Sept. Market Update: Detailing Deals in Belleville, ON. With Coach Stephen

**Transcripts are auto-generated.

Erwin  

Hello and welcome to another episode of The Truth about real estate investing show. My name is Herman Seto where we talk to real people with real results, repeatable results, and me reference check our guests before they come on the show. Funny thing about reference checks is as a benefit of being one of the old farts of the real estate investing community since about 2008 When I joined rain and since then I’ve attended hundreds of other networking events including masterminding with many of the top investors in Canada, I’m lucky to have many friends in our community. Hence reference checking is very easy. It’s often just one phone call away. Worst case a text message way. And on the benefit of being at my advanced ages, I’ve seen many investors and investments come and go including many who lost their shirts in 2009. Some are no longer invest some were able to persevere and I share these lessons with our coaching clients. Yes, we have coaching clients at my team, that when real estate team we are licenced real estate professionals who provide coaching services to our clients in acquiring investment property. For all you budding realtors out there. I know there’s many of you among our 70 listeners, those of you who want to serve as real estate investors as clients. In my experience, the sooner a client is successful, and that usually means renovating and or renting out their property as soon as they have their tenant and rent coming in. The sooner they buy their next property and send referrals. Is this a good business practice to have a lot of successful investor clients. I remember back in 2008, during the financial crisis, when we were worried about the recession, major banks in the US were going bankrupt, you know, Bear Stearns or Morgan Stanley. And then the news got worse for us personally, a tenant in our duplex gave notice they’re moving out. We were so concerned because this was early in our investing journey. I know you veterans all laughing right now because you love tenant turnover these days. But back in those days, we didn’t have any mentors. There were no podcasts, the Internet was pretty weak in terms of getting information data, we had no mentor no coach, we had no veteran leadership to lean on. We thought we were in trouble. But we still went to the cycles, we posted our ad on Kijiji, and the interest is poured in. After a week of showings, we had four applications three were crazy solid. Now four applications doesn’t sound like a lot. But understand. We didn’t really know what we were doing back then. So we actually made this novice move where we asked for sorry, we required 200 cash or certified deposit of $200 to accompany and rent application or otherwise we wouldn’t review it. Sadly, we had to do away with this process because it became a pain to return money for declined applications. You know, come pick it up like no, we can just send it to me like it’s cash, I can’t just send it to you.

Erwin  

What we learned from this experience is that when people can’t get a mortgage, such as 2008 2009, as it was the credit crisis, after all, plus a devastating crash in the stock markets, fear was at an all time high. But at the same time, people still needed a roof over their heads. And we had in our situation our rent actually went up and we had a better tenant. So we were better off for the tenant going away, giving us notice and for the financial crisis in terms of owning a rental property. So yeah, in the end, fear was nothing lesson learned. Our biggest regret. My biggest regret from those days was we only actually bought one house during that recession, which in that also in that recession barely put a dent in the real estate market back then this is these times were very different rates were still quite low at the time. And immigration was just so strong, we could buy back then we were talking about 2008 2009. We could buy a bungalow in those days for under 200 grand in our target markets, which now sell for well over 600,000. And that’s even pre pandemic. So we remove all the pandemic pricing, remove all that volatility prices more than tripled. But keep in mind, we typically only put down 20%. So that would have been like a 15 times return 15 times return on money in 10 years. I don’t think it will happen again. But I would take it gladly over the next 10 years. If it happened again, our strategy has survived that generations recession. And we’ve only improved upon our investment practices since and if this market keeps going down for the next six to 12 months which occurred, it might bounce back within six months, and we may hit bottom in six months, no matter what I still welcome the opportunity to buy for cheaper prices. Because to me, Canada and the Golden Horseshoe still offers a tremendous opportunity. And this may be our last and only opportunistic dip in the markets for this generation for the next 10 years. So if you want to buy on the dip, economic winter is upon us, I believe a time of recording this. We have a technical recession in the United States. And as such, I’ve asked all of our special guest speakers at the upcoming wealth hacker conference on November 12. To be sharing all their best practices on how to weather storms. And if you speak to any of them, they’re already buying the dip. No different than our clients know wealth. hacker.ca November 12 for details at the trunk Congress Centre live in person only. So that’s near the airport. Plenty of free parking. For our stock expert for example, Derek Foster, he’s net positive on the year, stock markets down about 20% I think on the year, I think Apple is down more than 17%. This year, I never thought Apple would go down. So some great companies are down on the air. Derek foster as an investor is positive on the year, if you can believe it. He’s also reduced more of his holdings due to cash. And he’s waiting for the bottom to backup the truck and buy more boring stocks. When I had Derrick as a guest speaker at one of our stock hacker meetings back in mid 2020. Derrick shared with us his picks which were This is advice folks, and this is steeped in history. This is back to mid 2020. So his picks are not coming near the same thing as they do today as they did back then right after the pandemic crash. Derek’s picks were really basically nailed it. He is picking companies like Suncor and bridge Berkshire Hathaway, Disney etc. And I can’t wait to put some my cash back to work and build me another stock hacking stream. Another six figure stream via stock hacking, if you follow along with Terry and I will be talking more about it is we’re looking to increase our passive income and in terms of passive income, I mean cash, our dividends and my life just like Tim Collins, and last month’s episode, last week’s episode, if you didn’t hear that Tim Collins generates over $10,000 a month in dividends a month. I think we could all use more cash in our pockets each month is Dahlia Barsoom streetwise mortgages is an author. She’s a financial wizard, and has a brand new presentation to detail a beginner to advanced investors journey in order to maximise marketability while and of course, the strategy this journey would weather an economic storm like the one we’re in, more importantly, or just as importantly maximise mortgage ability. Jordan Anderson, Chief Operating Officer bitbuy, Canada’s largest and first registered crypto exchange, Jordan tells me that he’d rather buy Kryptos on the dip than an investment property, we’re on completely different ends of the spectrum. Obviously, we have different expertise and different education and different comfort levels. My opinion on crypto and blockchain is I can’t deny the future including decentralised finance, and I want more education on the subject. And I can’t honestly find someone better to teach this subject then John Anderson, he is an absolute leading expert imitating crypto and blockchain space. And then once we have much, much more at while hacker.ca Of course, chair now we’re speaking, we’re talking about our insurance investments as well, as well as something that’s all new in terms of retirement planning, something we’ve never spoken about before. But it’s something we spend more time thinking about and planning for ever since this lovely pandemic is so detailed that wealth hacker.ca My discount code for you is a five letter word truth. I want you to have the truth, where the world is going, what the experts are investing their own money in and when the when is almost just as important and how to avoid financial devastation. If you want to learn all these things while hacker conference is for you onto a personal level. Chairman I had our first quarterly meeting one on one no electronics no personal electronics or screen time with the most important stakeholders, Investment Partners business partners in our lives. Our kids Robert and Bruce they’re eight and seven years old respectively. at Robins request cherry pick Robin to a pottery class followed by a manicure and pedicure. Thank goodness that wasn’t me. I don’t like people touching my feet.

Erwin  

Purses requests I took them to a video arcade called Dave and Busters followed by virtual golf. I don’t think we got it right as I felt a bit budget enough time for dinner. And for us to chit chat as we didn’t end up eating dinner until around 8:30pm. So it was like Rush, rush rush right before bedtime. But Done is better than not done. We’ll get it right next time. As like, you know, allow time for a proper sit down dinner. Just us to chit chat. The kids had a blast and can’t wait for the next quarterly meeting. Obviously we have to do each kid each quarter. So it’d be two nights, two nights for me each quarter cemetery. Robin has requested that I take her to Legoland, and she’s ever been the one Vaughan Mills Of course not the one in Orlando I think it is. And that’s what we’ll do. It’s her choice. What we do. For me putting my phone away is difficult as I’m a serial multitasker and my phone is my is I don’t know, remember the term Crackberry when people refer to blackberries. Yeah, my phone is like my crack. But quality time with the kids while they still want to hang out with us is short, so we’re gonna try to maximise this time. A good friend of mine actually warned me that his 12 year old daughter flipped like a switch the day she turned 12 not the exact date. But you know, I mean, she refuses to be seen in public with him. And he shared with me how their text message exchanges consist of daughter asking him for money to go to Starbucks with her friends. I’m not looking forward to that. If you’d like to do some reading on the subject around more quality time with kids. I recommend the book. I just finished it this morning the family board meeting by Jim shields. See if I read the book first before I did the forming of my son, we would have likely gotten it right but you know, nothing’s perfect. Perfection is the enemy of getting stuff done.

Erwin  

ready fire aim. Sorry. Again. The book is called Family board meetings by Jim shields. I have a link in the show notes. And Jim also happens to be an extremely successful real estate investor in Florida. Hopefully he’s okay with Hurricane Ian. I believe you yours because I believe he’s on the east side. Once the conference is over, I look forward to booking more quarterly meetings. One each with my mom, my dad, brother and sister as well, dates night, maybe we’ll get back to date nights as well with cherry. I’m gonna for me on to this week’s show. Our market update that we had two weeks ago with Coach Tammy de Tabasco was a hit based on the downloads. Tamizh DITA masses, were just right there with some of our ultra successful full time real estate investors on the show. As an FYI, to our 70. Listeners, I know we do have a lot of the big time investors in the show, however, understand, in my experience, the vast majority of real estate investors are investing as a side hustle over 90% of my Millionaire Real Estate. Investor clients are side hustlers. And in real estate, they all have daytime jobs that they have, they still have. The truth about real estate is that folks who do make a full time career as an investor is a small minority. And for those who got in more recently, a lot of them are no longer. It’s really sad that this market has not done good things to people that were over leveraged. And I remember asking a mortgage broker friend of mine, he focuses on real estate investors. And he told me that maybe 1% of real estate investors reach 10 or more properties. That number has gone up a lot since then. But my point is, do what’s right for you. No need to compare yourself to others with hundreds of doors. The other truth is several investors are in financial distress right now. And also understand that’s not my context. I’m hearing this from other mortgage brokers and lawyers deal with people outside of my clients circle. They’re having challenges executing their flips or their burrs. Are they over leveraged, or they simply speculated and can no longer afford whatever negative cash flows that are planning for with these now current interest rates, and also with the market with market prices falling? In my experience boring cash flowing starter homes is the bread and butter, and it’s been our bread and butter since our team. Since our team started in 2010. It’s worked out well. It’s very well in this in this current economic winter starter homes, we’ve obviously evolved our strategy. We’ve taken starter homes now to force appreciation via renovations to increase cash flow such as basement suite apartments, or we did it used to do a lot more student rentals before basement apartments were legalised. And all these strategies were pre pandemic and post pandemic. And it’s worked in against all working in a declining market as well. Hence we have coach Steven Phillips here to talk to us today about investing in the areas east of the GTA. And what in terms of terms of deals and numbers behind the properties investors are buying right now in today’s market. That makes sense. So in the show notes, I actually have screen captures of Property Analyzer spreadsheets, so if you want to see the details, sorry, the numbers and the calculations behind the properties we’ve discussed today. Go to show notes. Truth about real estate investing.ca. Or if you’re on my email list, they’ll go shop right in your inbox so you don’t have to go searching for it. If you don’t know Steve, he’s a member of our team. He’s licenced realtor. He has a tonne of real estate experience having owned and operated a kitchen and countertop business. His stuff was so nice that they caught the attention of HGTV Scott McGilvery. And Stephens business has was part of over 20 episodes on Scott’s shows. So Steven wasn’t necessarily in all the shows, but his businesses, his business and his products were on the show. Steve grew up in the Durham area, which is east of the Greater Toronto Area and now focuses on the areas east from Moscow to Kingston. But primarily this sweet spot at Belleville understand why we’re in Belleville a lot of the smart money that I know that I know personally in Oshawa, there in Belleville as well. So follow the smart money. It’s never a bad idea. The most common request we receive from new clients is quote unquote, I want a deal. So as a service to you 17 listeners, we’re here to provide you context into what a deal looks like. So please have your pens and paper ready. Spreadsheets ready. I’ve looked at the show notes, as we’re going to talk to current opportunities and the analysis behind them on today’s show. I give you Steven Phillips. Let’s see what’s keeping you busy these days.

Stephen  

Oh, in this real estate market, a lot of things are keeping me busy right now. So yeah, projects, clients, things that are on the go people. kids back to school. Lots of things.

Erwin  

Should a mouthful there. Yeah. So actually we’re recording this mid September. But what surprised me was how busy we were in August is actually forecasted. A very quiet August, like all of us. Were off for a week or two. All of everyone on the team including yourself. Yes. Investors were busy.

Stephen  

Yeah, they were busy. We had a I know, like out our way in Belleville did a fair amount of deals with our clients towards the front end of August, last weeks of July. A lot of those kind of closed out right around that midpoint. And then investors kept contacting but there was also the waiting for September’s announcement kind of out there. So there’s some people that were trying to get in before the announcement. And some people just can’t They’re hesitating and waiting until they heard the announcement. So we’re talking about the interest rate announcement from the interest rate announcement. Yeah, from tech Macklin yet I took advantage went out to Nova Scotia for a couple of weeks with my family because we haven’t been in multiple years to see family, and then came right back into it. And September’s picking up, right where mid August left off. Seemed like we missed a beat on that.

Erwin  

Yes, again, I’m surprised again, you know, after two years locked down, I thought people would be people are vacationing hard. Well, you live in the vacation area that you’ve seen how hard people are going.

Stephen  

Yeah, but you know, like, surprisingly, like, you know, you say that, and I would agree we do have a tonne of tourism here with Prince Edward County. But I don’t know, it’s anecdotal, but it just kind of felt a little slower this year with some of our tourism. I think a lot of people took advantage of being able to leave the country. So I think that kind of changed things. There was definitely a lot of tourists here like no doubt. But, you know, during COVID, like when there was a lockdown, and you couldn’t like many people couldn’t leave the country. We were like, inundated felt like you couldn’t even move on the streets here. It wasn’t like that this.

Erwin  

So if that was your baseline when you could not leave the country? Yeah, that’s not fair baseline. Because when I was in Belleville, when we did the tour, and it was August, right, early August, August, when I was in Belleville, every hotel was packed the hotel I stayed out of the pack, dude, don’t you remember? We stayed in the very last Airbnb and all the towel on the whole town.

Stephen  

The Shack, the shack that claimed to me yeah, definitely tough to find a spot.

Erwin  

So for the listeners benefit because somebody waited Not me. Not Steve. Somebody waited to the last minute to book our accommodation in Prince Edward County. So we got the very last Airbnb that was available. And it was I don’t know what year do you think that was built in?

Stephen  

Please the 30s.

Erwin  

So 90 year old house. I built by hand,

Stephen  

though the house was nice. That’s the big there was a nice house. And there was a nice guest house. And then there was the shack, which I think was the original house that family had moved and upgraded every year since so yeah.

Erwin  

Which didn’t help things. Because yeah, to paint a picture for the listener. It was a beautiful like 3500 square foot house without pool attached to it built within like five years, beautiful house where the owners currently live. And then next to it was the second house that was built on the property, which was not a fun, like pretty typical starter home for most suburbs. But no, and then, but they rent that property. But that’s not where we were staying. We were staying in what they call the shack, and we paid over $400 for the night for it. And it was a little one and a half story. And I believe that house that house was hand built. I don’t even think it was no it was tiny. 300 square feet.

Stephen  

It was still logs. Yeah, maybe maybe it was it was very small and very, very, very, Rustic.

Erwin  

Rustic. For any short term investors out there. We we paid over 400 a night for that place. It was embarrassing.

Stephen  

The county is crazy. Yeah, the county is crazy. I mean in so there’s not a lot. Everybody’s heard about Prince Edward County. There’s not a lot of hotels here. That’s kind of the thing. There’s not a lot of growth. So you’ve not a lot of growth in hotels. I think there’s limiting variables as to why there’s not a lot of hotels here. But it’s hard to build hotels here. So you’ve got the Drake, Devon char, which is a beautiful hotel, but limited in room size. You have the royal which just got built and picked in 28 rooms or something like that, like it’s limited in room size. Yeah, like beautiful boutique hotels, but the word boutique has to be added to all the hotels, right? Like it’s not big. And so that’s why there’s so many Airbnb ease, right, and they fill the void. But when they’re all booked up, the overflow lands in Belleville because it’s it’s about 3540 minute drive from the bottom of the county, or at least the popular part of the county, up to Belleville. So that’s why your hotels are all booked. And yeah, it’s a hard place to come in and stay in the summertime without

Erwin  

a plan. And just as the outside as an outside observation. The whole area hasn’t like a feel of Niagara on the Lake to me, because you actually have wineries there we are you took us out to you took us to dine on a winery and our winery, which is pretty awesome.

Stephen  

Yeah, we’ve got a few out here that there’s there’s lots of things to do. I think there’s you know, definitely Niagara came first and then the county has kind of tried to do their part to stand apart and yet follow and so yeah, there’s there’s definitely signals and signs of both. But it is its own thing out here. That county is its own beast it is. It’s an interesting place. Very interesting place.

Erwin  

Now you’re East I recall it. So we’re not talking about why No, we’re not here to talk about why because investors are buying and what I want to accomplish with with having you on being an expert of areas east of GTA is what are investors buying because I think there’s tonne is a few out there some more to some not, you know, if you’re in this for the 510 year term like you are an IR or we’re looking for opportunity, but a lot of investors don’t know what a deal looks like. So what are investors buying today?

Stephen  

What a deal looks like? Isn’t that funny? Yeah,

Erwin  

I think deals different everybody.

Stephen  

I think if you’re looking at it, it’s always a different thing. And I mean, when we’re having these conversations, I have a lot of conversations with investors, a lot of them are new investors, I think it’s key to first figure out what their time horizon is, because that’s a better way to identify what a deal is, like,

Erwin  

oh, boy, this is not the time. Yeah,

Stephen  

well, you better be good at them. Right. Like, it’s not the time for a rookie flipper, that’s for sure. We have a couple in our

Erwin  

and you better be going the tools yourself.

Stephen  

You better be good. Yeah, there’s no contractor. So like, you better be good at something to do with that. And you gotta buy right very much right now, I’m finding that I have a couple of clients that are flipped clients. They’re very, very experienced with clients. They’re not like newbies, they’re very, very experienced, they know what they’re doing for them. They’re just looking for the absolute best price right now. Because they need to pretend, or at least project, not pretend project, what the property will be worth in 90 days. And there’s no crystal ball that’s telling anybody that right now. So you have to be uber Uber conservative on your numbers, and then try to buffer in as much of a safety as you can. So also just as a sidebar to that. They’re also always looking to make sure they have a backup plan. What is the rent on this property? If I can’t dump it? If I can’t get it back in the market and time to sell it? What’s it going to rent for? And and am I willing to carry that burden until the market comes back to where it should be in and I can start to move and prices kind of bottom and start to climb again. So yeah, I think those flippers are definitely out there. But they’re very much not for the it’s not for the faint of heart. It’s not for anybody who’s this is not television. Flip shows this is like professionals. And so if you’re not that guy, be careful.

Erwin  

Right? So I would say that I’ve spoken to many investors as well. And we’re just people lawyers, this seems more of a type of buy and hold time, a time to be buying for hold for the long term.

Stephen  

Of course, like I think you’re absolutely right, I think all those people are because ultimately if you buy a product, and that product goes on sale, and you don’t know how long the sale is going to last, you should try to get as much of that product as you can afford to get you ready for when the prices aren’t going anywhere. And this is a great time to kind of stock up on your inventory of good opportunities, even if the property is not going to be renovated right away, stock up on it now and get yourself ready for down the line. So I have some people that are looking at properties that are are finished and have garden suite potential. They’re not duplexes, yet they’re still single family residential, but for the time being right now, they’ll they’ll cashflow neutral, and yet they have the option in the potential of a garden suite add on in the spring or in you know, maybe six to eight months from now. And then that will take them to a positive cash flow position. It just depends on what people are looking for right now.

Erwin  

So what are what are our clients buying right now? Can you tell us about a bit about them?

Stephen  

Our clients are buying those. I think the last few deals that I’ve been doing have actually been kind of a couple duplex conversions have gone through, I have one that just sold that we just closed on two weeks ago, end of August for a duplex or a two unit property that was already a vacant unit vacant possession. No renovations needed, take the property over and get it rented condos. Yeah. If you can find those right now. Like they’re great. I think the whole key to that deal was to make sure we had vacant possession, and then making sure that we could set the rents because rents are increasing. I mean, I’m sure you’ve talked about numerous times I’ve seen it just on a couple of weeks ago, rents are increasing significantly. And so we want to try to get our rents established to today’s values because a year from now, they may still be low. So we need to get them set as as best as possible. And so that’s the advantage of that that deal there of getting vacant possession.

Erwin  

I’m sorry, we’ve heard move on what’s a turnkey duplex gopher these days?

Stephen  

So there’s a very interesting question. There are

Erwin  

because it varies, it can be really duplexes there can be rundown, duplexes?

Stephen  

Absolutely, that’s always in the wheelhouse. And there’s also the variable of time. So the property that we did with our client was towards the first or the end of July into August, that price point. I don’t necessarily know if that’s still the same price point right now for some of the duplexes of that size. It’s a bit bigger than some of the other ones but I’m seeing duplexes starting to come down to the mid to low fours, which is significantly lower than even at the end of July. So the one that we picked up early in the year was or partly early in the month was closer to the mid high fives just under six. When we ran all of our numbers on that property. It was still in a cashflow positive position. There was no investment required other than the downpayment, the property management was coming in around $200. To manage the duplex was a two bedroom on the main floor and a one bedroom upstairs, the two bedrooms are probably going to rent or should rent somewhere around $2,000 a month, everything was split. So Well, not everything the water, the water had its water and gas was included in the rents and the hydro was an additional. So 2000 We were going to bump in another 100 or so and change for the split of those utilities, so called 2150 for the two bedroom, and the one bedroom was going to be somewhere around 1800 to 1900.

Erwin  

Oh, wait, that’s a lot.

Stephen  

It’s a lot. It’s a lot. It was a nice one bedroom, and it was a loft it up in the top and it was pretty isolated. Could be as you know, I’m also adding in those utilities, the base rent of that would be 16 1650. And then we’re adding in the cost of those utilities to the rent as well. So which kind of pulls it up to that 1800 number. But yeah, 1650

Erwin  

that’s a lot for a one bedroom 1800 For there’s no,

Stephen  

we have no vacancies, we have no vacancies here, we have no vacancies anywhere, the rental supply is very, very low. I think that for anything of good quality that’s close to transit lines, the prices have gone up. I think those rents were somewhere around 14 to 1500. This time last year, and they’ve gone up.

Erwin  

Okay, so hang on. So this one that we’re talking about, how much did you pay for this property that’s has two bedrooms, one bed down?

Stephen  

590.

Erwin  

Okay, so I was gonna run some numbers. I’m like the worst Asianet math my calculator out. So 2000 plus 1800 times 12. So my annual rent is 45,600. By 590. Hertz was a percent. If you’d if it was inclusive, you’d be you know, doing close to 9%.

Stephen  

Yeah, and so property tax. So here’s another thing on a property like that the property tax for that property is $2,300. So you have low expenses, low costs on a lot of your carry costs, and then your rents are still creeping up into those numbers. Now we’re renting that property right now. So the market itself is going to tell me how wrong I am or how right I am. But I think that the but

Erwin  

if you’ve no vacancy

Stephen  

vacancy, there’s really you know, there’s not a lot I know room rentals right now. So let’s take a room rental, for example, the room rental rate here, I know of a guy that was one of the realtors who has a boarder house, I guess you could call it a boarding house. He was getting 850 A room on just a room rental on a in a boarding house that was quite undesirable. So

Erwin  

I’m sorry to disappoint you there for listeners benefit of boardinghouse typical example is like a student rental, a proper one is usually licenced each room is treated like almost like a separate unit. So there’s fire safety for each of the bedrooms, to be self closing door to be fire rated drywall between all the units and the flooring and ceiling, all that sorts of things. So it’s all highly regulated, probably at least annual fire inspection, stuff like that. That would be a proper boarding house 850 room and it’s not so nice.

Stephen  

Yeah. And like who’s renting that right? For the most part, what we’re getting who’s renting those types of situations are either working in the military and are only here a couple of days, a week, three or four days a week, and then they live back maybe in Quebec or something like that, where their actual family is pretty dependent. Yeah, like they’re great tenants. And then some other ones are contractors. So just about job as a contractor or somebody working for utility company or something like that. They’re not here consistently. They’re just here to do their job. And then they go home, they tend to be the renters that are looking for those boarding houses, right, like room rentals. That’s not so bad. Now, you do have students here student rentals. I know right now we’re going around 750 a room for like, the student rental population,

Erwin  

for a marketing agency, with no

Stephen  

vacancy, and yet they’re all like, hungry looking for units. So like, it’s just very much a landlord’s market is just there’s no inventory, there’s no inventory. So I put them put the sign up, market it, see what shows up. And then pick the best quality if you pick a better quality tenant and you got to take 100 bucks off your your cash flow, but you’re getting in quality. Maybe you do that. But yeah, market will tell Mark will tell where we’re at. So Sorry,

Erwin  

Steve, I want to finish off these your 590 K, would you do me a solid and send me the spreadsheet. And then that can include a link to the show notes. So folks, they want it. So for those folks, if you’re driving, you know, don’t worry, the spreadsheet will be the show notes, at least a PDF or something like that. So you can see the numbers. But again, these numbers are great.

Stephen  

And again, we’re looking at a property that at that purchase price right now. I don’t see a lot of the properties selling at that purchase price right now. But for my client, I mean that was the market we were in when we made that deal. That was good. Everything was great online, and the numbers still work. And so moving forward, you know, we’re gonna keep moving on to the next one. Get this one be locked up, get it rented, see where the market rents come in and then adjust?

Erwin  

Well, even in my experience, the contractors, it’s hard to get a contractor and prices are going still going up. So they bought turnkey, which, in my opinion is a good thing in this market, because it’s so hard to get contractors now.

Stephen  

I agree. I agree. 100% and your

Erwin  

cash flowing day? Well, you’re basically cash flowing almost immediately. You don’t have to carry that darn thing and worry about it and deal with the renovation. Yeah, significant renovation.

Stephen  

I think the next property that on that note, I we just had a property close yesterday, actually. It was one that was on our tour. We were here in Belleville, that property, we ended up picking up for $430,000. This is a drum are they asking? For 49? Got under asking with conditions, right? Yes, three conditions. In the end, yeah, three conditions. I work appraisal conditions into my clauses right now. Because those prices are slipping. And I go back to my first client, like the first client that we talked about, we had no appraisal condition in there. So yes, the prices were higher when we purchase, but we had our appraisal done the day before we waived our condition. So we knew that the appraisal was already in, we knew the file was closed, we knew everything was going to work. And we move forward within a closed X amount of days later, this one, we did the same thing quicker closed. So the appraisal really didn’t matter. We got to well under value. So we were good. But 430.

Erwin  

Alright, excellent. And then what’s the renovation budget gonna be?

Stephen  

So this is where it gets interesting. This particular client is also a carpenter. So he gets to take care of a lot of the things himself, his budget is going to be somewhere around 100k. Because he’s really delegating very little, just the things he doesn’t actually do plumbing, electrical, things like that. H back, things like that.

Erwin  

This is why I think it’s wonderful for young people to get into trades. Because I just seen so many people who are good at trades become very good real estate investors.

Stephen  

This person is a younger than me, and he is quite quite smart, quite savvy, I would encourage the same thing. If you’re a young person who’s ambitious, get as many skills as you possibly can get, because it’ll just protect you. And like even if you delegate out to a contractor, and that contractor is doing the work for you. If that guy or that girl messes up anywhere or they’re slow, or they slow down, or they disappear, you can jump in and finish. So you’re never at this like moment where you’re you’re dependent on anybody, you have a level of independence. And so even that is a huge benefit. So

Erwin  

fantastic. Okay, so 430 by under camera, no. Budget, what are they renovating a kitchen or to a whole basement suite conversion?

Stephen  

So we’re doing a duplex? Yeah, we’re doing a duplex on that property, full basement, Reno and duplex and then the upper floor, we’re taking the kitchen from its existing place and kind of moving it half the room over and giving it a little bit more space.

Erwin  

So excuse me, you’re moving the kitchen over this is pretty significant. It is

Stephen  

but it’s if you see the layout, I’m going to show this at our at our upcoming meeting. The layout is is pretty conducive for this move. Actually, it’s not too intensive, and it works out because the clients are carpenter. It’s not as intensive as it may have. Be for some other people. So it’s not that big of a deal. Yeah.

Erwin  

Fantastic. I love it. I love I love efficient use of real estate, oh, efficient use of anything.

Stephen  

Yeah, we ended up we had a room, we had two living rooms essentially had a front living room and a back living room. And then this tiny little kitchen in the middle that you would zigzag through to get to the back living room, which was you know, an addition that was put onto the property. So why have a little tiny kitchen that doesn’t make any sense and have two living rooms. So the client is is looking to move that into the back and make it a kitchen and then have a proper kitchen and then actually use the old kitchen for his laundry and as storage is going to convert that space properly. So

Erwin  

Steven, I forgot to ask how many square feet is this house? Sounds big. If there’s two living rooms. It

Stephen  

was the additions throwing me off. I would say it’s like a standard bungalow like like larger size 1200 You walk through it. But the second one we went through, but yeah, I hesitate to say an exact number. I don’t know off the top of my head, but it’s a larger bungalow, but it’s a traditional bungalows, like three bedrooms, one bath, and then the kitchen, the living room and then the basement.

Erwin  

So you got you got a house for like around 360 a square foot. And that’s before counting for the basement.

Stephen  

Yeah, yeah. And then like the rents there.

Erwin  

Say, Let’s do this again for a second for all these people who buy condos. 360s square foot. You can’t build anything for that price.

Stephen  

As opposed to your 1600 That’s right.

Erwin  

You’re not in this game with the land folks. You can’t build anything for this price.

Stephen  

Let’s talk about the land is Before we get there, but

Erwin  

you know, buying for less than replacement value is a nice thing to do. It’s a good investment criteria. I think we’re I think we’re getting that here. You can build this house. Like if you missed the land. I don’t know, what do you think a lot is worth 100 grand?

Stephen  

You know what it’s hard to say out here. I’ve seen some of them going a lot higher. Call it 150 180 50.

Erwin  

Okay, so for 30, grand, less 150 for the lot, a lot. So you’re saying the building is worth about 280 1200 square feet, says $233. A square foot is what you bought. Right? Plus basement. So 233 inch square. You cannot build it when

Stephen  

you start putting it that way. You’re making me nervous. Like, like I’m doing the math wrong. Yeah, no, it is, though. I don’t see how you could build this house. No, I don’t see that. And I think that’s a common thing. That is part of the deals that I’m looking at right now. A lot of the deals that we’re looking at. I don’t think even if you had to gut the entire thing inside, it’s hard to build it back up at the price you’re buying it for I can’t even can’t imagine.

Erwin  

So I’d argue this is looking good so far.

Stephen  

Yeah, like this deal. I’m really excited about this deal. Oh, it’s big lot.

Erwin  

Right. It’s a huge lot. All the lots of believers years.

Stephen  

Right. I don’t have it offhand. I think it was 50 and change by 140. Posts himself. It was yeah, it was a doozy of a lot. We walked it. So anybody who was on our tour will know that Lot was good. If you want to come and see the numbers. We’ll be showing them on Saturday. But yeah, the law was was beautiful and garden suite potential. So the thing about Belleville just if you’re not aware, we can do garden suites in Belleville, but they fall under our accessory, apartment or accessory dwelling bylaw. So you can’t do both the duplex bungalow and the garden suite yet, because of our density is too low yet, like we haven’t gone through enough properties. So what clients are doing is finding properties that have potential for garden suite for future use, this could be added down the line and or rent the entire single family home in the meantime, and then put the garden suite in the back is the next step. So this particular property clients going to do the basement first. But there is more than enough room in the back to put a garden suite down the line that will be two bedrooms and adult you know, another 800 900 square feet easy.

Erwin  

I love real estate with options. You’re You’re really not a fan of condos. For folks, has been on the podcast before back in April. So you want to hear about his rant about at condos, it’s all in there. If you want Steve’s full story as well, it’s on it’s on the April episode. But for now we’re just gonna focus on deals. I love real estate with options. Because if the property has options, we’ve seen it before, if a house can have a basement suite doesn’t have to happen, just the fact if it has the ceiling height and the zoning for basement suite, those houses sell more than the equivalent house that does not have those things. Right. So So again, I want the house with options because I know it’s worth more. Even if I don’t do the work. Even if I never build the garden suite. I know my property is worth more because it can it can support one.

Stephen  

I also think you know, like piggybacking onto that comment, like that statement. Like it’s all it’s very true. I also think that your listeners and our clients, I mean, not to be too presumptuous, they’re quite advanced compared to the regular pert like regular market, right? It’s not everybody looking at real estate is even thinking about future use of cards. So when you’re using that knowledge, and you’re buying with that, you kind of also have to hold on to that, that you’re way ahead of the curve. So you may not see or realise that potential value until X amount of years down the line. That’s okay, you were in early, right. So like, if you buy the property today, and you turn around and go, but I can put a garden suite on it and nobody else cares. Don’t worry, it’s good that you know it because you’re ahead of the curve. They’re all going to catch up to you. It’s just a matter of time before they realise why that was important that you did that.

Erwin  

Fantastic. And then what do you think? What’s the property gonna be done? Once the duplex can be when it’s done three bedroom,

Stephen  

three bedroom up two bedrooms down. There’s a requirement of Belleville to only do two bedrooms in the basement. So that’s fine. We’ve put in pretty conservative rents. I think for what I’ve seen a lot of new build duplexes like this getting, but upstairs, we’ve got it in at 2200 2250 Plus utilities. And then downstairs looking at again about 1800 Plus utilities, it’ll be separate everything because it’s new new build. Again, property management in the area is about $200 for the duplex. I’ve got 100 grand in there, I’ll put I’ll send you those spreadsheets when we’re done. But basically when I run through everything through our calculator, it’s just over $1,000 on Monte Carlo.

Erwin  

Okay. Wow, you have four grand to rent for a month. Okay for granted random month, times 12 months 40,000 A year. Oh my Lord, for listeners benefit this is special since the since the investors doing the renovation themselves.

Stephen  

It’s an anomaly. Yeah. But even min it takes out of the outflow of capital. Right. So it’s it’s taking the original capital expense down, but it doesn’t affect the original buy too much so. So yeah, I think it’s a good one. There’s a couple other little anomalies in here that are that are interesting, but we’ll save that for Saturday.

Erwin  

But still numbers like that’s the rent is 9% of purchase place plus rent. I was like, That’s phenomenal. And the tenant pays all utilities since you’re split them.

Stephen  

Yeah. And I think if you’re looking for like social proof there are we have a mutual person that we know out here in Belleville doing some deals and like it’s all over Instagram, what they’re getting on their rents like, I’m not making them up. They’re kind of kind of being advertised here.

Erwin  

So before we move on to property number three, how important is it to have team how important is it to have a contractor and Property Management contacts? Okay, so in relationships,

Stephen  

this is it’s very, very important. The contractor aspect of here is, it’s complicated. It’s very complicated to get like, in the sense that there is a waiting period for a lot of our good contractors here. They’re not just ready to morrow, to start your renovation. They’re not ready to start anybody’s renovation, right. But as far as property management is concerned, we have that locked in there ready to go tomorrow, sign them up, they’ll send you the contract, everything’s good to go. As far as you know, general assistance with drafting and documents and paperwork and city dealing with all of that under control. You just when I’m dealing with my clients, I’m trying to prepare them for what strategy we can use to kind of wait until the contractors are available. So this is based on the individual investors kind of background understanding thresholds, where are they at with financial? Can they hold the property and pay the bills and float it while we wait? If not, then we may be looking at a turnkey. Yeah, we’re looking at turnkey, or we’re looking at a property. So what is the single family renting for right now, for the most part, you cannot find anything renting under $2,400 A month plus utilities pretty much any house. So you know that’s a pretty good start, if we’ve got now I have another property that I was just looking at with a client who was entertaining this property because it’s very interesting. It’s a 60 by 220 foot lot inside the city, like inside the rate on the transit lines and everything which is a big lot there. And the property is

Erwin  

a lot anywhere, Steve sorry.

Stephen  

I live out here there’s a lot of Big Lots I’m talking about like two and a three, four acre lots everywhere. But So anyhow, this property has just recently been flipped, the inside of the home is immaculate, it’s been done amazing, but the flippers flipped into the wrong part of the market and it needs to get rid of this property it will sell in the high fours it has future use of a massive garden suite in the back no problem. This property is one of those type of deals where you can rent that right now it is in the same quality as new construction you’re probably going to get closer to 2800 plus utilities for a property like this three bedroom one bath upstairs full house so that property although not cash flowing a significant amount of money right off the bat does put you in a position where you’ve got a very well finished house turnkey ready to go well you set up for your garden suite in the back. So things like that are options for people that are starting to entertain

Erwin  

well they have they have rental income commitment and right away there’s something to be said for that.

Stephen  

It’s not costing them three grand or two grand a month and carrying costs while they wait for contractors so gives them a bit of options.

Erwin  

So it again to each their own I don’t really think there’s bad investments. But again, for some people that might help them sleep at night knowing that the the properties or any type of tenanted right away

Stephen  

doesn’t doesn’t eat anything and it’s done very well and then go to like the first part of our conversation where you are buying a 60 by 220 foot lot in the four hundreds with a house on like those type of things are also should be valued. Like it’s hard to find something like that, you know, six months ago, in February or whatever it was we were we were killing for deals like this. So they’re all still good deals. They just interest rates are higher. That’s all

Erwin  

isn’t the flipper gonna take a bath on this. They saw it in the four hundreds.

Stephen  

This goes back to dangerous times to be a flipper,

Erwin  

Steve, I’m sure people are gonna be looking for this. Where can they find where can they read To to you if they’re interested in looking at property in Belleville and surrounding area. So we send me just to clarify that folks like we’re talking about belvo now, but Steve goes from like Kingston to Oshawa. So

Stephen  

deals are Yeah, the deals are going into different markets like we have people starting to look at different markets like Kohlberg, which is a nice growing market and values are going to jump much higher there. So there’s different markets along that corridor, the 401 corridor, but particularly right now, we’re talking about Belleville deals. But yeah, Instagram, I guess is the most conventional way people reach out to me. The world has changed. Yeah, email, but you don’t i don’t know you sometimes block given on emails on.

Erwin  

I just worry, because, again, internet’s forever. At least Instagram you can we say bye to it. Your your email is hard to say bye to

Stephen  

you know what, if you reach out to our team at iWin, they’ll put you in touch with me pretty quickly. I think everybody on our team connects to me pretty, pretty fast. So we can help you either way.

Erwin  

Stephen Phillips on Instagram, or the handle is Island underscore, on underscore the underscore east side of the link list. You’re in the shownotes, folks. All right. And that was property three that we’re talking about the the Flipped product, how was the workmanship on this flip product on this flip house?

Stephen  

Man, it was good. It was good. It was actually a very good finished product. Like I’m harsh. Just like, you know, the rest of our team is I’m pretty harsh on the contractors

Erwin  

because of rent home renovation background, so you know what workmanship supposed to look like. And that’s we gauged as well, how I want my rentals renovated is different than how I want my home renovated. So it’s different standards, right?

Stephen  

And it’s, you know, to a certain degree, and I not Yeah, I just I know, I have a gauge of what is what is in line with what it should be. And it was it was good. It was a good quality product, I was happy with it. So I think that that’s that’s definitely an interesting phenomenon, there’s there seems to be a few of them out there, these flip flop properties more and more coming online. And they’re in a position on the price point where they’re kind of a little out of reach still, for the first time homebuyer and they’re a little, you know, they’re in a weird zone, they kind of hit this weird place. And so they’re, there’s something to be taken advantage of, from the investor point of view, if they have what they need, doesn’t work for everyone. But if they have to lie, or they have something that could be very appealing, actually asking, I’m gonna hold that to myself, let them contact me to find out because it may give too many hints, and I’ll lose my lead, mystery.

Erwin  

Or be there the other day when meeting

Stephen  

appeared to be at the IOP the purchase price is definitely that I’m proposing is definitely lower than the list price. I

Erwin  

feel sorry for the flipper. But, you know, you can feel sorry for the flipper. But you know, I was talking to a flipper yesterday, a pretty big one, I think he was sharing that they’re gonna take like a 30 grand hit on the current deal. But they made tonnes of money. Last couple years. It’s the professionals, the professionals. So you know, it sucks to lose money, yes, on a deal. But you can’t just look at one deal, you have to look at the law, if the look the whole picture.

Stephen  

I think that’s the biggest mistake I see young investors or newbie investors look at is they get obsessed on the one and right in front of them. And the guys that I’ve met that are very long term minded, they know that it’s a long game, you’re going to win some you’re gonna lose some you try to win more than you lose. And for the most part, you know, you you don’t, you don’t take massive, massive risks. But if things don’t always work out the way you planned it, don’t let it ruin your life and your business. Just keep moving on you just and you move on to the next thing, right? It’s, it’s about that. And so the pros tend to like look at those scenarios, like these type of choppy waters, part of the game, like it’s just part of the game. And they’re gonna get a lot of good buying opportunities right now that hopefully they’ll make up for any loss that they’re taking right now next year, when the buys kind of cycled back out and they make some money. So it’s it’s hard to Yeah, I

Erwin  

think folks understand like, the consistency of success in real estate is very high, unlike general entrepreneurship, small businesses. So let’s leave it at that. All right. Awesome, Steve. Thanks for sharing, no processor. Is there another property to talk about? We’re good.

Stephen  

Let’s put it this way. We’ll leave it teaser. I have another property that we’ll be talking about at the iWin meeting. If you’re interested, you can come on out. We’ve got a couple more to go through and some of the deals that we’re looking at right now. We’re going to be covering on Saturday on the Iowan meetings as well. So come in to have a look because there are a couple of properties that we’re targeting and watching and keeping our eye on

Erwin  

or just reach out to Steve, if you’re open minded and nice.

Stephen  

Please nice people. My wife has a sign at our one at our building. It says Be nicer go home. We tend to follow that rule be no single or cool. Be nice but you Yeah, generally that’s the way it goes.

Erwin  

Amazing. See this, like that flip property you talking about? I don’t even know how much you spend for in Hamilton to get that kind of rent, it’d be over 700,000 might be over 800,000 to get that kind of not right kind of rent dollar. But amazing. Alright, Steve, thanks for sharing. And again, the whole point of this was so folks can get a taste of what investors are buying today. And the deals we’re looking at. Because if you’re not in the business, like we are, I don’t know how, you know. Context is everything. degrees.

Stephen  

Yes, context is everything, get the whole story about the market, don’t just follow the main narrative, because the main narrative is guiding you a certain way. And when you start to go into the trenches, and look and see and find details, you’ll figure out that the main narrative may not be what you believe.

Erwin  

It’s very good point. And we’re not saying that ours are deals with the best you can absolutely do. I’m sure some people can do better, but you probably got to work harder, a lot harder to find them. Amazing. All right. Thanks, Steve. Any final words? Thank

Stephen  

you, people get out there and do something. I mean, take action, it’s a lot easier. When this moment passes, whenever this moment passes, people will look back at these opportunity and they will surely call us and say I should have bought them. And at that moment is the moment where my empathy for you should have bought that is gone, because we were here working with other people helping them so let’s Yeah, take action, get out there, see property,

Erwin  

and then figure it out. Amazing. All right. Thank you, Steve.

Stephen  

Thanks, see you.

Erwin  

Before you go, if you’re interested in learning more about an alternative means of cash flowing like hundreds of other real estate investors have already, then sign up for my newsletter and you’ll learn of the next free demonstration webinar I’ll be delivering on the subject of stock hacking. It’s much improved demonstration over the one that I gave to my cousin chubby at Thanksgiving dinner in 2019. He now averages 1% cash flow per week, and he’s a musician by trade. As a real estate investor myself, I got into real estate for the cash flow. But with the rising costs to operate a rental business, it’s just not the same as it was five to 10 years ago when I started there. Forgive the cash flow reduces your risk. The more you have, the more lumps you can absorb. And if you have none, or limited cash flow, you’re going to be paying out of your pocket like it did on a recent basement flood at my student rental in St. Catharines. Ontario. If you’re interested in learning more, but it’s true for free for my newsletter at www dot truth about real estate investing.ca Enter your name and email address on the right side will include in the newsletter when we announce our next free stock hacker demonstration. Find out for yourself what so many real estate investors are doing to diversify and increase our cash flow. And if you can’t tell I love teaching and sharing this stuff.

 

 

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