**Transcripts are auto-generated.

Erwin  

Welcome to the truth about real estate investing show for Canadians. I am Canadian born and raised, proud hockey fan. This may offend some but proud maple leaf and who probably screamed a little bit too loud for just winning one playoff round. My name is Herman Seto and I’m a full time real estate investor and been in full time real estate since 2010. When I left my seven year career at Tech, epic blue, to apply my analytical and operating skills to operational skills to something that would actually build me intergenerational wealth, horsemen, something I was interested in getting ahead in life. I’ve been investing in real estate since 2005. I’ve owned over 40 properties that we renovated almost all of them with budgets in the six figures for almost all of them, well over 80% of those properties, call it burn investing, total value investing, call it whatever you’d like. I call it logical, practical and scalable. scalable, because I push for density that gets me higher rents to the bank keeps lending me money as an investor focus real to hear it. I’m in real estate, we’ve helped clients acquire around hundreds 100 Student rentals and convert around 100 properties into duplexes. We are every NIMBYs nightmare. As we continue to expand or our repertoire, we’re already executing on some garden and garage conversions. In my experience, these are the ideal investments for most Canadians most of the time, and our track record includes over 4545 clients who’ve made a million dollars or more investing in real estate properties, income properties specifically that we help them acquire. What I don’t think is ideal is pre construction. For most people, most of the time of the 40 Plus properties I’ve had my portfolio only wants to buy brand new, those were five bedrooms did rentals in Branford that I paid 275,000 for the cash flow, the numbers justified the purchase. And if you new downtown Branford, the properties there are generally quite rough and very old. So by new service law time, able to finance everything it would have worked out quite well compare that to investors in distress who call me middle class folks with middle class incomes who are negative 500 to $1,500 per property. I have no financial advisor, but I don’t think most Canadians can handle that kind of cash outflow and negative cash outflow goes against basic economic theory of what to do during inflationary times. As we’ve been we’ve been inflationary times forever. And you know, one of the first rules to funding inflation is to increase one’s income not to reduce one’s income. One investor I spoke to bought a three bedroom and pre construction condo for just under $1.4 million projected rent $4,000. To which I said, Wow, that’s great. Then they shared with me that their occupancy cost is $6,800. So how many months can one afford to be vacant to carry the cost which is $1,600, occupancy costs, and then even when monster rented, the cashflow is negative $2,800. Again, that’s why I say for most people, most of the time, this is not the right investment. If you were in me, I tried to sell but rates are still kind of high and a lot of smart buyers out there. They’re looking for a deal, as mortgage appraisals are coming in for less than what investors paid. Per the article in The Globe and Mail titled looking for blood condos nearing completion with mortgage appraisals, less than investors paid. So go ahead read that yourself. I like to read news. Anyways, what novice investors don’t realise is a tonne of builders and slash developers. They pay Realtors very well. Why do you think realtors are motivated to line up around street corners and whatnot to in order to acquire sign properties for their clients. The emails that I received from condo builders, they have 4% commissions in the subject line and in big bold letters, tall letters in the email body to promote to garner interest among realtors to sell their properties. FYI, that’s nearly double the rate that a cooperating agent would get on a resale condo. And aside from the short lived down markets we’ve had resale condos are generally been a seller’s market for as long as I can remember. So that means small seller’s market means you know, multiple offers. So buying agents are having to do lots of showings, that takes a lot of time and effort. They’re losing offers because only one person can win. Versus preconstruction pays nearly double, there’s always a good amount of supply. So a good agent may not get as many preconstruction properties. Each time they line up each time they steal transaction, each time they work with a builder, they might not get as many properties as they want, but they usually get a sum, they usually get a couple of them. And again for a business from a business perspective, from a business owners perspective, that sure beats losing and multiple offers. So again, from a business perspective, that means more money for less effort to like live tour golfers, for those who follow the PGA versus live but the preconstruction property again, my experience, it’s not the right investment for most Canadians most of the time. Note, note that I know many people who may have lost money for your construction. We’ve had past guests in the show, I’ve had family who’ve made lots of money in Bridge destruction, but their timing and the locations they chose were near impeccable. Right also the had deep deep pockets. And again, that’s not most Canadians. What have I noticed in my 20 year career as an investor is that those who’ve been around longer generally have fared better. Investors in BC and Ontario generally have feared have made the most money. Apartment Building investments work best when one does not overpay and renovating when tenants turn over to achieve higher returns. Another commonality I see regularly is no one’s cash flowing anything significant, no one’s taking money out of the portfolio in terms of operating cash flow, and after paying their debt after paying mortgages, our portfolio is no different. Nor did we ever plan to take out cash flow. And we’re on a regular basis just being conservative investors or ourselves. I graduated business school with $30,000 in debt and now a cherry we own a real estate, an eight figure real estate portfolio. And that didn’t happen without taking on a lot of debt, to be honest, no darkness distance from family. And it was only made possible by investing in high density, meaning most of our portfolio is duplexes, and student rentals. Without great rents. The banks won’t keep loaning lending us money, and along with our day job incomes to help us qualify. Thankfully, we did not over leverage and our loan to value is quite reasonable. Now, for anyone that follows the news. There’s several economic fundamentals in our favour. Terry and I are well set up for the poor storm approaching post or, for example, CMHC predicts that home building could drop by 32% this year, and a developer called State view and Ontario is having all sorts of financial trouble putting their 1000 preconstruction houses at risk. And I feel terrible for the buyers who put deposits on those pre construction houses, as they may get the deposits back. But they will miss out on all the gains, if they were in for any certain point in time. For example, if they had bought the property before the pandemic, there was a lot of opportunity costs there that they’re gonna lose out on. Again, I personally don’t mind pre construction, because I can’t stomach the negative cash flow. But I do invest in housing developments. And I only do so because I only do so at builders who are household names, I have a little risk tolerance. And I’d never give my money to a builder, such a state view, as they only have their experience is only 200 units. So I literally went to Staples website and counted up all the units of the completed projects. So across like five or seven properties, projects, 200 units, you know, I’m more interested in working with someone who’s done like 10s of 1000s of units. And sadly, speculators will pay a hefty price. And then recent news just this past weekend, another US regional bank, first republic bank is failing. The original headlines were that done, but the government would have to take them over. But that actually what happened was the so for right now as of right now, they’re required for pennies on the dollar. The stock was $115 $150 in March earlier this year. Now this morning, it was $2.30 down from 115 to $2.30. And the new owner is JP Morgan, how many more banks in the US fail, nobody knows. But investors do remember, bank turmoil equals cheaper interest rates. To get into details, the markets have a flight to risk. They sell off their equities generally, to trade them in for they want to buy bonds instead of which we consider safer, and that makes bonds more expensive. That makes the bond rate and bond yields lower, and then bond yields translate into our mortgage fixed rates. And if the yields are lower than our rates are lower, so with cheaper fixed interest rates, that just means more fuel for the fire for our real estate market. That’s over a year ago I share with you on the show just over a year ago back in January, February, I was sharing that the short term timing to sell was right. Fortunately, I was correct. And many of your listeners and clients now that peak, now the pendulum has swung, it’s time to buy. And if you want to learn how to I can’t recommend that you sign up for my email newsletter. Sign up today and receive timely updates on when this new podcast episodes are available and to be the first to know about upcoming events. And some of our events do sell out like the island free training events which are delivered via webinar these days in our island mastermind tours, which are in person on site inside property on inside actual income properties. So those do sell out. And so you do not want to miss it. We’ve already actually just announced our next tour during third east of the GTA because again, these events sell out the last two sold out within five days. So you do not want to miss this and our newsletter is the perfect way to stay connected with us and stay informed about all the exciting news that we have in store. Don’t miss out Sign up now and join our community of engaged and informed 17 listeners where to find it WWW dot truth about real estate investing.ca That’s also where I post my show notes. When I say like the listener don’t worry about running down all this information. I put show notes on website, www dot truth about real estate investing.ca. As always, we’ll tell you how it is we’re going to take keep telling you the truth about real estate investing and how to be a successful investor in Canada. The real estate investing community is a big one and it’s gotten a lot bigger. I’ve had a lot of requests A lot of folks who belong to who are clients of other coaches out there. And then when reached out to me, so I was speaking to a newer investor, who took a course and was instructed to use his personal to budget for his for two, six figure renovations, probably in the tune of each reservation should be around 750,000. That’s my experience. This young gentleman has two innovation budgets, plus down payments, renovations of budgets and loan should need to be in the six figures. Part of the course this gentleman took, he was instructed to use to budget for the use of his personal line of credit for the renovation, I share with him that’s not something my clients or I wouldn’t ever do, especially when the investor is a first time investor and bought two properties back to back over a short period of time, this investor has two vacant properties at this time, they have no money coming in. So in that personal line of credit now costs 9% interest. To me, that’s a lot of risk. Why not at least just do one property. Again, this is their first investment income property, their first burr project wanted to do one, you can protect your risk and more by more than half by just doing that. You asked me a follow on question was how does the avoid shiny object syndrome and those objects are different investment strategies. So I’ll share with you my 17 listeners when I told this young investor, I told him to turn off social media, as it’s mostly lies. He was smart and asked me if my own social media is lies. And I said Yes, probably. So I changed my shirt and style my hair before I’m well caffeinated before I turn the camera on. And honestly, I’d rather not share my investment journey as I’m an introvert, a private person. And generally, people do not share their investment journey. But I have to because I am here working and working on right now. It’d be terrible marketing and terrible social proof. If I did not share with my listeners and my clientele that we do have, for example, 350 successful investor clients, and they generally fit the mould of The Millionaire Next Door. If you haven’t read the book yet, please do. So anyone who posts on social media, as I generally say, they have something to sell somebody gonna post a lot. Again, I’m one of them. But how else would I explain that me and my team and I’m in real estate, we’ve transacted over $100 million in real estate, almost the vast majority of it was small, multifamily, and student rentals since 2010. And it doesn’t take a rocket scientist to figure out how investors have done since 2010. They’ve done extremely well, not everyone selling stuff out there is bad. But there sure are a number there. There are a number of good investments. But it’s buyer beware, there are way more bad ones and good ones. Otherwise, everyone would be rich, and you wouldn’t need the show. And you wouldn’t need to be me exposing people who have gone to share with our audience, people who have lost it. All. Right. That brings me to Alex Olga. So just as an update on the Alex Jones episode, Alex has gone bankrupt. He’s lost everything. The show will not be aired, as Alex asked that it not be aired. And also because I believe that through our conversation, it would likely be used against him in a court of law if that ever happened. So I’m not interested in being part of someone’s prosecution. So at least know that I know the truth about real estate investing and how he lost it all. And who was the party to that? So something that I’ve learned in my journey investor journey, is that form wants to build wealth, build real wealth, direct ownership of physical real estate is the way is by far the easiest and most reliable path to building intergenerational wealth. In my experience, it’s worked for me, it’s worked for many people, many friends and family in my life. And anyone who’s not owning at least one property in Canada is gonna get left behind. While those with multiple properties get ahead in life, they really get ahead in life. 

Erwin  

Speaking of multiple properties, today’s guest is Michael Ponte, and he’s an old friend of mine. We’re old guys, we have way more grey hair than when we when we first met back in late 2010 ish 2009. And, again, people who’ve been buying properties through the years, and especially the US old ranking members from over 10 years ago, we’ve known each other and we’ve all run we all run the same circles, and it feels like forever, and funny enough forever is probably the perfect time horizon to own real estate in terms of maximising money returns. Michael owns with partners apartment buildings across the country in British Columbia, Alberta, New Brunswick and Nova Scotia, probably Saskatchewan to it probably said it but I missed it. Michael is a savvy investor and that’s this social media handle across pretty much every platform Instagram YouTube, Facebook savvy investor, and that’s also the name of his private investor group with over 5200 Members, Michael being old school he’s investing successfully in multifamily apartment in the multifamily apartment building space. And he has no trouble raising capital is a bit of a proactive now. He educates others on how to do so. While he lives out in BC. Yep, that’s a special thing. Like my uncle doesn’t invest locally, mostly lives in BC, near Vancouver but most of his portfolio as well out of province. Listen to the show. Michael shares how he’s navigating today’s interest rates multifamily is fast money. I’m kidding. It’s not Michael’s words, not mine. Yeah, hear him tell you the truth about real estate investing. There’s not a tonne of cash flow in multifamily investing, even though there’s tonnes of rent money coming in, to access to the numbers of a couple of apartment buildings, including how he finds the deal, the different phases in costs during the due diligence process, seller financing screening, joint venture partners, what the biggest mistake an investor to make when buying an apartment building. And if you wait to the very end, but Michael shares how he thinks the new investor can get started. If you’re interested in investing in apartment buildings you definitely want to do this episode to listen to. And I’m sure as many of you out there, as I know, Seth’s multifamily conference and ticket sales have been massive. I know I’ll be there. I have a booth in case you wanna come by. I’m not sure Michael is coming by. But there’s a whole lot of people from all over the country that are gonna be there as well. So if you are, if you haven’t gotten a ticket yet, it’s www dot multifamily. conference.ca. My discount for you my 17 listeners is I win. That’s for letters IW. I n for 10% off. I’ll see you there. And please enjoy the show. Hi, Michael, what’s keeping you busy these days other than flying across country to be here just for this show. I am here for you in our 17 listeners are and the 17 listeners will probably last because they see me coming. Crap. Why did you warn your brother you’re coming on the show? Did I gave her a heads up? Come and check it out. Mom, please. Before you leave, I’m gonna leave me a list of eight people you’re gonna send this to done that we can make that happen. I sure get it back to 17. Let’s get it back. Yeah, man, what’s keeping you busy? 

Michael  

Oh, that’s keeping me busy. Well, it’s tax season. Obviously. That’s one thing, right? That’s always one of the fun parts. Not really. But it’s so nice to meet, you know, connect with your wife here as well. And I’m like, I feel so sorry for you know, tax season keeping me pretty busy. But I think there’s lots of things that are keeping me busy is exactly what everybody’s kind of dealing with right now interest rates are going up? And how do we kind of pivot and adjust and manage through all these things. It’s just a day in the life as a real estate investor, to be honest with you, it’s just you know, interest rates go up. So how are you going to manage that, and you know, been there done this, we’ve kind of gone through cycles as well, in our real estate world. So you know, we’re looking at raising rents, making sure tenants are paying their rents are looking at, you know, what are the banks going to be able to do to accommodate this, you know, I’m not sure if you’re aware, but you know, banks are making some concessions in regards to maybe extending amortisations on some of our mortgages. So we got to sell the story here and try to try to maintain some of the things, you know, we’re in a fortunate position, at the end of the day, you know, we’ve always had, you know, investing in cash flowing properties, and they were sustaining it, but at the end of it, it’s, we got to protect ourselves. Interest rates are impacting obviously cash flow across the board and across the country. And, and so we want to maintain that. And so we got to look at our business just like anything else with cost of inflation going up, how are we going to mitigate that? So we’re having discussions with tenants, we’re talking with our property managers, building strategies, you know, sometimes there’s vacancies that are part of that. So renovations are being done raising rents. So that’s all that kind of wonderful stuff. But yeah, it’s it’s busy. It’s really busy with lots of different things. So to continue to overwhelm our 17 listeners, how many units are you talking about here that you deal with? We’ve got over 225 units across the country, right? And you can name all the tenants, right? No, I ended up in fact, I can’t even name one of them to be honest with that’s not my job, you know, their birthdays? I do. I know, I don’t barely remember my own 20 to 25 units across how many properties?

Erwin  

Oh, 225. So we have got over 75 properties across properties. I compressed it at him.

Michael  

And then I’m just teasing. I had another question. That’s a lot rent, I want to ask you how much it’s worth about anyway, it’s been kind of, you know, that’s current current portfolio. And we’ve had, you know, buy and sell, we’ve sold a bunch of properties, too. And we bought and over the last, you know, 2022 years of doing this a long time 22. And then for listeners benefit. Can you explain how the mortgage? Because you’re talking to interest rates? What did you do in the past where you do a mixed portfolio variable and fixed or the majority of the portfolio is variable. But in the last year, year and a half, we were trying to catch some of that stuff a little bit early. So some of our residential stuff, we stayed variable just as long as making sense. And then we’ve also fixed them. To be honest, you know, Bank of Canada came in pretty heavy with a lot of the rates, so we didn’t anticipate it to some of that level. And so, for me, I’m trying to always, as an investor, you want to always kind of take a look two steps ahead. So I call it the mike Ponte crystal ball. And sometimes it’s very foggy, and you’re trying to just make the best assessments that you possibly can. So my anticipation is that, you know, in the next two years not and I am playing kind of worst case scenario rates will come back down, I don’t believe they will get back coming back down to the levels they once were before. Now, those are emergency rates, emergency rates were never so we can’t anticipate for that to kind of happen, right? But let’s just say it sits at four and a quarter, four and a half percent. And that’s kind of what we’re budgeting into our other variable as the variable rate at some point in time, right. So you know, we’re

Erwin  

Looking out two years out, I’m like, do we want to fix these rates right now at 6.3 6.4 or 6.2? Right now? Or do we just stay the variable rate, try to find ways to mitigate some of the challenges, raise some of the rents and see what we can do. And then it’s at some point in time, you know, we’ll revisit the mortgage in the next year to two years at that point. So you know, if we are fixing them, we’re fixing it for a one to two year term. In some cases, where you are sitting on a variable rate, all of most of our commercial properties that we own, all our apartment buildings are on fixed rates, and I’ve been knock on wood very, very fortunate, all of our mortgages got renewed prior to, or just around the COVID time. So we had some great rates, you know, I’ve got one mortgage right now that’s like 1.89%, for another three more years fixed. So you know, we’re just making tonnes of cash flow out of this property right now.

Michael  

So I’ve been very, very fortunate. But again, so we, our job right now is just raising rents as much as possible, because we know when we start to renew those, and three years from now, we’re dealing with a different situation where the rates aren’t going to be up at that point in time. So yeah, so we got a kind of a mixed bag of both variable and fixed rates. So with bond rates coming down now, are you looking to do any any trying to grab any fixed rates? Now? While we were just looking at some rates? Actually, before I got here, we’re still kind of at that 6.2 6.3? So the answer is no, if the plan is that we are going to renew, you know, for looking at the mortgage rates may be coming down in a year or two, we just got to take into consideration what the plan is for our strategy, right. So part of it and then then I got this is my two cents, so don’t quote it, my gut feel is we’ve got probably one or two more increases coming in for this coming year. That’s my feel. And then we got another quarter point coming up very, very soon. And again, gut feel that there’s probably one more coming in in probably August. So we are kind of planning and preparing that that’s going to come to fruition. And so we’re still very closely aligned with us. And so whatever they’re doing this, there’s going to be some implications to this thing. And there’s still some control on inflation, even though inflation starting to kind of come back down. But I still think there’s there’s some pressure that needs to be managed, they’re not just not seeing some of the inflationary pressures, even though inflation rates gone down. There’s a lot of factors that haven’t gone down, like just to get your groceries, I’ve got a 20 year old daughter, and 18 year old son has four adults, it’s not cheap for anybody, it’s really expensive. So with that being said, I’m kind of planning some of that stuff out. But at some point in time, those pressures going to have to get relieved at some stage. And so that’s why we’re saying, you know, when the next two years where again, it could be even earlier, but even if it’s a year, we see right rates start to kind of come down, we can start to assess maybe some renewals or early renewals on some of those mortgages, if we see the banks reversing their strategy at that point. So if they’re still around, if

Erwin  

it’s kind of crazy.

Michael  

It is crazy out there. And just just to add to that, you know, with all this banking trouble last was kind of what triggered the bond yields to come down. Like nobody knows that there’s not more issues out there. We don’t know. Nobody knows me knows, I can guess I said, this is the mike Ponte crystal ball. I just kind of look at what the numbers that are available to me. You know, I know economists probably don’t and nobody really kind of, you know, know, compared to when the Ukrainian war ends. I think a lot of people were really wrong about whenever the war would end lately, right? I don’t know if anyone saw these banks having troubles like the way they are. It’s a big shock, like, in some cases, very, really, really big shock. So totally Credit Suisse is gone. I

Erwin  

would have thought you would think that that would have ended back in 2018. Z here. Yeah, reset. You survived bad vibe that yeah, you survived the ultimate stress test. So crazy. So crazy. Some people fail to learn from history. That’s actually a good segue into I don’t know what next?

Michael  

You have a you have a what do you call your group? Is it an educational group networking group, a mastermind group? Ah, that’s a good question. Well, it kind of started off from COVID As we started it as kind of a simple group. And so our groups called savvy investor for those that know me or don’t know me, we’ve got a pretty large Facebook community, we’ve got a run over 5200 members across the country that are active investors, and it’s just our Facebook group. And it’s a community where people can kind of come together and talk about real estate investing, share their stories, celebrate their successes, if you’re looking for support and ask questions, kind of an open place, the one thing you’re not going to find is up, you know, deals investment deals, or any that’s it’s a place to kind of support each other and that’s what our community is to begin with, and then it’s 999 a month for the deals one, right? No, there is no deal ones no deal ones. No, no, no, no, no, no, no, it’s not that type of programme. You know, it was kind of really designed for a place to kind of have have those meet. Like we had a meet up in Vancouver back in the day and and COVID hit and that kind of disappeared. I’m like, oh, let’s throw this on as a Facebook group and see what happens and it just kind of exploded actually for a while. And then. So that was our Facebook community called savvy investor. And then a lot of people were asking about education and training and stuff like that. And it’s something I’ve always done. I’ve done it for years, but it was done as a live setting and we’ve always had like 1015 people

Erwin  

Well in a classroom setting and all that, so we did it virtually. And that that is called that’s called the elevat Academy. And our courses are called elevate masterclass, which kind of runs three different programmes fundamentals to residential real estate investing. So kind of foundational stuff for people that are just getting started raising capital through joint venture partnerships. And then for everybody’s favourite topic, I’m sure as multifamily investing. So we do that as well. And then we have a separate group called elevate mastermind, and that’s not people learning how to invest, they already know how to do it, it’s more kind of business based business focus. So for those that are wanting to kind of scale their business, but it just don’t know how to run a business. And so you know, comes to marketing and systemization, we had your lovely wife, join us duck off talk about accounting systems to put into your business and how to systemize that a lot better. We bring in guest speakers literally from all over North America, we got amazing lineup of guest speakers from bigger pockets joining us this coming year, been really wanting to bring in a lot of American speakers or just kind of sounds weird, but they just do everything bigger like this. Everything’s everything that they do is big. And so we wanted big thinkers to kind of change kind of our mindset a little bit and expand this kind of funnel process of some of the things that they’re doing. It’s quite interesting to watch some of those guys. So yeah, it’s a fun community. It’s a great, great place for resources, great place for learning. And like I said, at the end of the day, it’s just really trying to support our members to help them learn how to invest, but more importantly, support them to kind of deal with the challenges that real estate investing does have. It’s not all Lamborghinis and pimped up boats and all that stuff that you tend to see out there. There’s good days, and there are bad days. And do you have that support group and support to help you kind of mitigate and manage through some of that stuff. So who you surround yourself cannot be more important than ever. For example, I mentioned before recording, really happy to have yourself here and I appreciate being here as a palate cleanser.

Michael  

Parker solo, he’s honestly our last guest, that episode may or may never see public, whenever it doesn’t matter. I certainly believe he surrounded himself with the wrong people fortunate, like his coaches are doing really poorly. Other people he attended courses with are also facing the same challenges. He is as in the bank, the bank has questions. JV partners are handling many issues. It’s bad out there. So like, like you said, this. He said, It’s not a Lambos and all that it’s not all chaos to like, like I’ve had some guests on. For sure. Right. Like there’s opportunities, there’s lots of good stuff out there. You know, unfortunately, the bad stuff is the stuff that kind of sticks sometimes right, and so well as it stuck for a while because you didn’t have to, it was pretty easy to make money. Yeah, that’s the thing. But you’ve seen you’ve seen the ups and downs, the new this for 20 years. And that’s the thing, you know, for a lot of people and I’m from Vancouver, so I can appreciate some of the challenges that are happening, even Ontario. For those that are listening to us from Ontario, it’s like, there hasn’t been a downturn in this market. And in Vancouver in roughly 20 years, it’s been kind of up, up, up, up up, you buy something prices go up, and you put a smile on your face. Everybody’s an amazing investor. Everybody’s an amazing investor coach, now, I bought two properties. I’m going to coach you about real estate investing, right? That’s all sunshine and roses. But times like this, and I’ve shared this before his times like this actually make you a really good investor. Nobody wants to hear this because people are challenged right now I get it. And I’m not discounting any of the challenges because I have been there myself, period. Okay. You’re an investor. And I’ve been through this before several times, and I’m sure this will not be the last, okay, it’s just part of what it is. But I’ll be honest, I sleep really well at night. I do. I don’t know for a lot of people that they don’t because they’ve not gone through this kind of stuff before. So with that experience and knowledge, you just kind of go back to your experiences and look back at some of the things that you did and repurpose some of that stuff back again. Is it challenging? Sure. It is. It’s always challenging. But it does make you a better investor and you’re writing a cycle. So with that, it’s just like, yeah, it can, it can be really, really negative. And you can be surrounded by this. And I’ve talked to a lot of investors out there that have reached out to me and said, Mike, I’m in trouble. And this I’m sure you’ve probably been connecting with people too. It’s you know, it’s a lot of people reaching out to myself that had a lot of experience. And or, you know, I’ve known Erwin for years, too. He’s been in this business for a long time. So he’s been mostly sunshine and rainbows.

Erwin  

To be honest, but saying that it’s just like you go through these these types of experiences. And you ask that ask advice and stuff. And I hate seeing people kind of going through those challenging times you really do and you try to support them to the best of your give some suggestions to the best of your ability. But to go back to exactly what you said is it is so important to surround yourself with those types of individuals engage and talk and be open because in this game called real estate investing, you know, you post something like this on social media and Facebook, you don’t want to share some of that bad negative stuff. And then it gets to be a little bit of a lonely place. Right. And so with that being said, you need to talk these things out. You got to talk

Michael  

talk to people about your challenges because somebody else is dealing with the same thing. And they may have found a solution or they’re, you know, ask the question, how are you kind of managing through some of those things to help support you kind of to get through it right? Or else again, you can feel like you’re in this small, little tiny island. And I say that because I’ve been there too, you know, you just don’t like I don’t want to disclose that. Oh, my God, I’m in trouble with this property. This property is not doing well, I don’t want to talk about that’s gonna make me look like a stupid investor. No, you need to share this stuff like that it actually by sharing, you’re actually helping teach other people mistakes that you’ve learned, those are the best lessons from my perspective is shared the bad. The more you share, the more you can talk these things out, the more you’re also supporting other people as well to learn from those mistakes, too. You mentioned earlier, you’re having to raise rents. How are you doing that is partly a function of the markets that you’re in that do not have rent control, because I’m sure you’re in some markets that do not allow it and all the markets that I’m in with the exception of a few properties in BC they are there’s no rent controls. So very fortunate position. honest with you, Halifax is the only one as well as in my small my properties in Fort St. John. So with that being said, I’m sorry, worse for St. John, St. John BC, northern BC.

Erwin  

Things just get Saskatchewan. So I’m glad I’m glad to ask. It’s all snowy. They’re a part of Canada

Michael  

as part of BC, so we got some properties up that way as well. So you know, so with the exception of those few rents, we’re raising 18 to 20%. Somewhere in those vicinities. Now, does that BC sorry, isn’t an Alberta right now? Yeah. So Calgary and Edmonton, we’re seeing rents going up like crazy. Vacancy rates are actually quite low. We have very, very low vacancy rate in that in both of those markets right now. And rents are actually going up. And like Calgary, as you probably well aware, you know, it’s it’s appreciating it’s an appreciating market and this this environment because of affordability rate. So it hasn’t been on this for years years, I think it’s only been recent, like I said, it was kind of it was starting to hit kind of last year, just around the late summer, it started to kind of hit that lady.

Erwin  

Sorry, I’m ignorant. That’s okay. You know, in Vancouver, BC, they weren’t things skyrocketing during the pandemic, just like it was here totally, like in Calgary wasn’t and Edmonton wasn’t they weren’t doing that. But then all of a sudden, with interest rates going up, as you’re probably well aware, there’s not enough money in people’s pockets right now, people’s debt loads are just skyrocketing right now. And so when you know, some of the concerns that we’re seeing in Vancouver is similar that we’re seeing here, mortgages are going up through the roof, people are over leveraged. What I’m finding right now is people are paying debt with debt. So they’re using lines of credit just to get by they’re using credit cards just to get by but as you know, that can only be sustained for so long, high interest rates to get you you know, so with that being said, people are needing to make some serious decisions right now. And that one of the biggest decisions is, I can’t live where I live today, because this is eating us what are we going to do, and so are sharing this on another another interview I was doing, it’s just like people are moving like they’re migrating outwards from wherever major city is to be more affordable and very fortunate as we just talked earlier as people can work from home, and maybe travelling a little bit further to go to work for that one or two days that they have to go to the office. So we’re seeing people’s commutes go a little bit longer. Some are taking even bigger, drastic measures where they’re moving to different provinces altogether. The migration we just saw some of the recent stats just I think was just a few weeks ago, a couple of weeks ago. The migration trends as people were moving to Alberta, the biggest was population train changes from Ontario and BC going to Alberta and the biggest part of that was going to Calgary to begin with right so even idea to split that went to Calgary. I don’t know the split between Calgary and Edmonton. I could Calabrese took these and I remember and Edmonton so I can’t comment on that. But Calgary is quite nice. Yeah, Calgary is pretty. And again, just my context, if I drive three hours north, whether it’s very different is that the distance three hours between the two between the two, it’s about two and a half hours. Okay, but that yeah, agenda whether it’s different interests. NBCU drive two and a half hours north was different Edmonton is gonna be colder than you would see in Calgary. But in Calgary, you’ll get snow in the middle of June, which you get these little show notes that tend to happen. So you’ll see kind of those slight variations that are there. But Calgary is pretty sounds gorgeous, beautiful. You know, you gotta kind of ask is you gotta back it kind of feels a little Vancouver ish, to be honest with you. It’s quite nice out that way. Right. So like I said, you know, you’re looking at, you know, if you could buy a house, you know, if you go to Edmonton, for example, like you can, that’s gonna be maybe surprising for a lot of people. What’s the cost of a townhouse here? And we’re an over in Oakville. What do you think? Three bedroom two bath 1.2? Adam 1.2 All right. 1.2 Yeah, but Right. Okay. 1.2. So in Edmonton, you can get a townhouse there for under 200,000.

Michael  

Oh, how old is it? It’s old. It’s older. But you know, don’t fool yourself. You’d be surprised and that’s actually quite renovated. So it’s like, it might be an older unit, but it’s renovated. And you know, even if you want to go to the higher end or 250 to 300 That’s what we’re talking about here. And so when you start kind of you know, you go back to the old 10% Rule

Erwin  

ratio or the ratio rule or whatever, you know, there’s that ability to accommodate that. So there is cash flow that can be generated over things and you’re investing in. But more importantly, is if people want to live in Edmonton, for example, they can take a lot of their equity they’ve earned here and moved there and their mortgage is now kind of maybe gone for something like that. Right. So it depends on really where, you know, the biggest issue that we see is affordability. It’s just debt loads are just too high and people are needing to make some drastic decisions and drastic changes, but as affects us as investors as well. 100% I’m gonna guess your foreign jokes for St. John properties are expensive for St. John is not expensive, not compared, but it’s more expensive than your Edmonton market. I would say it’s closer to your Calgary. And so then so the nice thing that happened to you is because you you have kind of a national view of relisting. So where are you looking to buy next? So our our focus, so we got actually just a couple days ago, we got a 22 unit apartment building under contract in Calgary just outside of Calgary, actually. So we just locked that up. I shouldn’t say we locked it up, we’d got it under the first stage ended the due diligence. So we’re just going through that process right now just reviewing all the numbers and the assessment, and then we’ll see what comes out of that right now. What’s part of their due diligence phase? Like first of all, how long is it to do due diligence? Yeah, so there’s interesting, yeah, well, I normally try to push a week I tried to do while if it’s five business days or seven business days, but there’s one one little clause that I always like to put in our contract. So for those that are listening, pay attention, I always like to reference, the clock doesn’t officially start until I receive all the documentation. So what happens is there’s a list there’s a big laundry lists that they need to provide two years where the financials, rent rolls, the last two years lease agreements, all sorts of so all sorts of information. So that needs to land in my desk. So once I check off all of those boxes, then the clock starts, okay. Because what happens is people are a little bit what’s the right word lazy. So with that laziness, as you might get piecemeal of this and this, but your clocks already started and ready for this. It’s not a drop box somewhere that you would think, right? And then some of the investors, they’re not, they’re not. And then you got handwritten financials. And it’s just like,

Michael  

Oh, you’d be shocked to see what you deal with if they give you a paper ledger. No, I wish they gave us a paper ledger. It was it’s pretty bad. It’s really bad. Some in some cases, some people are very organised and buttoned down. But I hate to say this, some of the best deals are actually people that are bringing you in the paper Ledger’s To be honest, I guess, because their mom and pop, they don’t really kind of know what they’re doing. And a lot of ways, and, you know, seconds or mon pop is because if that’s probably an indication for larger management style, it’s not completely efficient. They haven’t extracted the most of the value out of everything they haven’t. And when I say Mom and Pop, I actually kind of still do say mom and pop like these guys are just they bought into this property, they maybe owned it for 20 years, or 30 years. In some cases, some of my best deals are actually second or even third generation owned, this inherited these buildings, literally have no mortgage on them. Susie has been renting the property for 30 years, okay, and she’s right getting rent for a two bedroom, two bedroom unit for $625 a month, including utilities. And that rent should be $1,100 a month, not including utilities. So here’s where you can capex on a lot of this stuff without doing a lot of work. But for the existing owner, they’re just like, I’m getting cash flow, I don’t really care. I want to keep Suzy in there, she pays rent on time, and we’re good, but they’ve not done themselves a service because they’re not increased the valuation of this stuff. So so like I said, they can be Mom and Pop, they can be more sophisticated. So due diligence process to go back to your question. On the number side, it takes about a good week, five, seven days, as long as you got the information ready to go. And then once the due diligence has been completed and accepted. Now we kind of go to the phase two of the due diligence, which is you know, going through your financing, get it appraised environmental study engineering report. You need all those things in 2018 it Oh, yeah, you’ll need all that stuff. Yeah, for sure. Yeah, the bank’s going to be requesting it and they’re going to be asking for it. So and part of it is you should be doing your own due diligence on all those things just to be safe. So it’s one of those things, it’s extremely, extremely important. So especially an environmental study, like in a lot of cases, they’re going to come clean. It’s funny, I was coaching one of my students, and he had a property under contract. The issue was he had a guest there was a previous gas station right beside his building. And so what happens is that automatically flagged that there was a gas station, and there was concerns that there may be some potential oil going into his property, there was a phase is it the lender less concerned or he should be the lender would have been concerned with this, right? So that study could cost quite a bit of money. And if there’s any, you know, contamination, the cleaning process is quite significant. So, here, he had to go back to the seller and say, Listen, this has got flagged and this is now going to need to go through a phase two study. I want you to pay for that study and to mitigate the risk if it goes through and everything passes, I’ll pay for the study. But if there’s any contamination that I have the ability to walk it well.

Erwin  

Walk away, and you pay for this study, you know, so these things kind of, we’re helping him kind of figure these things out, because this is all new. And so just got to be careful with all those pieces, what you’re trying to determine. And you can appreciate this is when you buy like an apartment building, you’re not buying a property at all, you’re actually buying a business. And so it’s based on valuation. And so you’re trying to determine is the business performing at kind of what market standards are for what this business actually is, you know, apartment building has more correlation to like a coffee shop or, or I’m trying to think of some other clothing store or something like that, where it’s all based on sales and sales here is rental income, and offsetting expenses, and all that stuff like that. So they wanted to determine is your current market cap base, you know, its current market cap, similar to what this property’s value is? And so they’re trying to understand what valuation is on this particular property. Right. So yeah, so those are just a few things in it. But yeah, I can take, you know, for those that are looking to get into this space, two to three months, four months, five months is not uncommon to go from the beginning of getting the offer accepted to closing, it just depends on on all the things that you’ve agreed to. But there’s a lot it’s quite a process for due diligence. So anyone ever resistant you inspecting suites, besides tenants? Sellers, the seller is not necessarily just trying to hide anything, though.

Michael  

Actually, that’s not true. That is that they did they did actually, it’s just a policy there. I think you mentioned the previous guests we had on the show, and I want to use but I find if you’re novice, like see your within four or five years, I can generally find you don’t know how many sharks are out there. For in what space as a seller is what you’re saying, in general. I’m sure you’ve run into sharks and sellers, they will eat your lunch tonnes. So your feet I don’t know. I don’t know what percent that percent, but they’ll take everything they can from you. 100%. Right. Yeah. So that’s my point is like, caution, always caution. Totally 100%. Like, you know, I imagine you’ve been handed fake numbers before, or like cooked number 100%. In fact, it’s true that real estate, but listeners, that is the truth. Okay, so I joke around, but I’m not joking. This is the real and I tell my students the same thing, when you get a copy of a pro forma and I love our Realtors just so you guys know I love you guys all love you guys all property, your performance comes to you. Okay, and you are basing your offer based on what the performer is stating? Yeah, of course, because we’re buying a business, you’re buying a business, or buying a stream of cash flows. Exactly. And so you anticipate that those numbers are being accurate. So you present your offer accordingly. And I tell my students, the same thing is 90% of the time that those numbers are not accurate. 90. And in fact, I think the number is even higher, okay. And for our Realtors to defend our Realtors, okay to defend them, you’re only as good as the information that you’ve provided been provided by yourself by the seller. So I respect that. So that’s been come to conclusion. So know what you are buying that pro forma, you gotta go in knowing that those numbers aren’t going to be accurate. And so here’s my kind of rule of thumb, and you reference sharks. And so I kind of reverse engineer it, to be honest with you. So when I look at a deal on pro forma comes my way. And I’m about to go to the process of due diligence. I go in it with the mentality is, how are these guys screwing me? And then work my way backwards? That’s me, too. Yeah. It’s like, how are they screwing me? And then by the time I come to the conclusion, there’s always a little bit of kind of screwing that tends to happen. But am I comfortable with that percentage? Or is there any concerns? And can I negotiate that aspect of it, but trust me by you going with that approach, mentally, and you’re like working that way backwards? It makes you scrub the numbers really, really well? And determine, determine what’s kind of going on? Because that’s what it is. And it does, it pops up in the numbers and you start to measure these things. And then more importantly, can it help you become more sophisticated when you’re going back to re negotiating with the sellers when you need to, right, so or any any other any common areas that that numbers are not as refined or accurate as it could be? Like for example, I’ll throw one out there. Like for example, some owners manage themselves. So they factor in nothing for manage that’s exactly that’s even because they’re they’re doing it themselves 100% Maintenance property managers number one and number two, right. And so you should always budget Property Management unless you truly want to be a property manager, which I don’t know what anybody wants to do this, that’s going to be a limiting factor for you if you want to scale your business and you don’t budget property management, but you need to do that, like you need to remove that expense, just to make the numbers work. You can fool the numbers, but at the end of the day, you’re only fooling yourself because you know if you’ve got plans that you want to own like 100 units or whatever the case may be, you know, you can’t man you’re not going to manage this. So you’re gonna have to budget those numbers in advance. So plug those numbers in the banks are going to put those numbers in anyway, they’re going to put that four or 5% 6% in there. They are going to put a repair and maintenance level based on you know, five or 6% Looking at the

Erwin  

To the building are also going to be budgeting a vacancy allowance. So those things need to be captured in those pro formas, they are immediately removed to make the numbers look better. But now you have to go back to the seller and say, Hey, thanks, don’t look at it this way, you got to kind of adjust some of these things. But some of the biggest ones I tend to find is a lot of the maintenance expenses that aren’t maybe budgeted aren’t being references as they should sometimes as utility costs. It’s very uncommon. Rents are not being disclosed accurately. But I’ve seen situations where they’ve provided me with kind of a fake lease agreement from fake tenants and owners were paying for it. So they’re just trying to show that the building was full when it actually wasn’t full. And so they’re just trying to throw that into the numbers right now. So that technically, the owner was kind of technically paying the rent, which is fraught, exactly. And so and then all sudden, the property becomes vacant, and all of a sudden, right, just as you’re about to disclose, right. But again, these are the things that you need to do is when you’re going out to go take a look at the property, you need to check out every single unit when you see the unit is empty, and it’s showing rent your questions. So you got to it’s checking balance, right? So then you look at what the Proform is saying, what are the actual numbers kind of showing? And is there a match, which are really there is not, then you can renegotiate, and you can say, Mr. Seller, I thought it was buying a property that was a 5% cap rate, but based on what the numbers that you’ve presented me, it’s a 4% cap rate. These are what you told me and I thought it was buying that but you’re not. So to make it a 5% cap rate, or based on what I thought I was gonna buy. This is your new price that I’m going to be renegotiated with and then we start to kind of go through that process. So fun. Am I another favourite of mine is projected rent, assuming full vacancy and civic full vacancy. Sorry, as I mean, fully occupied, fully occupied, zero vacancy. Yeah. And projected rent, so they actually sell the property based on future rent increases. So they’re trying to sell after you’ve renovated the whole thing. Yeah, exactly. So it’s just like, wait a minute, I’ve seen so much of that. It’s just ridiculous. But to your point, you know, this is really good. Actually, we’re talking about this, because Irwin said this earlier, it’s like the sharks that are out there. And for those that are looking to get into multifamily spaces we’re kind of talking about this earlier is, you know, how do you kind of get into this. And I think part of this is, you know, make sure you understand this business, because you know, for those that are just in the residential space, right now, you may have learned how to invest in single family properties, okay, so your education level is kind of is here and you can do this real estate at a residential level. But when you are looking at buying like a multifamily, you are not dealing with average Mom and Pop owner, you are dealing with another, hopefully, maybe a more sophisticated investor. And if you don’t, if you’re not talking the lingo or the language and you are trying to buy multifamily, with this type of knowledge, you’re gonna get eaten alive, right? Okay, so you need to get yourself I don’t care if it’s YouTube videos, you’re talking with Irwin, or understand the game no different than what you learned in the residential side. So you can at least talk at that same level, and you can understand this or else you’re buying based on emotion versus kind of using your nog into to understand how, how valuations actually being calculated, and does this property fit what your your investment goals are or not. So it’s very different. For example, I was talking to an investor earlier this morning, and he kept on referring to his house as being land lot value, because that’s isn’t where he lives, houses aren’t worth much. People only pay based on the lot.

Michael  

But that’s only true and how is this? All right, where in certain cases, it can be where a lot of the value is, it’s not the same at all with an apartment building totally 100% It’s not at all like it, like you said, you’re buying a business at the end of the day, you’re gonna have to 10 unit buildings side by side values, it could be completely different, even though they’re built by the same builder, same size, same everything. Well, one just managed better than the other, you will get two different variations with the price for sure. Absolutely. Okay. Is there a phase three? Do we need cover phase three? Oh, let’s see. Okay, so we got phase two, phase three. So okay, so first of all, we’ve got clients for phase two. So there’s no phase two. So yeah, I think, you know, the big part is, you know, you go through the information of phase one would be really just, you know, getting the offer accepted reviewing the, your pro forma, making sure it’s accurate, then you kind of go to the phase two, study, phase two part, which is due diligence, checking your number. And then I would actually say phase three is actually the aspect of environmental engineering reports, all those things, right. Once you’ve checked off all those boxes, and again, I think the important part is double check, triple check, quadruple check, talk to other people talk to other multifamily investors get a second set of eyes share with and I think the biggest one is when you’re looking at a multifamily. What’s the strategy? What are you doing this for? Okay, what’s the plan for this? It’s just like a business. Okay. Am I just buying it and then I’m going to just rent it, or is there opportunity to increase value

Erwin  

And so when I say that, that means you’re trying to increase the net operating income. And so for every dollar of increased net operating income, increase the value of the building between 15 to $20, depending on the area. And so just so for people are listening, net operating income is your gross income, because that’s all your income would be laundry income, rental income, whatever that is. minus all your expenses, not including your mortgage. So income minus your expenses. Okay. All your operating business, yes. Anything that caused me to talk to you guys before debt? Totally, you got it. And so with that being said, you’re trying to increase that dollar for dollar, you’re trying to find opportunities to raise that, by increasing the net operating income, you increase your property value, okay, your your business value. And so that’s the game. That’s the goal. And so is there opportunity, Is there things you can be more efficient? And is there expenses, you can reduce? Maybe you can get the tenants to pay the utility bills, which is one huge, huge aspect you can do? Is there ways you can raise the rents? So what’s your plan? Are you planning on renovating you suite by suite? What can you get increased rent for? So I think before you start kind of getting into multifamily is understand you are buying a business, but what are you trying to do? Like how are you going to increase the value isn’t like residential, where you know, you’re based on the market. There’s some factors to this, but there’s lots of ways you can create forced appreciation and in multifamily properties. So yeah, I’d add to one of the phases out reference check the salary as well. Oh, gosh, yeah, for sure. And want some information about them? 100%? For sure. I was like knowing who I’m dealing with, at a minimum, I check their LinkedIn at a minimum, at the minimum. Yeah, like at the minimum, like I think in this day and age with social media that we were talking about before, there’s so easy to kind of go on social media and just gotta get a sense of the individuals that you’re dealing with for sure. The more information you get, the better it is for you, right. So a friend of mine, he was here, he had conditionally sold an eight Plex. And just in passing and so who was buying it, he goes, Oh, this person like, Okay, I will put my Facebook searches name find them. We’re already friends.

Michael  

Just like three swipes, scroll down, like, Oh, I know who his coaches are. Yeah. So then I haven’t gotten a good idea who his friends are, as given the heads up, like a lot of these folks in this community are not doing well. Yeah. So. So then once you have that information, then, you know, in your negotiations and so he did it, I think it influences negotiations. Like for example, like, I believe you need an extension. Yeah. So that, you know, I’m pretty sure he asked for more money. non refundable. Yeah, you know, I mean, to see if this guy’s for real, yeah, don’t waste someone’s time. Yeah. But yeah, it worked out, worked out. I followed up and worked out. It’s fantastic. That’s good. That’s great. But again, he appreciate the heads up, because I kept like, you know, him and I were friends on Facebook, like, so I just, I just type in the guy’s name isn’t that hard? Yeah, for sure. And I think you’ll find the same people over and over again, because when you work with when somebody is investing in multifamily, or you see a property that’s for sale, like say, for example, is one of my properties. I don’t own just one property, I own lots of multiple, lots of properties. And you’ll see the same thing, same trend kind of happening with others. And so don’t ever be afraid to ask the question, Are you selling any other properties? And if it’s a good if this the process of transaction went, Well, yeah, maybe we can explore maybe selling more or buying more. I tried to do that to the best of my ability, because most of these people are multiple multifamily owners. And the same thing is with the reputation, you know, we talked about real estate investing as a small community. And it’s true. The guys in the multifamily space is even smaller, like really, really, really tight. Really, really small. All your the amount of realtors out there and property managers that manage this space, the investors that are in this space, it’s not a very big industry, right. So you don’t want to ruin your reputation by any means, especially in a small city like Edmonton or Calgary compared to like in Toronto. 100 versus two GTA like, what is the population of Calgary? I couldn’t even tell you to be honest with you later. I don’t think it’s massive, though. I have to google that one. Wikipedia, they have a hockey team, they must be decent size. Yeah, well, they’re doing better than Vancouver. Sorry, guys, Vancouver.

Erwin  

There is their face for now. That’s pretty much it. So at the end of the day, once you once you’ve kind of gone through the process of due diligence, you’ve double checked all your numbers and reviewed it, you kind of sign off no different than would you do in the single family space and you know, then you’ve got you normally it’s about 30 days before you actually come to completion and close back quickly a bounce 30 days to close, usually it’s around 30 days to close, right? So you’ve got so you’ve gone through the process of due diligence, that process can take between 45 to 60 days is an average rule of thumb, depending on the financing, if you’re getting CMHC, it’s way longer. And then after those 45 to 60 days, then tackle another 30 days to actually close there might be preparation of documentation, maybe you’re setting up a court, if you’re bringing in partners adds more complexity to it. So you’ll need to kind of budget for those things. But it does take about 30 days, usually on a general rule. And I think for those that are getting in this space, the best advice I can give you is it sounds like the purchase process is long compared to residential like you know, residential, you can probably get most of this stuff done in about a month. And you can do it even faster.

Michael  

than that, but in multifamily time goes by very, very quick, you know, to do an environmental study takes about three weeks to do and inspect, you don’t have a lot of time. So the more you integrate your team at the very beginning, almost at the time of offer acceptance, then you’ve got everybody aligned to making sure it hits your timelines, these deposits that you’re putting down, they’re big dollars, right. And, and sometimes banks will say, you know, just to give me given you kind of a rough conditional approval, they still can walk away from from the financing, if they feel that there’s too much risk, and it’s happened, I’ve seen people really, you know, literally, they’re about to close that day and say, we’re not no longer interested and pull away, and so puts people in really awkward positions. So you know, get people involved, right, as quickly as you possibly can, you know, 45 minute, 45 days or 60 days to do your due diligence and condition removal does sounds like a long time, it really isn’t long time very, very fast. It goes really quick. So especially if it’s like your first second or third time, oh, god, yeah, like, especially your first time, you just don’t expect it. And so, you know, for those that are getting into the space, just understand time goes by really, really quick, don’t use every single minute, every single hour to kind of make sure that you’re pushing everything forward constantly. So So what do you do for your clients? In what way?

Erwin  

Because I imagine, because we’ve said a lot, for example, yeah, sure, buying a business is not for everyone. Heck no. Right? Most people did not go to business school. First off, most people who are buying these things that I know, have never run a business before. Most most investors I know are generally employees. You know, we’re talking about buying a business. It’s a whole different, you know, people spend many, many years studying, going to business school, whatnot. Yeah, becoming an accountant, all those sorts of things.

Michael  

I imagine some things are handheld. Yeah. Do you hold hands up for my partners and my money partners? Is that what you’re saying? Or for anybody? Coaches? Yeah, for students all the time, constantly. It’s a constant process. Like, you know, for me, you know, when somebody hires me as their as their coach, or they’re wanting to be, you know, even just students of mine that are like so for example, I, you know, we do more of a group setting training. And I also do individuals that really need hand holding, especially during a live deal, especially live deal. And so I tell my students, and this is not any extra, this is just part of the process. This is just service that we try to provide, like, you know, if I taught somebody how to invest in multifamily, and I tell them, my students, this, I am expecting you to call me on your first deal, like I want to filter but the comment that I always share to my students is, you are going to tell me why it’s a good deal, it’s not the other way around, I will obviously vet it and review it and pick holes to it no different than I do with my own deals. But absolutely, so I want to make sure that they have clarity, and they understand exactly what’s going on. So same thing, even with my partners is the first multifamily deal like they’ve, they’ve entrusted me to just do the work and just manage it on their behalf. That’s why they have hired me in the first place is they just don’t want to do it respectively. So they just wanna make a good return on their investment. It’s great, happy to work with them. But I think it’s still important to understand the business they’re there they are my partner and so you know, for me, I you know, do quarterly reviews with them, we go through the financials go through bank statements, updates on the on the property, are we to budget every single year, we have a five year projection, no different than, like a five year projection of what where we’re going to be at those particular stages, we do annual reviews. And so it’s important to kind of make sure that you’re communicating with your money partners on a regular basis, how you are managing your properties, and things are working well. And then the same thing also goes with your you know, even some of my students is we do hold their hand through the whole process. This is like, okay, these are the steps what, you know, how did you negotiate the setting, setting the tone, making sure the offers written well for them, so they’re not put in an awkward position where they run out of time. So we’ve got all these little tips and tricks that we kind of use in our purchase offer to protect our to protect the buyer, and, and then obviously, going through the process of due diligence, you know, they put the numbers together, and they just reassess it helped them with negotiations and all those stuff. That’s the easy part is kind of the acquisition side. The second part to that whole process is the strategy, what are we going to do, and increasing valuation and executing what the plan is, and so that requires a little bit more hand holding, just to make sure they are launching it well. So from day one, once they’ve got the keys, they are going like they’re moving forward, because a lot of ways for multifamily people are trying to refinance it after a year or maybe two years. And so it’s kind of like, you know, all guns blazing at the very beginning to make that happen. So yes, I have a lot of questions. You just mentioned that the refi is usually one or two years. Why does it take so long? What’s happening during the first two years great question to you really great question. So you know when you got up because we were joking, I have actually have a bullet point to say this is fast and furious money making right Fast and Furious a year.

Erwin  

This is fast money right? So fast. Get Rich, or get rich overnight. rich overnight. Exactly. That’s all it is Lamborghinis.

Michael  

Oh, it’s all that stuff all that fancy stuff. That’s what we you will ever need any collection right one for every building one for it’s right beside yours that you have downstairs.

Erwin  

You have so many five Lamborghinis one for every building.

Michael  

But yeah, what what is the one to your process look like? Because I want I want people to people to have the expectation of like, what is what is the fee? Like? Sure What’s What’s the cash, inflow, outflow, whatever? I’m sure you could do this for your students like, what do you set the expectation? What is the expectation, I think part of it, it’s like, there’s always this expectation that, you know, you’re going to do this really, really quickly. But as everybody’s well aware, cash is always tight, it’s even more tender than now than ever. So you kind of Systemising this as well. So you’re looking at, when you got a building, like, let’s just keep it simple. It’s a 1010 unit apartment building, okay? You may see an opportunity here, where the current rent for the property is like $800 a month, and you have the ability to raise that to up to $1,100. But you may have to improve the overall look of the building for the units first to get it to that level. So maybe some new flooring, some painting, maybe some kitchens, or whatever the case may be, you’re not going to vacate the entire building to do that, because why would you do that, and because sometimes it’s just not, it’s just not going to happen, you know, it’s just not going to work. So you may work floor right below,

Erwin  

right? Because we’re gonna go over, okay, think about that, at $800 a month, $800 a month times 10 units, you know, that’s $1,000 a month that if the whole property vacant, and you’re losing $8,000 a month, like that is an income, right? So you don’t want to necessarily do this, you want to kind of stage this out a little bit. So the initial steps are, you know, you look at the lease agreements, lease terms and stuff like that. And when they’re going to come up to renewal, most of the time, when you have units that are maybe month to month, or they’re month to month, or they’re coming up to the end of the term, those are the ones that tend to kind of move the soonest, right, so then all of a sudden, you know, many of you may not be renewing it, then you go in and start taking it over and start renovating those one or two units. And then you start kind of planning out your lease based on these terms is when you know, hopefully can get these two units rented. And the best part about this is you can start communicating to some of these other tenants that maybe like the area like the building and say, hey, just so you know, we will not be renewing your lease for this particular unit. So we’re just giving you a notification now based on whatever government policies are, we are going to be renovating it. And I know what this I know what I’m saying maybe doesn’t work in every single province. But I’m just sharing what what we’re doing in the provinces that have the ability to do that. But with that being said, we give them the first opportunity to maybe rent the other units, the brand new units at the higher level. And then once we start to maybe make those transitions, and it’s actually quite high, believe it or not, they’re like, Yeah, I like the area, I got a brand spanking new unit, or maybe a newer unit that I want to move, move into that right. And then you start kind of working your way down. And then obviously, you will have some vacancies that you will have to address. And you might have to eat one or two months worth of rent. But that’s part of the planning process at the very beginning. You know, and I think that’s, you know, another big lesson for everybody is make sure you have good reserves. That’s my lesson that I learned years and years ago is reserve funds, right? But even more so when you’re doing something like this over budget, really over budget. And so both time and money, time and money for everything and go aggressive like I tell my partners all the time, I’m like, in my analysis, you’ll see the numbers be the highest compared to everybody else, like you can work with other real estate experts, mine will be the highest 100%. And the reason for that is because I don’t just budget for the one or two years, I actually budget for a five year timeframe in regards to owning this building. What can come from that is within one or two years, I got too much cash. So all I’m going to do is give the money that money back to the partners at that end. But what this is doing is it’s not me constantly asking partners for money, which has this negative content, I’m gonna either be honest with them and open and ask for that front. So with that being said, You’re capitalised well, to kind of go through the process to do the renovation, but it is a step by step process. So you’re dealing with lease agreements. And so that’s why I say a year or two, because you might have some challenges with tenants that don’t want to leave you might renovations might take longer than not, you might come up to some surprises that you didn’t want to hear. Right and so you’re gonna fire general contractor, you just never Yeah, all things come out, you know, all these things. It just happens. So you kind of plan for that scenario to kind of come to fruition and so you always plan worst case scenario. And over a pandemic. Yeah, exactly. Right. So it’s all those things, right. And so it’s all those aspects that you try to plan for. So again, you’re dealing with lease agreements, you’re dealing with renovations, repairs, all those kind of things and also raising rents, God forbid there’s a higher vacancy rate or something like that, but that that is kind of the stepping stone process once the building gets completely full at the higher rent levels. At that stage. Now you can go to the process to the bank, because you can show lease agreements you can show rental income coming in, even though the months previous have not been good because you’ve been doing this but they can see what you’ve done to stabilise us they will look at that new valuation based on the new rental income side of things. So that’s kind of the steps

Michael  

Yeah, hopefully the listeners happy with that answer because I want to move on. Yeah, please go. And when asked about partners, for example, when should someone had their partners lined up in the middle of phase four? Oh, no, no, no, no, no.

Erwin  

No. How about phase? Minus four? How’s that? Before you even know, you’ve got to build a house.

Michael  

Before building before?

Erwin  

I feel sorry for this lady, but she’s got firm offers on property and doesn’t have a money partner, like, doesn’t have the money to close? No, that’s wrong. You’re saying? Well, you made the biggest mistake that I see from investments, one of the biggest ones is actually a lot of mistakes I see. But this one’s a big one. Because I’ve seen people lose out on really some amazing deals, really lost some amazing deals. And so with that being said, the time to have your money lined up is way, way before you’re even looking at the building that you’re about to buy. Okay. And that may sound really weird. And you’ve probably you’ve heard this or winning your longtime investor, but and I can’t speak to all those speakers that you’ve spoken to. But you know, at the end of the day, people are not investing in a deal. They’re not investing in you as an individual and trust and credibility. And so once a money partner says, I trust you, okay, like I when I say that 100% Trust, like I trust you, or when, with my $100,000. And you’re not going to zeros, yeah, and maybe some zeros, and you’re not going to Costa Rica with that money. Once they say I have confidence in you, the deal is completely irrelevant, because they trust you 100%. And so if I went to my property, so if I talk to my partners right now and say, Hey, I got a property in tuk tuk tuk. And this is not a knock and talk tactic I’m just using as an example. It’s real place, it’s a real.

Michael  

If I brought it to them, I would have partners for that, because they trust me, right. And they trust me wholeheartedly. And so that’s what they’ve hired me to do. So you know, what you’re selling. And what you’re doing to raise capital is never selling the deal is selling yourself. And so how people can be confident and trust you don’t get me wrong, you still need to present your partners the deal. But you should have most of that lined up probably 90 to 95% of the way by them. And so with that, now you’re just presenting the deal and see if they want in or not. And but that should be coming to conclusion in like a day really quick. So you shouldn’t be spending your precious quality time we talked about how the Time goes fast and the due diligence, shouldn’t spend that quality time raising money. That time is for due diligence. And so if you don’t have money to buy a property, a multifamily property, you’re spending your time doing the wrong thing you need spend your time raising money not be looking at a deal period. So damn someone DM me on the weekend.

Erwin  

There’s these five great properties in XYZ city. You can pass them to me if you want to take them

Michael  

introduce to someone with money.

Erwin  

But then how does someone secure the partnership? Because Because for example, I’ve heard, you know, I’m sure you’ve probably seen it to where money partners are not serious, think of the newer investor right now have been locked out of the secure that relationship with the money partner? Oh, that’s almost an episode in itself. That’s a long, long process. And so I think part of it is, it’s a screening process. And so and when I say a screening process, your money partner is going to screen you for sure. Right? They’re going to ask you lots of questions, because they want to see, hey, is Erwin going to Costa Rica with my money, which I know Irwin would not just so everybody knows he’s a good guy. But I think it’s even more important for the real estate expert to screen the other side. It’s an interview process on that end. And so you want to make sure that they’ve got some form of commitment and understanding and more importantly, and the best example that I can give you is two things. Number one, you are going to be married with this person for as an average roles probably five years. Can you be with this person for five years? Like truly like don’t don’t forget that forget the dollars can you deal with this person for five years is Is there some compatibility? Do they have common goals to what you have? And can you work with with this individual? Secondly, obviously want to determine they’ve got the capital to do so and that they are wanting to take action? Or are they just wasting your time and that and again, that’s part of kind of an interview process that you need to feel comfortable with? Because you’re asking uncomfortable questions like you’re sure Michael showing you of money. Absolutely. 100% want to put the money in this account in Switzerland. Exactly. You know, and so for us, it’s just like, You know what, we want proof that you are going to follow it through right. And so I actually don’t ask for deposits can sound kind of strange, right? Because I I’ve been doing this a long time I can bet my people quite well just know where my flaky people are and my not and so I still do

Michael  

get people to sign a document. It’s a very generic simple kind of letter of a commitment and three letter letter of understanding letter of understanding, right. And it’s just kind of follows our structure, right? And so I get them to sign it. And you will always have people have hesitation with signing. And if they have hesitation of signing, that is the biggest red flag if you’ve got a problem with, yeah, don’t get married, you already know you got an issue there. And you got a bigger issue. If you got somebody that you pass it over, and they sign immediately and you feel comfortable. That’s pretty good commitment, like saying, like, don’t get married to my church and like.

Erwin  

Yeah, so I think part of what you have to do too, is this is you will always have a small percentage of people that will probably not follow through and commit. But that’s why you need to raise. So if you needed to raise like a million bucks, you should actually be raising like $2 million, or $1.5 million. So then, when you have those individuals that maybe they have cold feet, and it’s okay to have a little bit of cold feet, or they’re nervous or something comes to fruition that they weren’t surprised, but they lost their job. You’ve always got backup, right? So in this game called real estate investing, you never I still I never stopped raising money ever, right? You just this constant engagement and connections that you should always be making. So you always have capital ready? Like this does not sound like a four hour work week to me. I think we should have shut this off for now.

Michael  

This sounds like work. Work is called work. This is a job.

Erwin  

All right. So the markets changed a lot. Like cap rates. Give me context, when was cap rates when you first started looking? Good Old Days? Probably something that half a percent cap somewhere in that vicinity? What year were market? Oh, boy, probably looking at 2002 1020 10 2011. somewhere in that vicinity. We were seeing stuff like that back in just prior to not know maybe probably around 2000 to 2003 2004. So those are the good old days. The Good Old Days anymore. These are your cat you’ve calculated caps. These aren’t the ones that are being sold to you know.

Michael  

Those are actually sold to me, believe it or not. Okay, what were the real caps. So real caps. I mean, after we’ve increased valuation and stuff like that, after you’ve done your due diligence, made the adjustments, I’d probably say just maybe another Oh, after we’ve done did the dude after we’ve acquired the property just released after the diligence period after you’ve had you’ve worked with the real numbers are actually well, you know, here’s here’s the thing is I’ve always pushed back on the sellers to get it to what I’m what they’ve presented back on, okay. Always like they like I say, if they’re presenting a some bang, a seven cap, and it comes in at like a six cap. I’m pushing back, you’ve gone through the numbers on through it. I’m like, yeah, it’s just like, I know where your numbers came from. But you sold me a basket of goods. This is what your number, these are your actuals. So I was under the impression that you’re selling me this that’s not so to make it match this, then this is where it is right. And so the price is adjusted that price has to get adjusted. Is it going to get into seven? No. But you know, for me, it’s just like, it’s maybe halfway in between to try to come to some some reasonable Association. Yeah, and, and that’s just the acquisition side, I am worried about what I’m paying, because I want to be sure that there’s opportunity in the deal, but I want to see really truly what the actual future opportunity is. So that’s, that’s really, really important. You know, I was dealing with a student just recently, he was so concerned about this 40 $50,000 variance and this because they’re going back and forth. And he started with 40 $50,000 in negotiations. And at the price point, and he’s like, I don’t want to give it to him. I don’t want to do this, I think, you know, I just really feeling uncomfortable with this. And I joke around, I’m like, I’m a very cheap, Portuguese boy. So it’s just my nature and just the way I am so I can understand getting a good deal. But don’t lose sight to what the opportunity is. His upside was probably close to almost a half a million dollars in a very short window. So are you going to really risk that opportunity for 40 to 50 grand, I go, of course negotiate this, but you’re not going to

Erwin  

walk away from this deal and piss the guy off. And then he’s not going to do you any favours to try to help you come to a close, because there’s still he’s still in the process of due diligence, and there’s lots of things the sellers can do and not being accommodating to support that close. Don’t risk it’s not worth it for half a minute for $50,000. Like this is bigger money. Like it’s so much bigger than what the seller realised what the opportunity was.

Michael  

So don’t lose sight. Right? It’s important to kind of understand that too. And so it’s kind of go back. Yeah, like I said, you know, those are the good old days in the cradle cap rates, you know, today, if I’m looking at Edmonton right now, you know, you’re probably pushing it like 5% cap somewhere in that or five points. 5.25 If you’re lucky in Calgary, you know, you’re probably pushing around the four four and a core somewhere in that vicinity. So we’re kind of getting to those types of markets. Monkton you’re probably pushing it around

Erwin  

aren’t just maybe around five and a half 6% cap somewhere there six, if you’re lucky, Halifax again, you’re probably pushing in those kind of like, low fives early five, somewhere in that vicinity there. Yeah. So the demand for multi has gone up for sure. And so part of the problem that we find is there’s a lot of investors getting into the and unfortunately don’t know what they’re doing either. And so they’ve overpaid some of these properties overpaid. I’m not saying that’s truly what the problem is, but it’s not helping the cause. And so now you’ve got comparables at these extremely low caps, extremely low caps. And that’s where you’re competing with unfortunately, like even myself, I sold some property my properties in Moncton, I sold them all before they implemented their their caps, rent caps. When the yeah rent control, rent controlled, right, so I was buying it just under a 7%. Cap, we increased valuation. And I was a little concerned, I was just trying to be a little bit forward looking. And I was taking a little bit of a gasp, but they announced it in Halifax. And I’m like, I don’t know, I’ve got this gut feeling that they’re going to be announcing it in New Brunswick. So I had to do everything, I just raised all the rents, there was no renovations done, I just raised all the rents, and really quick and we sold it in six months. So we bought it, bought it for 950.

Michael  

Raise all the rents six months later sold it for $1.515 million. And we didn’t do any rentals, nothing. You know, it’s Oh, it’s just, and about a month later after that rent control came in. Now that has been removed, we might open the door again.

Erwin  

And you sold it to the open market. So like you were like preying on your students or something? Oh, gosh, no, no, no, not at all. I think part of it is like, you know, here, this, there was somebody that said one of these courses

Michael  

and courses in and out.

Erwin  

So

Michael  

buyers are a man.

Erwin  

Yeah, like that’s something like for me, I want to get my best value, I’m not going to sell that ethically to my students, because part of that is I’m actually not doing my investors a favour or on the flip side, I’m not doing potentially my students have favour to I teach them try to look for opportunities, you probably won’t find those opportunities in my deal, because I’m trying to get the highest valuation. So I can’t ethically just do it and do that, let alone with rent control.

Michael  

Can’t do that. I just I just but yeah, so at the valuation, you sold it you don’t think made sense? No. It didn’t, then. So that’s the thing, you know, they sell it. I’m like, I don’t know why somebody’s buying it at this price. It just doesn’t make sense. It’s their prerogative at the end of the day. And end with the sales process looks like, like, for example, you know, I’m friends with, we have mutual friends. And one of them explained to me how their objective is to be when when an agent has a property that’s going to be called for sale. Their objective is to be really high on that list for when they when they call so they are high on that list because they have a record of closing. Is that true? This is 100%. Right? So then this is what I want. I actually told the beginner just yesterday. That’s that’s the reality of things. So I said to him, like, you know, between you and I, where do you think we show up on the list?

Erwin  

Yeah, see that assumed list is 150 names and then numbers. Where do you think you and I show up? Yeah, right at the bottom. Right. So it gets through all of us. Yeah. Probably gets an email list as well. Yeah. Right, I guess shopped around the mortgage brokerage? 100%. And then it makes it on realtor.ca. Totally out of present. Yeah, it’s one of those things, you know, you’ve seen it well, before Oh, my goodness, like, you know what, I didn’t call you can call it Oh, yeah, I’ll get calls. I get deals that don’t, there’s never ever been ever pop up at all I got. But those are really where the opportunities are. But I’ve been doing this for a long time. And so for those that are seeking a reputation, yeah, people know you, for sure. But that shouldn’t discourage people to be really honest with you, you’re just at the bottom of the list right now. Right? And so you just need to build those relationships with those people to move up the rank. And that’s all it is. So you know, do your do your part to work with your team members build those types of relationships with them. And it may sound kind of like, you know, it just may sound kind of little bit unjust, I guess. But it’s just take your realtor out for lunch, build relationships with your property managers build relationships with your photographer, like, it’s funny, I had a photographer, he takes pictures of our rentals, okay, but he takes pictures for realtors as well like for showing properties and stuff like that. He was taking a picture of an apartment building that was about to go out to the market. And he called me from there and say, Hey, Mike, FYI, this property’s coming out on the market in advance. Here’s the seller would you want to talk to him? Right? That’s where my photographer giving me leads. And so it’s communicating what you’re looking for what you’re trying to and build those relationships. Property managers are managing these properties. If I am looking to sell one of my properties, guess who my first call is going to be? It’s actually my property manager to give them a heads up

Michael  

First Call Number one, okay? And so with that being said, Here, or she may not want to sell that property. And they may want sorry, he or she may not want to lose that property. And he can talk to the owner and say, Hey, I got somebody else, another owner that I’m dealing with or somebody else that might be interested, would you want to maybe do this as kind of a private sale, kick the property manager a few bucks, just to say thanks for the lead and call it a day. But those are the types of relationships and discussions your lawyer like there’s all these inside discussions that tend to happen. It happens in business too, all the time. It’s so you just need to get out there and connect with those people. And you may not have that really tight connection right now. But that’s what you got to strive for build for right now. Are you doing that in Vancouver?

Erwin  

Because I’m leaving you with it? My question. My leading question is really like, you know, you mentioned like Moncton, New Brunswick or Halifax? Have you value Foster’s relationships? Like it’s almost the other side of the country? That’s a long flight. Yeah. How long is the flight Vancouver to Halifax? Halifax? That is a seven hour Yeah, so seven hours. Yeah. So you’re not getting? Are you getting on a flight to Bali? Are people buying these people lunch? Well, you know, there’s lots of things that I can do here do from that. So for example, you know, I was just in your office, I saw lunch being served here, right and wonderful to touch it because I didn’t touch it. I want to respect it. It looked amazing, by the way. But their body is a temple nobody’s temple. If you don’t believe me look of Michael’s picture.

Michael  

The old pictures all pictures right.

Erwin  

Michael a little bit bodybuilder

Michael  

ABS everywhere, on his forehead, forehead.

Erwin  

Everywhere.

Michael  

No, I you know, there’s lots of things you can do virtually. And I think that’s the little bit of a change. But you know, there’s a lot of stuff you can do like even sending lunch in by surprise, you know, these small little gestures, small little venture gift cards go a long way as well. But it is building and fostering those relationships. But obviously, when you are there, take them out for lunch, take them out for dinner. And you know, and you know, talk about everything. But real estate investing is about connections and just building those relationships so they can feel comfortable with you. Because most people don’t do this. I know it’s changed so much. They just like, hey, I talked to this person. But I haven’t seen any leads. You know what, you just haven’t made it up that list yet. So work really, really hard with to connect with those people. So you get first access, right? You’re adding to my four hour work week here. Oh, sorry. Because to be honest, everything he was talking about here is like you have to have a lot of skills, you should have basic accounting skills, somebody else’s skills, sales skills, relationship building skills, operational skills, yeah, probably some landscaping skills, planning on doing some of that stuff. A lot of cases, these relationships and things, these are things all the stuff that I’m talking about is what you really have to do at its very infancy is like you, you got to work really hard, just like any business. The hardest time in a business is the first 234 years you got to work and work and relationships, that at some point in time, you start to kind of delegating, like, for example, bookkeeping, I don’t do any of that stuff. Right. But you know, for me, it’s it is more so customer relationships, they still invested it with myself. And so I still want to make those connections, you know, you spent a lot of time raising money, right? And so you got to constantly be raising money, I don’t really need to raise work too hard for that anymore. Because you know what the money that I currently have with my existing partners. It’s rinse and repeat now, and now that we’ve got such a track record, they’re just providing me with referrals. So I’m not necessarily needing to go out hunting too much anymore for that kind of stuff, right. But for those that are wanting to scale, you can’t just expect that you’re going to have a very successful business without working you have to work really, really hard to have a successful business. I’ve graduated weekend course I got this.

Erwin  

Talk about for context, Michael, what amounts are your money partners putting into a project? And how long have you known them along.

Michael  

So just an idea, in some cases, I’ve been working with them for probably around 17 1617 years. And so as an average rule, I kind of first started, the magic number is between 50 to $65,000. As an average run rule of thumb, that number is definitely bumped up to be somewhere in the closer to around 85 to $125,000. We do it in share increments. So we have specific shares, but you know, my partners now so say for example, we have a project that may have 10 equal shares in the corporation that owns the property. Each one of those shares will equate to say about $100,000 Just just a general number, right? And so we keep our shares very minimal, because we just look for quality money. And so with that being said, you know, we have individuals that are buying 234 All shares it doesn’t you know, we have people who just say you got 10 shares at 100 grand, here’s a check for a million bucks. Thank you very much. And you just call it a day. And again, this is the relationships we built. And and more importantly, that we’ve been working with them really closely for years right and so but it’s taken some time to do

Erwin  

All right, so the How does someone get started for assuming still is still a good idea to invest in multifamily? Oh god. Yeah, for sure. How does someone get started? Um, question? Yeah, we had a fan whose name happened to be Adam? Rodin? Yeah. Real popular guy. Yeah, yeah. No, I it’s one of those things, I think if you’re gonna get started in multifamily, which I think is a question correct. So if you’re looking to get started multifamily, take the time to take to learn a little bit, you know, understand what you’re buying. Don’t pretend that hey, you know what, I’ve got 20 single family homes. I’m a sophisticated big headed investor know what I’m doing. It’s a different game, completely different game, go back to go back to day one and start your learning no different than what you did when you first started learning single family home. And if you go in with that type of mentality, you’ll have a lot more success because you are buying something different. You’re buying a property, yes, your customer is a tenant, which is similar to single family. Yes, the business is very different. So take some time to learn, like what is it exactly you’re buying? How are you managing this kind of stuff, you know, you’re going to be dealing with different people, like your single family realtor is not going to be your multifamily realtor, your single family property manager most likely will not be your multifamily property manager, your single family, the man your hand, everything, everything changes, everything changes, right. So you know, and more importantly, it’s like, when you’re buying this, you got to also think strategy here. So this is what it is. It’s like it’s not just buy a property and hold it is what’s the plan? What’s the strategy, so learn those things of when you’re about to buy it, that you have a very clear plan of what you’re going to do with it after. And so that’s what investors need to know. And it’s not to scare people, it really shouldn’t be, it’s actually a great investment strategy. But it’s just taking some time to kind of educate yourself first. And like I said, I’m not here to pitch courses or anything. I’m not Not one bit. But read YouTube videos, there’s lots of great free information that’s out there, you know, if you really want to push yourself and scale and do it, yeah, to maybe take a course or two. And again, it could be anybody’s well, not anybody’s chorus, do your research on, on who the person that you’re learning from? And then, you know, do your research on the course itself. And you know, do your research on what the students got out of it? And do they feel that there was value connect with these students? Like if they’ve got testimonials, connect with them, ask them? What did you find value of this this help of what did you buy multifamily after you’ve done this, so start to kind of get yourself educated to learn this business. So you can kind of go in again, like I shared, you want to talk the same language. And that’s what I want is, you know, just, and even more importantly, hopefully, your education doesn’t just kind of keep you at this particular level with your other investor. I’m hoping that your whatever education you’ve got, or whatever knowledge you got, is going to help us make you even more sophisticated as well, right. And that’s kind of really the strategy. And then from there, my other small bit of advice, you’re dealing with bigger numbers, you’re dealing with a different strategy, dip your toe in the water. Okay, so don’t buy your 100 don’t buy your first property as 100 unit building, okay. Buy yourself something maybe a little bit smaller. And, you know, I was talking to some, some amazing guy named Adam or something like that. And I think, you know, he was referencing a four Plex, a four Plex is still falling under a single family, which is still it’s still a good segment, it’s still really, really good, but anything six and over, but I still kind of want to push people to kind of really consider like, seven 810 units somewhere there dip your toe in the water. Yeah, you know what you’re probably and people will challenge me, especially other investors, and they’ll say, why would you do that you’re not gonna get the best economy has scale and all that stuff. And that’s true, it really is. But making these really big, costly mistakes can be very, very costly. So take the time just to dip your toe in the water. And the reason why I share that is I did the same thing too. And trust me, saved my bacon multiple times. It’s just that I’ve just kind of go in dip, and then figure things out make sure everything’s working out now we’ll start to work on some bigger aspects of this. So it’s gonna be like a start off learning. Is it looking at the coop in turn model for example, could someone just be a passive investor and like, come along for the ride and totally learn everything from somebody? Yeah, absolutely. Like I think even for partners that I’ve worked with too in fact, I’ve got one that is here that I’m meeting up tonight actually, he’s one of my partners. And that’s exactly what he’s doing is he became one of my partners as a joint venture partner and he was very open and disclose this 100% It was my I just want to invest with you on this deal. But would you do me a favour Can I go on the ride with you? Absolutely. Come like let’s go. So they got a chance to go part of the the inspection process and learn and and so as a student to or the Eastern nations, they are just an investor or investor Oh, just investor not a student. So he just wanted to be part of the process and so you’re gonna have like 10 requests for First off, she really don’t mind to be honest with you. I really, truly don’t mind because like I said, the more they see the amount of work and they see the amount of

Michael  

work that comes along with this, then more importantly, it comes to the conclusion do they really want to do this or not. And so for some people, they just say I want to be a multifamily investor. And then when they see the amount of energy and effort and energy that are energy and effort that comes along with this, they’re just like, You know what, Mike, I don’t really want to do this, you know, so here’s just my Mani, and off you go. But I’m not pushing them to do that as like, this is what it takes to do this. These are the reasons why I’ve done it the way I’m doing it. So you can think about to get to where it is to get it where it is. So when you go by your deal, just remember this stuff. And I’m not pushing them to come reinvest with me, because they’ve been open with me at the very beginning. So I want to respect that. And I do want them to be successful in whatever acquisition that they have in the future on their own. And I hope the experience that they had here with me was positive, and they’ve been able to relate that back to their future deals. And I want no credit on that. It’s really them. They’re the ones that are taking the action, they just needed a little bit of hand holding to support that. That’s great, awesome, watching in a fair amount of effort. Totally 100% I’ll be honest, when people kind of go through the hand holding process and acquisition like that, there’s a high percentage that people just say, I don’t want to do any of that stuff. I just, you know, I want my kids spend time with my kids. I want to do this and so they’re just like, here you go, right. And because I have a lot of money partners that say that they just don’t want to do it. So I know you can answer this but isn’t that a better use of your time than taking a weekend course? I don’t actually believe in weekend courses. So that might be a surprise. Oh, boy, I might be opening up a can of worms but that’s just my two cents. I might cell phone number for your.

Erwin  

Anyway, I’m not gonna ask sorry, guys. I just don’t I just not the way to see your social media. So Michaels, DMS are open for hate.

Michael  

accordingly.

Erwin  

I’m okay with that. That’s okay. Yeah, I think we covered Oh, yeah, cuz because the point the point I was trying to make with, with someone investing alongside you, because we talked about before we were recording about the right deal, because I think that’s where I think investors can get you can get it wrong in many places. If you’re investing in the wrong deal. You’re doomed. 100%. Right, you have not given yourself a chance. totally right. I think that’s a part of it is, and you know, if there’s a bit of advice I can share with people here, and hopefully, they’re hopefully I’m sharing advice with people. But I think the important part is do not invest based on emotion at all. Ego is huge, right? It’s a big one, especially in this space, I got 100 unit building. Exactly. It’s all that and I just bought my 20 unit building, I can’t wait to post this on Facebook, you know, and they’re just like, under contract, I just bought it not real and they’re making themselves look so good, until you get to the meat and potatoes. And it’s just an absolute dog. And it’s funny because there’s deals that I’ve gone in taking a look at it has been presented to me. And I look at it, I’m like, I’m not touching this thing with a 10 foot pole being posted on social media, you know, three weeks later by somebody else really excited and hyping themselves up and just like I don’t know what they paid for it. But it’s it was a bad deal. From what I looked at it right. So the ego has got to stop and it’s gonna have to stop you just do not let your ego and emotions get in the way of what is important in this game, which is the numbers it is multifamily truly is 100% all about the numbers it is when you look at it, you understand it, it is as clear as crystal clear can be, you know, can there be some minimal variations? Yes. But if you understand those numbers really well, you can have a lot of success. From my perspective, it’s actually one of the more safer investments out there. Because you’re not so dependent on what’s going on with the market. There’s so many things you can do with it, and pivot around to make you successful. And this one is done. Right? If done. Right. Right. And to add more to it is when I say done, right, it’s also right for you based on what your why is I know people I know people say why, why why but it’s the truth. What you know, we all get into this game for a specific reason, in a lot of cases is I want freedom on my time, or I want to be a full time real estate and it doesn’t matter what it is. But as this project getting you closer to what your objectives are to begin with, or not, it’s a simple answer. And that’s the right answer. And by looking at the numbers properly and finding the right deal to get you closer to there,

Michael  

you’ll be in a good spot. And having a quality pair of eyes vet your deal for you’re sure. And it doesn’t have to be a coach or a mentor. It’s just maybe having another investor that knows what the heck they’re doing or whatever it is. But don’t be afraid to have a second set of eyes. You know, you’ve myself I have people that look at my deals from time to time, just, hey, I’ll present it and you say just need a second set of eyes. What do you think? And let’s talk about it and have you thought about this? Have you thought about that? It’s just checking balances making sure they do the same thing in return sorry, but you’re looking at you’re talking to an investor with over a decade of experience you’re not going to talk to someone with five years experience.

Erwin  

No offence to the people that are doing it. It’s not to say there’s no great investors for five years. But again, just like anything just in general just in general rule like you know what you want people that have gone through cycles, honestly, that’s the truth of it, especially for especially for people

Michael  

Out of, you know, looking for coaching or advice or any of those things like, get them through a cycle before, I’ve had times in my buildings where, you know, we’re dealing with 20 30% vacancy. It’s not it’s not pretty, it’s not pretty at all. And so how do you be creative in those types of approaches? So ask those questions from people, you know, have you been through this? Oh, no, I’ve just been writing the last 10 years, it’s been amazing. And prices are going up rents going up making lots of money. Okay, that’s everybody can make money when things are great. And everybody can look like a sophisticated investor when everything is going great. The real good investors has been what have they been able to do to overcome the downturn? And still survive that those are the ones that I want to talk to you? So this is the ultimate stress test right now. Yeah. Michael, thanks so much. Any any final words? No, I just want to wish everybody success. And like I said, I know this is can be a challenging time for everybody. And, and I know a lot of people are because I’ve got a lot of people reach out to me as well. And I think the important message I want to relay with everybody is you guys aren’t alone, everybody, you know, and it’s real estate still is right investment strategy, when done very right and very well. And you got to remember that the challenges that we’re facing today, a year or two years from now, you probably will look at this and say, Man, those are some really good lessons. It’s just hard to visualise that at this very, very moment. So surround yourself with people talk to people. Try not to keep it all in I think the more you engage with individuals and share some of your challenges, I know it might be really challenging to do that. It’ll give you the support that you need to help you overcome some of the challenges you’re facing and the answers that you need to learn from other people in regards to helping you support them and I wish everybody success in their restaurant and their investing journey to really do so in the savvy Facebook group. Anyone can join it. Yeah, absolutely. Come on on. So savvy investor you can actually even go to our website called the savvy investor.ca The savvy investor.ca You can get links to our Instagram YouTube channel, we got lots of free education that’s there. No cost to that we even have some interesting guest speaker that comes join me today that’s on there. Mr. Irwin’s also done a presentation there as well for me in the past church and as well and and yeah, definitely gotta sign up for our Facebook group under savvy investor and connect, engage, you know, talk share, you know, that’s what it’s all about. There’s no selling that’s in there. It’s just all about communication and supporting each other as as a community. So thanks so much for doing this Michael. Appreciate it, buddy. It’s great to have you and nice to see so.

Erwin  

Before you go if you’re interested in learning more about 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.

 

 

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