**Transcripts are auto-generated.

 

Erwin  

Hello, everyone, and have you stepped out of your comfort zone lately? I find that those who are willing to challenge the status quo often, that often that’s what I see as successful real estate investors. I see it my clients, I see that’s what sets them apart from that assets. Real estate investors from my experience are often from the middle class. They’re homeowners, kids, are the children of homeowners. They have great paying jobs that businesses and they want more. And oftentimes, their parents wanted more adults as well. So that’s pretty much the investing is that many investors receive help from their parents, especially young ones. And when I mean help, I mean like significant financial gifts range of hundreds of 1000s of dollars, which can also include guaranteeing or cosigner mortgages. And you please read stories of folks who have received inheritances. One of our staff received a very sizable inheritance from their grandparents, grandfather’s passing away, leaving behind I think about like a $1.6 million free their house. So is left behind to two grandchildren. So yeah, massive transfer of intergenerational wealth, and the cause of it was real estate. Will that change anytime soon in Canada, as soon as immigration changes, we see immigration current numbers come down. Don’t forget when Harper was in office, and this isn’t a political thing, it’s more of like a dating. Well, over 10 years ago, when Harper was in government, he set a record of immigration that with 245,200 45,000 new immigrant Canadians during his office, and we’re now in 500,000. Immigrant rage now, at the same time, there’s articles this week that just came out about how massive labour labour shortages in construction and renovation. So add on that to the difficulty already building housing. Oh, it still seems like owning quality, small multifamily properties. Makes sense. And that’s the advice we’re giving to our clients. Now, we’ve spoken to some, we have some new audience members who are new to the value investing world, we have a lot of folks who were buying construction now listening, at least they’re not they’re now tuning into this show. And unfortunately, a lot of negative cash flow properties. Thankfully, some of them do have equity in their properties they’ve held they’ve had them long enough that they’re leasing equity, they are positive. And we have many clients in similar situation. They bought single family homes for value, like five 810 years ago with refinances. Now for anyone who’s done the burr method, you know, one of those R stands for refinance. So that means that someone took a new mortgage, to borrow more money on the existing property, making the mortgage payments bigger. Now, if interest rates, pretty uncomfortable rates pretty high. Even people who’ve owned property for a long time are negative cash flowing. We’ve had clients choose to divest them in order to pay down debts, or even turn that money over into properties that can potentially cash flow, like a duplex or a triplex. So this is getting people out of the comfort zone. Many of us got into real estate investing thinking that we would buy a property held like 510 15 years, pass it on down to family at times change. So we’re always happy to do a portfolio review and that can be checked with our listeners. And if that’s something that interests you, feel free to email us at Iwan real estate. Sorry, that’s Iwan wi n at infinity. Well, that’s, that’s iWin community wealth.ca. Again, we’re happy to do portfolio reviews to do an equity check how you’re doing, because again, many of our clients who are negative test positions that are positive on their equity returns are choosing to divest. If you want to have a conversation around that, we’re happy to help. Because, to me, I’ve spoken to some people, people who aren’t our clients, they tell me that they have negative cashflow. 1000 or more on generally the condos and I have better things to do with my money than to subsidise my tenants rent. That’s just me. So hopefully everyone out there is okay. Hopefully your equity positive. Again, we’re happy to have the conversation if you’re interested. Yeah, again, I’ve never been a fan of condos. I think I’ve been pretty obvious in the show. I’m happy to invest in the development of condos. I never want to be a holder of a condo because again, condo fees rise, typically faster than inflation. counterbores limit once control the property doing what you can do with the property. For example, if you wanted to run into short term rental, on the other hand, real estate our clients generally own freehold houses on land, and those with a big lot and add a garden suites and a better name. So just some loose rocks, not the numbers. You can build a garden suite for around $300,000 from from scratch some young land already. And then our client is renting out her property right now for $2,500 a month. So if she gets that, bless the management costs, maintenance costs, they can see costs, a cap rate works out 9.1% 10.1% Tap on the garden suite. So that pretty much beats almost any investment out there. Real Estate. Again, assuming that you already own plant, that’s the point, you need to own a property, not a condo in the sky. So if you would like to invest like one of our 45, plus Income Property millionaires or multi millionaire real estate investors, and you need a portfolio review, I highly recommend it. Especially if your cash flow negative. If you’re not ready for action, and you’re just ready to you’re interested in learning more, we do have an upcoming Iowan meeting online on Zoom, where I’ll be sharing the Live Smart market update. And I’ve been digging to artificial intelligence quite a bit in terms of the tools that are available for for my business, including being a landlord. So I’ll be sharing about the tools that we’re using today in our business, AI is going to be a massive disruption for the good for those who know how to use it. And the tools is getting better and better. I’m not easily impressed with what you can do already with these tools. As always audition for truth, seeking to find out what works and what doesn’t work. In my own business, my own portfolio. That island meeting is Tuesday, July 25, at 7:30pm. Eastern Standard Time, my team and I will be breaking down, my team will be joining us as well, Coach Chris and Steve will be showing you what the highest and best use shows the investments our clients are executing on right now. Properties that do actually cash flow, and they even work in this elevated interest rate environment. And the timing device actually is pretty strong. Because if assuming you’re one of those who saved and worked hard, save a much premium with their money, then there’s not a lot of buyers out there, all interest rates are high. And we’ll see more and more business owners come online as the interest rates the high for probably at least a year. For those who enjoy an in person experience. We do host I would mastermind tours in person. And our next one is Sunday, July 30. in Kitchener Waterloo, for me for coffee tour to income properties. So we go inside them. We have hand notes that the numbers potential numbers on their properties, and then we mastermind over lunch. To me there’s nothing better than learning hands on in person and hanging out with like minded people in my experience. Make sure you’re on my email newsletters stay connected to all these best in class educational events. I can register on my website at WWW dot truth about real estate investing.ca. Again, that’s www dot truth about real estate investing.ca. On the right side, enter your name and email. And you know that all of our latest events, if you have a friend or family member who cares about improving their financial future, feel free to come along. Now speaking of being in a display, business play my terrible golf game, for which I am self conscious to others. While I do love the game, and especially the networking, it’s painful for me to be consistently slicing my ball into the woods, and regular three, or sometimes four. If you’re new to golf for unaware this is these are. The positive, the people I’m meeting and getting to know has been awesome. My new friend Susan, for example, has been in the business for a very long time of helping immigrants come to Canada. I asked her How’s business? For answer? It’s been busy. And you know me, I always follow on questions busier than pre pandemic answers. Yes. To my surprise, I have more questions. Don’t they know how expensive it is to live here? She responds with a smile. Yes, that’s why they’re moving to Hamilton. This type of backroom of micro economic information to me is gold. Because it’s information that my clients that I need to know, we as real estate investors have two businesses. So therefore, as a real estate investor to business, you have one, you’re in the business of renting to tenants. And two, sometimes we do sell these businesses. Hence I want to own what’s in high demand for both tenants and buyers. And the way it’s going to do just look like we’re gonna have clients for both tenants and for resale. And as long as you’re messaging right asset class, in the right area, and as long as the immigrants keep coming, surely, that’s happening onto this week’s show. We have our friends returning from covered home mortgage investment corporation back to give an update on the private lending market, mortgage market dates, including lessons from the downturn. For example, what did in default real estate investors do wrong? What do they have in common? So that you the listener, this is leverage, right? So that the listener myself my clients can learn to avoid the same mistakes. So please keep in mind, the same essence can be easily done wrong. And there’s obviously less right ways to do it. Ask anyone who speculated on construction and its negative cash flow like a lot, and especially those who are close almost pre construction contracts. Long term, that can be a fine investment, but most can’t handle today’s interest rates in the work difficult lending guidelines. Anyways, on today’s show, we have Derek Lebar was an underwriter at Calvert. He’s the guy so an underwriter what they actually do is there’s one who reviews more mortgage applications from a risk perspective, both the applicant and the property and determine whether or not to let awesome we have to So I’m guessing Justin’s his boss. He’s the vice president.

 

Erwin  

He’s been on the show before. One of the things about real estate investing is that the asset is so good, the banks will lend me a lot of money versus my objective of keeping the deal and the equity to myself, I maintain full control of the asset. And all the upside and profits are mine. On flip side all the last week, as well. This is why learning financing options is absolutely key to becoming a successful investor. But debt is a double edged sword. As your risk is greater, as you’re, as you’re about to hear. In this interview, such as the truth about real estate investing. Some people got the wrong sort, since Garrettt, Jesse living invest in Calgary, the share market and economic update on Alberta, which I know is a hot topic for investors. As we do discuss securities investments, the disclaimer is coming. And you can check our Calvert at Ch hmic.ca Ch M ic.ca. Please enjoy the show.

 

AI  

Disclaimer. The Information and opinions expressed in this podcast are solely for educational and informational purposes, and should not be considered as investment advice. The hosts and guests of this podcast are not licenced financial advisors, brokers or registered investment advisors. And their comments should not be construed as recommendations or endorsements of any specific investment, security or strategy. investing involves risks, including the possible loss of principal. Before making any investment decision. You should conduct your own research and consult with a licenced financial advisor to determine the suitability of any investment for your specific financial situation and investment goals. The hosts and guests of this podcast make no representations or warranties as to the accuracy, completeness or timeliness of any information discussed in this podcast. The podcast is not responsible for any errors or omissions, or for the results obtained from the use of this information. listeners are advised to use their own judgement and seek the advice of professionals before acting on any information provided in this podcast. The podcast shall not be liable for any damages, including but not limited to direct, indirect, special or consequential damages arising out of or related to the use, inability to use or reliance on any information provided in this podcast.

 

Erwin  

Jesse, Garrett, what’s up guys busy these days?

 

Jesse  

Oh, fortunately getting to hang out with you.

 

Erwin  

But last time was over zoom. You guys are from Calgary. We’re here in the GTA today.

 

Jesse  

So yeah, we get to visit with yourself, we get to visit with some of our borrowers. While we’re here on this trip, we get to visit with some mortgage brokers that we get to do work with and then also some of our capital sources, bankers and shareholders.

 

Erwin  

Fantastic. So let’s jump right into it. Are your borrowers happy to see you hear from you?

 

Garrett  

Yeah, I think so. I mean, they’re always happy to hear from us. Like we were talking about earlier, we’re calling all our old clients who bought in that tough time between January and April. And just checking in to see how they’re doing making sure projects are coming along and seeing how we can help. We’re always solution based lender, so we want to do what’s best for our clients.

 

Erwin  

Fabulous. Sounds like you’re experienced better than mine. Because I’m chasing my property manager for my last month’s rent right now. No, no, it’s like it’s May 11. So it’s a little bit late.

 

Jesse  

Well, well, don’t get us wrong during our check in calls that we did to those borrowers who we lent to during peak times, there are some some issues, there are some people who are not going to make as much money as they thought or worse, lose money. But based on the fact that we saw property values dropped essentially 20% In six months, we as a fund are very happy with the results very happy with the performance of our borrowers, and their ability to be resilient through this time. So so it was it was a good exercise exercise. We’re really glad we did. And I think if you were to pull our borrowers in and exercise, they’re glad we did how many? How many banks reach out and say, Hey, or when everything okay, anything, anything we could do to to work with you on? Like, like, we literally took that approach and called hundreds of borrowers to see how they were doing.

 

Erwin  

How many did help, how many needed help? Well,

 

Garrett  

I mean, cost them needed help in the sense that the properties went down in value so

 

Erwin  

much, because I know lots of flippers are losing money. My friends aren’t losing that badly, because they were pretty smart. Yeah, no, I’m talking like 515 K on a property. Right? Not bad. Considering

 

Garrett  

Right, exactly. And I’d say that’s where the majority of our clients would stand if they lost money would be around that 1015 grand type of things in the world. Yeah. And then it’s just talking to them about like their future plans. Right. Let’s see. Let’s see if you want to continue this. Let’s you could take this as a learning experience. Or you could say it’s This isn’t for me because I lost on this one. So people have different mindsets. And it depends how long you’ve been in the real estate investor business to right if it’s your first flip and you lost be tough to come back from that.

 

Jesse  

Yeah. And even when you say, how many people did we help? Like? I’d say all of them, because in some instances, help was just somebody to talk to, like, you know, your plans got flipped up on their head? Is it to sell is it to refinance? What should I do? And, you know, we’re fortunate as a company in that we’ve been through multiple cycles. And we’ve seen what works and what doesn’t, and what doesn’t work is inaction. That’s where

 

Erwin  

things compound sit in your head, and

 

Jesse  

you’re paying our fund, high interest rate, things are getting worse. So something was just talking about action, what are the next steps and pointing them in directions and giving them options? So I’d say we helped everybody but some needed different types of health and others.

 

Garrett  

Clients always want to, I shouldn’t say always want it. But clients are sometimes nervous to call their lender and tell them hey, I’m having troubles. Like, that’s a tough conversation to have. But we welcome those. Yeah, yeah. We welcome those. And we were good with those conversations. So we’d like to talk about it, see what we can do to help. And, yeah, people just need to know like, it’s a good thing to call your lender and be in contact with them will work with you more,

 

Jesse  

at the end of the day, their success is our success. So to sit there in fear, and worry about that stuff. That’s that’s not going to be successful. So

 

Erwin  

there’s just a, you know, I’ll pause. So listener, because you and I already caught up last week, so I’ll tend them, I’ll likely miss some things. But one thing we discussed was, I actually found the shewbread. Within the last week, the national average for default, is something like point one, six, or point one, nine, so it’s crept up, but historically, it’s still extremely low. Right? What are you seeing in terms of your own portfolio?

 

Jesse  

So from a high level perspective, what we’ve seen and keep in mind that typically we’ll see defaults quicker than a traditional bank lender. And that’s because the bulk of our borrowers are typically in and out in a very short period of time. So it gives us

 

Erwin  

sorry, you can’t quantify that like six months, 18 months?

 

Jesse  

Well, in normal market conditions, our borrowers are exiting around every six and a half months. Yep. And these, again, are flippin bird clients. Today in on cheerio, she’s not has been, let’s say four months ago, in Ontario, we were seeing that push up to 910 months. But in Alberta, they’ve stayed around six months for us. But going back to defaults, we had seen an unprecedented time of low default, through to basically, let’s call it May of 22. And then from May of 22, to October of 22, we saw that really ramp up, but still well within historical averages. So our historical, we use a word of enforcement rate. So that would be people where we’re having to take legal steps on would be, I think it’s then and I might not get this number perfect. But I think we’re at like two and a half percent of our fund. So we use the bank’s Term versus our term are a bit different, we’re more liberal with with what we consider default. So we saw that increased significantly. And then over the last six months, we’ve saw that level off. And today, we’re on a downward trend with defaults. Again, keep in mind, most of the stuff that we lent on during peak is off of our books. So we’re lending on today’s values in today’s market. Yeah, we

 

Garrett  

think that a big part of that decline now. And that historical loss rate is based on those phone calls that we had with our clients. That was super proactive and beneficial for us to understand our book and see where we stand. Yeah, so now we’re seeing this decline. And now we’re, we’re doing deals now in a market that isn’t seeing the massive decrease in values.

 

Jesse  

And really, we you know, when we look at Ontario stats, things have levelled off for three months now in a row, which has us comfortable of deploying capital back into Ontario,

 

Erwin  

right. So you’re bullish again,

 

Jesse  

we’re happy with the stable statistics. We’re also happy with where inventory levels are. So even if there is further pain, we believe it’ll be muted because of the low inventory. There’s a lot of buyers that are out there. And I’m sure from the realtor point of view, you have people ready to buy, there’s just not much product.

 

Erwin  

Yeah, there’s way more buyers out there. When people need to understand is there’s a lot of smart money out there. So people that did not over leverage, and there were no pouncing right now. Yeah. And

 

Jesse  

that’s that’s who were like the clients that we’re lending to today in Ontario are that smart money?

 

Erwin  

Very good. I’m sorry. So you mentioned enforcement rate to 9% How many properties is that how many files is that like 1020?

 

Jesse  

Well, we have 800 mortgages. So what would that be? 1620 20 properties.

 

Erwin  

So for listeners benefit for context, I had my friend in here, saw Rob, who’s a Mississauga lawyer, one lawyer office. I don’t remember. I think I’ve 32 Power Cell fallacies working on. Well, so I’ve been concerned enforcement.

Yeah, yeah. Yeah, that would be so one lawyer

 

Erwin  

one office 30 Something files, and your your guys are under that?

 

Jesse  

Well, under that, like in Ontario during this period to date, I think we’ve had, because we have to keep in mind we have a few active, I think the number has been eight total power of sales, five of which we’ve sold. And it’s through that sale process, what we’ve seen it to Garrett’s point is, for the most part, our borrowers have lost very little, some have lost, the ones that have lost the most significant amount are the ones that were over leveraged, the ones that weren’t taking action. So we had to take properties over, or we had to force the sale of properties that were not finished. And that guys didn’t take action. And those are the ones where we saw losses,

 

Garrett  

it was typically clients with multiple projects on the go at once, and just being way too tight on their cash reserves or line of credit and stuff like that, and running those up. So over leverage, and then just really bad timing on that purchase.

 

Jesse  

Yeah, and which is, it’s tough to see those things happen. It’s something that we as a company now paid more attention to for like, like from the risk side we look at okay, what are the real contingencies this client has? What is their ability to project manage, we always ask ourselves that but even more acutely today than ever,

 

Erwin  

right? See, for myself, I’ve only ever bought one property at a time. I will not buy the next property until my vacancy until my property is full rents coming in stabilised everyone’s definition of stabilised, but by tenants in and getting rent. Now I will look for that next property, I only want to have one vacancy in my portfolio at a time. I can imagine people doing two three properties at a time.

 

Jesse  

And now keep in mind their model was flipping not boring. But yeah, you definitely have to have project management acumen and the ability to source trades, like the trouble you get in his young guy who knows what he’s doing. Doesn’t Well, let’s say he atletic see as a trade and he has a good team. But then when you stretch that team, yeah, cracks you up,

 

Garrett 

you got to make sure that cash reserves are there and the experience is there. But one of the big benefits about Calvert is the fact that we will lend almost all the purchase price, right? Like we do $20,000 down in Ontario, minimum. And then in Alberta, it’s 10,000. And our biggest client in Alberta, he’s got about 20 on the go right now. So yeah, so that’s a lot to manage. But you if you have the teams in place, it’s doable. And he’s been doing this. He’s been scaling with us for the last four years. I think so. And

 

Jesse  

he’s an interesting case, because he’s very, he’s much more cash rich than a lot of our borrowers, like a lot of our borrowers that use the 20 Grand down product. They’re just starting out, right. So so so their barrier to well, just starting out in that they’re doing what the barrier to entry, we’re reducing on the capital inside, but they have the experience. They have the acumen. So we support them. This gentleman with the 20 on the go. He’s built this over decades, and he’s putting 25 30% down per property really de risking us on that end.

 

Garrett 

Yeah, he’s started in the 90s. So like he probably would have started where all these others would have started at that $10,000 down or doing some sort of loan like that, and scaling to the point where we can do all these at a time. Yeah.

 

Erwin  

That’s investor and guess if we have 20 deals on the go, I’m guessing they have lots of staff.

 

Garrett 

Yeah, for contract teams that 14 for teams on payroll. I don’t know that I don’t get into that too much. And that’s not something he always wants to share. So it’s a bit

of a secret sauce.

 

Erwin  

Yeah, but I’m guessing he’s our biggest customer. So there’s a lot on payroll, or he’s probably like, over 80% of our business.

 

Jesse  

Yeah, I would be like, it would be like the contractors for builders, where, while they’re not on payroll, all their business is coming from the builder

 

Garrett 

or Yeah, so if he doesn’t have a property on the go, then they’re gonna go elsewhere. I think that’s the case. So he’s always got to keep moving and buy the next property to do so.

 

Erwin  

So sorry, you said when you said 90s, you said you’ve been doing this since the 90s. Yeah,

 

Garrett 

okay. He’s a real estate, investor business,

 

Jesse  

and all Calgary. So he’s seen what what we love about our Alberta clients is they really understand risk. Because in Alberta, yeah, they’ve seen it, we get slapped around every eight years typically, you know, market drops 1020 30%. So they understand how to manage their downside. Whereas here in Ontario, we have a generation of investors who haven’t seen that the although we just did witness it over the last year. Although I think like we’ve talked about it, it’s impressive how quickly it has bottomed and stabilised

 

Erwin  

which is really fast. Yeah, yeah. And I thought

 

Jesse  

Yeah, faster than we thought to we were really concerned that it would compound itself with with inventory issues and continue that slide down. But it all data indicates that we’ve found bottom, although data can be wrong.

 

Erwin  

It’s kind of the silver lining of rates going up so quickly. They went up quickly, so they stopped pretty quickly.

 

Jesse  

Yeah, we felt the pain quick. We rip the band aid off.

 

Erwin  

Yeah. Can’t wait for that stop. For example, I’ve shown the show like we Terry and I bought two duplexes in August 2021. And so we paid like low eight hundreds for them. And then with the downturn, we were under, like prices, a farm boy paid like, dammit, we screwed up shouldn’t have bought those. Yeah, I knew I didn’t have a good feeling about it. And now like, you know, our backup in our back in the black like, yeah, I didn’t sell those. Yeah,

 

Jesse  

like, like all the investors who say it’s ermine, it’s not timing the market. It’s time in the market.

 

Erwin  

I’m in the market. Timing is pretty nice right now.

 

Jesse  

It’s great to have timing, but you can’t rely on

 

Erwin  

Oh, no, no, my point is like, from what I’m seeing, we’re past the bottom. I’ve been saying on the show and into our clients for the properties that we transact on the bottom was August 2022. Yeah. And then since then, it’s just been price has been steadily creeping up. And then it just make just keep creeping up until I don’t know what well like,

 

Jesse  

until there’s inventory or less demand, which are we seeing neither of those happen. Look at the immigration numbers. Look at the employment numbers, like

 

Erwin  

in the I don’t know if you guys caught it a Toronto last night just passed. We got rid of single family zoning.

 

Jesse  

Yeah, we were. I read about it on the news this morning. But we were also talking with Rockstar real estate earlier about that. And it’ll be a really interesting trend to follow. Hopefully, we see a lot of opportunity for more density in the single family space in Toronto. And that’s the business we want to support. So hopefully, we see a good trend with that. Let’s get

 

Erwin  

into it. Because for example, I think it’ll turn we’ll set the trend. So for example, I invest a lot in Hamilton, we’re probably I’m gonna guess about two years behind. We have an NDP mayor. So I think she’s at this she’s probably like the on board with something similar as well. So I guess probably within two years, we might have something similar in Hamilton. But let’s get into it, for example, because I was talking with my investor friends, and we’re talking about what happened about the getting rid of single family zoning. So how do you actually invest? So specifically Toronto, you know, you might have to pay like 1.3 for disaster property, right, that you can convert into a four Plex? Yes. Right. So say I want to invest in me say I want to buy that. How can you help me? So

 

Jesse  

we want to focus on the renovation side. So if you’re truly tearing it down and constructing, we’re not the right lender?

 

Erwin  

No, my plan would be convert, because I want to do within the ability to love your plan. Right. So I want like, my perfect role would be two and a half storey. I need at least 3000 square feet. Ideally, a detached garage. Alright, go. I want a four Plex in the house. Let’s do

 

Jesse  

a tonne of those. Yeah, so we’ll support on the purchase. Because that’s a lot of money. Yeah. 1,000,003 We definitely aren’t going to do it at 20,000 down. Come on. I know I’m sorry.

 

Garrett 

Yeah. Anything over 800,000 We’re typically gonna want at least 10% down. Okay.

 

Erwin  

All right. 10%. Down, okay. 10% down,

 

Jesse  

show us that you have the capital to renovate, and the ability to renovate like,

 

Erwin  

because I’m probably gonna be like, five 600,000

 

Jesse  

Yeah, so that’s gonna be a trickier one. And we may have to take a good look at our product to try to support the construction side. Because the barrier to entry is huge on

 

Garrett 

that. What I’ve found, too, when people want to get into these bigger projects, or multifamily is they do have typically a portfolio of real estate too, that we can possibly tap into, as well. So we can blank in another property up to 70% 75% loan to value and use some of that equity to help with those renovations.

 

Jesse  

Yeah, very solutions focus. So you know, guy like, yourself might have a portfolio properties, let’s say on average, they’re leveraged with the bank at 60% will take them up to 75. to inject the cash into that property. We’re always looking for ways to get it done for

 

Garrett 

you exactly. We’ll look at your whole portfolio and see what’s the best solution for you give you options too, because some people will want to, they will want to tie in other properties. Let’s say I can bring on a partner or something and I’ve got this other cash so they want to do that way. But a lot of people will say hey, I’ve got this equity here doing nothing for me, so might as well tie that in.

 

Jesse  

Yeah, but today if you’re without that property, and you want to buy for one, three, and your cost is 500. It’s gonna be tough for us to get that deal done, unless you have the money. So like 10% Down 130 grand and then you have to have the four or 500 grand, so the cash preferably in cash Credit. We’ve seen good joint ventures happen, like, you know, or when’s uncle might be looking for yield, everybody’s looking for yield in this environment. Everyone’s got a great plan and he’s gonna back it. So we’ll allow that money to come in Absolutely. As long as we see the money’s actually there. You can’t just show us Hey, Uncle Joe’s lending me 500 grants, we’d say great, show us the bank statement, show us the agreement. Ideally, Uncle Joe flows the money into your account. Because what we’d hate to see happen is life event happens Uncle Joe and now the money’s not available. Now we’re in trouble on the project.

 

Erwin  

And just a reminder to the listener, like I’m talking about disaster property. So pretty much no one else is gonna touch or be like, like,

 

Garrett 

even I remember, my was probably my most recent multifamily, but it was an IT WAS AN Edmonton, and it had cockroach infestation. And and that’s my like, Well, no, it had like a bunch had health orders on title and stuff and boarded up and all this. So like, there’s certain ones like if

 

Jesse  

we see all the orders on title, you see opportunity. Yeah, in Alberta, we register our health orders on title. So we see opportunities with those get pretty

 

Erwin  

bad to get to that point. Yes, certainly, visibility government didn’t want to like register on title and belly of legal fees to Yeah, they gotta

 

Garrett 

provide a specific plan for us to be able to consider that like that’s an extreme case, this is not going to be most cases. But a lot of times it’s hoarders or just a property that just looks off on the inside that for a lot of people, a lot of people just shy away from just for the look. But there are opportunities there.

 

Erwin  

Right. But you guys love it.

 

Jesse  

We love it. That’s where we see opportunity. You don’t go on site. Yeah, we do. So we always send and we always do a site inspection, that will sometimes be our staff that hazmat suit that will sometimes be a third party. So we’re always walking the property and understanding not only the property, but its surroundings, because maybe the hazmat suit is the next door and they’re always looking to buy and where they grew. And it’s gonna be hard to rent this out for the market rents you think you’re gonna get when you have a crack house next. So we always we spend a lot of time understanding the property and its location, because that’s really how we manage risk is by doing good loans on marketable properties or soon to be marketable

 

Garrett 

properties.

 

Erwin  

Because this downturn like my friends and I we say like this downturn is the ultimate stress test for anyone’s business portfolio. Sounds like you did all right.

Oh, we’re really happy with what we do.

 

Garrett 

We feel very comfortable with how we did like I said, the big problems that we had, were those people that bought January, April. Other than that, we’ve been super comfortable with our book and and what we’ve done

 

Jesse  

so yeah, like we talked about the exercise that we did, where we literally went looking for problem files, which not a lot of banks do not a lot of mortgage lenders to. And we when we find a problem, we mark to market that problem. So it lives in our financials as here is the problem. And we our year end is February 28. So we just published our urine statements to our shareholders. And with all of that, in this terrible year, we were able to produce a plus 10% return to our shareholders. So yeah, we’re, we’re happy with how we manage the risk.

 

Erwin  

All right, many directions are gonna go. Let’s first talk about your outlook for Alberta. And a lot of people interests on Berta, whichever look for Alberta. Yes, the lending thing gonna fall apart. Do you care about oil prices?

 

Garrett 

We’re still excited about Alberta Oil. Yeah, there’s a lot of don’t go that far. But there’s tonnes of opportunity in Alberta, like oil is still here. We’re like, there’s still opportunities there. We’re building in the tech centre as well, like tech is becoming a big thing in Calgary as well. But just cost of living to like our properties are valued, on average, or benchmark prices in the 500,000 range, right? Whereas here, it’s a little more expensive. So but like we haven’t seen it, we didn’t see a big Yeah, just a little more. But we didn’t see the big drop off that that Ontario did, right. Like we stayed flat all the way through, we’ve been a steady market. So we’re really comfortable with Alberta. Oh, yeah.

 

Erwin  

Like Jesse said, what? 20%? Over 17 years.

 

Jesse  

Yeah, if you look at we had a peak in residential real estate in 2007, followed by the financial crisis, followed by a couple ups and downs. And then most recently, an upward trend and values are 20% higher than they were in 2007. And to Garrett’s point, all these great things you mentioned, because of that, we’re seeing unprecedented migration to our province,

 

Erwin  

your federal community for BC and Ontario. Yeah, and even

 

Jesse  

on the income side, like on an average basis Calgarians on earn more than Torontonians and real estate is half the cost. We have less income tax. We don’t have HST it’s just GST so fibre sent and the quality of life like you and I were talking or when earlier tomorrow morning, we have to go. We’re gonna stay in Hamilton tonight and we have to go downtown Toronto for breakfast at 10. And we’re worried about it’s probably going to take us two hours and probably be off for two for two hours and be a bit of a hassle. Whereas in Calgary, you can live 20k outside of Calgary, in let’s say Cochrane would be a good example. Cochrane is a town of I think Cochrane is 40 50,000 people. No, yeah, but that’s what we were, you know, we’re only $1.4 million dollar population base in Calgary. So 20k outside, you could be downtown Calgary in under 40 minutes during rush hour. So it’s very easy to live in Alberta. You get the mountains nearby. And you can see them

from everywhere. From everywhere. So anyhow, that’s the

 

Garrett 

other thing is we when we drove into vond, because that’s where we’re staying last night. Like what is around here? Like we didn’t see anything. But we’re close to Toronto. Like that’s the crazy part is there’s no interest like there’s there’s a couple couple of condo buildings as well of it

 

Jesse  

in saying all this we love on Yes, we do love to and we think Ontario has a bright future. But going back to Alberta, we’re very comfortable. With lending in Alberta. We’re very comfortable where our economy is. One thing we have to be wary of is that our economy does move with oil with energy prices. But the outlook on energy is is isn’t going to drop below $60 A barrel in the near future. The smartest people who say not likely so but also like Garrett said we’re we are finally diversifying our industries. There’s a lot of tech happening. There’s a lot of clean energy solutions.

 

Erwin  

There’s a lot of both Edmonton and Calgary diversification or mostly Calgary, Edmonton has

 

Jesse  

always been diversified more on the public sector. So that’s where our capital is. That’s where a lot of public sector activities are. But both cities also have a big education of a few universities, well regarded worldwide. So yeah, we’re both Edmonton and Calgary. We’re really confident and that’s where 90% of all our Alberta money is.

 

Erwin  

Do you notice your split between the cities? Yeah,

 

Jesse  

I might not get it perfect. I think it’s 7030 70% in Calgary, and now that’s because of Calgary is our backyard. So we understand a lot better. It’s a lot easier for us to deploy money.

 

Garrett 

Yeah. Also, I think the biggest brokerages mortgage brokerages are in Calgary as well.

 

Erwin  

Yeah, it matters. It really depends on where the opportunity is.

 

Garrett 

Sure. It’s just what they know. Like and it’s what we know. We know Calgary,

 

Erwin  

intimacy. Yeah. Yeah. So you’re still Calgary game like it’d be like 50 or 80,000 people just from Ontario last year.

 

Jesse  

It was a big number. Yeah, unprecedented migration.

 

Erwin  

Oh, yeah. You guys must think the prices here are nuts. Do you got we do early. Okay, so I live in Oakville, I think people know it’s not the cheapest. And a friend of mine had put it off our house in Canmore. Okay. She’s got a beautiful view. It’s like 3000 square foot four bedroom. And he’s told me it’s like 1.5.

 

Jesse  

And we think that’s wildly expensive, by the way, but like cameras and camera are expensive and more. Kenmore is the most expensive area within

 

Erwin  

GAVI. Right. Yeah. And it’s only that you want to be close to Banff. Isn’t that why you live in Canada?

You’re literally smack dab in the mountains are 10 Wars just

 

Garrett 

nights too, but I mean, it’s only 10,000 people. It was like 10,000 people and that price so

so so are you is your friend thinking that Canada is a good deal or an expensive deal? Oh, it

 

Erwin  

is expensive? I’m like I’m laugh. Because 1.5 Don’t get you much.

You don’t think that that’s that expensive? No, because of Euro

 

Erwin  

do not get a view at 1.5 and 10 in Ontario. Right?

 

Jesse  

Where is that? 1.5 You’re waking up smack dab in the mountains. In this world class city. We’re close to class. Yeah, yeah, yeah. But yeah, can more we’ve seen big growth like Mr. You drive around. And because it’s you’re an hour away from the Calgary International Airport. You have Europeans buying in Canada quite a bit, because it’s cheaper than buying in Zermatt and Switzerland and all that kind of stuff. And you can’t

 

Erwin  

find their freight. No. So it’s the next closest thing

 

Jesse  

you can if you live and work in Bath pricey if you don’t live in work in bath you cannot buy in Bath.

 

Erwin  

I’m guessing it’s pricey.

Yeah, similar we can Yeah.

 

Garrett 

But it’s mostly businesses. I feel like people who are buying in Bamford getting like Bed and Breakfast, that type of stuff. Airbnb, there’s a couple I don’t know. There’s not many. So

 

Jesse  

yeah, you’ll have like these millionaires that want to live in bamps a little by convenience store. Yeah, most.

 

Erwin  

Most will buy in. The bad part about living in tourist town is the tourists Yeah, festivals and weekends is nuts. To change it. You can’t get a table at your favourite restaurant,

not on weekend. It’s not in the summer.

 

Erwin  

Okay, so look for Ontario prices are nuts here. No one can afford anything. Yet they’re

 

Jesse  

somehow affording it. Yeah. Okay. But it is it is one of the things that we worry about is how stretched Canadians are, you know, we’re not seeing it as as bad in Alberta, because what we just talked about, but the debt burden is worrisome. Like, it’s tough to do the math on how people are surviving the average person with how much housing costs. So, but what we’re seeing again, as it relates to the micro economic data, is you got hardly only supply. You got a tonne of demand. And families and individuals are figuring out ways to make it work. They’re living multi generation, they’re staying with their parents longer. Parents are passing down wealth to children in order to buy housing. So we’re comfortable with the values, believe it or not, it’s just from a Calgarians perspective is like, how do you make it work? But they’re making it work? Yeah,

 

Garrett 

but we don’t do a lot of lending right in the GTA area. Like that’s not our main focus, some, but our main focus is those London, Hamilton, K, WC Euro, like all all these different places where the the average price point is not over that million dollar point,

 

Erwin  

but we’re still well above a Calgary price point. Yeah,

 

Jesse  

well, even those centres that we mentioned well above Calgary price point, when you’re

 

Erwin  

so you had yourself feeling comfortable. Yep.

 

Jesse  

Yeah. And again, we’re, we’re shorter term, right, like we can flow through our portfolio in a year. So we’re not saying, you know, bullish 10 years, 20 years out, but we’re very comfortable letting today’s Yeah.

 

Garrett 

And we pay close attention to the markets, though, like we do if you’re probably on our monthly economic reports, right. And so we send those out, and we analyse them internally as well. And we keep a close eye on what the markets doing. But since like you said, since that drop off, we’ve seen it really steady for the last few months. So we’re comfortable with Ontario. Yeah, it’s

 

Jesse  

a good point. And we stay really fluid with how we lend, like our chief risk, Officer Dale, is paying a lot of attention to the leading indicators. And if we’re seeing issues with supply, if we’re seeing values drop, if we’re seeing demand drop, we can lower our loan to value, that’s the easiest way we do it. So during this downturn, when we were comfortable with the market, we were letting up to 80% of the after repaired value. We brought that all the way down to 70. We’ve since brought it back up to 75. So we’re not as comfortable as two years ago, but we’re comfortable. So we have we have really good levers to look at the data and move our lending decisions around based off of that.

 

Erwin  

Now I want to talk about lending because it’s, it’s funny, as I’ve been saying to friends lately, it’s never been a better time never been a better time to be rich. Because the quality opportunities I’ve never seen so many last time I call it off opportunities. I’ve said on the show many times that I personally don’t private lend, right to me, it’s too much work. Too much risk. The worst case it does too much for me, as for example, worst case is I’ve had to take back the property. So this is so for the benefit of the listeners benefit, if worse comes to worse, if I need to take control the property, and I need to start making mortgage payments for the first mortgage, I’m generally not happy at all, like the intention of private lenders is for something passive. Now you went from extreme passive and to earn some positive cash flow. Now you’re nowhere near that once you’ve taken control of the property, a lot of work a lot of work, legal fees, I have to pay someone else’s mortgage. Right?

 

Garrett 

Yeah, like Jesse and I came from the same background, we both were at a syndicated mortgage lender to start, which is one off mortgages that you’re selling. So you get a mortgage and you have a bunch of different individual investors and you send out a whole summary of this mortgage to sell them and say, Hey, this is what we got. Are you interested in participating? So we’ve been on that side, but now being on the mix side.

 

Erwin  

Just want to elaborate on the syndicated deals you were doing. What kind of deal with is this a single family home was a retail,

 

Garrett 

it was all types of deals. Like we’d do just all typical stuff that a private would at that COVID is purchases debt consolidation, equity, takeout some construction to and we just sell those to individual investors.

 

Jesse  

But where you’re talking is it would be so for some context, that would be a form of private lending where you Erwin are going on title. But there’s a professional manager in between doing the due diligence, having disclosure and your best interests in mind where what I believe you’re talking about is you doing your own due diligence sourcing your own deal and going on title.

 

Erwin  

Yep. Or even just

 

Garrett 

working with a broker. But yeah, well, the Sure yeah. And that’s even more challenging because you have to do all your own administrative where call you or, like you said, so

 

Erwin  

your own collections? Yeah,

 

Garrett 

it’s a very tedious and it’s hard work

 

Jesse  

takes a lot of expertise to manage that risk. Like what I would consider if I was considering that is what is your expertise? How do you know how to underwrite risk? What does loan to value mean to you? What type of property Do you want to focus on? What type of market do you want to focus on? Ask yourself those questions. Also?

 

Erwin  

Well, the words are to diligence, due diligence. But with all these failures, we’re seeing, like we’re talking about, like Greg Martell, and MMAC, whatever it name is, MC is, we have a developer of 1000 houses that won’t get built, all the deposit money’s gone and cost a few in Ontario. My point is that everyone says due diligence. And then I generally think a lot of people are a little bit overconfident themselves in their ability to do due diligence. Yep. But we’ve there’s a lot of history out there that people cares.

 

Jesse  

Yeah, we’ve built a business based off of managing risk with 40 years of intelligence, and we still are learning. So to have an individual with no underwriting experience and risk experience, that’s a big task. And now, sure, you couldn’t do it and make it work for you. But I also even look at deal flow like, like the most important thing as a, as an investor is going to be given the right opportunity. And the way the market has evolved in Canada is your banks that are getting bank loans, they’re getting the top end of the credit curve, and you’re getting B lenders, let’s say they’re lending out a prime plus one plus two, they’re getting those type of deals, then you’re getting alternative lenders, private lenders, mix are part of that space mix make up 95% of that space. So you think to yourself, Why am I getting this deal? You’re getting the deal? Because it’s been kicked down the credit curve, to the point where you’re getting the opportunity, are you going to jump in? Are you the greater fool? Why would the MC not want to do this loan? Are you pricing it right? Are you managing it right? So there’s a tonne of questions to ask yourself. And

 

Erwin  

I asked a dealmaker to my desk and like, Why do all these other people pass it? Yeah,

 

Garrett 

exactly. And then you got to think worst case scenario, too. So you go do you want to manage a foreclosure or power of sale? Like that’s worst case. And that’s, that’s a full time job, takes a lot of work. And then the other part of the private lending, too, is if you’re doing it, and you do a deal, and so you get paid out in a year or whatever. You got to find the next deal to keep that that rate of return, where it should be like you think, okay, you’re getting paid 11% on this deal, interest, and you get paid out. Okay, now what you better find a deal quick to be able to keep up with returns that mix offer,

 

Jesse  

you have the money sits idle for three months, and you annualize that now your 11% is actually 8.75. So what have you really done, and you have to invest a lot of time and energy into properly underwriting so there’s a tonne to consider, and you know, if any of your listeners are thinking about it, we’re happy to discuss it. And it could work and we’re happy to give you underwriting tips and let you know how to kind of how we would think about it because we want to see our industry succeed. And if they’re being directed to the what’s the guy’s name in in Victoria, that’s being accused.

 

Erwin  

Yeah, so we’ve $58 million is missing. If the public is

 

Jesse  

being directed to the Greg Martel’s, then that’s not good for our market. That’s not good for Canadian so we’d rather give our information and guidance at no cost and then have it go to what is allegedly a fraudster and Greg Martell.

 

Garrett 

Our industry is scrutinised that much more after these things. Oh, yeah. So

 

Erwin  

there’s gonna be a reckoning. Yeah, for developers and for all of whoever else is going on under our private lenders are having massive issues. Yeah, we’ll

 

Jesse  

see the downturns in the market bring to light who’s swimming naked?

 

Erwin  

Yeah, it wasn’t always swimming naked though. Apparently. The receivers accusing him of also you know, having private jets and luxury condos in several cities and obviously supercars. And that seems to be a commonality that people who have that stuff, but you can wonder.

 

Jesse  

Whereas Garrett and I are here in Ontario over supercars, pinching every penny, we’re literally we literally decided for our shareholders benefit that we like each other so much that we’d roomed together for this weekend. So like, that’s how focused we are on the bottom line.

 

Erwin  

In the book, Good to Great by Jim Collins. It was actually mentioned several times. Great companies are quite frugal, right, like, my cousin works at Walmart. The Walmart head office in Mississauga went to visit them. They don’t have a cafeteria. It’s a Tim Hortons and it’s they pay rent, nothing subsidised. You want to have a meeting with someone So there’s so no frills, right? They truly are,

who they say they are. And that’s how you get the lowest cost.

 

Erwin  

Right? Yeah. That’s how they get to. Yeah, that’s how they keep their prices down. So damn, yeah, yeah, that’s it. That’s probably the truth for real estate investing. Most real estate investors are not flashy at all,

 

Jesse  

no, and most, most truly wealthy individuals are not flashy at all. When we mean get we’re mentioning on the flight here, like, I’m looking on Google LinkedIn, for some of our most successful clients. And there’s not much you know, there’s no pictures of them driving Ferraris, or stories of them living in villas in Hawaii there. They’ve got themselves to the place for a reason.

 

Erwin  

Yeah, lots of people are very quiet about their wealth. Because why would you want to be so public? What what benefit?

Is it? There’s no, yeah, just put a target on

 

Erwin  

your back. Yeah. Yep. So sorry, I cut you off. We’re talking about him getting mortgages. And then he has moved into a MC format. Well, no, we were

 

Garrett 

at a different company completely. And it’s funny, because Jesse actually hired me twice, I was hired to Cedar, he left two months. And I was very happy with him because he left me but but he left and then I joined over at Calvert, like five years later, and now been with Calvert for four years. And, and this is the MC model where we take in investor money and diversified across 800 mortgages in our portfolio. So there’s just that it’s still considered a high risk investment when you consider Calvert and a MC. But it’s diversified across 800 mortgages, instead of just being on one mortgage, and we’re managing everything. So when it comes to a power of sale, or foreclosure or whatnot, we’re gonna manage that. So you’re not you’re still hands off. And even though we had all these power of sales, and when not that many, we had eight, we return that 10.76 to you with no management, right? Do your masters Yeah. So

 

Erwin  

in how often is I paid annually, once a week, once a year, once you’re

 

Jesse  

paid annually, usually goes out honour before May 10. financial year end, February 28, auditors come in and review our books, we build our audited financial statements for board review board meets just before the end of May, and we push out our returns and our information commercial person. But from the standpoint of Garrett mentioned, high risk, from the Securities Commission standpoint, we’re considered a high risk investment reason is as a private company, we don’t have the same disclosure standards as pub coasts, and also the liquidity like we’re not publicly traded. So if you needed to access your money, you could only access it with us annually. So you would you would put it in a redemption request. And we would pay that out again, honour before that may 10. Every year, we also have a gate on the fund where we’ve seen some funds run into trouble is they don’t have gates. So the gate on the fund that we have is up to 10% of of the whole fund annually. Luckily, we’ve never hit that 10% We’ve been able to honour every redemption request we’ve we’ve ever gotten. But there is liquidity like to me, one of the bigger risks of investing in any private placement is liquidity. So you gotta be prepared to have your capital sit there for at least a year at a time, if not more,

 

Garrett 

we’re very transparent, like we have very detailed financials that we send out and you can see our entire portfolio and where we sit loan to value wise, which is at 59% right now, on average. So we where our money

 

Jesse  

is placed, like you can see the loan to values on the whole book, you get to see where we’re lending which communities what we’re lending on residential versus commercial, a lot of great detail which our analysts were are really sophisticated investors love that type of reporting. We try to report to a professional company to a sorry a public company standard and operate to publicly company centred as it relates to how are governed and an audited

 

Erwin  

today. So what what is your budget for reporting? Well, I think we’ve always had a staff or and they’re just doing a report

 

Jesse  

on on with with on our accounting team. Our accounting team is made up of CFO, Carl, we have a treasury manager DOM and then we have five staff accountants. Okay. And that’s that’s a lot and then also a comptroller Eric. So yeah, we’re a financial institution, we need to operate as such. So we’re happy to spend money where money shouldn’t be spent. And to us it’s it’s on reporting and managing our investors money.

 

Erwin  

So somewhere north of a million a year yeah. And salaries just in your counting to you. Yeah,

 

Jesse  

yeah. Oh, yeah. Keeping in mind we earned over 30 mil.

 

Erwin  

So obviously going for more, don’t tell them don’t tell them.

 

Jesse  

No, no, we like to strategically invest where it makes sense and to us. Risk is is a huge part of what we do. So So hiring the best underwriters and risk managers and accounting is our two big things for us.

 

Erwin  

So is this an MC? Is that the official term for each investment company, but just because you’re in Alberta, you’re regulated differently.

 

Jesse  

The securities regulators in Alberta regulate mortgages differently. So everything that is not one person on one title is considered a security.

 

Erwin  

Also, soon as this indicates no security Interesting. Yeah, so you don’t hear. So

 

Jesse  

what’s happening in Ontario and BC, is they don’t have that type of regulation, although I think they’re going that way. And I think this downturn will help them get that way. Because you’ll see, again, these private individuals who really didn’t appreciate risk and didn’t appreciate underwriting where it worked for them for 20 years, because the market is able to mask those mistakes when it’s going up 5678 9%, on average, whereas on the downturn, that’s where you learn, oh, shoot, I shouldn’t have been in that second mortgage at 85% loan to value on a $2 million house where I’ve lent 200 grand that 200 grand is gone. Now. Plus, I can’t I can’t even protect it, because I don’t have the means to pay up the first mortgage. So we’re regulated more closely in Alberta. And a big reason for that is the amount of private investing activity in Alberta, not real estate, like oil and gas, they start up to raise a lot of money through those means. So the security commission put a lot of good regulations around that. And in turn mortgage just got captured in that which, you know, 10 years ago, I remember it, we went through that process in 2010. So I guess, 13 years, dating myself, but at the time you look at it as a business operator, and you say all this red tape all this stuff, why do we have to do all this, but in retrospect, it really increased the level of professionalism in our industry, and truly did protect investors, which was their goal. So it worked out. Right, because don’t get me wrong. Red tape always doesn’t work out like that.

 

Erwin  

No, it doesn’t. But it might have prevented, like some of the massive losses we saw in Ontario like fortress. Yeah. Paramount equity. missing somebody. But yeah, yeah. Yeah, I know, lots of people personally, that are great lost money. And those things are not they’re hiding under the mortgage regulations. So that, to me, there were securities they were not, yeah, not not transparency, not enough

 

Jesse  

transparency, even how the business was being ran with, I’ll use fortress as an example. They were they were a development company that didn’t really know development. And they were raising money to lend to themselves. So it was a, it was not a good model for success.

 

Erwin  

I think if people if they were if they were more transparent, for example, like right away, because I got an idea what their marketing budget was, and I knew what they’re paying for commissions. And then like, then the investors caught home the risk for not a proper, to my opinion, a risk of proper risk adjusted return.

 

Garrett 

Yeah. And that’s the big benefit to Calvert. And something we always say is the fact that we’ve been in business for over 40 years. So a lot of these companies come up, and they’re newer, and you got to do your due diligence on their background and how they’ve done in the past. That’s a huge part of

 

Jesse  

how much money that principals have invested alongside you is important. Like our money, the bulk of our net worth is literally right alongside or, we’re prep shareholders, and so is you if you were to invest in us. But also, I like what you do, you’ve mentioned, marketing budget, which is something that we’ve done in a really another way we provided value to our shareholders to hit that those high returns, is we don’t really pay for capital. So our average cost to raise $1 is significantly less than the rest of the market. Garrett and I and our CEO do it mostly through relationships. And because we have had the ability to manage risk, have that long track record, and really transparent financials, we can go to sophisticated investors and raise money. So we’re not having to raise money from, you know, grandma with $50,000 TFSA, we can raise an average check size of significantly higher, so that makes us more efficient. And it also makes us a better company, because we’re getting to work for really sophisticated investors who challenge us and ask us good questions that make us better. Whereas, Granny with $50,000, God bless her is probably not asking those types of questions.

 

Erwin  

Can you share? What is the track record of return? How far back can you go? Well,

 

Garrett 

we can go all the way back. But I think the two most important numbers that we throw out to our investors is five year tenure. So 10 year, we’re at 10% and five year we’re right around 10.7%.

 

Jesse  

And we got to say that this year, and we got to say that past returns are not indicative of what the future holds. We’re not here to peddle our security. But yeah, that’s what our return has been. And what I love about the tenure is it includes the tail end of the financial crisis, because that was the last real big risk event. And through the financial crisis, we didn’t lose Any shareholder money, and we’re able to provide a positive return the lowest return gotcha was just under 5%.

 

Garrett 

Yeah, we see those averages. But whenever we’re talking to investors, we’re typically telling them that we expect between eight and 10. If we’re lower than eight, we’re doing something drastically wrong.

The market, something’s happened in the market, that’s happened.

 

Garrett 

But we’re all striving for over 10. Because like Jesse said, we’re all shareholders in this company, we want to see it grow and, and get those big returns for investors.

 

Erwin  

So then my question like, how member is asking, that’s trying to get a call to get on a call with you? So my question was, why would someone private land, willing to just be a shareholder of Calvert, and to be diversified across 800 mortgages

 

Jesse  

or advice, poor advice, maybe the brokers self motivated for them to lend their money, they make the commission. So poor advice, poor research, they haven’t understood all the opportunities, but also sometimes they’re like, for us, we don’t accept money from non accredited investors. So unless you have an income of over 200,000, or a million dollars, now, financial assets were not an opportunity for you. So unfortunately, you may, you may choose to go that route because of that, which is even worse, because those people don’t really have the financial means to be taking on that risk.

 

Erwin  

Most of the people I’m talking to are accredited, they’ve already exited a piece of real estate, they don’t have lots of money. Well, we

don’t have a marketing budget. So we’re not splashed all over either. Like it’s

 

Garrett 

not selling our investment much. But sometimes people just want that control to teach us what to do the work. There’s some people that just I don’t want to troll too, but I know my limitations. Some people just want to take it on themselves. They think they can do it and have outer. But yeah, it’s a good question. Because we offer similar returns with with no work self.

 

Erwin  

So I find that as an office investor, who’s looking to invest in Florida, right there Canadian, never done anything in Florida before. They’ll have trouble getting financing, they know. But then the suggestion came out, she came up with something that’s been suggested to her. It’s just borrow private money as her primary financing. But it’d be like 10%. And I’m like, in my experience, that’s expensive. And that’s for short term use. Yes. Right. And they’re like, oh, as long as the numbers make sense. And like, I don’t know what deal with that makes sense. Yeah. Because if that deal made sense, it should make sense to a lot of people. Right? But yeah, you gotta make money lending out. Yeah, even you think 10% is not something you do for long term.

 

Garrett 

It’s not sustainable. That’s why we want to be that short term option, we make sure there’s an exit. You don’t want

 

Erwin  

to lend for long term. You

 

Garrett 

know, we

want we love short as possible. Yeah, you’re

 

Erwin  

getting a great rate. You don’t even want it out there.

 

Garrett 

Yeah. And I think I think a lot of people know that we do a lot of financing for real estate investors. But we also love just any sort of short term stuff, like a bridge deal where the purchase and sale dates don’t line up. But there are other incidents,

 

Erwin  

actually, because I’m hearing a lot of bridge loans are needed these days. Yeah. And we’re happy

 

Garrett 

to do them like those are, those are great loans that are quick, and people just are in and out. So the interest rate is less relevant, right, when it’s a month bridge. But the other one, too, is is just

 

Erwin  

so how long does it take you to put together a bridge? It’s usually usually you’re finding out late or you can close the deal tomorrow?

 

Garrett 

Well, maybe not that quick in Ontario, but in Alberta,

in Alberta, tomorrow

 

Garrett 

48 hours right?

 

Erwin  

Late in the process. So we need to bridge

 

Jesse  

where’s the 11th and a half hour, my bank fell through here’s why

 

Garrett 

helped me. And there’s also when you’re saying the elevens and a half hour, it’s the same with when the bank has a bunch of conditions and we’re coming up on the on the date, they’re going to purchase a property and maybe the appraisal comes in and says the property’s fair condition or doesn’t look the way they want it. And they’ve got three days to close, like, what the heck do I do? So we’re that option that’s super quick for clients. We do our internal values, so we can turn it around really fast, fund it for you. You can maybe do whatever the bank needs you to do, and then jump right back to the banks and hold it long term. And maybe that’s their primary residence. They just couldn’t get the bank financing because they pulled it last minute or something like that. causes delays and closed happens all the time. Yeah, yes, we want to be that short term solution. But there are other things that we do. Other than real estate investor focus stuff like this, where it doesn’t have to be a big Reno or something. But we want to be that option for people new

 

Jesse  

like like new to Canada come with capital and the job but they don’t have the job history, or the credit history got to be a citizen, but you got to be a citizen. They see a house that they love. Good value. We see a clear line to them getting bank financing in four or five, six months. We want those loans So what you said is, yeah, we’re getting a great rate for our risk. But risk is the key thing there. And when we’re getting paid out, the risk goes to zero. So we love recycling our money. It benefits our shareholders benefits, our risk profile. So so that’s what we want to do see your friend who’s buying in Florida. Let’s say she was buying in Calgary.

 

Erwin  

And I mean, just the tour, just for the price point. And

 

Jesse  

there were a clear, let’s say she had to go, for whatever reason, new to Canada couldn’t close quick enough with the banks, whatever. But there’s a clear line for her to get bank financing. We want that loan, and then we’ll work we’ll coach her if needed. We’ll get her with the best mortgage broker, we’ll do whatever it takes to see her succeed and getting rid of us. That’s where we see successes when they exit the loan.

 

Garrett 

Yeah, like most people know us as the real estate investor focus, which we are like, we still love doing those deals with people who are flipping and burning, but we also do so much other stuff to be able to finance things short term. Yeah.

 

Erwin  

And then so what kind of investor deals are you looking for?

In terms of real estate investor,

 

Erwin  

real estate master deals? Well, it’s

 

Garrett 

like we talked about before, we’re we are focused, not as much on the GTA you typically houses that are $800,000. And last, but we still go above it. So we want to be in that sweet spot. And then we also want to make sure we’re in in around the urban centres. We don’t want to go too far out. So we’re not going wave rural Ontario,

 

Erwin  

what’s a population minimum floor, so 50,000, within,

 

Garrett 

within a city that has 10,000 people, we can land inside that city, so it can’t be outside that city. And then we do cities with 50,000 people within 10 kilometres of that. And then 100,000 People will go 25 kilometres outside of that. So it’s urban centres, we’re wanting to stay close to some sort of city.

 

Jesse  

Yeah, I was just looking in in our portfolio composition for Ontario. 82% of it is 100,000 population and within the 25k off. So that’s the bulk of what we’re doing. But really, yeah, who we want to support is firstly, real estate investors that we see them making money on residential projects, short term flip, or book,

 

Garrett 

or two main underwriting criteria for flipping houses, are they going to be successful? Like, are they going to be profitable? And do we think they are going to be via our valuation that we do internally by our internal evaluators? And then two is do they have the money to complete it. So that’s the downpayment, the renovation costs and the carrying costs. So seeing those two things, and then we obviously review the rest of it, AP credit, notice of assessment there, I feel expertise. And if they have a lot of expertise, we probably won’t have to dig in as much as we would new investor and make sure that they have a good plan in place to be successful. Because ultimately, this should be mutually beneficial. That should be okay, you’re coming to us short term, but you should also be making money on the back end, whether it be a burr or, or a flip.

 

Jesse  

Yeah, we want to work with these clients for life. And we’re not going to get the opportunity to do that if we don’t set them up for success. And then finally, mid floor half of the market, we don’t like high end stuff. Because what we’ve seen historically is when there is downturn, that high end stuff gets beat up the most. Also, there’s just less of a market for it, right? Like, there’s just more liquidity in the mid to lower half when economic turmoil hits a floor usually establishes for real estate, but the height usually gets compressed quite a bit. And there’s just less transactions in the high end space. So we love mid to lower. And for that reason, most of our investors are already looking at that. It’s not like we have to say no, don’t buy that $5 million house and renovate it, because they’re not considering that.

 

Erwin  

Yeah, very cottages. Is that something that? No, no. Yeah. Because the

 

Jesse  

because of what we just talked about, exactly. Like it’s great until it isn’t. And it’s amazing how many investors thought it was great over the last three years. And now that people are holding the bed struggling with with with really big payments, they’re letting go those cottages where their supply, it’s in some of the rural cottage areas, there’s no supply in urban centres where people are working and living. Right.

 

Erwin  

And also that seems a problem for him. For many people bookings are low on Airbnb, or maybe yeah, when

 

Jesse  

the economy struggles, those discretionary type income endeavours to get cut back and you always need a place to live for but you don’t need a place to vacation necessarily.

 

Erwin  

I do think part of is because our borders are completely open. So I think more people are leaving as well. They’re choosing other vacation. Yeah. Because my friend that went to like, where she goes she went to Italy in like October and Why’d you wait till October like your past your most past shoulder season? She said that Italy was sold out in September.

Yeah, a lot of pent up demand for travel. Wait. Yeah, there’s

 

Erwin  

still lots of money out there. Yeah, yeah. It’s an interesting world of haves and have nots. Yeah, folks need to make a decision which one they want to be part of? Yeah. All right. Where can people follow up with you, if they want to learn more about this

 

Garrett 

website, check out our website, ch mmic.ca. We have Instagram, Facebook, check those out, we have a lot of educational content that we post. Yeah. And our contact information is on the website to check that out.

 

Jesse  

Yeah. So everything you see on our website and social is going to be geared towards educating real estate investors and borrowers on how to make good decisions. If you are looking for investment information reach out to Garrett or I, we don’t publicly have that information available. Because we’re not allowed to or you know, for multiple, we could technically, we choose to for a few reasons, it does go into the grey area as it relates to securities rules. But also competitively, we don’t like to have it out there. And also, because of how relatively guarded we have our shareholders, we like to be relationship based. So we don’t want every person in the public calling us to be a shareholder. So we’re more than happy to share our information. Like we’ve said, we really take pride in our transparency. So you can reach out to Garrett or I, our emails are just our first names at ch fmic.ca.

 

Erwin  

And I don’t know if you notice, but what you just shared, right? They’re so different that people who are trying to raise capital on social media. Yeah, I guarantee you call me anytime of the day.

 

Garrett 

The disclosure was even thrown out there. So yeah, yeah, I hope it’s Yeah,

 

Erwin  

so So listener and trying to highlight the fact the difference between when your licence insecurities and how you present opportunity, versus how someone that took a weekend course reforms, that’s opportunities on social media. Thanks so much for doing this. Thanks for coming all this way, just for me.

 

Jesse  

It was just for you, or when. Thanks for having us. And thanks to your listeners, for hopefully, getting a little bit of education but we love we love what you do. We love your platform. We love the fact that your mission is education and something that we hold near and dear to ourselves.

 

Garrett 

Yeah. Yeah, we appreciate it. And thanks for having us.

 

Erwin  

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

 

 

 

To Listen:

 

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

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

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

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

Youtube: https://youtu.be/CHLd-3JB9gs