group.ca. And my own personal Instagram is Matt loves real estate would love to connect love to talk about real estate, love to talk about learning, and always love to meet great people who are interested in the same things.

 

Erwin  

Fabulous Matt, and then any final words you want to leave off with to the listener or 17 listeners.

 

Matthew  

That number sounds like it hasn’t really grown, you know,

 

Erwin  

here actually, let me frame the question for you. If you could stand up stand on stage with your old school in high school. What would you tell them? Yeah, you

 

Matthew  

know, that’s that’s such an interesting question. I think I would, I would tell them that, as the author Marie Forleo says, Everything is figured out double click, we can figure this out, always and forever. There’s always a way forward. I think that I think that I would Gosh, that’s that’s a that’s a really great. That’s a really great question, Erwin, that’s a really great question. I think, what would I say to those kids? I think that, I would think I would tell them that we spend far too much time thinking about the future and the past. And that in that very moment, we can be in the in the present. And I think that that’s important for all of us, because we’re full of hopes, ambitions, or maybe regrets. And I think that that’s part of it. I think I would say that life is not a straight line. It’s not a to be that it’s a squiggly line with lots and lots of learning in between those squiggles. And I think that when we reflect at the end of our lives, that each one of us would hope to have made a difference, and to maybe have lived a path less travelled more, at least more exciting and more interesting. I’m really interested in retirement and even, you know, there’s that great book, The Five Regrets of the Dying and just like thinking about your life, I was a history teacher. So for me, history wasn’t about names and dates. It was about stories. And it was about understanding themes. And it was about reflecting on what the past look like and how that has, you know how that has changed or stayed the same. I think that’s just so, so fascinating. So our life has been a blip, but a blip you know, in that in that vast timeline of history, and I think that we take it far too seriously. And I think that we could all live a little bit more creatively and adventurously. It’s pretty awesome.

 

Erwin  

Well, we’ve got that there. Matt, thanks so much for doing this. This was pretty awesome. Hopefully we’ll start enjoyed,

 

Matthew  

really appreciate it. Really appreciate it.

 

Erwin  

Before you go if you’re interested in learning more about an alternative means of cash flowing like hundreds of other real estate investors have already then sign up for my newsletter. Find out for yourself but so many real estate investors are doing to diversify and increase our cash flow. And if you can’t tell I love teaching and sharing this stuff.

 

 

 

To Listen:

 

On iTunes: https://itunes.apple.com/ca/podcast/truth-about-real-estate-investing…/id1100488294

On Stitcher: http://www.stitcher.com/s?fid=87335&refid=stpr

On Spotify: https://open.spotify.com/show/6Z8yd37AQfQI5DK0J0Xwzz

On Google Podcast: https://podcasts.google.com/feed/aHR0cDovL3d3dy50cnV0aGFib3V0cmVhbGVzdGF0ZWludmVzdGluZy5jYS9mZWVkLw

Youtube: https://youtu.be/JEXNh2W7xuA