From Living in Affordable Housing to Building 400 Units of Affordable Housing with Alfredo Hermano

Greetings, fellow Wealth Hackers!

I’ve been investing since 2005, including through the last recession, the financial credit crisis of 2007-8. With a high probability of a recession coming, I can’t recommend enough that newer investors connect with veterans who have personal experience investing during a recession— the more real estate they had, the better. I personally had five properties with partners, and those were good times. I’ll go more into detail at our real estate meetup in May.

 
 
 
 
 
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Being back in the gym is so great, especially not having to wear a mask to walk into the gym as I’m often running late, so rushing the kids and me out of the car and into the gym is often… well comical. I have my phone in my hand; I’m pulling my gym bag out of the trunk and trying not to spill water on my stuff while loudly encouraging the kids to move quickly as we are late. Then their gym bag gets stuck in the car’s footwell, and my hands are full… dealing with masks for myself too on top of the kids… well, I’m just glad I have one less thing to worry about.

At our last class, Maz, the owner and lead instructor of the Kick Boxing gym we belong to, welcomed me when I walked in and asked if I had a minute to chat.  He knows I’m late for class, and I’m thinking to myself, am I in trouble? Did I pay our dues? The last thing I want to do is owe money to someone who’s won over 30 professional fights and has a dozen championship belts on display throughout the gym. 

Maz tells me my daughter Robin is doing great in class and is ready to test for her bronze gloves, a two-hour test to exit the beginners’ program, by far the most comprehensive, longest test of Robin’s career.  I’m like, great! So what’s to talk about that couldn’t wait till after class?

Maz informs me that Bruce, who’s 18 months younger, is not ready to test and asks how I’d like to proceed.

First, I ask if the kids will be in separate classes, which I don’t want because that means twice the commuting and time investment on my behalf.  The answer is no, so I say no problem! I teach my kids all the time one gets what they earn, and this is a great life lesson opportunity. 

The heads-up is appreciated, but I wonder how other parents would deal with this situation.  I couldn’t imagine arguing with the head instructor that my son deserves to test when I, too, can see that he’s not ready. On the other hand, Robin is very good, likely the best in her class, and she’s been asked to participate in the recording of demonstration videos.

On the car ride home, it’s just Bruce and me in the car as Robin stayed home with a fever that day (non-covid, I rapid tested her myself). I told Bruce how Robin will be testing for her Bronze gloves as the coach says she’s ready and he’s not ready yet.  I ask Bruce if he’s fine with that.  Bruce asks if he can attend the test with me to support Robin.  That’s the response I was looking for. 

Apologies for the proud parent moment 🙂

From Living in Affordable Housing to Building 400 Units of Affordable Housing with Alfredo Hermano

On to this week’s show!

We have a pretty amazing story of Alfredo Hermano, who grew up in affordable housing, and now he’s building and developing a ton of affordable housing. He’s got three buildings on the go for a total of 400 rental apartment units with rents well below market value and plans to grow that number to ten buildings and well over 1,000 units.  These are investments, and part of the investment was crowdfunded via Addy, which I think is super cool, so even those with smaller bankrolls are able to invest.

On today’s show, Alfredo shares how his company 3H Properties Group is able to work with the government to provide subsidies AND his investors a return.

As usual, none of what is shared today is an endorsement.  Please do your research and due diligence; past results do not predict the future, and please seek professional investing advice. Everything shared today is for educational and infotainment purposes, and I wish you all success in your investment returns!

Please enjoy the show!

 

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

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

 

This episode is also brought to you www.stockhackeracademy.ca where everyday real estate investors learn the best practices in stock investing to earn cash flow in about 15-30 mins per day from their mobile phones. After real estate, Stock Hacking is the next best hustle as you’ve heard from many past guests on this show. Among our students last year, 31 trades were shared with them. 30 were profitable for an over 96% success rate. I will be giving free demonstrations online, very similar to the one I gave my kid cousin, a full time musician and he just made 50% return in 2021.  Past of course does not predict the future but if you’d like a free demonstration go to www.stockhackeracademy.ca in the top right, click FREE Demo.  At the demonstration I’ll have special bonuses. We do not advertise publicly for all my favourite listeners and I only have two more demos to give in the next few weeks.

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To Listen:

Audio Transcript

Erwin  

Hello, my fellow real estate investors. This is the truth about real estate investing show. My name is Erwin Szeto. And I’ve been investing since 2005, including that much longer recession than the last one. We had pandemic recession. I’m referring to the financial crisis, the credit crisis of 2007, and 2008. With the higher probability of a recession coming, I can’t recommend enough that newer investors connect with veterans who have personal experience investing during a recession. The more real estate they had, the better. I personally had five properties with partners, and those were good times. At the time, yeah, it was a scary, but with a healthy dose of ignorance. We did just fine. And I’ll go in more into detail at our real estate meetup in May. I was I wasn’t that old. So yeah, wasn’t that smart, either. Anyway, so with things the way they are, being back to the gym is great, in my opinion, especially not having to wear a mask to walk into the gym or walking out of the gym, or, yeah, as because I’m often running late, or rushing the kids out of the car into the parking lot of the car and into the gym. It’s often very comedic and slapstick, like i got my phone in my hand and plumbing gym bag and about shrunk and probably tried to shove all this stuff in my pockets in the gym, trying to track down my shoes, and I’m holding my water balls squeezing or an arm somewhere. And while at the same time encouraging the kids to move quickly because they don’t move very fast. And they don’t understand urgency that well. So they often require a lot of loud verbal encouragement. Sometimes their gym bag gets stuck in the footwell of the car and my hands are full. So I’m having to verbally coach them on how to stuck their head stick and stuck and stick through their gym bags, their boxing gloves and stuff in the gym bag. So it’s a bit bulky. And then so on top of that we’ve never had to deal with masks too well, I’m just glad we have one less thing to worry about. 

 

Erwin  

At our last class Maz his full name is Mazimol. But he goes by Maz as the gym owner and lead instructor of our kickboxing gym that we belong to. He welcomed me when I walked in to the gym and asked if I had a minute to chat. He knows i’m late for class. So I do class too. So my kids are on time ish. But yes, he stops me. So I’m wondering, Am I in trouble to pay my gym dues, because the last thing I want to do is owe money to someone who’s won over 30 professional fights and has a dozen championship belts on display throughout the gym. So Coach Maz tells me my daughter Robin is doing great in class and is ready to test for her bronze gloves. That’s so she’ll be graduating from the belt system into what is a 2 hour exit test to exit the beginners programme. So this is again, it’s a two hour test. And my daughter’s never done, probably an hour test. So this is a two hour test. It’d be by far the most comprehensive test of my daughter’s career. And I’m like, great. So let’s talk about but couldn’t wait until after class. So I, you know, because I’m late. Maz goes on to inform me that Bruce, my son who’s 18 months younger, he’s not ready to test and asked how I like to proceed. So first, I asked him if my kids would be in separate separate classes, but you don’t want because that means twice the commuting. I don’t know how you parents do this shuttling around have kids when they’re in different programmes, because you know, my time investment, or at least our children as time investment have to be double, which is a no go for us. We’ll have to do it by mistake eventually. But try to hold off as long as we can. Maz says no, the answer’s no, they can stay stay in the same class. It’s just that they spend 50 minutes of class doing the more advanced stuffs also show them that I teach my kids that one gets what they earn. This is actually a great life lesson opportunity for me to tell my son he’s not getting a grade, which is honest. But Heads Up is appreciated, but actually wonder what other parents would do to deal with this situation. For myself. I couldn’t personally imagine arguing with the head instructor or dude who has 30 Professional wins 30 Plus professional wins, to arguing arguing with him that my son deserves to test for his bronze gloves when I can totally see he’s not ready for it. My daughter is very good at her class. She’s likely the best in her class and not just a my opinion. She’s been asked to participate as the demonstration student for the recordings of her classes. I think they’re making me making an online course or something. But anyway, it’s there, that she’s been there. Their actor I don’t know their demonstration student whatever you want to call it, but we all know that her technique is absolutely fantastic. Warning to all those who are bullies in or race bullies. My daughter will be well prepared. On the car ride home. It’s just Bruce and I in the car is Robin had to stay home that day. She’s She had a fever, non toilet related. I did the rapid test myself. I told Bruce how Robin will be testing for Brahms club gloves, which my son understands. As coach says that she’s ready, but he’s not. I asked Bruce if he’s fine with that. Bruce asked if he can attend the test with me to support Robin. That’s the response I was looking for. Apologies for the proud parent moment. 

 

Erwin  

Enough about me on to this week’s show, we have a pretty amazing story from Alfredo hermano who grew up in affordable housing. And now he’s building and developing a ton of affordable housing. He’s got three buildings on go right now, for a total of 400 rental apartments. With rents well below market, I believe he said 20% below market value for rents. And he’s got plans to grow that number to about 10 prop 10 buildings with over well over 1000 units in the short term future. These are investments and part of those investments are crowdfunded. Via Addy, we’ve had Steven from Addy on the show before, in case you’re not familiar on one of the more popular crowdfunding options in Canada, and I think it was super cool that these options are available to those who have smaller bank rules, and that they’d be able to participate in the real estate investing market. On today’s show, Alfredo shares how his company 3H Properties group is able to work with the government who provides subsidies, and he’s able to provide it to his investors in return. Pretty cool. As usual, none of this that’s shared today is an endorsement of anything. Please do your own research and due diligence past results do not predict the future. Please seek professional investing advice. Everything shared today is for educational and entertainment purposes. And I wish you all success in your investment returns. Please enjoy the show. 

 

Erwin  

Alfredo. Thanks for coming on the show.

 

Alfredo  

No problem.

 

Erwin  

What’s keeping you busy these days?

 

Alfredo  

Well, my businesses my family two young boys three and seven staying active staying healthy. Actually just before this it was nice I I got out on the Bruce Trail to just an Appleton to do a little bit of biking. Right here my head. So that was good. Keeping healthy.

 

Erwin  

Good for you. Yeah, but no golf. You Live on a golf course.

 

Alfredo  

I live right in front of a golf course. Yeah.

 

Erwin  

You could have been Tiger Woods. 

 

Alfredo  

Probably not. Tiger Woods is half half Asian. Isn’t he? 

 

Erwin  

His mother’s Thai.

 

Alfredo  

Thai? Yeah.

 

Erwin  

It’s pretty cool. Because I think Did you watch the last dance with Michael Jordan? 

 

Alfredo

Oh, yeah, that was that was good.

 

Erwin  

And how Phil Jackson teaches like meditation stuff and, and that was a big part of that was I was a part of Tiger Woods. his upbringing as well was meditation and to see a lot of winners who meditate and have strong mental mindsets for it.

 

Alfredo  

Yeah, that was me. I mean, he’s he’s so well known for his his mental concentration. Right? Like, I mean, that’s an incredible.

 

Erwin  

Minus one yesterday. 

 

Alfredo  

Oh, really? 

 

Erwin  

Yeah. That’s incredible. 

 

Alfredo  

Yeah, people are a I think there’s big hype him going into the, into the tournament, right?

 

Erwin  

It could be your kids, man. And they’re both working that day. He just made Tiger Woods money. So we have a lot of talking about today. Cuz that’s what’s fun with this podcast is like I get introduced to all these crazy ideas, like morality and real estate investing. We’ll get there. We’ll get there. And oh, yeah. Oh, boy. We’re gonna get some people complaining about what we’re talking about today. 

 

Alfredo  

That’s okay. Controversy is good. 

 

Erwin  

So you mentioned businesses, how many businesses you got, what do they do?

 

Alfredo  

Mostly construction and development, and GC constructors, three h properties. Wooper. That main business is keeping me busy. We have a few other businesses. But you know, COVID hasn’t helped that and in the last few years, so they’ll resurrect at some point, you know, some online rental sharing programmes and stuff like that. Some some pretty cool stuff. But

 

Erwin  

I thought I was busy.

 

Alfredo  

You’re busy. You’re busy

 

Erwin  

I took four days to respond to email. I don’t know how you manage all the businesses you got. So you mentioned construction. Is that kind of how you got started in real estate? 

 

Alfredo  

Yeah, yeah, exactly. I started my first business out of college. Right and, and grew up pretty, pretty aggressively over the last, I’d say, you know, I’m dating myself now and close to 20 years and opened up offices in Washington, Washington State and Texas. We have our head office in Vancouver offices here in Toronto, but mostly focus on commercial multifamily construction, and boom, 2020 COVID hits and $40 million of our business disappears. And so we had to shift to, you know, make a big pivot so, so that’s why we’re doing you know.

 

Erwin  

What were these projects that just went poof?

 

Alfredo  

A lot of our businesses in the hospitality industry

 

Erwin  

Oh mercy.

 

Alfredo  

Exactly 

 

Erwin  

That’s coming back real strong.

 

Alfredo  

It’s unknown when that’s coming back. Right. And so we were building theatres commercial. They called Family Fun centres, family entertainment centres 

 

Erwin  

Like Dave and Busters.

 

Alfredo  

Yeah, like those kinds of places, right. And, you know, obviously COVID Hit that. So like a puff of smoke overnight, everything disappeared, and still hasn’t come back. So yeah, challenging times,

 

Erwin  

You were able to sleep at night?

 

Alfredo  

Well, fortunately, I was, you know, when, when all this happened, it was when myself and my sisters had and my mother went to the Philippines for a three week holiday. And that three week holiday turned into five months of being locked down in the Philippines while this was happening, so it was a pretty crazy time

 

Erwin  

Because they’re still having challenges 

 

Alfredo  

still, yeah, yeah. And it was a real, real eye opener to see like how COVID was handled in the Philippines, as you can only imagine with the current president, who built a pretty bad reputation of human rights.

 

Erwin  

Were you able to eat? 

 

Alfredo  

No, no, we were safe. We were, you know, very fortunate. I have real estate in the Philippines. So we stayed at my my place there, and lots of lots of room for the kids to run around. And sort of a blessing. Because, you know, pre pandemic, I was just going bananas with business and hadn’t spent so much time with my kids. And I got to actually slow things down, you know, get a little healthy, and get some rest and spend time spent a lot of time with the kids. But business was just, you know, disappearing, like, you know.

 

Erwin  

What did you do? Like yet you have staff and salary? 

 

Alfredo  

Yeah, exactly. Yeah. You know, there was, there was a bit of a tough moment, actually, at one point, when, you know, prior to government subsidies and help, there was a moment where, hey, we didn’t know how long the pandemic was going to be, we actually, you know, funny enough, we were at the house, and I was saying to my my sisters, and, you know, brother in law and stuff like that, and I saying, hey, you know, we got to prepare this is this is like, March, we got to prepare and, and potentially, this pandemic can extend to may. And so, let’s, let’s like settle in, you know, and try to make do with everything and hope. Well, we didn’t get back till August. Right. So, so life was was pretty, pretty different than what we have here.

 

Erwin  

And you weren’t even here and you’ve tried to deal with this stuff at different timezone.

 

Alfredo  

Yeah. So you’re trying to try to deal with business checking in with a team, you know, you know, unfortunately, a lot a lot of layoffs had to take place, you had to really relook at the business itself, and like what business you had, and you know, your resources and all those kinds of things and, and try to make the best decision. My My decision was always like, how I built an amazing team overall, with like, very low turnover, totally total commitment, amazing people, family, right, like I consider those that work with me, you know, my business family, and to have to let people go, oh, it just killed me. So I tried to figure out ways as creative as I could, with the resources that I had to keep people as long as on payroll, as long as I could. And, you know, fortunately enough, we kept about 75% of our staff or 80% of our stuff, for the majority of the pandemic post subsidies that ended last October, you know, we’ve had to make a few more changes, obviously, but we’ve kept our staff pretty intact, which is amazing.

 

Erwin  

Slick, the projects that started, did they get finished?

 

Alfredo  

No, they they were all terminated. That’s 

 

Erwin  

Even mid project mid Build?

 

Alfredo  

Yeah, mid Build. Yeah. 

 

Erwin  

So you, you have some like, are they were to frame building more 

 

Alfredo  

They were tapered down, right? Like they, you know, for example, you’re gonna build a theatre 12 auditorium, theatre, they’re only going to do five. And we were, you know, we’d built three of them already. Right, that kind of thing. So, so things really just, you know, took a turn for the worst. And, and I mean, hate and all those businesses are still struggling today. Right. I mean, streaming has decimated the film industry. But we move on. Right.

 

Erwin  

So you mentioned a pivot, I’ll put as a happy ending to the story. 

 

Alfredo  

Yeah. Yeah, no, exactly. We we three its properties. I mean, we actually launched 3h properties in 2017. But because we were so busy with all our other businesses, we didn’t actually shift to that until about 2021. So you know, we’re still trying to recover From what took place from the start of the pandemic? And also, interestingly enough, 2017 there wasn’t that much focus on affordable housing. And there wasn’t that much 

 

Erwin  

because it wasn’t a problem. 

 

Alfredo  

Yeah, it was.

 

Erwin  

I’m joking, I joke a lot. 

 

Alfredo  

Yeah It and funding and it wasn’t in the public’s eye, right. Like people weren’t really talking about it as much as they are today. Right. And so…

 

Erwin  

The rates have been low as long as I remember. So I’m surprised no one thought about it. I remember when I was doing forecasting around real estate investing, like for interest, like vacancy rates were like, never higher than 3%. That’s probably a problem.

 

Alfredo  

Yeah, no, and it was I’m not sure why must have been other policy focuses that the government had, but it was really, at the beginning of COVID, when the significant funding had been, you know, placed in affordable housing, the public’s perception, and public’s concerns about the housing problem had really been exacerbated, right, with people moving from the urban core moving to smaller communities, and those people from smaller communities who had to move out of those communities and all those kinds of things. And so, so for us, you know, the story is positive, because we were able to take all our staff reshift, you know, pivot all their efforts from what we’re doing in the commercial construction stuff, to affordable housing development.

 

Erwin  

Okay, so how do you convince people to invest in affordable housing? Because, as you say, affordable, like, oh, there’s no money to be made? Yeah. I mean, and then investors, that’s like, that’s not what any investor wants to hear.

 

Alfredo  

Yeah, no, I mean, like, the way what I always say, when we meet with potential investors, if in and I asked a question, you know, if if you can invest in something that does good for the community, but also where you can do good business? Why not? Right, why not take a look at it? And so that’s what we’re trying to prove out. I mean, were the majority of affordable housing has been carried on the backs of, of, you know, one, nonprofits, cooperatives and government for how many years? And I think the the movement for private industry to get more involved is starting to increase. I mean, the US, which is a little more developed on the affordable housing side, and our first Fireside Chat with Jonathan Rose in March, where he’s been in affordable housing for the last 30 years, you know, these policies and programmes that are in there, you know, and he’s able to the law for the last 15 years, provide his investors, you know, a 6% consistent return with a 15% IRR for the last 15 years, doing 100% affordable you know, so he’s able to He’s proven out our model, basically. 

 

Erwin  

So why hasn’t it happened here? 

 

Alfredo  

Because it’s still it’s it’s still in its infancy

 

Erwin  

But problems pretty bad.

 

Alfredo  

The problem we know infant. It’s a gigantic Brontosaurus. Yeah. All right. Cool.

 

Erwin  

She’s a meat eating dinosaur. Not a vegan dinosaur, but okay. Product stores, like it would appear a T Rex. That’s helped me the problem is.

 

Alfredo  

Yeah, absolutely. Yeah. Hey, I don’t know, I can’t say why.

 

Erwin

 But you know, how we’re getting out of this. What’s that? Say? Again? You know, how we’re getting out of this affordability issue?

 

Alfredo  

Well, hey, there’s movement, let’s say, right? I mean, CMHC has this vision and goal to have by 2030 Everybody in a home? Right? That’s a big goal. That’s, that’s pretty lofty. And I’m on the phone, at least every couple of weeks with folks from CMHC. And what’s great is that you’re hearing a lot of willingness to look at different ways, looking at the housing problem, right? Different ways, investing structures, different innovative approaches, partnerships are key, you know, those kinds of things. So that’s uplifting to see such a, you know, substantial organisation have that interest. So, yeah, I mean, I can’t answer the question of, you know, is this is what we’re proposing the solution right? But I think it’s a combination of of all the things that are happening, whether it be you know, mixed use developments where there’s a portion of affordable you know, whether it’s 100% affordable like our model, it’s nonprofit or you know, there’s there’s there’s all those approaches I think are key.

 

Erwin  

Okay, well let’s focus on one of your current projects.

 

Alfredo  

Sure. 

 

Erwin  

Like the King Street one that’s about that’s like I honestly 

 

Alfredo  

Main Street 

 

Erwin  

Sorry, Main Street obviously lived like 100 metres from that location. 

 

Alfredo  

Oh, you did? Oh.

 

Erwin  

I honestly just lived up the street from there. 

 

Alfredo  

Oh, on Lock street

 

Erwin  

Yeah, just off lock just Street. 

 

Alfredo  

Okay.

 

Erwin  

Yes. Oh, man. I think I sold that house for like 600 something and I saw one of my neighbours just listed for 1.4. And that’s part of the problem like, this is this is crazy. Yeah, this is crazy

 

Alfredo  

Nuts. 

 

Erwin  

So can we use that one as your main street property as an example? What are you doing? So? Tell the listener what what it is you’re doing at? Can you share the address?

 

Alfredo  

Yeah, it’s 405 Main Street, West Hamilton. Yeah, so what we’re doing there, it’s it’s a project 96 unit building seven storeys, our model is, you know, 100% affordable. But the key to our model is we partner with nonprofits to be able to get access to grants, loans of sorry, forgivable loans, exemptions, development, cost, storage, exemptions, property tax abatement, you know, and a whole gamut of things that help our model, make it profitable. And commensurate in terms of investment with, with other real estate investment opportunities. And so for that project, one of our biggest, one of the biggest keys to our model is finding properties that are on it within the within a transit corridor, that are already zoned for our purpose. So we can find properties that are, you know, that allow for six, seven storeys, 100 150 unit buildings that are about half an acre to an acre in size. Brilliant, you know, so we’re starting out in Hamilton with this 405 project, we’ve got three others and development. And our goal, by the end of the year is to have 10 projects in the pipeline, roughly about 1500 units.

 

Erwin  

And then have your investors, they’re open to these opportunities and just the VR.

 

Alfredo  

Yeah, I mean, the majority of our investors, our investors who are looking to make an impact, right, they have been involved in real estate, or they’re, you know, high net worth individuals, or, you know, they’re just folks that are really keen on taking their money and making a change in, in our future. And so, you know, one of the biggest problems that we face today, of course, is affordable housing.

 

Erwin  

And then you mentioned earlier with the other gentleman’s doing for his investors for for returns. I know you can’t tell people what the prospect of returns are, but what what idea do you give them? 

 

Alfredo  

Yeah, so for for our model, because we try to maximise all the grants and loans and forgivable loans, exemptions, etc. You know, our model is one where we can provide a return of capital, pre stabilisation, post stabilisation, we’re looking at providing a six and a half to 7% return. And then and then the exit strategy is a refi, or a sale of the building. But since our model is one where the refi strategy is key for us, as our main is our main strategic position, we’re going to provide a return that is in perpetuity. So once we provide, you know, capital 100% of capital back upon refi, we’re going to still provide a return in perpetuity. 

 

Erwin  

That’s interesting. 

 

Alfredo  

Yeah. So it’s a so it’s basically an infinite return. So and I’ve heard it’s called the, you know, the holy grail of investing. Right?

 

Erwin  

Yeah. The rate of return on investment? Yeah. Because we’re returning their capital. 

 

Alfredo  

Yeah, exactly. 

 

Erwin  

So how do you are you refinancing like everybody else is doing like, you’re going to like, you’re going to a commercial lender?

 

Alfredo  

Yeah. Well, what’s unique is that CMHC also has its own direct lending programmes. But also, it also has a commercial mortgage side, right. And their commercial, their commercial side, they provide insurance to commercial lenders, that will provide terms that are almost equivalent to the direct lending programmes. And so you know, long term member amortisation, 50 year terms, lower rates, then then the market and, you know, combine that with grants and loans. And the numbers make sense.

 

Erwin  

Interesting. No. And all these people hate Justin Trudeau is this wouldn’t be possible without him.

 

Alfredo  

Yeah. Yeah. I mean, I think it’s I mean, you look at what’s needed and affordable and government assistance is, is absolutely what’s necessary. That’s the only way the model works.

 

Erwin  

Now, because private people do this, like a regular bank won’t lend you because housing is affordable. Your rents are 10-20% well below market value. 

 

Alfredo  

Exactly. Yeah. 

 

Erwin  

That’s crazy.

 

Alfredo  

Yeah. So yeah, we’re our model is a combination of what’s called Deep affordable and market affordable. And so deep, affordable tenants pay around 50% But their rents are subsidy. iodized, and the market affordable is pay, you know, up to about, you know, 15 20% of market, right?

 

Erwin  

Can you give an example? Like, do you know what your projections are for? Like, what are you building? What are you building up the four or five main street?

 

Alfredo  

So this will be a purpose built rental building 96 units, seven stories, it’ll have all the amenities that are, you know, it’ll not any old theatre, you know, floatation? No, no, 

 

Erwin  

I’ve never heard of that Macondo.

 

Alfredo  

But no, it’ll have a gym, it’ll have a community gardens, it’ll have, you know, parking, parking, and we’ll actually, in fact, have a larger laundry space to kind of treat that as a, you know, a community space as well. And, and we have a commons area where can be treated as a business centre for various programmes, or just a place for people to gather. So we’re trying to really create a community in in our, in our buildings, because not only do we want to treat our tenants with dignity and respect, we also want to create, you know, a place where they can call home, you know, because a lot of the affordable housing developments that have been built in the past have this sort of, you know, I don’t know, the best way to describe it, but not very appealing. aesthetic, right, and more of more, more of like a Soviet potentially, you know, facility, right. But there are so now with what we’re trying to do is we’re trying to create design excellence, we’re trying to create, you know, trying to implement ways to make the building look unique, you know, and and, of course, within a budget, because it’s an affordable housing project, where we don’t have the we don’t have the budget that, you know, market projects have. So we try to be creative with with the resources and the budgets that we have.

 

Erwin  

Are you looking for cost savings to via green technologies? Mr. Praveen mentioned, and I’m I don’t think I’ve heard of it before used in Canada. Is he mentioned shower water recapture? Yeah, just to redeem and recapture the heat as well. 

 

Alfredo  

Other than electricity, are you going to try to keep people accountable at all to their water usage? For example, is this one thing and like, I’m like in my condo is people kind of like, because they can’t really tie the expense back to themselves. They they find that condos, they can’t people who live in condos, I find them more wasteful.

 

Alfredo  

Yeah, there’s, there’s many technologies, and that’s what’s also really unique about affordable housing projects. I think they’re very, they’re leading edge on that, from that respect, like for 405. We have, we’re trying to aim for a net zero electrical use, and that kind of thing, you know, reduces the long term operational costs of the building, which then helps separate affordable, affordable. Absolutely, exactly. And, you know, and things like solar panels, things like heat pump systems, heat recovery, pumping, nothing, heat pump, for the various units, right? heat recovery systems from sewage, and sanitary, right, and, or, you know, envelope, all there’s so many different, different approaches to ensuring the building is energy efficient,\.

 

Alfredo  

Right. Yeah, I mean, we’ll have we’re actually looking to partner with TELUS Smart buildings, and they have, you know, digital metres that help not only digital metres, but from, you know, a single mobile device, you can open and close doors for viewings you can you have, you know, as you said, water, you know, water analysis, water use analysis. So you have energy use analysis and all these type of things, which I think are important, because you’re right, there is the potential for that.

 

Erwin  

For you just like by mistake, someone leaky toilet? Absolutely, absolutely. I don’t think everyone appreciates, but if you’re if your toilet, you can hear it running. That can be a couple $1,000 a month. Absolutely. Just wasted water.

 

Alfredo  

Yeah. So you have somebody helping monitor that. Right. And you have your very various options of and levels of digital monitoring, but you want to cover the basics like that.

 

Erwin  

That’s pretty cool. Yeah. And then what stages do you do you accept investor money just at the beginning? Can people buy these units?

 

Alfredo  

So just you know, so our model, I don’t nothing of other questions. Great questions. No. So our model is is all rental. We’re focused primarily on rental there is affordable ownership as well. That’s not what we focus on. We forego focus on affordable rental. And so in terms of investments, you know, we were actually launching a new project, just actually in the next week or so, it’s on Barton Street, and I’m sure you’re familiar with Barton. And 

 

Erwin  

What’s the intersection? 

 

Alfredo  

That’s at Barton Ottawa

 

Erwin  

Yeah, we talked about that. That’s a wonderful location. Yeah. So this sick time for up and coming.

 

Alfredo  

Yeah, absolutely. It’s right beside centre, mall, participates Mall. It’s Yeah, exactly. And there’s a lot of a lot of traffic on Barton street foot traffic as well. And yeah, that’s a seven storey building 164 units. Amazing design on that building, we had a little more flexibility. And I think, you know, don’t quote me, but we may be, you know, winning some awards, I think, cool. The uniqueness of our design, shout out to revel house or architectural team amazing design. But yeah, that building has been launched to investors. We did a teaser, just a week ago. And next week, we’re going officially to our investment group, and forever and making the opportunity available. So four and a half million bucks we’re raising and to do 160 in a building.

 

Erwin  

So the raise Okay, actually, the questions to ask. And then your involvement is you you’re also the like, the general contractor.

 

Alfredo  

Term is construction management. That’s we’re primarily a management company, but acting in a similar capacity as general contractor. Yeah. So we have full control. That’s one of 

 

Erwin  

You are big time, because not everyone’s allowed to do this. 

 

Alfredo  

Yeah, one of the things that gives us that…

 

Erwin  

I’m not allowed to do this.

 

Alfredo  

From your…

 

Erwin  

I wouldn’t be allowed to GC, there’s no lenders gonna let me be the GC on this. Yeah.

 

Alfredo  

Yeah. I mean, but we’ve been in the business for 20 years dropping John. So you know, we’re building two condos in BC right now. So, but, yeah, I mean, it’s, it’s something that gives us control over the whole process. So from right from the get go, you know, one of the some some of the problems that that developers face is that they get a building that their architect designs incredibly, and it’s beautiful, but then they are challenged with the budget, because, you know, the architects not focused on that. But because we’re involved right from the get go, you know, we immediately look at our design and how it impacts our budget, and make those numbers work.

 

Erwin  

Reminds me of those condos in Hong Kong, where there’s like a hole in the middle of the condo. People couldn’t live there, man. That’s not practical. It was cool. You throw you throw something big through it, but what 4.4 point $5 million raise. So how are you raising the capital?

 

Alfredo  

So we you go to our existing resource or existing investment group. And basically, we have a structure a GP LP structure, raising the LP funds, and we make it available to them for the, you know, for the next couple of weeks. Right. And, but also what we do with our projects is…

 

Erwin  

Just once like your existing investment group, these are high net worth. But really, really high net worth 

 

Alfredo  

High net worth. You know, in some cases, institutions, pension funds. 

 

Erwin  

Oh, institutions have appetite for this?

 

Alfredo  

Family offices. Yeah. In some cases, you know, institutions have now, you know, a lot of these, you know, I think we talked about it, you mentioned the ESG. Right. And so a lot of corporations have created funds, or have allocated funds to, to doing impact. And a lot of them are interested in affordable housing, because that’s an area that they’re focused on. 

 

Erwin  

Got it. Got it. And this fits their return profile as well. Yeah. 

 

Alfredo  

And you will, a lot of these organisations aren’t looking for huge returns, right. And mind you, a lot of them invest.

 

Erwin  

They’re not looking for huge returns, but they’re usually looking for low risk as well. 

 

Alfredo  

Yeah, they’re looking for low risk, they’re looking for, you know, stay at stable income. They’re looking for, you know, decent returns. But most of our conversations are about impact. You know, if they had a choice about, you know, if they, they had one investment that provide a decent returns, and they had another investment that provided decent returns and also had an impact, they’re going to choose the the, you know, the ladder, right, you’re saying so, and that’s those are the investors and joint venture partners that we look for, you know, those they have the same vision, they have the same values. And, and there’s a lot of them out there.

 

Erwin  

Because these investors aren’t gonna go, hey, you know, you can get 20% more rent if you rent evict this person.

 

Alfredo  

No, no, no. Okay.

 

Erwin  

All right. We’re out and wait, let’s wrap it up.

 

Alfredo  

I know you are.

 

Erwin  

So I remember reading the article. And that’s how it was when I reached out to you, because you have involved with ADDY. Yeah, because we’ve had Steven formati on the show. Yeah. Super cool concept. And then where does Addy get involved in this process?

 

Alfredo  

So good question and shout out to Addy, Steven and Mitch. So Addy like the same thing. So as soon as we we make the offering to our investment group, they’re part of that Group, they’ll commit a certain level of investment per deal. And we love bringing them in, because what they do is they make investment available to everyone. Right. Right. And right now, our investment community are mostly accredited investors. Right?

 

Erwin  

Very accredited

 

Alfredo  

Majority or all, you know, like 

 

Erwin  

family offices are not just a credit the there multiple times the requirements to be accredited, okay, sorry, continue,

 

Alfredo  

But love the fact that you can get, you know, anybody and everybody involved at at a low risk, because they’re not allowed to invest more than a certain level. And they’re basing it on, you know, the, the majority, right. And, and so, and to have them not only be our partner, but because they’re building a great reputation around, you know, focusing on more on impact. You know, that’s, you know, the same value alignment. So.

 

Erwin  

I remember, I didn’t know much about Adam, and I hadn’t had him on the show. Sorry, Steven. But he told me the max investment was $1,500. Exactly. I haven’t repeated three times. Really? Because the example I’ve given before on the show is, I don’t have our RESPs because honestly, it’s not enough for me to be interested. Right. It’s not an it’s not a significant amount of money for me to be interested in. And then I’m gonna get some hate for this. Like, it’s perfectly I completely understand why it exists and who it’s for. Yeah, it’s not for me, because I have way too much stupid stuff going on. And you know, I got a I got to learn Tik Tok, apparently, yeah. Right. And that’s somehow our priority over an Educational Savings Plan. But not me. Steven Tilly is with investors that are often I’ve seen it taught and understand why they’re often taught, you know, have one partner in a real estate venture. Okay, because it’s too hard to manage lots of relationships. Yeah. Versus and he’s got the exact opposite direction. They have 1000s of investors now was 1000s of relationships on just one project.

 

Alfredo  

Yeah, they, I mean, on on 405 main street, they raised half a million dollars. And I think I can’t remember the number of investors that were in there, maybe 2000 or something like that. My work is spread pretty, pretty amazingly. But yeah, I mean, I, you know, I’ve been on I’m also a member of Addy, and, you know, voting,

 

Erwin  

You’re able to invest in your own project then. 

 

Alfredo  

Yeah, absolutely. And so the whole platform is so frictionless you know, everything that is that is provided to an investor who isn’t, you know, well versed in real estate can really understand it, and then best.

 

Erwin  

Well, absolutely easier than doing cosi property, right? An offer when the damn offer inspections, insurance, get a mortgage.

 

Alfredo  

Up there, so you still have to manage it ensure that the value stays right. Like I mean, it’s like 

 

Erwin  

It’ll Be over five years. Yeah, magazine maintenance tenant. 5, 10 20 years

 

Alfredo  

And anything, I mean, anything can happen in that situation. Right. And it’s challenging, crazy stuff happen.

 

Erwin  

But what again, I think that is super cool. This is not endorsement by any means because they give me nothing for it. But I think it’s super cool. It was a cryptocurrency presentation. And as always, like they can’t tell you how much how much you should own. But the lady suggested by $1 Bitcoin. Hopefully she won’t get sued for giving financial advice. Okay, bye. Bye, everybody point was get off the zero don’t have zero because at least if you like break the seal, then hopefully that opens the door to a greater journey of learning more. Right? Maybe you want to get into construction. You want to get a socialised housing. Maybe you want to be a landlord. Yeah. Right. So but that doesn’t happen until you break the seal. Right. Interesting. Yeah. So very easy way to break the seal. Because my understanding is you can do a minimum of $1. But that doesn’t make any sense. Because the fees,

 

Alfredo  

The fees, yeah, I think the fee is $25 a year or

 

Erwin  

Just a year, not even a month. Yeah, so, so invest more than $25. Yeah. But yeah, that’s pretty cool. Because that is about impact. And that’s why that’s why the dude asked even three times what the maximum investment was. Because it’s hard for me to get a financial impact as an investor when I’m only investing 1500 bucks. But he meant impact more for socialised investing, essentially, yeah, you may leave space for everybody else to build to get in. Yeah, rather than just the big fish. 

 

Erwin  

Yeah, and exactly that, right. Because primarily real estate has been, you know, mostly invested in by people that are accredited or people that have wealth and, you know, to get the vast majority to get involved, as you say, you know, get the get your get your foot in the door, basically, you know, starts opening up your eyes to Other things that will help you improve your, your financial situation.

 

Erwin  

Reminds me of one share of Tesla, because it’s too expensive. So just want to share a piece of Elon, all the action, mostly to kill my phone while he wasn’t bought this year. It’s mostly killed by FOMO. Got a piece, I’m in the door. I got foot in the door. We talked earlier before we were recording about book co ops. And it was a it was a presentation that you were giving about around. Sorry, I’m jumping all over. But I didn’t notice it, which is kind of sad that I know this. But you’re talking about in the presentation, how a bunch of affordable properties will no longer be affordable probably pretty soon. Yeah. Can you explain what that is about?

 

Alfredo  

Yeah, yeah, absolutely. I mean.

 

Erwin  

If I didn’t know, there’s probably one person out there also doesn’t know. 

 

Alfredo 

Yeah, absolutely. I mean, this is that particular example was an article that came out in January, about this year, City of Kitchener. Yeah, City of Kitchener. So there’s a cooperative or a bunch of cooperatives that have that own affordable housing. And I think there was a, I can’t remember the exact numbers, I’d have to flip back in my notes, but something around a couple 1000. And so, you know, couple 1000 apartments, apartments. And these apartments were, you know, built about, you know, 4050 years ago, on on long term mortgages, and to be kept affordable for that term. And so now, you know, of course, buildings only, or only have a life around 4050 years, and you know, the changes, major changes need to take place or improvements. And so not only do they face the end of their mortgages ending and, you know, although they have a lot of equitable value in these properties, they don’t have significant cash flow. So, you know, what do you do with these properties? And, you know, the only options are, at least at this point in time is to either sell and then it gets sold to, you know, private, private industry and private industries looking to maximise profits. And what ends up happening is you have displacement, you have all these folks that are that are, that’s a benefit on the street. Yeah, it’s, but it’s

 

Erwin  

But they’ll have stainless steel appliances, and like granite countertops and hardwood floors. And yeah, that’s not a good thing.

 

Alfredo  

No, it’s not good in the sense that you have displacement. Now you have all these these folks. And that’s happening across the country. And, you know, it’s, it’s, I think, one of the biggest problems and opportunities that we have in the future, which is under the under a category called preservation. And so it was, that was what the chat was all about, and with with Jonathan Rose, but yeah, I think there’s, you know, there’s billions and billions of dollars of assets that are all at end of life, you’re hearing some sad stories about rent evictions, you’re hearing sad stories about people being left out on the streets, you’re hearing, you know, rat infested elevators not working and all those kinds of things. And there’s currently today, there’s no solution for that. So, you know, I’m trying my best with my team and our partners to try to lobby government and lobby, you know, various institutions to get involved in trying to find a solution for preservation.

 

Erwin  

Here, you’re just talking about preserving affordable housing

 

Alfredo  

Preserving affordable housing? Yes. 

 

Erwin  

I don’t know many people are talking about this. 

 

Erwin  

No, it’s not. That’s why it there’s not many people talking about affordable housing in general. And but it’s it’s building, preservation is really, you know, it’s more of a might be more more focused on in the future as we get the supply up of affordable housing, because that’s, that’s still, you know, the challenge in the US, the majority of affordable housing development is preservation, you know, out of out of all the projects that that they did, and I think it was, you know, a year ago, they only built like, 50 to 60,000 new units of affordable housing. The rest? Yeah, that’s it. That’s it.

 

Erwin  

That’s nothing. Exactly for a population of 300,000,

 

Alfredo  

350 million people. Yeah. And they have, they have, you know, their numbers are in terms of people like in Canada, we’ve got it. You know, the total waiting list for people waiting for affordable homes is roughly around 300,000 people in the US, it’s like 20 times that it’s like six to 10 million people, right? It’s, it’s a giant number. And so, you know, preserving existing affordable is, is something that they’re focused on.

 

Erwin  

I see multiple challenges. Even for you guys. I like to call you guys. She’s another apology. I’m sorry, folks. When you’re buying property, there’s other people that want the same properties as you. How’s that working out? Are sellers, sympathetic All right, yeah, this one.

 

Erwin  

Actually. And you know, it’s been amazing. It’s been an amazing journey so far, because not only are sellers empathetic, because we’ve got a lot of problems in society today. Right. And that’s another probably podcast for, you know, but the, you know, the sellers are we’re not only not only sellers, but our consulting teams, other stakeholders, everybody is very empathetic to, to the problems and want to get involved and want to help. We had one of our consultants say to me the other day, and I said, Hey, I know you’re busy, Hamilton, Hamilton, you know, construction, and development industry is going bananas right now. And so I said to him, I go, Hey, you know, heads up, I need your assistance on a, on an environmental study on this project and the next week, because we’re, we’re closing on it. And we’re going to do go into due diligence, just a heads up. And if you could fit it in your schedule, please let me know. He’s like Alfredo, because of what you’re doing. Because you’re developing affordable housing. You’re my priority, or, and so that’s pretty consistent amongst the various groups. And so yeah, so sellers are open to finding out a way that they can also have an impact, right. But to our model is one where we’re focused on secondary markets. So instead of paying, you know, 20 25% of our total cost of a development like in the urban core, Toronto Vancouver’s you know, we’re looking at, you know, markets at a, you know, the secondary markets that have a little more affordability and a lot of available land for development.

 

Erwin  

Other than the Hamilton where else are you looking?

 

Alfredo  

St Catharines we’ve looked in places like across the country from Ontario, southwestern Ontario is our is one of our main focuses but all the way to heading west to BC. So we’ve looked at Regina, we’ve looked at Winnipeg, we’ve looked at Edmonton, Calgary, various, you know, smaller cities in BC Victoria and Nanaimo.

 

Erwin  

But you’re starting in Hamilton. 

 

Alfredo  

We’re starting in Hamilton. 

 

Erwin  

Why Hamilton? 

 

Alfredo  

Well, I live in Hamilton. 

 

Erwin  

You didn’t always.

 

Alfredo  

No. Yeah,

 

Erwin  

Like Hamilton, I understand. You’ve had some nice experiences in other parts of Canada.

 

Alfredo  

Yeah. Originally from Vancouver. Moved to Hamilton in 2050. 

 

Erwin  

You upgraded I understand. Okay.

 

Alfredo  

I super happy, amazing family community. Amazing place. Still tight and strong ties to Vancouver there every couple of months. Families there. So

 

Erwin  

Yeah, that’s pretty wild. Because maybe it’s the grass is greener on the other side. But you know, I just love Vancouver. And we’re, like, you know, like, we’re going back. We’re going to Vancouver end of May. We’re going to do a real estate meetup, stock hacker meetup. I don’t have all the details yet. My wife put it in my calendar for like, like 6:30. So with the time change, there’ll be 930 our time. Yeah, I’m like, home. The kids can’t be up that late. And there’s we don’t have a nanny in Vancouver. So figure that out. Yeah. I Love Vancouver. 

 

Alfredo  

Yeah. Beautiful place, beautiful place.

 

Erwin  

Beautiful People beautiful culture, like people are chill. Yeah. Great to hear.

 

Alfredo  

Well, you know, funny enough, we brought on a new controller just recently, and she’s out of Kitchener. And she was getting on boarded with our team, and in our head offices in Vancouver, and my, you know, Chief of people or is in Vancouver. And so, during this process of onboarding, there is a big noticeable difference between the different you know, from from the West Coast and, and, and Ontario. And so, yeah, definitely, definitely a lot more relaxed and chill for sure.

 

Erwin  

How many employees do you have? 

 

Alfredo  

  1. We used to have closer to 50 pre pandemic, right.

 

Erwin  

And then, but then all the people on the tools they’re contracted out? 

 

Alfredo  

Oh, we don’t have Yeah, so construction management. We only have met the management team, project managers, project coordinators, development managers, superintendents, you know, the rest of the stakeholders are all all our contracted.

 

Erwin  

Parts of the construction industry have bounced back. Have they not like your I still see cranes everywhere. And I understand just from hearing what I hear on the ground, like, they can’t hire enough people.

 

Alfredo  

Yeah. I mean, there’s always been a problem with skilled trades in construction. The pandemic made it even worse, because a lot of folks, you know, in the construction industry, the average age is is, you know, over. I think the average age was over 45-50. At some point, maybe it’s changing. These are old metrics. But, you know, with a pandemic, with a lot of people experiencing such despair as particularly in the commercial side of the construction industry. A lot of businesses went bankrupt or, you know, guys are saying, Hey, I just, you know, I’ve been in this business for the last 2030 years, it’s time to get out. Right. And that happened. There’s, you know, a lot of attrition. And so, you know, a lot of a lot of folks. And that’s been one of the problems also that has impacted the cost of construction.

 

Erwin  

We talked about morality and real estate investing doesn’t want in your emails in our email exchanges. Oh, what do we need morality for? So I’ll think I’ve mentioned to you in probIem, the, you know, it’s, I think you’ve, you’ve seen it, too, like the common apartment building investment model is to buy something. I know, many companies like their strategies to buy something that needs not a lot of work that’s being rented for under the under market value. And their goal is to turnover, tenants renovate, raise values. That’s not a moral investment. I don’t mean to push you. So I’ll start off by saying, when people tell me those things, then I’m not interested. So I’ll throw that out first. Versus I have friends who are trying to build something in Waterloo, like, I’m interested, you’re building, you’re creating supply, I’m interested, right? Versus again, buying something existing. And then, however, that are asking tenants to leave, or living whatever, I just don’t know, where do they go? Like someone who’s paying like $1,000? For a two bedroom? Like, where do they go? Right. And that’s why that’s, that’s, that’s for me. That’s my morality issue with apartment building, investing for that style of investing. So that’s why it’s a no for me, right? I’m not judging anyone. It’s just me. All right. What’s your what’s your view?

 

Alfredo  

Well, a little bit, a bit of background, I mean, immigrant family from the Philippines, you know, parents careers had changed dramatically when we first moved to Canada in the late 70s, early 80s. And, you know, pizza delivery driver with, you know, several income, right? 

 

Erwin  

Your parents? 

 

Alfredo  

Yeah. And so, you know, we grew up in affordable housing. And so my, my career has been about, you know, giving back because I saw and firsthand experience, you know, the having a half being in a situation, where paying rent was still a challenge, but isn’t the challenge that people face today, my parents were able to have their kids go to good schools, and then eventually go to, you know, good colleges and universities and do something for themselves and give back to the community. So that’s where that’s where it starts. That’s the base of, you know, my morality. And that’s what backs a lot of my decision making, you know, giving back to, you know, being fortunate to grow up in Canada, you know, and giving back to the community is super important. Yeah, I mean, that’s with the problem of affordable housing, you know, not only are we trying to do good, and give back, but trying to find a way to make it a sustainable profitable business model, so that we can encourage the rest of the private industry to get involved. You know, so, you know, hey, I want to I want to go to sleep at night and sleep well, and know that what I do every day is having an impact. Again, we just have so many problems in society today, you know, why not? Do why not do it, if it’s not going to be me are not going to be, you know, someone else, like, Who is it? Who’s going to be? And then you know, you’ve got young kids, I’ve got young kids, I want to see their futures be different than what we know, right now looking pretty bleak. From an environmental perspective, a real estate perspective, right? I mean, it’s, we got to make changes, we got to do something about it.

 

Erwin  

That’s pretty cool. Are your investors public about how they’re investing. I only mentioned it because there’s a lot of rhetoric about, you know, hate for for rich people. And that’s in your projects.

 

Alfredo  

Financialization of real estate.

 

Erwin  

I know that too. Yeah, I’m part of the problem. too. But then my defence is, you know, what else is someone supposed to do? This is the same. Don’t hate the player hate the game? Yeah, the game is central bank, money printing. Inflation. Yeah, we as investors, we get a lot of tax breaks for being investors.

 

Alfredo  

And really, if you’re not investing your money in contributing to the economy, the economy is not going to turn and it’s not going to turn over and opportunities and jobs aren’t created. So they’re, you know, things have to move, you know, and what we’re trying to do is to create a bit of a model that’s sustainable, because just like the Kitchener problem that’s being faced, and we don’t want that to happen, you know, 40 years from now, we’re trying to create a model that is, you know, beyond that, that, folks that had been fortunate enough to be, you know, living in the affordable projects that we develop don’t have to be kicked out at the at the end of the term.

 

Erwin  

Right! What are some of the challenges? Is that city city run affordable housing? What do they face? 

 

Alfredo  

Well, I mean, being government backed a lot of those, you know, the income model, you know, a lot of these buildings have have been affordable for so long. So the so the level of income is so low that, you know, they don’t have much room to, to make changes to make improvements.

 

Erwin  

And keep up with inflation on their rents. No. Oh, boy. Yeah, that’s a that’s a recipe for disaster.

 

Alfredo  

Yeah. I mean, so that’s one thing that we do. I mean, our rents are, you know, there’s government, you know, rent control that it’s in place, and, you know, we stay within those guidelines.

 

Erwin  

So, so then your buildings will, I don’t know, if I call it That’s right to call me or buildings, but the rents will be indexed to inflation, at least.

 

Alfredo  

As I said, like, it’ll be to, you know, the the government

 

Erwin  

Got it controlled, which hopefully keeps up with inflation.

 

Alfredo  

Which keeps up with inflation. Absolutely.

 

Erwin  

Because otherwise, otherwise, these businesses, businesses, I don’t know if it’s right word for affordable housing will make it.

 

Alfredo  

No, it won’t. If it you have to be practical, right. I mean, and government money is finite. Right. 

 

Erwin  

I don’t feel that way. Bartenders are getting new pharma plans and child care and dental plans. I’m happy for them.

 

Alfredo  

Yet now in here, that’s, that’s today. Right. And but the you know, I would say that my perspective is that it’s finite. And so if we can find a way to make it sustainable, then that’d be amazing.

 

Erwin  

Any thought to making your buildings co-op? 

 

Alfredo  

No, no, I mean, our buildings are going to be you know, one of the things about real estate as well, and why I’m in involved in construction and real estate, it’s, it’s a great legacy, you know, asset to have, right and, and, you know, I think the goal for all of us is to work hard, and one day not have to work hard. And so I’m just I’m you know, part of our our model is keeping it private, and interesting. So, you know, and by having you know, over my career, develop, develop 1000s and 1000s of buildings, be able to build wealth for myself and my family and for the next generation. And well while giving back to the community.

 

Erwin  

That’s pretty cool. Because we talked about earlier about the examples that I shared before we were recording is like two well known coops failed during the pandemic mountain Equipment Co Op, which is no longer called Bad mountain equipment companies.

 

Alfredo  

I don’t know actually, I didn’t follow that what happened with them?

 

Erwin  

The C stands for something else besides coop now, this was the acronym stays, so really stays. It’s no longer coop because it’s not a coop is privately owned. So it’s still MEC. Yeah, so I see okay, and then locally, mustard seed clarity field, and just reading into MEC, like management wasn’t tight, just their inventory control was just poor is a thin the story that was given was I think, certain piece of hiking equipment, they’ve happened to find it in their storage, but it had been sitting there for like three or seven years so actually worked out. Normally you sell you know, when you have excess supply you you know, you heavily discounted put it on clearance, but thankfully, they found it. And there are the sell for you know, full list price, because you know, during the pandemic, but that was more of a an insight into how poor their inventory management was.

 

Alfredo  

How long did you say five, seven years?

 

Erwin  

Yeah, it was it was in inventory for that long. And it was known as lost in inventory loss. And in freight, we found it. I don’t know, because they were looking for stuff to sell. And then just one I have questions and then wonder like, how is quality of management in a coop? Because you don’t get talented people running businesses unless you pay them? Yeah. Right. So like the whole sunshine list thing? And then like, I don’t know, people are Villa being vilified for making what they do like CEOs of hospitals, for example. But my thinking is, you don’t get talent unless you pay for talent. Yeah. Right. Yeah. So that’s part of my where was I going with that? I don’t know. Like do coops and real estate work? Different things? And that’s kind of the kind of what we’re talking about with with city run affordable housing, like in Hamilton, for example, like a bunch of these properties are in house. uninhabitable? Yeah. Yeah. All right. Like I think one project I think 60 or 70% of it was vacant, because people couldn’t live it. They were being kept. Yeah.

 

Alfredo  

Right. Yeah. The the history of of like city housing and Hamilton is that actually it was what I understand it to be is that they were an amalgamation of a significant number of nonprofits that I think were actually going bankrupt. And so, city housing stepped in every day. and took them over. And so, you know, they already started with problems, right financially. But there was a lot of folks that were living there. And so, you know, what are you going to do something had to be done. And so they stepped in and, and came up with that solution. But, you know, is that the solution for the long term? You know, that’s yet to be determined?

 

Erwin  

Because I remember, within two years, I won’t say which political party I’m sure people can guess. But one of the leaders said, I don’t want to see developers making money’s money off the back of Canadians. Right. And then here, we have nonprofits, oh, leaving a whole bunch of problems for the taxpayer. So how did that work out?

 

Alfredo  

Well, not well, because there were billions and billions of dollars spent originally. So if all that gets converted to private, then, you know, look at the the lost dollars there. Right. And, and so, you know, I think that, you know, back to that comment about preservation being a potential, you know, or not potential being one of the biggest issues and, and opportunities, I think, needs to be resolved in Canada.

 

Erwin  

Are you’re working with the city on any existing affordable housing that they own, that they’re operating?

 

Alfredo  

We’re having talks about opportunities to partner up. I don’t think we’re talking about existing properties only, only because the financial model today with grants and incentives and loans, etc, that are there, but won’t support a preservation model. But they do support new construction, new builds?

 

Erwin  

Well, I mean, they should bulldoze some of these places and build high rise.

 

Alfredo  

In some some places. Absolutely. It makes sense financially to do that. And it will contribute back, you know, if you’re demolishing a 10 unit building and put it up, you can put up 300 units that will have a unilateral positive effect. But what do you still do with those 1010 10 families that are living there? You still have to be, you know, fair and find a, a solution for that.

 

Erwin  

It’s more likely three families because three of the seven of the units are in and you can’t live in them. Yeah. But yes, we do have to relocate.

 

Alfredo  

Yeah, exactly. 

 

Erwin  

And that’s not easy to do. 

 

Alfredo  

No. 

 

Erwin  

Anything else you want to cover today.

 

Alfredo  

Hey, I mean, I got a few shout outs at the end, or how much time we have left, but…

 

Erwin  

Long enough to show to people you’re showing to the city at all. The city we should shout out?

 

Alfredo  

No. I don’t think I’m promoting folks in the city. But building relationships with the folks at the city. I think, you know, no, no specific names, particularly. But

 

Erwin  

I’ll have to say like the people that people I’ve dealt with at Hamilton, they’re very progressive people. Yeah, you wouldn’t, you wouldn’t know their public servants if you’d write by talking to them. Yeah, they have vision. They’re not NIMBY, right. They want change they want they want density. Yeah. Right. Which is not typical of city. Municipal Employees. Yeah. Sorry, continue. 

 

Alfredo  

No, hey, that’s an interesting comment. Because, you know, that’s one of the reasons why we moved to Hamilton, having grown up in Vancouver and seeing the changes over, you know, the last 30 years and Vancouver, seeing, you know, Richmond from where, which is where I grew up in, you know, from farmland, to giant powers and see, you know, Vancouver and high income area. Yeah, absolutely. And see how, what the impact of the, what it was called the skytrain. The rapid transit, the Rev line, and all these other lines, that had just had a huge impact to the city and its growth. And, and that’s what’s exciting about Hamilton, with the LRT, coming, and all transit, the late trail transit and all the other investments taking place in Ontario, and connecting the whole grid together. I think that’s amazing. And, I mean, it has to be done. Because the population is going to continue to grow. You know, there’s the government’s bringing in, you know, one and a half million people over the next three years. And that’s a substantial increase to the population. But Vancouver, seeing, seeing how it grew, and the type of the type of the developed society, and then the regulations and all that stuff that is now in place is, is what happens over time as things, you know, become more, you know, sort of set up, right. And now, Hamilton, we’re in this growth stage, and other areas in Ontario, and it’s really exciting to see that and to have these folks at the city, be open and be willing and look at innovative techniques, look at partnerships. In all my experiences, all my conversations have been all positive. And even from the administrative stuff, they are very supportive. You know, they’re always you know, attentive to you to your files, and I think it’s been great. Yeah.

 

Erwin  

And are you even talking to the mayor as well, because he’s got to be wanting to, you know, pose in front of your buildings. 

 

Alfredo  

We’ve had conversations with with Fred and other counsellors are very supportive. So we’re getting a lot of support of, you know, whenever I asked, you know, how many private industry developers are getting involved in affordable housing, the name, you know, there’s not you can count more than, you know, the fingers that are in on one hand, that are involved in doing affordable housing. So…

 

Erwin  

I’m not sure if one knows how to give a benefit of a construction business. I don’t know. Maybe come back in another episode on how someone else can start. Yeah, absolutely. I can someone with like three properties start getting into affordable housing? Yeah, well, we’ll chat about that when we’re done recording, because I gotta let you go. Yeah.

 

Alfredo  

But, ya know, I would love to, you know, just share that, you know, we’re launching our Barton through project, I mentioned that just in the next couple of weeks. So if anybody’s interested.

 

Alfredo  

What’s the date? because I don’t know when people are going to hear this. 

 

Alfredo  

Oh, we’re launching that probably around middle of April.

 

Erwin  

Middle of April. Got it!

 

Alfredo  

And you had a couple of shout outs, I’d love to shout out to our official charity, foundations for social change. I think Praveen might have mentioned that when we first chatted.

 

Erwin  

He talks fast, dude.

 

Alfredo  

Foundations for social change. You know, it’s they’re basically a direct giving, giving model. I’m not sure if you’ve ever heard of that. But what they did is they did a trial in Vancouver where they gave 50 People $7,500, no strings attached. And the majority of those folks are, are stable financially. And so you know, and you think that the opposite would actually take place. And so what, you know, you’re, you know, these folks will have the money to buy food, buy their clothes for getting a job, they can now afford some food, and they can now afford rent. And so they’re not no longer struggling on a day to day basis, and are able to improve their lives and get back into the game of life, get back into society. So they’re making some pretty cool headway. And they’ve got this new programme, their Greenleaf programme, where they’re going to be raising $3.8 million. They have a control group of around 400. And they’re getting up giving about 200 of those folks at $500. Each, and and seeing what the impact is getting tonnes of support media wise, getting a lot of, you know, in various institutions interested internationally in what they’re doing. 

 

Erwin  

How you track what they do?

 

Alfredo  

That I don’t know. Yes, so that’s very fast.

 

Erwin  

I have a charity too. And logistically, running a charity is not easy. Handing over money is very easy. Understanding the results.

 

Alfredo  

Yeah, there. Yeah, I think I mean, they’re, they’re very sophisticated in their analysis and their studies. But, you know, they are very simple and in the folks that they’re giving the money to.

 

Erwin  

There must be about like a prepaid credit card that they’re tracking or something. I’m not sure. I think there’s no strings attached. Just to track Oh, yeah. Just like I don’t I don’t hang them a stack of cash. 

 

Alfredo  

I know for sure. Yeah. Seriously? Yeah, for sure.

 

Erwin  

Or this is a China we’re using talking about digital currency.

 

Alfredo  

Yeah. No, yeah. So so there are official charity, as shouted out to Addy invest, as I mentioned, we’ll be bringing them into our Barton three project as well. And as well, we were doing our next fireside chat this June. This time, it’ll be with him on Novan of Novan. Developments, a developer out of California, amazing story, you know, similar situation, talking about preservation again, and what they’re doing in the US. Hopefully, we can bring in some of our I’ve been trying to get some or are CMHC partners to get involved. If that’s possible. That would be amazing. Just to get the perspective of what’s taking place in Canada, and how it compares to what’s happening in the US and and if there’s any learnings that we can take please take from that.

 

Erwin  

When you have a third project coming up to and Hamilton. Isn’t there another project as well in Hamilton 

 

Alfredo  

For us? 

 

Erwin  

Yeah

 

Alfredo  

Yeah, we have three projects that we’re working on Bourbon Street, and then we got this Queenston road project that’s taking place. Oh, we’re looking at launching another project in St. Catharines. And, like I said, we’re trying to put 10 projects in the pipeline by the end of the year,

 

Erwin  

and increasing road couple 100 units as well. Yeah, similar idea.

 

Alfredo  

Exactly. Our model doesn’t change, like that’s what we’re being disciplined about is that it’s, you know, 100 150 units, already zoned to six to seven stories, grants and loans are all similar and expected. So the returns are all the same. And so we, you know, try to we’re trying to create scale, basically, that’s one of the biggest challenges that have taken place in affordable housing. Pre pandemic, the City of Hamilton alone had only built 350 new affordable housing units when there’s 7000 people waiting on a waiting list.

 

Erwin  

That surprises that small list will be lot bigger. 

 

Alfredo  

Exactly, exactly. You know, well, that 7000 person list continues or family list continues to grow. Right. And, and so that’s not only happening in Hamilton that’s happening across the country, you know, and so, so, you know, we’ve got to do something about it. And we’re trying to we’re trying to lead by example.

 

Erwin  

And then there’s some of the ridiculousness in the media about all we don’t have a housing supply issue. We have all these houses in Saskatoon that aren’t that are boarded up things. People need to go live there. Okay.

 

Alfredo  

There is a housing supply issue for sure. I mean, you know, statistics I mentioned this during our fireside chat, is that Canada is, you know, on a housing capita, per capita basis is the lowest amongst the g7. And for Ontario, just to meet the national average would have to build 650,000 new units. Well, that’s why we’re talking over what time period? No, no, that just just not not that it’s going to happen. But I’m just saying that to get to the national average, and why are we having this housing crisis? And why are prices so high? Why rental rates so high because of that deficit. Right. So yeah, lots and lots and lots of stuff. 

 

Erwin  

We have a provincial election coming up. Yeah. optimistic. Oh, man. And another, something else to ask? Oh, so I’m trying to be an FAQ for you so that you don’t get like all these crazy emails, other than the ones that I send you, for someone to be an investor. So for someone, so you mentioned that there’s kind of like two rounds of investment. There’s the there’s the one you from your private investor group, what are you looking for there? What is so what does someone have to do to qualify for that?

 

Alfredo  

Accredited Investor? $100,000 minimum investment. You know, obviously, it’s similar alignment?

 

Erwin  

Well, they wouldn’t be investing. Exactly. You’re gonna be asking like, what’s this return? Yeah. Again, like in person? I don’t know. Dogecoin.

 

Alfredo  

And then for for, you know, as I said, we will be bringing Addy on board as well. So make that available to the, to the groups.

 

Erwin  

Amazing. Yeah. All right. Any final words you want to share?

 

Alfredo  

Well, hey, investing in affordable housing is possible. And it’s needed. So you know, if anybody’s interested on on your show, and your listeners know, please get in touch. We’d love to be we’d love to meet you. 

 

Erwin  

How can we get in touch?

 

Alfredo  

They can reach out to by email.

 

Erwin  

Okay, I’m gonna warn you. Emails are forever. This is on the internet.

 

Alfredo  

That’s a good point. You know, I’ll check out our website at 3Hproperties.com. And, you know, we have a we have an email there at info@3Hproperties.com, and you can reach out, reach out to us that way. 

 

Erwin  

Fabulous. All right, thanks. 

 

Alfredo  

Well, thank you very much Erwin for letting me share my story.

 

Erwin  

Cool stuff. You’re you’re doing more to change the world than I am. 

 

Alfredo  

You’re doing lots my friend. You are doing an amazing, thank you. 

 

Erwin  

Thank you. 

 

Alfredo  

Thank you.

 

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 and you’ll learn of the next free demonstration webinar I’ll be delivering on the subject of stock hacking. It’s much improved demonstration over the one that I gave to my cousin chubby at Thanksgiving dinner in 2019. He now averages 1% cash flow per week, and he’s a musician by trade. As a real estate investor myself, I got into real estate for the cash flow. But with the rising costs to operate a rental business, it’s just not the same as it was five to 10 years ago when I started there. Forget the cash flow reduces your risk. The more you have, the more lumps you can absorb. And if you have none, or limited cash flow, you’re going to be paying out of your pocket like I did on a recent basement flood at my student rental in St. Catharines. Ontario. If you’re interested in learning more, but it’s true for free for my newsletter at www dot truth about real estate investing.ca. Enter your name and email address on the right side. We’ll include in the newsletter when we announce our next free stock hacker demonstration. 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.

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