**Transcripts are auto-generated.

 

Erwin  

Hello and welcome to the truth about real estate investing show. For those watching on YouTube. No reason to adjust your camera screen colour. I actually see myself and I’m pretty tan for just came back from the cottage been off for a week. And would you like to know what what it takes to be a guest on the truth about real estate investing show one criteria is that one has to share both a repeatable systematic strategy to investing and sharing what did not work, including the lessons. Our last episode was great one with Austin yay. And we’ve got some great feedback coming in already about what a great episode that was. Again, Austin is very successful right now. But he’s he’s quite frank about sharing the very rocky journey to get there a lot of things that has changed in his investment strategy. So have a listen to that episode. If you missed it. There are some influencers out there who are not completely transparent and do not share but they’re losing deals, or their breakdowns and business partnerships or personal relationships. There’s nothing wrong with that to his throne. But a mentor of mine shared with me how he does not trust anyone who’s never lost in investing, gambling or whatever. If someone’s willing to withhold information on losses, what other information are they willing to withhold, there’s the famous quote by T Harv. Eker. How you do anything is how you do everything. So to me how it applies to real estate investing is if someone’s willing to lie, cheat or steal in any area of life or business, they may be willing to lie, cheat or steal from you. Well As for me, hence my business. One red flag is usually enough for me to stay away from someone or in their business associations and Associates. Take for example, this one Real Estate Investing Club that just recently imploded, they were being accused of one of the founders, has been accused of many things and have been for many years. Hence, I’ve stayed away from members of that club, the owners of the club, as they’ve never guessed it on my show, while they were out there operating that club. There’s so many good people in the real estate investing world, that’s actually hard to keep up with all of them. Many friends who are better are excellent, excellent investors. But again, it’s hard to keep up with them to spend more time with them network mastermind, whatnot. So why spend time with folks with red flags, life is short and never losing money or guidelines that I try to live by. I’ve lost plenty of money in my career. Thankfully, I’ve made more. And I’ve been terrible at times with my work life balance, but the long term trajectory looks pretty good. Speaking of long term from all the news and information I continue to consume, but economics, artificial intelligence, networking with the real estate investors, you know, folks who own stuff on the ground, long term view is interesting. It’s always been interesting. I think now, as I’ve been saying this for for a very long time is an interesting times we live in, and we’re living through history right now. So to me, at least as I continue to geek out on more and more information, my conclusions are still the same. Owning quality income properties is still the path to building one’s wealth. That’s an incredibly efficient and time saving AI won’t stop that. But AI is already disrupting a lot of jobs and industries. I’ll be sharing about that in my presentation. One’s ideal window to buy investment properties. It’s about 12 months roughly till we see another interest rate cut. And that’s just a guess, no one knows for sure. So again, I’ll be sharing my research on Tuesday. So probably the day you’re listening to this, hopefully you listen to these Redway Tuesday, July 25 7:30pm. eastern standard time I’ll be sharing an economic update at this month’s I’m meeting via zoom webinar. So it’s all online. I’ll be at home. Hopefully you’re all at home enjoying yourselves and your families. My research and AI will hopefully take the fear out of AI away from most of more people understand Yeah, there are some fears that bit to have around it a more importantly the opportunities. And also coach Tim Hahn from my team will be sharing how he himself and other our restaurant clients with who own condos and single family homes, how they’re navigating negative cash flow in this high interest rate environment. It’s not something you want to miss the link to register is in the show notes, which may mean it’s in your email already. If you’re on our email newsletter, and if not, you can find it on our website at WWW dot truth about real estate investing.ca on the show episodes, in the show notes, you’ll see this link and yeah, you can find it at www dot truth about real estate investing that’s it, the meetings all virtual no charge and but if you do prefer personal and more personal, small or technical hands on experience in person, then you do not want to miss our island mastermind tour in Kitchener, Ontario on Saturday, July 30 10am, where we tour inside a note to income properties. Real estate investing is about owning physical assets. So this is an opportunity where the rubber meets the road. And when yourself can do hands on learning about how our clients earn world class returns, investing in income properties, quality income properties, so don’t forget that quality part time of writing we only have four spots left these tours they’ve always sold out. So again, the link to purchase tickets are in your email or you can find it on the web on our website in the show notes. The cost is nominal and All proceeds go to charity. onto this week’s show. Today we have a full time real estate investor who’s really really smart. I’ve known Christian Spil. Fogle. Yes, I can say his last name. It’s not the easiest to see or smell, and still phone call. I’ve known him for a couple of years, but only in this interview to actually get a better understanding of where he’s coming from, and how he actually transitioned out of his executive position in in big tech and how he became a full time real estate investor. What’s especially interesting so Christian originally, in metabolise investing, it’s not what I expected, and how he found a bunch of cash flow, enough to replace his job income in mixed commercial residential real estate. If you’re a geek like me, that might catch your attention. And you may enjoy this episode as I cannot think of anyone off the top of my head who is as successful in mixed use commercial residential, he’s got the worst kind of commercial to retail. Yak am I experiencing financing is expensive when investing in mixed use by Christian has cracked that nut. So if you want to learn the truth about how one can replace how he replaced his income, his job income and you make good income, you make really good income. He’s a tech executive for a big company. And he replaced it with real estate cash flow from operations. So you want to take notes, if you’re interested. Listen to this episode more than once. You can find Christian on the web at WWW dot att liveris.ca. Eliphaz means to have wings, Alec Christian explained that in part two of this interview, but I’m guessing if you want your retirement planning to have wings that invest in real estate, so again, a Lefort liveris.ca. And he can find them on Instagram, on Facebook, LinkedIn, all at Elif rehearse properties, please. And during the show. Hi, Christian, what’s keeping you busy these days? Oh, boy,

 

Christian  

lots and lots. A lot of what I’ve been doing over the last six months is refinancing the

 

Erwin  

portfolio at historically high rates. What do you think about? Well,

 

Christian  

if you think 3.85% is historically high rates than I guess they’re high,

 

Erwin  

it’s all a crying and screaming IECA out there. You think the world’s ending with the rates of the way they are?

 

Christian  

I think there’s a big difference. Because one of the things is, you know, I invest primarily in commercial type assets. So I’m not doing much if anything in the in the smaller

 

Erwin  

retail assets. Elaborate on commercial, what kind of commercial? Yeah, sure. So we cover

 

Christian  

about 60 70% of our holdings are in mid size multifamily buildings. So that’s basically anything five plus, most of our buildings these days are in the order of 10 to 20 units, we have some light industrial property, we have some mixed use buildings, we have a little bit of office and a little bit of retail. So it’s it’s a wide variety of things. And we got into those asset classes for completely different reasons. So you know, at one point, you know, when I quit my job, right, you know, that’s a whole other story we might want to talk about. But when I quit my job, the first thing I had to do was replace cash flow. So at the time light industrial, you could basically pick them up for in the order of 910, sometimes 11 caps, which meant that they were highly creative, as long as you keep them full. So lots of cash flow coming in. So that was a priority for me and why I focused on that particular asset class at the time. And so over time, asset classes become more or less popular, or they meet your specific needs or objectives at a particular time. And so I shift. So light industrial five, six years ago, was a cash flow machine. But through the pandemic, the cap rates came right down on those, the value of those buildings I hold, obviously, you know, really, yeah, they exploded, they did really well. I never planned for it. It’s just a great upside in that, but they generate great cash flow through the process, right, because you got them at a better price. Yeah, I got them now relative to now they looked like great prices at the time it met an objective which is cashflow. So you know, I had to replace income at the time. And then we’ve done lots of multifamily.

 

Erwin  

Sorry, before we move on to light industrial, like what are housing? Yeah, so let industry have a picture of what like what light industrial looks like? Yeah, it’s

 

Christian  

a good question, because I get asked this all the time. So our light industrial buildings typically look like big buildings with big garage bay doors on it. So it’s where the trades will typically set up their business, the electricians the fire, guys, like we have Winmar in there we have oh, in large disaster

 

Erwin  

renovation. Yeah,

 

Christian  

so the exact place so floods, fires, that kind of thing. So there were I think I want to say buildings we’ve got

 

Erwin  

they made lots of money. It must be a great tennis.

 

Christian  

Yeah, they’re they’re actually very professional, which is nice. So because they’re a larger operation, they’re very professional to deal with. We have capital appliance and repair in there as well, which is a firm that’s pretty much going national so they were Ottawa based. They started leasing some of our space and then more space and then more space, fantastic tenants and strong business. That’s their opening locations all across Canada. No, but yeah, it’s basically business. You know, businesses like that are the two Typical tenants,

 

Erwin  

they mainly just need to space, industrial zoning, current manufacturing anything. They’ve machinery robots. And I

 

Christian  

know that probably be what I’d call a heavier industrial. But it’s, we don’t do manufacturing facilities, this is for the trades. So they typically have their offices in there they have, you know, for example, their accounting staff, administrative staff, but they also store their materials, they might park their trucks in there, that’s why they have the big bay doors, so they can unload things, and put stuff in there, you know, and then we’ve got a bit of office space as well. So we’ve got, like the Alzheimer society is one of our tenants in there were a bunch of smaller telecommunication providers that are in those offices, and we’ve had some nonprofit government organisations in there, they’re actually really good tenants all the time, because they tend to be very well organised and professional. And they tend not to be highly demanding, either. So I find a lot of the tenants in the pure commercial space like that, once they’ve got their space, it’s their space to do with as they wish they’re managing their own fit UPS inside. So they tend to be very responsible about what’s going on. So the only time we hear from them is when there’s something significant happening, right, like a giant power outage in the area, or there’s a leak in the roof or something, something to do with the shell,

 

Erwin  

just the commercial act is way easier. And just the, I don’t know the culture of commercial, you know, it’s in your unit, you’re responsible for it, versus I hear residential,

 

Christian  

I hear that. And based on everything I just said, it sounds like that would be a true statement. But I find that it has a lot to do with tenant class as well. All right. And by that I, you know, just the quality of the of the place that’s being rented as well as the quality of the tenant. So Class A tenants tend to be relatively not too heavy maintenance, be them commercial, more residential. And you’ve seen some of our property. So we have a lot of what I would call a Class A or B plus tenants. And they tend to be relatively low maintenance as well, some you just never hear from at all. So when they, they keep the properties in good shape, and, and so on. So we like to focus on good quality tenants, good quality accommodations, because it actually reduces our operating costs and the distractions.

 

Erwin  

In my experience with our doctor tenants, they’re generally great. But they know their strength in the negotiation, and office space, if there’s massive vacancy. So they know where they’re that they have a lot of strength in negotiations. So they’re asking for a little bit more than you’d typically expect from a commercial tenant.

 

Christian  

Yeah, and that’s absolutely right. There are times when certain asset classes have higher vacancy rates. And so it’s a little harder to manage. Sometimes you can mitigate that if you have space that you can easily convert to other

 

Erwin  

purposes. Yeah, like light industrial and be nice.

 

Christian  

industrials, exactly right. You know, so, for example, some of the space was more lucrative for a while to do office space in it. So we just took some of the bays and just made office. In other cases we had, and I think I’ve mentioned this to you before, but we had, you know, a larger 2000 3000 square foot office space, that was impossible ease through the pandemic, but we had them already, in some cases converted to individual cubicles, or you know, but in closed offices. So we started renting the individual offices during the pandemic, when people were trying to get away from the spouse, the dog, the kids, you know, all the background noise, but they couldn’t go to the office. So we did really well, when we pivoted that way, in the pandemic, now, things are starting to shift back, right. So those are a little harder to fill again, as people are really kind of, even though everybody’s saying they’re not going back to the office, people appear to be going back to the office,

 

Erwin  

three days a week. Yeah, it’s much better than than what it used to be.

 

Christian  

So having flex space like that, so space that you can easily just pivot and change the tenant category that you have, gives you a bit more power to negotiate as well. That’s just sometimes luck in what you bought. Or sometimes it’s strategic and what you bought,

 

Erwin  

how is light industrial demand, and we’re just gonna spend some time on this topic because we don’t get many guests that can speak to this subject. Sure. How is the demand for light industrial,

 

Christian  

there’s a good reason why the cap rates are down.

 

Erwin  

They’re making so much money. Well, the cap rates are down,

 

Christian  

right? Because there’s a lot of demand. There’s just huge demand. And the pandemic kind of forced a bunch of things to happen. You know, it wasn’t just that the trades needed space. There was clearly a lot of demand for the trades through the pandemic, as we saw as we were trying to build stuff. But then also warehousing started to happen. So with everybody ordering at line, there was a whole video of storage, right? Yeah, and often light industrial and warehousing tend to be build on spec. So if Amazon comes into town, they’re not looking for space they’re building and a lot of time light industrial spaces relatively easy to build, right? Because you’re just putting a concrete pad down, you’re putting a shell around it, etc. So and by the land,

 

Erwin  

or did you see more businesses doing more eco commerce business. So the right term e business just like just like packing, delivering shipping. I know that was a big story in the GTA for industrial

 

Christian  

Well, yes is the simple answer, right, I was just taking a pause to think about it because every business was a little bit different. I saw all the retailers that we have, and some of them are in our enlightened industrial buildings, but they they definitely pivoted online. So for example, one of our tenants is kaboom comics. And these guys have some of the most amazing product that you’ll ever see, the guy’s a passionate collector, and I helped him consulted with him, during the pandemic, to help him save his business. He was almost ready to pack it in. And as I look at his business, right, and we’ll get back to it in a second, but it was it’s an interesting segue, because when I looked at his business, I realised his business was very similar to real estate. Right, what he had was his assets were books, instead of, you know, real estate itself. But the notion is the same. So he’s building equity. So every time he sold something, he made profit, he took a portion of that profit and reinvested it in building the collection and the asset base that he had. And we went through it and did an inventory. I said, Dave, do you realise how much what you’ve got here. And once I explained it to him, the light bulb went off for him, and he doubled down on his business. So instead of packing in, he grew it and continued to grow it. And then it was more a question of operational discipline in order to make sure that he had a good solid, cash flowing business he was going through. So Dave’s business has grown very well. And the reason I bring up that is because obviously, the comic book trade is largely their revenue comes from the event market. So they go to things like comic cons, and other forms of, you know, comic book events, etc. And during the pandemic, all of that gets shut down. That’s why he thought he was done. And he did pivot to online sales. So he found through recommendation as somebody else of doing these sorts of sales parties, if you will, or live party, so he would talk about comic books and so on, that were really very interesting that he had, and that would attract people to live views of this stuff, and people would buy during that session. And his profitability on those was higher than when he was actually at the event space. Yeah, he had virtually no overhead and the price per book was actually a lot higher than when he was at the event space. At the event space, all your competitors are there.

 

Erwin  

You’re competing with everybody. Yeah, all your competitors are there versus he’s the sole voice. That’s

 

Christian  

right. And not only that, but people are buying in the moment. And everybody loves a good story. Right. And so he’s a very good storyteller, and he would talk about the books. And because he’s an avid and passionate collector, he knows everything about it.

 

Erwin  

So he would, you know, guess the audience would would jive with him.

 

Christian  

Absolutely. And they’d be all in. And so yeah, like, and then you have a bunch of people now are interested in the book. Right? And he’s got one book to

 

Erwin  

sell, and then you raise the rents, right.

 

Christian  

Dave is on a good lease. He was. He was one of our early tenants. I brought him in probably in the very first year of that particular building. So he’s got a very, very good, right very,

 

Erwin  

for listeners benefit, who are who are newer to commercial leasing. What happens when the lease is up? Does it go month to month you write a new lease? Like what?

 

Christian  

So commercial leases are negotiated with the concept that the people involved are responsible adults that know what they’re doing?

 

Erwin  

That should be all contracts? Residential tenant leases, and yeah,

 

Christian  

you mean like residential leases? Yeah. Residential leases are a whole other ball of wax, but with commercial lease,

 

Erwin  

do freedom to you, I saw some posted somewhere like Twitter or something that all landlords had to take a course before becoming a landlord. I couldn’t agree more. And in turn, I think I think all tenants should also take a course on how to be a tenant as well. Like,

 

Christian  

I think there’s pros and cons to all that stuff, for sure. Potentially. Yeah. But yeah, at the end of the day, you know, being a landlord is a business in every way, shape, and form financially as well as customer relations and how you manage things. So that’s a whole other thing.

 

Erwin  

But a bigger topic. Let’s

 

Christian  

let’s get back to your question specifically and answer that. So commercial leases are relatively simple. In Ontario. They’re governed by the commercial Tenancies Act, which is separate from the Residential Tenancies Act. Whereas the Residential Tenancies Act, I forget exactly how many pages it is now it’s but it’s quite quite large if you were ever to print it out. The commercial Tenancies Act is quite short in comparison, and it’s just basic ground rules. So when it comes to law and covers

 

Erwin  

so much, you can’t be too specific. We’re talking about Office light industrial heavy industrial.

 

Christian  

Yeah, but it governs the You know, fair practices in business is really what it does. So it’s just making sure that people, you know, there’s a level of anti predatory behaviour, aspects that are in there that are just good practices that developed over hundreds of years. But it’s relatively lightweight and common sense. So when a lease ends, and it depends very much what’s written in the current lease. So some leases, for example, and we’ll use a typical framework, a lot of leases have milestones at the five year mark, they may be a renewal, they may be a continuation, they may be an interim point of changing certain terms, like the rent price, etc. But often the lease and the leases can be very flexible. So there’s no rent control, right? It’s what you contracted in the lease. So you might say it’s a fixed base price for your rent from now for the next five years. Or you might say that there are escalators, so that every year you might have a rent increase of a certain percentage or a table of some form. Because often what we do for the first year of operation is we’ll give it you know, brand new commercial operation, a bit of a discount, right to help them survive the first year. But then they go back to the regular rate. And other things we might do is if they’re doing fit ups, right, that’s typically at the end, fedup means that they’re doing all their internal renovations in their unit, it’s typically at their cost. But some tenants don’t have the capital to do it, but you know that they have long term viability. So what we’ll do is we’ll finance their capital work, so they might do their fit ups. And we might go on and say, a 5050. And we will take part of it, and we’ll finance it at a prescribed interest rate. And then we’ll just add it on top of the rent that they pay over the, say, the five year period.

 

Erwin  

So some big Phillips during the pandemic for Office.

 

Christian  

Yeah, we didn’t end up with a lot in that.

 

Erwin  

My point is, is what to negotiate and what the what the markets like a good friend that did very well. Office space, it was a really painful part of the pandemic. No, yeah. And so the landlord is very motivated,

 

Christian  

we were lucky that a lot of the office leases that we had were relatively fresh just before the pandemic. So we only had I think, maybe 3000 square feet come up for renewal during the pandemic, and it was early on. And those are the ones that we pivoted to the micro offices, but everybody else had commitments on the longer term and the because there were good quality tenants, right? It’s not like they were just gonna file for bankruptcy or disappear. So to close off in your question, when you get to the end of that lease, there’s a bunch of different options. It depends what’s written in the contract. So sometimes a lease is just the end of the lease. And if it’s the end of the lease, the next lease is that a brand new contract new terms, rent everything.

 

Erwin  

It’s, you’re discussing this in advance, usually a few months in advance of discussing what’s coming. Yeah, it’s

 

Christian  

three to six months, depending on what you write in the lease. But the other thing that can happen is you might give certain number of renewals on similar terms, or uncertain terms that are to be renegotiated on the renewal mark it because

 

Erwin  

the tenant will often want the right to reopen or re rent. Oh, no, I’ll be in the contract.

 

Christian  

Yeah. And they’ve rent, they’re running a business there. And it becomes part of their goodwill, if you will, because we’ve already renovated this space, not just a capital investment, but people know where to find them. Yeah, they’ve been going there for five years. So if you suddenly up sticks and move, now you risk losing some of your clients.

 

Erwin  

So I’ll just see if they like your car restaurant. Rental, your menus, for example, because you’re the address changes. Yep. And the like you mentioned goodwill, people will keep going to the location expecting you to be there. That’s right.

 

Christian  

And if you move to a different place in a different restaurant shows up their portion of your customers are going to this new restaurant. So the the location itself has some goodwill. So that’s why tenants that are a bit savvy commercial tenants will negotiate rights associated with their renewals, and

 

Erwin  

like my tenant do.

 

Christian  

Yeah, well, they’re smart, and they’re savvy, they’ve obviously not their first rental. So but they would do something like, you know, what’s very common is they will say, or want things like I want the right to renew either on similar terms, and the landlord is saying, Well, look, it’s five years, a lot can happen in five years. So we need to renegotiate what the rent is going to be because we don’t know what the market is going to look like,

 

Erwin  

especially today with inflation being so I see I have lots of the entrepreneur, business owner friends who are trying to negotiate maximum increases to rent like tap tap increases your rent, but a

 

Christian  

savvy tenant will then make sure right, and often we write this, probably about 30% of our leases have something like this is where the landlord and the tenant can’t agree on the new rent, you’d bring an arbitrator right and arbitrators so that, you know a fair third party person would come in and and help decide what that new rent is actually going to look like.

 

Erwin  

Interesting. That’s fine. comstice anything else? Yeah, yeah. See what the recent listings rented for. Yep, I even visited some of them ourselves.

 

Christian  

Yeah. Well, typically when I’m doing something I don’t, I don’t push people over the edge, right? So do is I’m gonna raise it to what I believe is fair market price that you really gotta raise. You know, I mean, you want goodwill with the, with the people that the tenant, so I’ve got a lot of Main Street retailers. And I always want to make sure one that they can run their business. So if they’re highly profitable, right, that’s one thing. But a lot of retailers are doing, okay, they’re doing all right. So but they’ve got a lot of operational expense. But I take a look to see what the current rents are on that street, right. And I go for what the current rents are there. And typically, what I’ll do is I’ll anticipate some inflation. So we’ll typically put a percentage increase every year to account for a level inflation, and then five years, we’ll do a reset again, based on what the real market is. So that’s the way we tend to manage it.

 

Erwin  

So before we were recording, we were talking about this interesting conversation because your investment journey has changed along the way. Yep. So actually, before we move on, like, are you not looking for light industrials things that you made a lot of money there?

 

Christian  

No, if we’re, we’re actually thinking of building so. So when the cap rates are low, like this, it becomes expensive to buy relative to the cash flow, you’re gonna get out of it. But light industrial is relatively inexpensive to build. Because you’re basically putting concrete pad you’re doing all the service things like water, power, etc, you’re doing the shell, and you’re doing a modest amount of fit ups on the inside of the building. But it’s in the land, it’s still expensive. Depends on where you are, if you’re in an industrial park, we’ve got some opportunities right next to one of our buildings where I could buy probably about four or five acres and build something reasonable. And it’s really funny, because, you know, my business partners is my wife, townie. So she’s when I first bought the light industrial, she she much prefer the residential side of things. And she looked at it and she said, I don’t really want to do this, right. And now she’s all in. And she said, When are we going to build some more of these things. But right now it makes sense to build them rather than to buy them. And that’s often a discussion in any asset classes. Sometimes you can’t buy it cheap enough to make any sense. But you could build it for maybe the same or less, and you get a new product, in that case, so. So that’s the way I look at it. And to be honest, building is probably one of the riskier things to do in in real estate. But sometimes it still makes more sense than buying, though, because buying something that’s I wouldn’t say overpriced. I think overpriced is the wrong word. But something where the business case just doesn’t hold very well, or there’s a lot of risk associated with the business case, is sometimes riskier than the other options such as building.

 

Erwin  

It’s a question it doesn’t sound like you make these business decisions based on your gut feeling.

 

Christian  

Yeah, you know me well now. So it’s

 

Erwin  

a you’re not buying based on a television personality telling you if something’s good, and you know, though, seems like you’re actually researching stuff.

 

Christian  

It’s so easy to get caught in that emotional hype isn’t as I’ll admit, I can get caught up in the hype, I can. And, you know, I, I look at it, and I get excited, emotionally excited about it. But I’ve got a discipline that I’ve developed over the years, when I’m putting money into something, I need to know how I’m getting money back out at I just prefer deterministic things. When I was younger, I used to do more stuff that people said, oh, you should do this, you should invest in that you should invest in this other thing. And in hindsight, I realised that a lot of what I was investing in was speculative. Right? So you’d invest in this because you expected it to go up in value. Well, why? Why would you?

 

Erwin  

Yeah, why invest in? Also, how does it go up here.

 

Christian  

And the one thing that I’ve learned over time is that there’s easier ways to make money. So if you take if you buy soybeans, the

 

Erwin  

magic words, easy money, I’m excited. I’m turning sound clip does that on their show? Easy. Money isn’t easy, but

 

Christian  

it’s easier money. Relative? So the thing that I’m looking for these days, okay. So, you know, I kind of recall a discussion I had with my father. Okay. And my father, you know, he was trying to top up his pension. And if you take a look what he invests in, now he invests in good dividend producing assets. Right? So Trans Canada pipeline is one of the things that he holds. That’s a

 

Erwin  

good one. Yeah, it’s so easy to make more pipelines in Canada,

 

Christian  

and the dividends so he focuses on the dividends because he’s retired and as long since retired, and he’s looking for cash flow out of those operations. And then when you really think about I didn’t think about it at the time when when dad was doing this, but I realised it later and now I can backcast and think about, you know, how clever My father actually was around these types of investments is if you can find an investment that has a good rate of return, you know, one that’s determined relatively deterministic. So whether it’s a dividend producing, you know, A stock, you know, with a high yield on it or whether it is real estate that generates a level of cash flow, those are good returns at the end of the day. And so you can have that as your base. And if you go back to why did I buy light industrial, for personal reasons I left my job at the time was by my older daughter had some mental health issues, right, which we talk commonly about. And you know, I had to make a decision at the time, so I had to focus on her. And so we had to pivot and restructure our portfolio and drive cash flow, and we looked for assets for cash flow, and that’s at the base of our operations. But if you really think about it from a business perspective, any successful business has to have effective cash flow management, you have to pay yourself, you have to pay your staff, you have to pay your operations, and then everything else is like that’s your foundation. That’s where you start. And then from there, you grow your business. And so the other thing you’ve pointed out is I’m doing mostly stuff in the commercial lending space, right, or the commercial, you know, we talk at commercial assets, right. But it really relates back to what the lenders look at in terms of the way that they’re loaning you products. So five plus multifamily residential, typically, it’s commercial loans. That’s why they’re called commercial

 

Erwin  

and can be very attractive lending to as well.

 

Christian  

Yeah, for sure. Right. But what’s nice about those is okay, now I’ve got my cash flow plan. So that’s my business and my foundation, now we can take a look at an asset purchase, and think about what am I going to do with this? So how am I going to improve it? So I could just buy the hold? And if it’s a creative, meaning that it adds cash flow to the business, then that can be fine, right? But we’re a bit more aggressive than that. So we’ll typically buy an asset and figure out how can we take its current value and increase its value. And the cool thing about commercial assets is it is primarily driven by the net operating income of that particular asset, revenue minus expenses, net operating income, if I can increase the net operating income, there’s a direct portion will increase in the value of the property with some puts and tastes. But generally, that’s the case. So if I can double the noi, I’ve generally doubled the value of the asset that I have. So to me, that’s a very deterministic thing. So if I improve

 

Erwin  

something, you can really control what’s on something you’ve lost control over? Yeah, it’s

 

Christian  

much more control. It’s much more deterministic. I can go from point A to point B control something that’s pretty quite predictable. Yeah. And if I can figure out how to do it, and usually that’s affecting the revenue line. So if I can do something to change the revenue, and I can maybe do a bit to improve the expenses. I’ve increased the value of the building.

 

Erwin  

But I do have to say, it took some hard work and talent to do this.

 

Christian  

I don’t know about that. To me, it’s relatively straightforward math. Alright.

 

Erwin  

So not everyone can do math. I mean, we know that.

 

Christian  

I believe we’ve seen evidence, so I didn’t balance

 

Erwin  

themselves. You know, that’s a that’s a very excellent lesson in math. The budget will balance itself. Budgets, budgets balance themselves. Yes. So if you apply that to all areas, fiscal policy, monetary policy, they balance themselves. So who needs math?

 

Christian  

Yeah, that’s great. Until you have to rely on it personally, right. And you don’t want to a financial crater where your life used to be. So

 

Erwin  

sadly, we know people that have that, but yeah, but my point is, is that you you can’t just walk into this, and it’s not quick and easy.

 

Christian  

No, no. And that’s the thing, I think. And also,

 

Erwin  

I think, for folks who don’t know, like you were very successful tech executive.

 

Christian  

Yeah, I was, but I didn’t make my money there. I’ll tell you that.

 

Erwin  

I’m gonna guess that you were before you quit your job. You probably had higher net worth and most people who are listening to the show,

 

Christian  

not to the extent that you think really, you know, who are poor, rich tech executives, something like that. Yeah, we’re single income family or expenditures were very high. You know, I’m not gonna lie about that. My daughters were in private school. They were in debt, you know, competitive dance. And any, any, any parent here who has daughters or sons that are in competitive dance, know how outrageously expensive that is. It makes private school look cheap.

 

Erwin  

You’re getting close to what is 8070 80,000 a year between private school and dance?

 

Christian  

Yeah, I would probably be getting up there. So we burned all the cash that I earned. I wasn’t really saving. And there was a period of time there where our home finances were cashflow negative. All right. I’ll be perfectly honest about that. So no wonder you have to quit. Yeah, I’ve made more in real estate than it ever did in tech. Dami.

 

Erwin  

That’s absolutely the case. In some projects bluff because you’ve worked for a lot of startups as well, like,

 

Christian  

No, I’ve never worked for startups. I’ve worked on larger firms where we did do IPOs and public offerings. And I’m on the board of a lot of tech startups to help from a tech perspective, because I love technology, right? I just you can’t get this done. So one of my mentors said, as a Christian, you said, you might be in real estate now. So but you’ll never get tech out of your blood. So you need to come and help me with some of these companies. I think it was a part of a sales pitch, but he’s not wrong. So, in fact that that gentleman, he said to me, because he’s a big tech entrepreneur,

 

Erwin  

we’re not naming names.

 

Christian  

I don’t think that’s fair to him. So, but he’s a big tech entrepreneur, you know who I’m talking? Yeah. So

 

Erwin  

and it’s a household name. Anyone falls on Canadian business?

 

Christian  

Yes, that’s right. So he said to me one time, because he was still trying to convince me to make sure that I stayed within the tech world. He said, he said, Where do you think, can I actually make my money? Right? And, and I know, he has a lot of hand off our land holdings. And I said, I’m guessing the real estate, so absolutely. So but I love technology. That’s where my passion is. And that’s why he stays in there.

 

Erwin  

That’s crazy, because he has like two or three tech companies that anyone who follows Canadian Tech was the name of That’s right.

 

Christian  

That’s where he made his money originally, but then he put it in the lamp. Okay, so he owns a tech Park. Right. So that’s

 

Erwin  

what started to do. So he owns the property that his businesses are in, I mean, the tech, just

 

Christian  

his but all the spin off businesses that came off him all the other companies that came in because he became sort of a centre of gravity for that particular area. And so a lot of tech companies that are unrelated to him would also leased property in that area. So he has, probably, if I was to guess, maybe 60 70%, of the largest tech Park in Canada. Yeah. And what’s kind of funny is that there’s a few competitors that were always a thorn in his side, you know, through his history, and they leased property that’s across the road. It’s just, it’s an amusing piece of it. But no, on the tech side, I mean, we were burning cash as fast as I was earning it, and for a few years burning cash faster than I was earning it. And that was at a point where I actually thought about how he’s gonna restructure the finances in our in our household is neither my wife or I had a pension plan at the time. And, and I really, I got very nervous about the whole situation, understandably. And I had to think about how we were going to fix this. So

 

Erwin  

it started what what year, did

 

Christian  

you quit your job? 2017.

 

Erwin  

So you’re 20 years old?

 

Christian  

No, I wish so I don’t know how to be probably 52. I

 

Erwin  

guess. So you didn’t you got started pretty late in the game? Well, no,

 

Christian  

sort of. So we had built some assets. We had the equity in our principal residence. Gorgeous home, by the way, thank you. But we trade it up, right. So my wife and I started with nothing, right. And I had no money to my name when I finished university, right? Like a lot of university grads start off cash negative, right, your net worth has a minus sign in it. My wife came from Hong Kong, she’s, and she came from very modest beans. So you know, when she came here, she didn’t bring any money either. So we built everything from scratch. But we made some smart decisions early on, we bought, remember, the very first real estate we bought was probably about 1989 or 1990. And we bought two and a half acres, it was a country estate lot. And we bought it off of a friend who had just done a subdivision. And we thought, okay, this is where we wanted to build our own home. And at the time, so the first thing so after we bought this, our friends were how much was that? Oh, yeah, it was. I think I paid 50,000 or 50. So

 

Erwin  

you tell someone today, the lots were 50,000 they got arriving because I think there’s something wrong with it.

 

Christian  

And it was just outside of Ottawa. So it’s technically still in Ottawa. Now. It’s fairly close to the city.

 

Erwin  

That’s your fun when even that loss worth now, just a lot, same lot that you bought,

 

Christian  

maybe just shy 200 For that lot. Might be more than that. I sold it four times for time. Well, I so I bought it. And so there’s a lot to the story alone, but so I bought this thing 55,000 Let’s say it’s 1990. And the first thing my friends said are actually it was my wife’s friend. She said, Because Chinese so okay, we will build a house there. And she said, Well, do you know what you want to house? The Chinese had always lived in a you know, a small apartment in Hong Kong. So she’s, well I I’m not sure it’s just Well, maybe you want to buy a house. Right? Figure out what you like and as and then build it on this lot. So what we did was we bought a house in a little community called Constance Bay just outside of Ottawa. But it was we bought, we didn’t over leverage ourselves at all. We bought Well, what we could afford at the time the house was we bought it for I think $120,000 And that house is probably worth 300 Now, I think no actually that’s it’s got to be more than that house probably 450 or 500. It’s actually reasonably well situated. That’s a good word. Turn. But yeah, but that’s a retail market part of that’s inflation part that’s housing supply. But we bought it. And it was far from town. We thought it was near the beach right now, I grew up near the beach in Nova Scotia. So I thought, okay, that’s where we want to live. And we found ourselves commuting five days a week, all the way to downtown Ottawa, and then maybe going to the beach on on a Saturday, maybe, right, but definitely not every weekend. And then it became clear that we had this wrong, and everybody who was living in Ottawa and coming out to to Constance Bay probably had the right idea. So at that point was okay, well, we gotta move closer into the city, we paid off because the mortgage was so small, and the value of the house was relatively small. We what we did was we lived on my salary, and anything Chowning made went into paying off the mortgage. So we slowly built up equity that way. And then we sold that house, we bought a house in a pn, which is a suburb of Ottawa, so you know, halfway to downtown from where we were, and then we, same strategy, we lived off my salary, and then my wife salary went to paying down the mortgage. And it was a very conscious decision, right? It was, we were not going to live the lifestyle of a two income family, we decided we were going to live in one one income style family, and just bank the cash effectively. And then the after the second home, I was out of town on a business trip in Washington, DC and I got a call Wednesday. It was really funny because a colleague of mine at the time was he was playing move, his wife was looking for a house and we were joking was going to come home and find a post it note on his door. Well, while we’re talking about this, I got a call from Chinese. She says, I bought a house. And I didn’t know what to say. So I just had said a nice house.

 

Erwin  

A nice house that she bought a shithole.

 

Christian  

Yeah. And that’s the house that you know where I live now. Yeah. So it was a bit of a fixer upper, we had a lot of work to do on it. Great views. Great. The view is we’re right on the canal. It’s a great location, and like house, but it was all part of our equity development. So there’s all kinds of I learned a lot about financing on that one, too, because there was no condition of selling our old house. Right. So I had to finance that entire thing. And we didn’t have enough. And the bank gave us a demand loan. They said, Look, I know you’re good for it. They gave us an extra 50 grand or something like that, to just make sure we could close it.

 

Erwin  

That’s sure how much what year and how much it costs that

 

Christian  

we bought that one for 430,000. I think in that insane? Yeah, the you. It felt like a stretch at the time. I’ll tell you, like the

 

Erwin  

poor kids today, for 30 felt like a bigger stretch. And you’re here you are a very successful tech executive. Yeah. Oh, yeah.

 

Christian  

It was a stretch. It was a stretch. There were some nicer houses in the area that I really wanted to buy, but it just looked like it was too much. And we always lived on the principle, like the mortgage we had on that house was no bigger than the mortgage we had on our first house. Right. So I think that’s worth emphasising right, we did not carry more and more debt. As we went through this process, we carry the same amount of debt on each step. And that enabled us to have a reasonable lifestyle on a single income family. Now we had children by that point. And at that point, the animal the kids were getting into all kinds of stuff. Chobani decided she was going to stay home and focus on the children and the children, which was great. It was mutual discussion. And we had that flexibility because we learn to live on one salary. So it wasn’t easy, but that’s why we get into that negative cash flow situation within our family. Now, even with all that going on, I took the equity that my house and I bought my first four Plex. And I think I’ve told you

 

Erwin  

this story before Home Equity Line use a home equity line or Yep, yeah, yeah,

 

Christian  

I just I put the HELOC together. And this was with TD Bank. They were really super helpful on this. But it was a purpose built four Plex right next to her house that came up for sale. And Tony and I had always thought about about buying rental property. And so it just felt like it was being handed to us. And we knew the owners well because they were just next door. And that was my first private deal that I’ve negotiated. So that was a first purchase but I that one because it was the first one. I spent a week doing financial risk management. I went through full analysis on this property figuring out what did I think it was worth knowing not what I know today. Okay, so I was I was an absolute amateur at this stuff, but I just used a lot of common sense to figure out well, how much could I afford to pay with carrying costs with the operating expenses, etc. Because I could not afford to have that being cashflow negative, I was already cashflow negative, but if I figured if I could find a way to make it cashflow positive and it would add to our family position So I modelled everything I modelled what happens if I have a vacancy for a period of time? What happens if I have two vacancies? What happens if interest rates go up and at the time interest rates were about five and a half percent. So I modelled at 7% and 10%. So, okay if that were to happen, how long could I sustain this before it became a serious problem. So, after a week of that analysis, I knew precisely what I could afford to pay. And I wasn’t going to pay more than that. It turned out that became a great position when I was negotiating with the seller, because I knew what my bound was. And I was simply wasn’t going to pay more than that. And in the end, we ended up at a price that was actually a little bit lower than what my upper bound was. And the seller guaranteed the rents for six months, as well, in order to make sure you call entities and so Oh, they have ever seen that before. Yeah, he was facilitating the sale. And he was very confident in the asset and his his abilities. And he was trying to make it easy for us. And I think he liked us. And I know his his wife was looking at us. And I think she wanted to they’re very good people, to be fair. So they’re they looked at us and saw us as a young couple, and we’re trying to help us get on the right path. So they kind of made it easy for us. Right. And that was great. So that set the base. So once I have that property, Keaton road paid for. Yeah, it was about 850, I believe,

 

Erwin  

Oh, and year 2005. And then when you think the rents were back then they were

 

Christian  

I know this because it’s one of my rules of thumb. So the rents were about $1,500 a month, spacious two bedroom apartments overlooking the canal. Oh, Luxury. Yeah, yeah. And so my rule of thumb at the time became for that $1,500 of rent, the value of per unit cost needed to be around $250,000. That’s what I needed at the time, right for to in order to make sure that there was at least cash flow neutral.

 

Erwin  

So what do you think it’s worth today, though? It’s

 

Christian  

probably worth, I know this, because we value our properties on a regular basis. So it’s just under 2 million. I think I have it valued at 1.9. or somewhere around there. Seems like a decent return. Well, we’ve only had two tenant turnovers. So I have a tenant in there that’s been there since 1993. And she’s paying. She’s paying, she just went over the $2,000 mark, but the value of those units now on the open market is probably about just shy of $3,000.

 

Erwin  

That much nado

 

Christian  

on the canal. Yeah, yeah. When there’s never a vacancy in that building, when we have had turnover. So it’s, we always have people interested in moving into that building. And the people that are there. I mean, there’s a psychiatrist, there’s a lady that used to work for the WHO there’s a lady that used to be the chief protocol officer of Ottawa, right, who is in there. So they’re very good quality tenants, and the units are tacular absolutely spectacular. The quality of the work that we do in the units is always high end. Right? So makes it easier to rent, get better quality tenants, you get a better value and better price for the for the product, would you call self manage? Yeah, we do. So we, we started self managing, but then by virtue of the kinds of things that we invest in, because we’re always trying to figure higher and better use, we’re trying to figure out how to increase the value of property. Remember that what I was saying about determinism. So cash flow is the operational base. And then we as we take an asset, and we improve it over a specific period of time, we’re fundamentally increasing the value of it, but we know precisely what’s coming out on the other side. So so that’s the deterministic piece of it. So the other lesson that came out of that, when we bought that asset is I now had an asset to be able to do some financial restructuring. So that’s when I started to figure out how to do a lot of managing the debt structures associated with this. You know, I applied at the time, a concept that’s now known as the Smith manoeuvre at the time. It wasn’t called Smith manoeuvre, it was just a practice that was accepted by accountants based on recent CRA rulings. And so I started to apply that principle and

 

Erwin  

can you explain it for the listeners benefit? In

 

Christian  

case they’re not familiar? Oh, yeah, sure. So debt that you have in your personal name, you cannot deduct the interest from as an expense against your income interest that you’re charged on. Things that are to derive an income later on. So an investment if you will, so carrying charges for investment purposes are tax deductible as an expense. So what is now called the Smith manoeuvre is effectively a process that allows you to transition, you know, personal debt to tax deductible debt. And usually what you do is you set up a HELOC to do that, where or you use the revenue associated with the rental property in order to pay down the personal debt, right the stuff that’s on the personal debt. And then you can re advance money on off of the HELOC in order to be used as an expense, or sorry to pay for the expenses associated with the rental property. So it’s a very fast way of getting that converted. There’s another concept called, I believe it’s called these days velocity banking, which has a similar type of concept. What it does is it says it’s similar to Smith manoeuvre in the sense that it takes advantage of the fact that interest is tax deductible when use for investment purposes. But what most people do, and the easiest way to explain velocity banking, because it can sound complicated, is that people typically take their paycheck, then they save it in a very low interest savings account. And then they pay their expenses through the month, and then they get a new paycheck, you know, two weeks later, or a month later. And then they repeat the process. Now that money is just sitting there earning nothing the other way, because a lot of people have personal debt that’s non tax deductible, what you can do in that scenario, is you start with a line of credit instead. So you get your paycheck, and you pay down your line of credit, and then you pay your expenses out of your line of credit. And since that interest is non personal tax deductible, you’re you’re basically saving the equivalent instead of earning, say, 6% on your savings, which you weren’t doing before, you’re now saving 6% on the money associated with your line of credit. And the compounding effect is is significant. So it’s just another approach to you know, a money hack, if you will, that a lot of people aren’t aware of, but things like that, or, or the Smith manoeuvre are very useful. By doing that I was able to convert by personal debt to tax deductible interest over the period of I can’t remember exactly maybe five years, and my personal cash flow situation completely changed, we finally got back into positive cash flow, the equity within my house and the four Plex that we bought, then was large enough that we bought our first six Plex. And that was my first commercial asset in 2010. And at that time, and it was it was funny, because I knew nothing about investing in commercial assets at the time. It’s I, I sound like I know what I’m doing now. And I do know what I’m doing now. But it was through the school of hard knocks. I figured out commercial and at the time, trying to figure out how to finance that. And I was dealing with TDs commercial thing, they were so patient with me, I have to say they were really very good about it. That was the first time I’ve ever heard of CMHC based financing at the time. And it was it was hilarious, because the guy that was doing the underwriting for TD, he was based in Toronto on Wellington Street guy Armstrong. So I’ll just name him up because he deserves a lot of credit. And guy was really patient with me. And he said, you might want to consider CMHC financing for this. And I said CMHC financing as well, my friend, he said, Well, you know, there’s certain events, so what does it cost? And he said, Oh, it’s probably about 4%. And my thought was because I was so naive, I thought an extra 4% on my interest cost, right and not realising this 4% premium on the actual loan amount. So I was like, Oh, God, that sounds terrible. I’m not interested in that. Then I thought about it later on or read up more about this guy. Maybe I will want to do that. So that was my first CMHC based financing that.

 

Erwin  

So in this, you know for listeners benefit. Nobody knows what they’re doing the first time. Yeah, yeah. The best learning is the first time. Oh, yeah. The analogy I always say is like just like the first kid. You know, nothing the first kid. No. Yeah, by the second one. It gets way easier.

 

Christian  

Yeah. The first kids bubble wrapped. The second kid is fend for yourself. Yeah.

 

Erwin  

The classic is so true. Like, I have a bajillion pictures of my daughter and my firstborn. Way less pictures of myself I signed. And then if there was a third Yeah. Just Yes. This declining? Yeah. So we’ve talked about a lot about some past real estate. What do you focus on today? Because I want the listener to understand where they should focus today isn’t because again, you know, I speak to novice investors all the time. What’s better? Industrial or vacant land? Yeah. And like, Okay, how much money do you have?

 

Christian  

Yeah, well, that’s right. Some of those asset classes are capital intensive, for sure.

 

Erwin  

And because I can say like she was Chinese or like, are you crazy rich Asian, because then you could afford these things. Yeah. You’re not these might be tough to get into yourself.

 

Christian  

It’s funny because a lot of the properties I bought I did not put a lot of money on them. I just figured out leverage really quickly. And to be fair, and I want to make sure that people understand we are not a high leverage portfolio. So My debt to asset ratio within the portfolio, I don’t allow it to go above 65%. Right. And it’s typically lower than that. So some people say, well, that’s highly inefficient. But for me, it’s part of my risk management strategy. But on an individual deal, I might put something in. Alright, so one deal that I’ve talked publicly about, I’ve done a session with Elizabeth Kelly, I’ve done another one with Delia Barsoom, where I talked about very specific examples of of transactions that have done and how I made the money on it, what the business case look like, etc, etc. So it goes through all the math. So one that I did, I ended up buying a building that had six residential units, a commercial unit, it was on a town’s main street. And I got a house thrown in like a piece of land and sort of a rundown house, its end of life. But I got thrown in to the deal, because it’s right adjacent to the property it was actually buying and the owner on that as well. And he wanted, he was trying to consolidate his portfolio. So I got that thrown in. I bought the whole thing for $850,000. But I had a 90% VTB, with a four and a half percent interest only loan on it. And so the cash that I had to put into it was about 85k. Right? So with legal fees, and everything is probably just under 100k. Because there were some puts and takes on the 85 based on closing dates. But at the end of the day, I put in less than $100,000. On that I turned that around, not even Well, yeah, just about a year later, I guess with a valuation just on that mixed use commercial portion of about 1.4 million. So I drew out a lot of extra equity out of that particular property. And that’s a process that I repeat quite frequently, so I might buy it high leverage, but I have a principal is like the building either has to cashflow, an acquisition or a line of sight to cashflow. And I knew when I bought it that there were some quick and easy things that I could do to make it more valuable. Again, going back to the commercial side of things, just figure out the NOI exercise. And so that’s how I make money on this stuff is they all end up cash flowing when I’m done, they add to our cash flow base. And then we increase the net worth of the value of the building in order to extract more working capital to do more projects. So it’s like a big flywheel

 

Erwin  

just goes fast. So what do you do this property to increase noi you’re now when I was a piece of cake

 

Christian  

is probably one of the easiest ones I’ve ever done, that generate a lot of cash fast, the fundamental promise that the seller had, although he was a sophisticated real estate investor, he had taken his eye off the market and the market had moved very quickly. So everything was under rent. He had, it was a complete renovation in 2015. So it was Paul brand new in there. And as of 2015, so I had no renovation work to do. The issue was that his rents were about half of the current market. Well, at the time, it was probably about 50 or 60%. Let me put this in the right context, say $900 a month in rent where the market was probably at the time about $1,400 in rent. By the time I finished my business case, the market had changed again to about $1,800 a month in rent. But my initial business case was on the 13 $1,400.

 

Erwin  

So as the sole losing money was always so motivated to let it go.

 

Christian  

No, it took nine months to negotiate

 

Erwin  

that deal. Not very motivated, then

 

Christian  

he was not motivated. And he asked originally for 1.2 million just for the mixed use building. But when it came down to it, so he and I negotiated over and over again. I’d met with him monthly until we finally hammered out a deal. And I had him help me with a valuation exercise. And he said, I understand why you believe it’s worth that. You said but I’ve got over a million dollars in these renovations, so I can’t afford to sell it for less than that. But eventually he sent me an unsolicited offer to sell. You know why? I think because he had just gotten tired of holding it had been on the market for over a year at that point and he was trying to consolidate why no one else wanted it. The reason it didn’t sell was that he did overpriced it so he had priced it right if the rents were at market value right. And I think he was thinking about that in his mind he said okay, well I’m seeing units go and selling for you know certain price and great but as rents roll and yeah his rent evaluations and makes sense based on current rent. It didn’t make sense. And at the time this was in a town called Carlton place. Carlton place at the time. I saw the potential that’s why I started buying in Carleton Place I go like I don’t understand why this town’s not on fire right now. Like honestly, it’s right at the end of the divided portion of highway seven on the Ottawa side. Alright, so just like you have the 407 here on in Ottawa highway seven is divided right up to Carleton Place. And you go there and you see Walmart Home Depot Canadian Tire. Rona Plaza has lots of new subdivision development going on. I want to go like, why isn’t this place going crazy in terms of real estate? So we got in there we bought tonnes of stuff. And just to understand and we’ll get back to this right but this was just at the period where I had left my job so before I left my job, I basically expanded my he locks to maximum extent I did refinances on the other buildings that we had while I still had a T for job. And then I made my transition that point because so it was all very planned, if you will. And then we started using that money to buy primarily cash flowing assets. That’s how I ended up in the light industrial, right. So we talked about that earlier. But when I looked at Carlin plays and go, Okay, well, this plays really should be doing well. And right now I can buy cash flowing assets like residential stuff on the main street I could buy so so you

 

Erwin  

had all these big box stores there Yeah. What was driving all that though?

 

Christian  

Because it’s so close to the city of Ottawa and divided highway right there so transportation was a piece of cake, how far then town as well. Like you have to go through Carleton Place if you want to go to Elmont or Perth or Smiths falls, etc. And from downtown. Okay, so I live downtown Ottawa, I can get to Carleton Place in about 35 minutes.

 

Erwin  

Oh, okay. Yeah. So very reasonable, right bedroom community. Absolutely. And then you

 

Christian  

see the City of Ottawa growing. And, you know, you and I talked about Canada and Stittsville before Stittsville having the highest per household income in in the country. And Stittsville is maybe, you know, Stittsville to Carleton places, maybe 1012 minutes. So the boundary between from Ottawa to Crowne Plaza. In fact, the physical boundary of the City of Ottawa is about two kilometres short of Carlton place. So, which also gave it an advantage because of, you know, the municipality, putting so many restrictions in development, all the developers were literally just going to the townships that are literally just outside the city boundary here. So we bought a bunch of stuff in Carlton place through 2017. And then probably by about 2019. Like, yeah, somewhere late 2019, everybody discovered Carlton place, and everything went up in value there, and the cap rates came right down in that town. And they’ve stayed there. So now it’s a popular, it’s basically become a new bedroom community. So that was that. So now let’s go back to that particular transaction. This was a just before all that stuff was really starting to take off, and he had put quite a bit in renovations. That’s why he didn’t want to sell it, it sat on the market for a long time, he had valued put it at 1.2 million. And, you know, I said, Well, it’s not worth anywhere close to 1.2. From my perspective, it’s worth maybe half that is the value at ascribed to it. And, but he was emotionally tied to getting that particular money out. And because it was priced too high to market, especially at the time, you know, if he’d waited another year, he probably would have gotten this price. Okay. But at the time that he was selling it, he couldn’t. And because it was overpriced relative to the market, nobody was putting an offer in, it was just there maybe putting other ridiculous offers, but he just wasn’t accepting it. But I kept that conversation going with him all the time. So every month, we would meet up and see if there was another way to structure this deal. And the I think the part that really got him over the hump was when I literally sat down, he and his wife is doing the bookkeeping. So we sat at his kitchen table, and we went through all the revenue, all the expenses. And then I asked us what what do you think the cap rate is in this particular area? I saw? I don’t know. I think it’s like maybe six or seven cap? And he said, so yeah, that sounds about right. So will they choose the lower that the sixth cabin, and as you know, based on the noi, this is what the value is? And he says, I understand and I know that but I’ve put a million dollars into this property already. So I just want to I need to be able to get that back out. So So I left it alone. And it was maybe three weeks later that he he sent me an unsolicited offer right to sell at 850 at the time, or sorry, 825 is what he offered which and I’d offered him 790 or 795. So we were close, right and we were figuring it out. And then so I called up the realtor that had originally been involved because his contract was up both the seller and I didn’t want to cut them out of the deal. So we brought the realtor back in. And the realtors name is Rob. So as Donna Rob, and he said, Well, he said now he wants to sell it at 850 As always, well somebody asked him a question about the property. So now he thinks there’s two of you, right potentially buy. I said, did the guy put in an offer? He said no, no, it’s just an inquiry. Actually Okay, so Okay, Rob, this is

 

Erwin  

the joys of working with sellers. Yes, yes.

 

Christian  

Well, yeah, you appreciate it far more than I do. But you know, here we’re at 50. And so I said, can you get them off the 50? Mark, and at least back to the 25. And it drops it? No, he’s absolutely fixated on 850. Now because he thinks he can sell it for at least 850. And I said, Okay, totally Well, at the time we had a 6%. Interest, p&i. So I said, Can we take that 6% VTB interest and convert it to four and a half percent interest? Only? I said, No. And then I’ll give him his 850. Rob said, he does private lending all day long at 12%. Why is he going to do it at four and a half? I said, is he fixated on the price, or is he fixated on the other terms, or he’s totally fixated on the price. So just ask him that. I’ll give him his 850. But this is what I want in return. And Rob called me back 10 minutes later, he says he’ll do it. He said, he said, I’ve already filled out the paperwork. I’m in the car driving to his house right now to get his signature. So he doesn’t change his mind again, that for Docusign. Yes. And then later on, Rob, and I had a coffee, right. And Rob said, Why did you agreed 850. I thought you weren’t gonna go above 800. And I said, Rob, what’s the difference between 6% and four and a half percent over five years? He did the math. He just he looked at me. He goes, Oh, right. Because it was about a $60,000 difference. And the way I like to explain it is, is that the seller got his price. And I got my price, which was a psychological number for him. Yeah. Yeah. And I get thrown in. It was a psychological barrier. That’s that’s actually really important.

 

Erwin  

Yeah. Yeah. Because those are real things.

 

Christian  

Yeah, right. Yeah. But it’s not always the price is the thing, right? Like you just find other terms. Well, okay, I’m gonna give up on this. Can I find another term that he doesn’t care about? That matters to me?

 

Erwin  

Well, my favourite stories was stuck in a number of selling my country property to city folk, as we call them, is a three acres of three acres and in a rural area, we were 10 for 10 grand apart. So you know, classic negotiation, make it about something else. I had a tractor of a 23 horsepower Kubota Tractor, okay, with a five foot five or six foot bed on it if mowing bed in a in a snow thrower, a five foot wide snow thrower, so I said, we’re going to take the tractor trackers working with Larry $5,000. He says I do it. I say 25,000. Yeah, he gets his 10 grand off.

 

Christian  

Yeah, the solar probably didn’t have a need for the tractor anyway. Oh, no,

 

Erwin  

he’s didn’t know his country by using a city folk. Didn’t you have an acre of grass? Yeah, yeah. You need a serious mower? Yeah, that’s roughly didn’t know. Yeah, yeah. Engineer budgets.

 

Christian  

Oh, there we go. fatal flaw, right. I

 

Erwin  

didn’t understand mindset.

 

Christian  

But you were talking about asset class. Right. So I thought it might be good to wrap that one up. Right. So what am I looking at right now?

 

Erwin  

Yes. Because I guess, you know, get some current times, especially people aren’t no new to the show new investing. Yeah. Like, what should they be looking at today? Like, what are you looking at today?

 

Christian  

So I’m looking at mixed use buildings today. And

 

Erwin  

interesting, typically tough to finance. No, they’re not,

 

Christian  

not if you do it, right. So it’ll give you the parameters so that it’s easy, but what I’m always looking for as I don’t follow the herd, okay, I look for what I can get under the parameters I’m looking for. And I’m not religious about an asset class. So I didn’t get into light industrial, because I knew anything about it. I just knew that it meant my parameters of what I needed as output. And then I was going to figure out how to make it work. So So I’ve do a lot on the residential side, as you know, in terms of the multifamily, and we’ve had a pattern, it’s really easy and so on, but if you’re, well, it’s practice. Alright, so but on the multifamily side of it, everybody seems to be teaching people to go after multifamily buildings that it’s, you know, generational wealth and all this kind of stuff. And, and so

 

Erwin  

you can, it’s good for a lot of reasons, but they have the caps are pretty low these days. Yeah, the caps are

 

Christian  

very low, especially relative to the interest rates. And if you really, truly believe that interest rates are going to come down, then you’re kind of hoping that that’s the case when you’re buying them at the cap rates today. I never count on that stuff ever. So do I still buy multifamily? Yeah, sure. But it has to be a screaming deal. And, interestingly enough, it’s the new developments where the screaming deals are coming in, right? Because the construction lenders are trying to get out of those deals right now and people can’t do the refinances to pay other construction loans. So that’s a whole other topic, but I’ve been looking at mixed use assets over the last couple of years because the multifamily chasers if you will, so yeah, there’s a lot of them and they’re not looking at mixed use for one they don’t know it’s one of these scary things. It’s got a commercial piece on it, right. They don’t think they know how to deal commercial leases and all and how to manage commercial She’ll tenants, they think vacancy rates are going to be super high relative to Residential Tenancies. If you buy wrong, that’s true. But I purposely

 

Erwin  

overpay, but yeah, I think everything will go wrong. Yeah, yeah, that’s right.

 

Christian  

There’s a lot of parameters, you can make mistakes on in anything. But the reason I like makes us one is I’m very familiar with commercial tenancies, right through my experience in the Residential Tenancies, and you’re saying, Okay, well, it’s difficult to finance. Well, at the very basic level, you can do conventional financing on it, and lots of lenders will do it, it’s not that big a deal. But if you buy strategically, you can get CMHC financing on it. So the parameter for CMHC is that the commercial component has to be 30% or less of the gross leasable area. And if that’s the case, then they will do CMHC. The underwriting is a little bit different, right? So you have to underwrite the commercial piece and the residential pieces to distinct entities. And you need to do that anyways, from a valuation perspective. So a lot of people say, well, what’s the cap rate on a mixed use? And I said, What’s the percentage gross leasable area that’s commercial. And really, what we do is we write, we underwrite the commercial portion, we underwrite the residential portion, and then you add the two valuations together. And that’s the value of the property, but they’re often overlooked. And what I do is I buy mixed use buildings on Main Streets, on towns that I believe have strong economic fundamentals. I don’t invest in towns that I can’t understand their economy. So if I understand it as solid economic fundamentals, then if I invest on streets that I know are going to be popular or nearly popular, that’s where I buy them. So that first mixed use building was on the main street in Carlton place, right? We have a great tenant, we have great commercial tenant in there. So that’s what I’ve been buying these days. And as it turns out, on a blended cap rate basis, you can get them to cashflow and acquisition if you do it right. And not only that, but just to accent the point a bit, is remember the whole feeding frenzy that was going on in the back end of 2021, early 2022, I bought a portfolio of these buildings in Elmont, just outside of Ottawa. And people know Elmont because it’s often featured in Hallmark movies, it’s really cute, pretty little town and my buildings are often in those Hallmark movies. So I bought those in the height of all that, you know, craziness that was going on. And it was cashflow on acquisition with tonnes of upside in the buildings. So I have a five year plan around that those properties. And they the business case, the internal rate of return is going to be I think a calculated out to be about 45% IRR right over a five year period. So which is outstanding, right by any measure. And it’s relatively straightforward, right? Some of the units are freshly renovated. Some are a little bit dated, so easy to update and there’s probably out of the whole portfolio, maybe four units that need like a complete gut.

 

Erwin  

Tell me about the tenant profile who are your commercial tenants and

 

Christian  

so on Main Streets, their retail. So for example, in Elmont, I’ll give you some example of the retailers in Alma, we have Ottawa Valley Coffee Company. It’s they’re a great little boutique coffee shop there. They’re always full, fantastic coffees, fantastic teas. And the place is always full.

 

Erwin  

Sorry, just to take a step back and you’re gonna do diligence period, you’re checking out all the retailers.

 

Christian  

Oh, yeah. Yeah, check everything out. Yeah. Like,

 

Erwin  

you went as a customer type thing or? Yeah,

 

Christian  

I went in, you know, like, get to understand what their clients look like, I want to understand their longevity. I want to know who’s backing after etcetera.

 

Erwin  

Right. So you didn’t just like, do this virtually or? No, no, I

 

Christian  

was on site. Okay. Yeah.

 

Erwin  

So yeah, you know, by like, in Saskatoon without ever seeing it. I’m sorry.

 

Christian  

What could you be alluding to? Or what? What could you be alluding to?

 

Erwin  

Point is that you’re active,

 

Christian  

very active, and there’s Intel oriented

 

Erwin  

boots on ground boots inside the property. You’re talking to influence seller?

 

Christian  

I’ve met every seller have bought a property from without exception. There’s I’ve never bought a property blind. I’ve always met the seller, even if a realtor was involved. Yeah, always, always always. It builds a connection when we’re doing the due diligence. I mean, clearly there’s inspection involved in my inspectors a pH, okay, so we’re looking at everything structural to the point where the seller was like, said, Holy cow, this guy’s good. And it enabled me to negotiate a 400 grand off of that deal. And the guy the seller was convinced that I was right in terms of negotiating that it was just was an arbitrary because the engineer was very thorough, and I told them exactly what their concerns were One of which manifested before close. So it’s another story. Right? So as real concerns, they were real concerns. Yeah. So I just thought, okay, that’s fine. I’m just going to some of it will absorb because the business case was solid and I could, but heck, I’m gonna negotiate that price down. Right. So and because I have a duty to do so. But yeah, then we go not just past the paperwork, diligence, but we take a look, we’re looking at the tenant profiles as well. So in Ontario, because of the Residential Tenancies Act, there’s one key thing that I don’t think a lot of politicians understand how negative and impact it is. rent control is one thing, but that two and a half percent rent cap that regardless of what inflation and CPI is, is really detrimental to long term tenants. And so when I’m going to buy a property, and I take a look at the demographics, if I see that the tenants have a profile that will typically be long term, I don’t buy the property. Because I know my rate of return is going to be too far. So we do have tenants, you know, so we’re looking at a percentage. So if there’s some people that are fit that profile, I don’t have a problem with that, necessarily, as long as the overall business case is gonna make sense. And I want to be clear, we never push tenants out. Okay, the only, I shouldn’t say never the only time we ever pushed in and out is where the building cannot be renovated or redone. With them in place. Okay. But if I’ve

 

Erwin  

been in the property it was because I don’t think the previous owner did everything with permits. Is that fair to say?

 

Christian  

I’m talking about the James Street project. Yeah, no, that building was just a disaster, right? We it was chopped up, it was structurally unsound. And we had structural engineers in there to double check everything. And it was very clear that there was just no way like, often what we’ll do is unit turns, right? We might can reconfigure units. So if a three bedroom comes available, we can make them to one bedrooms. That’s easy. We’ll just wait for that tenant to move. But, you know, if tenants are good tenants, and they’re just trying to lead a comfortable life, we won’t push them out? I’m sorry, I just I can’t, you know, I kind of look at it as like, what if I was living there? How would I want to be treated? So we don’t do that. Now, if a tenant has a real problem in their interface, that’s a whole different situation.

 

Erwin  

Oh, the tenant board does not like anyone infringing on tenants, including other tenants.

 

Christian  

They, they don’t, but I’ll be honest, it’s very much a process of retaining housing. So even if they’re interfering with other tenants. So we have a number of cases where we’ve dealt with this, we’ve always been able to negotiate it out before getting the LTV, but the reality is that it has to be egregious before the LSB would do it to the point where like, I’m sorry, but the way it’s set up is good tenants suffer at well, the bad tenants benefit.

 

Erwin  

Yeah, all right, is 20. Probably even smaller, but like 4% 96%,

 

Christian  

good tenants far far outnumber bad, you know, I put the ratio of 95% Good, right. 5% of problematic 2% in that 5% are truly problematic. So going back to where I was saying that is I’m looking at a demographic profile. So if I see that the tenants are typically let’s say, in their 20s and 30s, okay, then, that I know they have life events, I don’t need to do anything, I just wait for them. They’re getting together, right? Like boyfriend girlfriend, or they’re getting separated, or they’re getting married, or they’re having children, or they’re getting a divorce or the there’s just lots happened that get changes in jobs, life when you’re in your 20s and 30s. It’s highly dynamic. And so life events just naturally have them do turnover. So I can take a look at in that portfolio purchase. It was 80% of the people were in their 20s and 30s. So I know over a five year period of

 

Erwin  

community generally be the younger people, your families. Yeah, yeah.

 

Christian  

So when I was talking about unintended consequences on that two and a half percent cap, so you know, while I don’t ascribe this of the policy that we do, because we look at tenants on merit, I can absolutely see that there are some landlords that say, Do I want to take on a long term tenant? Because my expenses are absolutely going up faster than two and a half percent, which means that 510 years from now, I’m going to be underwater from a cash flow perspective. So I could see that there would be a bias. Oh, it’s an unfortunate thing. And that’s why, you know, things like that, while they sound good on the surface, I really would love to see them change, not for the benefit of the landlord. Right, but for the benefit of the tenants. Right? If the landlord’s benefit out of that as a you know, as a side effect, that’s great, but there are unintended consequences to a lot of these policies.

 

Erwin  

That’s what pushes people to Cash for Keys. As part of it. Yeah, for sure. Sorry, back to the parameters of what you’re looking for a mixed use. Yep. So you’re looking for a term profile. Sorry, you’re in an area that has The tenant profile of 2030 Somethings that will likely turn over.

 

Christian  

So let’s be crisp about it. Okay, so what I’m looking for is highly sought after area. So Main Street properties are almost always sought after from a retail and commercial perspective because everybody wants to get their sign on the main street. And so even with those ones in Elmont, we just had a unit turn. Like literally right now, I think we wrote up the lease last weekend. And we didn’t have to advertise. We already had like four tenants had already put in requests over the last nine months saying, if a unit comes free, can we have one?

 

Erwin  

No kidding. And this is retail. Yep. Because Because retails capturing headlines as a in general like, well, for example, when I go to the mall, I’m sure everyone’s seen it. There’s lots of vacancies and malls these days there is

 

Christian  

but main streets are different. Right? So people like to go to main streets because it’s a social thing as well. Right? It’s walkable, I go to a mall because I need to buy something I don’t wander around all but I’ll wander around a Main Street and Main Street like Elmont is, is really interesting because it’s highly picturesque. So James Naismith, founder of basketball, that’s his hometown, and there’s a statue of him there as well. And then the buildings all on Mill Street, which is the main street there are gorgeous, right, like the building that the post Dino’s restaurant is just a beautiful, it used to be the postal post office building and customs and revenue. And there’s lots of stone buildings right on the Mississippi River there, the waterfalls there, there’s a little power generating station, you know, I’ll show you some videos later. It’s just, it’s just gorgeous.

 

Erwin  

So it’s kinda like Niagara on the Lake.

 

Christian  

Yeah, it’s a little bit like that, but more condensed. So you don’t have to go far right? Like the the main streets, maybe three blocks long, maybe a little bit longer. But it’s all there. And there’s lots and lots of people there all the time, because it’s very photogenic. You can do you know, all your social media pictures to be seen there. And it’s one of the reasons it’s been featured in Hallmark movies so much is that it is so picturesque of Old Town in our living, Small Town Living and because it’s Hallmark features that also draws people in, but Alamanda is one of the most popular towns in Ontario to go from a visiting perspective. So it’s absolutely lovely.

 

Erwin  

Right? So heavy tourism. Yep. Just switches just for the local economy. Yeah, yeah. And get for Main Street. Yep. Fascinating.

 

Christian  

So I’m looking for Main Street, like where there’s lots of demand. So you could go off Main Street, but you have to be pretty convinced that there’s enough foot traffic to make sure that the retailers are going to get trade. But Main Street, I’m looking for commercial where the gross leasable area is 30% or less of the overall space so that way, I can get CMHC, you know, beneficial financing associated with it. I’m looking for good quality structured buildings there. I don’t mind if they need renovating, because that’s a specialisation that we have. So we’ll just do that. But by looking at that specific asset class it because no one is really chasing it. Like I said, that portfolio I bought, and it was a creative and purchase the clothes was a nightmare, but completely unrelated to the well, not because of the asset class. It was a couple of things. But that’s a whole other whole other story. Unless you want to dig into that.

 

Erwin  

I said that I think this whole thing leads into a joke is that maybe they’re not allowed people to look at from excuses. No one’s has a course teaching you yet. You’re looking for a business idea interest, if you want to be a core seller. Get rich quick, I’ve mixed use for real estate.

 

Christian  

There’s a lot of that stuff going on out there. Right. So I you and I talk about this at length, it’s it’s a bit of a scourge in the industry. I never understood this because I was doing all this investing relatively privately. And then at one point when I decided to go really kind of full time in 2017. So I should get to know this community, you know, other fellow investors network with others. For real, real estate investors organised. It’s where I started with and you know, I paid my $127 A year before nothing. Yeah, it’s a not for profit club, you know, just investors, helping investors. So I started there. And then I, I began to understand the network of everybody else that was involved in the industry. And then I began to understand the fact that people were coaching and teaching and stuff like that. And then I started really looking at their qualifications. And I was I was shocked. I was absolutely shocked by it. The industry is just, you say this all the time. And you’re absolutely right. You got to do your due diligence, not just on the properties, but on the people that are helping you with it. Right and the so called coaches and education programmes that are going on it’s it’s really quite troublesome, such as capitalism. It’s always been this way too. I came from a poor Rational Environment, right? So, you know, as we talked about, I came from the tech side of it. Most of the people there were, you know, engineers who have a ethical code of practice. I’m not an engineer, right? Not, I don’t have a ring, you know, so I’m not a piano or anything like that. So, but I was in that environment where it’s mostly engineering staff, it was, you know, corporate business professionals with certain ethical standards and so on. And I lived in what I now realised was a sheltered life. You know, I thought that’s the way everybody was, and that’s the world and when I came out of that world and started getting involved much more on the real estate side, I was a bit disappointed to see how many people are trying it, trying to take advantage of other people in capitalising on their hopes and dreams. And I just find that terrible.

 

Erwin  

There’s there’s all these courses on trying to raise money. And usually people trying to raise money have no money. Yeah. And so, you know, fake it till you make it. Yes, that means you lose other people’s money.

 

Christian  

Yeah, there’s a lot of that going on. You know, one of the things that we’ve seen you and I have recently over the last few years is just prom notes going bad. Oh, yeah.

 

Erwin  

The gentleman on the show that will never air 2.8 million prom notes, they’ll never get paid back. With due diligence, like, we should fully when it prominent means and understand that you may never see that money again. Yeah,

 

Christian  

a prom note virtually has no security. Right? And I listen to your show regularly. Actually, I do. I’m one of your 14 listeners. So a regular one. And you had a one with Elizabeth Kelly back a little while ago. And she mentioned me in terms of my underwriting practice, Elizabeth and I talk very regularly. And when I do write prom notes, okay, so I do them. But my criteria, like I understand the risk and underwrite them based on what’s the likelihood of getting back. Okay, so I’m not focused on the interest rate, right, I’m interested in getting my money back. So if it’s a very low risk, and I know that the money is going to come back, and I have almost absolute certainty, I’m going to be lenient on the interest rate, you know, within certain parameters, because you have to make a certain return. And of course, I’m covering myself, right. So it’s not a simple one page prom note. So if I do a promissory note to somebody, there’s probably about five or six documents involved that you got to sign off on including PPSA. Sorry, BSA is PPSA. What was it? What does it stand for? Personal property? I don’t remember. But what it is, is basically, it’s a note against your name. Okay. So if you then go on to your personal securing it, yes. personal security. That’s right. So it’s, yeah, private, personal property securities agreement, I think is what our PSA stands for. But basically, if you’re personally liable for Yeah, yeah. So if you go to try and get a car loan, for example, and you’ve got a big lien on a PPSA perspective, you probably won’t get your car loan.

 

Erwin  

Well, sorry. You can register this on their on their credit on their Equifax. Yeah,

 

Christian  

yeah. Yeah, I don’t know. It’s registered as a PPSA. Right. So there’s a separate registry. So I don’t think it sits on Equifax and TransUnion, that they had sets on another registry. So I just let my lawyer do that, right. But it’s something that we do. So we’ll take the entire amount, and we’ll just register it as a PPSA for a certain amount. But that’s just one of the documents that we do. So I’m interested in getting my money back. So if I’m lending to somebody who’s relatively high risk, and I will do some high risk loans, but then I’ll look at it like I have one guy who I know is risky, and that I loan money out to and I look at I’m gonna go okay. I think that if I were to write four loans, that type, I would only get three back. Okay, so are this okay, well, what interest rate do I need to earn on that in order to still make that a business case? So if I keep writing these and I know that one and four is gonna go bad, I still need to make a certain minimum return and so that’s just the cost of doing business so don’t get wound up. Remember what the return was the only charged on that one? It was 30% interest compounded daily.

 

Erwin  

All right, with a credit card return credit card rates. Yeah,

 

Christian  

I mean, I could go higher, right. But on that one, it was 30% and like loan sharking is 60% Okay, so just to put it plus whatever else yeah as the you know, some people don’t know what the loan sharking limits are. And they’re 30% Christian, you’re just another word no, no. 60% is actually the limit but 30%

 

Erwin  

like credit cards, do it all the time. All the time. And we’re not talking payday loans, no.

 

Christian  

Payday loans do that kind of stuff all the time to the difference is that the guy was boring as a sophisticated borrower. And I know he, he knows what to do. The thing that made him risky was he had a bankruptcy about five years earlier. And he has this tendency to take on too many projects. So there was always that risk. But at the same time, he is a finisher, like he’s determined he’s not a lazy investor by any stretch. He’s very active in what he does. So so, you know, there’s probably still a decent chance that I’ll get the money back. But I that’s the way I underwrite it. So if I lose the money, okay, I lost the money. But your return of risk adjusted its risk. That’s exactly right. Yeah. Which I find most retail lenders are do not know how to risk adjusted or whatever they’re doing. I’ve seen some of my clients, and I help people from time to time, take on a handful of people to kind of help guide them through some troubling situations. And I’ve had some clients come with me like, I’ve got this problem note, right. And they wrote it like 12% 12%, no security simple one page problem.

 

Erwin  

If the credit card company won’t give them money, then why should I? Yeah. Because they can no use their credit card 20 30% interest they could, right? So I want something similar?

 

Christian  

Yep. Yeah, well, it is. But again, like there’s other scenarios where, you know, I might lend money to somebody, and I know that they have the ability to pay back. I know that in some cases, there’s some people I’ve been loaned money to that have a reputation they have to maintain, like they would be devastated reputational, if, if they didn’t pay back, so you know, what? I know the risk was a lot lower in that scenario. So it’s not zero.

 

Erwin  

It’s actually funny that you mentioned that because there’s like, there’s actually some well known borrowers out there. If I know that they’re bad at paying back, I imagine other people know, but people still give the money they do, because they’re good marketers, good marketers. And also, I just find in general, not enough people are suing.

 

Christian  

Yeah. And I don’t know why that’s that’s the case. I mean, one is you might just say, well, it’s we can’t get blood from a stone and off. Oh,

 

Erwin  

the other thing is that they want to be the pawns that they keep going for in order to get for them to get paid out.

 

Christian  

Maybe it wouldn’t stop me I’ve sued people before. Right. And,

 

Erwin  

and we’ll name names right now.

 

Christian  

As it turns out, whenever you settle something, you’re often putting a nondisclosure, right. So, but I’ve sued people before, right? And because I’m no nonsense with this kind of stuff, so sometimes, it’ll mess up people’s money. Well, yeah, I can be very lenient with people who are very reasonable. Okay. But when people become jerks, right, I can be far I can be really tenacious about that. So if

 

Erwin  

I tell you, I’m not paying you. You’re not our sponsors are suing you. It’s not my

 

Christian  

natural response. My natural response is, okay, well, let’s figure out how we can work this arrow. Oh, no, I’ve

 

Erwin  

already told him that. Hey, you. Yeah. Well,

 

Christian  

if you’re coming back is, you know, the worst, I think, was one who said kept saying that they were gonna pay me back. And then every time we set a milestone, right, they didn’t pay? Yeah. I kept trying to drag it out. So look, at this stage, again, I’ve tried everything to work with you, and you are not helping your cause at all. So in which case, you know, the next step is, is we’re going to go to a suit, right? In which case, it was a she at the time, she said, Yeah, whatever. Alright, she was surprised when I actually sued her. And she ended up I got, my lawyers got most of the money to be fair, because it was a relatively small amount, but it was the principal of the situation. And I got as much as I would have gotten in, you know, if she had just settled with me, my lawyers basically made a lot of money on that at her expense. And she had to pay for her legal fees. So in the end, it costs her far more to defend this than to just work something out with me. She took

 

Erwin  

a bet, stick a tuck in it a bit. But she had

 

Christian  

an even when you’re in a lawsuit, there’s times you can negotiate out, but she was too stubborn

 

Erwin  

it but like I said, though, there’s always people who aren’t suing people who deserve to be sued. Oh, yeah. Yeah. Christian, we’re

 

Christian  

way overdue. As typical of us as typical, we didn’t even get into the macro. Early, we could have talked about the refi that we did, as well. But you know, obviously, maybe we’ll save that for another show. Yeah. It’s a really interesting set of lessons in that.

 

Erwin  

Because I think it’s important because I find a lot of beginner investors, they don’t really see the larger picture. Yeah. Canadians in general, because I believe the Canadians General saw the larger picture. They understand we’ve been problem. Yeah, sorry. No, I think every global citizen is interested in the world problems that we have, then naturally, you go towards trying to fix the problem. Yeah. And that’s why we both ended up and holding hard assets and real estate, right, we’re solving a problem.

 

Christian  

So right now, if the if you know, and we can discuss at length in a future so this will be the teaser right but right Right now, people should be holding hard assets. And I don’t care if it’s real estate or gold have a preference to real estate, but you gotta hold a hard asset and have liquidity have cash on hand. Okay, it’s lots can go wrong for the next few years. And you don’t want to be in a situation where you’re in a cash call situation, no matter what’s going on in your life. So have cash on hand, just in case. Maybe it’s a 20% issue or 15 percentage, but have cash on hand.

 

Erwin  

Don’t Don’t quit your day job. Just yet. have cash on hand till you’re Christian rich. Country, where can people follow? Follow you?

 

Christian  

I’m all over social media. You know, me I like to give back. You know, I do lots of give lots of resources to help educate people and stuff. So my website is a liveris.ca a l i f e r o u s.ca. I’m sure it’ll be in the show notes. I’m on social media under my name, as well as my company which is a live harus live press group. It’s registered. So it’s a very unique name. And I also encourage people to become members of the Ottawa real estate investors organisation that’s o r e i o.org. I’m a member to Yes, or wins or wins a member,

 

Erwin  

I hope to hope to make it to the June meeting. Yeah,

 

Christian  

I won’t be there for June. I’m at CFA, I’m presenting at CFA in Halifax

 

Erwin  

is that you’re a pilot what is the

 

Christian  

Canadian Federation of apartment associations? Because I’m on the board of the Eastern Ontario landlord organising which is a member of CFA and it’s the same chairman of both boards. So CFA is a an advocacy group for landlords at the federal level like Firpo is for the provincial level and yellow is for Eastern Ontario. And in Toronto, it is the GTA Greater Toronto Area apartments or association Apartment Association. Do not Airport Authority. Okay, good. No, no, no, no, there’s an extra a.

 

Erwin  

A Yeah. Okay. It’s great. Yeah, it’s

 

Christian  

the Greater Toronto Apartment Association GTA.

 

Erwin  

Yep. Let XJ Trishna. Thanks so much for doing this. All the way to audit from Ottawa just to do this show.

 

Christian  

Yeah, it’s actually I’m glad to finally do this in person. You and I always do this over zoom. So this is awesome.

 

Erwin  

We talk mostly during the pandemic, so yeah. All right. Thanks so much for doing this My pleasure.

 

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. I know 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