**Transcripts are auto-generated.

Erwin  

condos are bad versus highest and best use triplex conversions east the GTA while they’re good and actually cashflow before we get to that, what are some people being taught these days as, as your classic Asian parents, we want our kids to excel in their after school activities. So naturally we asked our kids gymnastic club. If they offer private lessons, the staff members response and note she was a she’s a teenager, okay, whatever. Let’s not practice ageism here. Her response was, that would not be fair, as my kids will have an unfair advantage over their classmates. For context, the club is so busy, we were only able to get our kids into one class per week, which is not nearly enough if you want to be in competitive sports. So we’re switching clubs, but still, what is fair have anything to do with anything? First, Clint Eastwood famously said at the end of the Oscar winning movie, The Unforgiven fairy got nothing to do with it. I could pull it off slightly. Now it’s probably pretty bad. But I’ve major grass allergies right now. Anyways, life isn’t fair. And pretty much everything I’ve done in life was to get ahead, you know, work hard, stay late, working late working weekends, go into business school, investing in real estate, investing in coaching, to coaching for myself to receive coaching, reading books, taking courses, I don’t believe in fairness, I believe everyone has opportunities, and everyone has the right to take advantage of those opportunities in life. I believe in winning as well. And getting ahead in life fair fares for communists. I wasn’t born with any natural talents. So my don’t expect my kids who inherited it. Still, they’re got to learn the grind. And that includes doing extra work, including private lessons, speak to young people, I was checking in on one of my clients who hired a new property management company. So they have a new rental property, and they hired a new rental property management company, and the property hasn’t read it yet. It’s been two months since the property’s been ready to rent brand new renovation, two months have passed. And so that’s bad. The market is telling you something two months, that’s bad peak rental season is the spring market because parents want to you know, no one wants to go looking at properties in the winter unless they have to. But generally, for most people, most of the time spring, our parents want to settle in on a place before the next school year begins. And this apartment is a two bedroom plus den. So it’s ideal for our family, I informed our client that he has only a couple of weeks until a school is out for summer. So that’s when the official summer market summer starts in my books, I reviewed his ads with him and they’re fine, they can be improved, I give some tips on how to improve them including shooting a video that includes they can just be a simple selfie camera, just use your own phone, do the tour, you don’t need to spend all the money for professional tour for a rental property, tell them how the attitude could have been better written in order to target who the target market is, and who the decision maker is, is written very little, very technical, very technical, versus I said, you know, you need to paint a better story than that. And also, the key thing that stuck out was the price was high. Again, the price has to be high, because everything was else was decent. Pictures are okay, but he hasn’t rented. So you need to do something, I proceeded to review his competition in the immediate area, let’s say to the head, you know, they’re all similar in terms of number of bedrooms and bathrooms. Also, they were newly renovated. The New Town is a small town as well anyways, so newly renovated two bedroom, his competition, they’re asking for 100 to $300 less than he is there’s no one at the same price point in him, let alone higher, somewhere even above grade versus not so not a basement apartment, but rather a main floor and second floor. If I’ve attended, there’s a new build as well. So if I’m a tenant looking for a place, I’d probably choose that over my clients basement apartment. So again, I’ve identified three direct competitors in this small town with less than 50,000 population, all brand new renovations, I explained to our client that this is a competition, who can get the best tenants who can rent first, not just anyone, but obviously the quality tenants. But my point is, is that we’re losing this race. We’re again, our client has the highest price, it’s not going to work. Again, understand my client has professional property management in place, and two months is too long before making any adjustments. So he needs to take action. So again, this property is in a town that we no longer recommend. It’s called Trenton Ontario, we don’t recommend to clients as it appears that the markets saturated as in too many investors with on rented properties. Again, there are four, two bedroom newly renovated properties apartments available for rent in a town of around 43,000. So that’s a small market. You know, we’ve had guests, we’ve had lenders on the show, for example, who said they won’t even lend in a market with that small. So yeah, affordable markets can be a double edged sword, while prices may be affordable. If the rent gets too high, it makes better sense to buy. And that’s what we’re seeing in this market. Any reasonable person knows that real estate investment, hence, the top end tenants they’re turning into buyers they’re choosing to buy instead of rent. Alright, so too much of our time Ain’t no tenant is a red flag, especially in a small market, right? If you’re renting a small market, that you need to be even more cautious, right? To price things, right? You’ve got things rented, because vacant property is risk, right? Like no one goes broke, having fully occupied properties with Tet rent coming in. So yeah, a good reminder that even if someone has has a property manager, especially a new one, you need to check in on their work, in this case, like a progress. Whenever you invest, do you make sure you focus on economic fundamentals, or other clients have, you know, we’ve been working with clients since 2010. And if you just look back, our clients that purchased 11 years ago, they have tripled in value. So any one of our clients that bought in 2012, the property of their properties have tripled in value. Also, a lot of those were single family homes, cash flow those like back then anyways. And also, none of them experience two month vacancies of newly renovated properties. And if they did something was just plain wrong. on a macro level. What a world it’s the highest. It always seems to be it’s fascinating the world that we live in the the level of history that happens, I don’t get get a world news in economics, as many people do. But just to summarise, this is just my view of things. Our friends, the Americans will raise their debt ceiling to avoid bankrupting the richest country in the world. And in response, the bond market predicts the Federal Reserve will increase interest rates another point to 5%. This July or September, before cutting closer to November, December this year. In Canada, our economy performed better than expected, causing speculation that the Bank of Canada will raise interest rates again, my bet if I had to bet, I would bet no rate increase as inflation has already slowed last few months, it’s likely gonna continue slowing. I believe that. I believe that to be great news. Even if rates go up, even if rates go up. 25%, which some are predicting? I think that’s actually great news for buyers. Yes, that sucks. But everything gets more expensive. But it also slows the recovery of real estate prices. The recovery real estate prices has been actually really fast. Yeah. And by slowing the market down with a rate increase that just allows buyers to find more great deals. And honestly, I’ll just, it’ll also push off some sellers off the off the cliff that they can no longer afford, and again, making more great deals available. In the US real estate market. We are seeing some serious problems. There’s an investor whose name is Jay get to valley. Hopefully I said that correctly. Who owns apples way Investment Group. He has a fun that’s making national headlines. The fund owns 7000 multifamily units in Houston, Texas, amazing rate, that’s much similar other buildings are being foreclosed on by their lenders. This is why I say on the show, I don’t care how many units somebody has all I care about how much money is being made, and unfortunately, the investors in these funds, so the investors of these multifamily apartment buildings, they raised a lot of money to do so. And these people are going to lose some of their investment. I’ve included a link in the show notes again, just appreciate folks, people who’ve arrived provide fake news did not provide their sources. I will always attempt to source everything. Anyways, the article mentioned that the investor the investor j is coached by a brad some rock me being nosy I crypt j is Facebook and he appears to be part of a large a large investors group under this Brad Dolman buying apartment buildings. So that sort of education group networking group. And as the old saying goes, where there’s smoke, there’s fire. So this could just be the early early days of a number of foreclosures of apartment buildings in the United States. I even watched a local news channel in Houston, a local Houston news channel report on how the mayor of Houston the mayor of the city and his Houston Texas, it’s not some rinky dink town, several heads of department, the city with both police and fire departments showed up at Jay’s property because it was so being so badly managed broken steps and handrails, overflowing garbage bins, rats brands, etc, etc. Basically my point is that there can be some great deals on the horizon. For those with deep pockets and know how. Here in Canada we have lots of groups that promote investing in general and real estate and also multifamily investing. And as a result, a lot of my longtime apartment building friends across the country, you know, good friend, Pierre Poulter, John, you know, Michael Ponte, who was just recently on the show they’ve shared with me, you know, off the record, there are many apartment building listings, with multiple offers on them where their winning bid often makes no sense makes no sense financially, time will tell if we see the same level of problems here in Canada in the apartment buildings. Not to say all investments are bad one just has to, you know, put in the time and effort to find the good deals as passives guests of the show have indicated have shared how to write it gives you a check. You know, we just had my Graco lawn and yet Michael pani again. So from what our clients are seeing on the streets, we have coach Steven Phillips here to share what our clients are experiencing both the good and the bad deals and what our clients are are acquiring these days. The focus, more recently shifted away from Some smaller towns, smaller markets like 50,000, population, some 50,000 population to places like Kingston, Ontario. And Steve is here to explain why, with Bill 23. The more homes build faster Act and the densification that we’re seeing in lots of cities adopting the adopting Bill 23, allowing us investors to create more housing. So the point of il 23 is to reduce red tape, we’re just building dividend charges, so that we could build houses faster. Anyways, it’s working, the bill is doing its thing. And between just our experience and of all the education that we have done in the past, we tend to know what the highest and best use investments are, which the find the properties and line them up with the investors or investor clients to connect them with the ideal properties for highest and best use investing. Have you met Steve Phillips. He’s a member of my team at the four time award winning Iowa and real estate team. Right out of school, he worked for one of the largest law condo management firms in the GTA. So he knows condos very well. He still condos in the past as well. He’s a serial entrepreneur. He’s had a construction business. Real Estate runs to the family at the Mississippi as a designer as well. Steve is well known in the Durham Region, lots where he grew up. Also, having been coached by him taking courses by Quinton D’souza quince stuff is fantastic. By the way, if you know Steve, like I do, He doesn’t sleep well until his clients have a great deal under contract. And he’ll be sharing how he’s been doing. Doing. So along with the numbers behind the deals that we’re transacting on in Kingston, Ontario with our clients, you can reach out to Steve at Steve at infinity wealth.ca If you’d like to book a call or tour again, that’s Steve at infinity wealth.ca Of course, links and I’ll have more contact information in the show notes. Please enjoy the show.

Erwin  

Hello, Steven Phillips, what’s keeping you busy these days?

Steve  

Hey, what’s up, man? A lot of things, a lot of new projects, a lot of happy clients just getting ready to start some new projects. So it’s been a lot of fun. A lot of good deals.

Erwin  

So you’ve been in real estate a really long time.

Steve  

Yeah. Thank you for Ageing me. Yes. Yeah, I’m 40 years old. And I’ve been in real estate in one way or another since I was 2317

Erwin  

years. That’s a long time. Do you share with the listeners where you started from real estate? Yeah, so

Steve  

I came out of school in whatever year that was, Oh, 304, whatever. There’s somewhere around there. I can’t even keep track. But I wasn’t doing marketing. Just keeping mark. I was doing marketing. And I always joke that I took marketing, got out of the programme. And then eight months later, Facebook was invented. And so that kind of ruined everything I just learned. So yeah, so I I ended up my father in law. My wife, my now wife, my father in law owns a property management company. And Marco has done so for now, almost 38 years. When I first came out, he was in need of help. And so I fell into condo management as my very first job out of school. So I was running properties, townhomes, low rise, some seniors living and a couple of high rise properties when I first started, and I just jumped right in, I was doing about 1200 doors are about eight to 10 condo corpse as my portfolio. This was, you know, before a lot of the new rules and changes and everything. But it was after the condo Act had been put in place. So everybody was kind of just learning the condominium act. So that’s where I kind of cut my teeth. I learned a lot about real estate that way because the condo corpse got to hire very smart people as accountants and engineers and architects, there’s reserve funds studies going on and lawyers are involved in so I got a lot of time with some very, very smart, talented people that had to teach me everything that they needed to know. And that I needed to know. So it was really cool. Crash Course and condos right away.

Erwin  

Sounds like a whole bunch of red tape, but probably very well needed. Red tape. Bureaucracy. What do you mean, you need an engineer? What do you mean, you need a budget and the accountant, the auditor, this stuff. Sounds good to me.

Steve  

There’s a lot of people that forget that condominium corporations are a legal entity. They are after the bank, the only one who can take your property away for non payment. They can enforce a sale or a power of sale on your property. If you don’t pay your management fees, your maintenance fees, your condo maintenance fees. And so as a result, I mean they hold a lot of weight. They’re very political board of directors are very intense. And running. Board meetings can be very intense. And we would spend I mean, I spent many, many, many nights running condo board meetings and annual general meetings and all of those things. So yeah, they’re legal entities, they need to be run correctly. And so people forget that. You know, those status certificates that you order in a condo sale that just become like, yeah, who cares? We don’t need to see that or I’m sure it’s fine. Those things things. Those things are like, so important. Realtor now and I’ve dealt with so many realtors are just like, Yeah, I just I waive the status certificate condition. And did you read it? Like, did you at least read it? So yeah, I mean, there’s a lot of things that you can do with condominium corporations that you need to be aware of.

Erwin  

I remember one condo building I was doing listings out of and Hamilton they have a leaky parking, underground parking doesn’t have a deal right.

Steve  

Now, those are crushers those are instant costs. So when you look through condo corpse and you’re trying to figure out like, where’s the risk, everybody that you know, run into is always talking to me about the amenities. They’re very obsessed with the amount of pools and bars and the rooftop patios and all of these things. But as a condo manager, you know, you cringe, because those are all things that are now on your reserve fund study, or reserve fund study is going to take your costs for the next 30 to 50 years, and make you force you to start saving for those items. So you want a whole building worth of glass, beautiful. Canada, eventually all that glass has got to be fixed, repaired or replaced. Eventually, maybe not in your lifetime, but it will be a done an issue. You need to start paying for that. All your boiler systems, all your mechanical systems. Just think about people on apartment buildings, they frequently look at a 20 year old boiler, you are doing the same thing. When you move into condominium corporations, you inherit everything that is in that condo Corp. It is now a portion of it is your cost. Sounds like fun.

Erwin  

You’re taking all the fun out of condo ownership.

Steve  

No, I mean, listen, at the end of the day condos are not a new idea. They’ve been around for a very long time. It’s a means of property developers fractioning up of one single piece of property and selling it to many, many people, it makes a lot of sense on a lot of levels. So it creates a lot of housing. A creates a lot of units and everything, right? But the problem is, is that you know, when you actually manage 800 people or 1500 people living in one structure, going up the same three, or four or five or six elevators coming off the main levels coming out the same exits, humans just don’t operate or live that way naturally. You just have to remember that right? Like we didn’t come from wherever we came from the starting out wanting to live on top of each other. That’s not how this is sort of meant. So it’s not a natural process. So you’ve got to get people used to it. There’s noise, there’s fights. There’s been plenty of times right calls over disturbances and domestics and all of those bad things. And so, you know, you end up in a very tight living quarters. And so you got to learn how to live with other people. And some people are good at doing that. And some people are and so it’s a process. It’s definitely a process.

Erwin  

Yeah, I love where I live because I back on to a pond. So I have no back neighbours. And part of that also means I don’t hear many dogs bark, right? Because Because dog barking was designed to wake people up.

Steve  

Yeah, alert. Yeah, I have one of those. I have an alert system built into my house.

Erwin  

Yeah. So I love living in the house. I don’t think I could ever live in a condo because I don’t want to be that close to people.

Steve  

This I look, I’ve managed condos. I’ve sold condos. I’ve lived in a condo. I’ve been a board member of a condo, I’ve managed board members of condos. I’ve worked for you know insurance companies that were in charge of fixing the condos after fires and floods and kind of help them out. I’ve I’ve seen a lot of things kind of consulting with people and helping people manage how these condos operate. On paper. They make

Erwin  

miserable and around. Yeah, all GTA Oh, GTA including downtown.

Steve  

Yeah. So somewhere out of the suburbs of you know, Mississauga, all the way through to Oshawa, and somewhere in downtown Toronto. But ultimately, yeah, ultimately, they all have the same issues. All right.

Erwin  

So can you share how many condos Do you still hold? And how many conferences? Why not? Absolutely not. I get emails like every week about this great project coming up and all this cash flow would be made.

Steve  

Listen, there are a lot of people who have made fortunes in Toronto condos. So by no means am I here to tell you it’s it’s the worst thing you could ever do. It’s not but personally for me, what I talk to my clients is that we focus on highest and best use. There is nothing you can do with a box in the sky. There is nothing you can change to it you are completely stuck as whatever its current use is one bedroom, two bedroom you can try to squeeze and listen. I’ve gone into units that were student rentals by without for landlords even knowing and sheets were being strung across lines. And they were all separated into like seven or eight living quarters in a one bedroom unit. So I’ve seen people get creative. But that’s not the point. You know, as a landlord, you can’t do that. So you’re in this spot where you’ve got one use for that thing, it goes up as the market goes up. And as we’ve seen in the last few months, it will pull back or months years, it will pull back as the market pulls back, and it will rise again, as the markets go up. There is a shortage of units in the city. That’s a very valid fact. But the problem that I foresee is that you can never get the numbers to work anymore. Because the average price per square foot to purchase is between, you know, 1000 to $1,600, a square foot, and the average rent is sitting somewhere between five and $8, a square foot at $10 a square foot. So you’re in a position where this you can’t make the numbers really work, you’re going to negatively cashflow month over month, that means the only play is speculation, that is not a real estate investment that is just speculating that the market will go up. Therefore, I will make more money when I sell it. But until you sell it, you’ve made no money. You’re losing money month over month,

Erwin  

I literally had a conversation with a newer investor, just two weeks ago, their condo is worth about 500 right now. It was at the peak, it was 550. They’re currently negative $1,200 a month. And we got on a call and they asked me should I sell? And I don’t know how much of a filter. So I said, apparently this is a good thing. Good friends don’t have filters. Don’t dance around things. So I said, I can’t believe you have to wait for this call to ask me if you need to sell this is a simple math, simple math because it may be in two years to get back to peak. So maybe it was a 50 grand. But in the meantime, that was two years. Your oblique close to $30,000.

Steve  

Yeah, no, that’s fair. I mean, that’s what the numbers say.

Erwin  

Right? You’re gonna guarantee bleed 30,000 For a chance if it made 50,000 to go out 50,000 students a chance you’ll net 20

Steve  

Yeah, that’s it right. Like, listen, I remember speaking with very heavily invested real estate, you know, condo investors from foreign, you know, typically they were the ones I dealt with were out of country, I would run into them once in a while, they would come and see their portfolios, and I would meet them. And one of those investors one time told me that they treat Toronto condos, similar to a safety deposit box, they put a bunch of money into them, they hold them, and they know that over time, it’ll be protected in a go up. And that makes a lot of sense. Okay, that makes a lot of sense.

Erwin  

First of all, cash,

Steve  

deep pocket investors, right? Like deep pocket investors, you can make a tonne of money, and you really don’t want cash sitting around nowadays. So, okay, that makes sense. If you’re a deep pocket investor, good for you. That’s a good play, buy something that’s always going to be in demand in the neighbourhood makes sense? I find that a lot of the time the people that I’m running into are looking at condos like a get rich quick scheme. Oh, no, I add on spec, they buy it on spec from the builder, they wait in the lineup, they get the red dot down. They tried to then flip the property back out on paper and assignment sale before anybody has to close on it. They take the capital off the top, like those things, again, have worked. But when you don’t have a lot of leeway or play in your investment portfolio, I mean, that can be very punishing when the market slips on you. You don’t control that. So deep pocketed investors

Erwin  

different which is where we are now the market slipped and people are looking at taking baths taking haircuts.

Steve  

Yeah, maybe not on all their court. Maybe not every condo unit people are taking a bath. But no, no.

Erwin  

I mean, like this. I remember I knew that. Right? I mean, like the assignment, the assignment market. Yeah. And just to be clear for for listeners, like the assignment market means you’ve already bought like pre construction, you’re like, contractually, the buyer, you haven’t closed yet. And there’s a lot of them. So from what I’m hearing from our friends in this market, is there’s a lot of look people looking to sell their contracts. So they’re trying to assign them. And so if you’re a buyer, there’s probably less of them with REITs being high, and also with large appraisals are coming in for pre construction condos when they do close. So buyers are looking for deals, which often I think the starting point that I’m hearing from people is for the seller to lose their deposit. That’s the starting point.

Steve  

Eight or 900,000 That’s a chunk of change. Yeah,

Erwin  

that’s a chunk of change. All right. So and Steve, like you’ve seen entire construction buildings that are completely investor owned, have you not? Yeah, so

Steve  

like I’ve taken it In a few properties through the first year audits, and the second year audits and the Terry on warranty process and, and getting those corpse through, you know, what was what was happening more and more. And I mean, it’s not rocket science not breaking, you know hotcakes here. 90% of the buildings are investor base, right? So you’ve got a lot of tenants living on top of it. Yeah, each building is different. But you know, generally speaking, most of the projects that have been sold in the last five to 10 years have been investor heavy, it’s just what they are,

Erwin  

can you speculate as to the ballpark? How much or that’s foreign versus local investment,

Steve  

I can only speak to what I ran into, and it was some years back. Now, I’ve been out of condos for the last, you know, 567 years as we’ve been doing more and more conversions, but in my experience, going through the process, had no put a number on it 60 to 70%, were foreign at any given time, I think the laws have probably changed a little to make that a little less,

Erwin  

this is free. This is pre 2017. Seven,

Steve  

tax. That’s right. But I mean, for the most part, it wasn’t uncommon to be dealing with one realtor who represented 20, or 30, or 40. Investors. And he, he or she were the point of contact for every unit. Because there was no address or direct contact for anybody else in the unit like loan, the properties

Erwin  

and the climate speak English. I have a contact, you know, as your Mandarin.

Steve  

But, you know, I think that ultimately, you know, at the end of the day, the bigger problem with condos is not so much for me personally, it’s that I can’t change the use, I can’t do anything more with it. And now you can I find a ticking time bomb, because the fees only go up. And you know, sometimes you run into these condos, and it’s like, but the fees have been at this rate, you know, 1% increase, or 2% increase for seven, eight years. Right. My very next question is, how many special assessments have you done? Because the trick is if I cap your fees, and I just do an incremental and minimal inflation rates, you’re still going to have a shortfall most times and that shortfall then gets split out amongst the the amount of owners there are into a one time special assessment fee. If I want to sell my unit, I just pay off the special assessment before I sell it. And that does not apply to my status certificate, and therefore the unit is just the maintenance fees. So it’ll have to be told that there was a special assessment but at the end of the day, it’s an encumbrance on the new owner, I can take care of it before I sell it. So it’s just one of those things, if every year you’re being special, assessed 10 or $15,000 a year, then your maintenance fees aren’t real, your costs are actually much higher. And people don’t take that into account. They just look at the number that’s on the listing page and say that’s, that’s what I have to put into my sheets. That’s what I have to put into my numbers and spreadsheets. You don’t know that look at a reserve funds. They’re pretty accurate when your next payment or bills will be.

Erwin  

Okay. It’s good to know that the statements are accurate though. They have to be

Steve  

Yeah, the reserve one studies there’s engineers on the other side, they’ve got no choice but to be very accurate.

Erwin  

Very cool. Very cool. So Steve, you’re saying today in today’s time condo, not good investment.

Steve  

I’m saying that I would advise my clients that there are better options. And optionality for investor to get into a marketplace other than a condo. All right. Yeah. So

Erwin  

what do you like? So?

Steve  

Yes, so I’m big on the density right? I’m big on density. I think that density is the future I think that all of these things that we’re seeing, you know, if you look at it, go with the river go with the flow of where the politicians are pointing you and pushing you because you won’t have as many obstructions to your plan that way. You know for a while Airbnb and we’ve done talks on Airbnb so Airbnb ease were very much a good avenue for investors, they may still be one of the city centres, you’re going to find it complete uphill battle in every large city centre to kind of get your Airbnb through for the large majority of them. It’s not the way the rivers flowing. What is flowing is increasing density on existing infrastructure. So we’re seeing people being able to do 345 units in Toronto, on existing properties. You’re seeing people be able to add garden suites and then to laneway housing. So finding investment opportunities where you can take a current property that is at the end of its lifecycle, and increase its density, although this is very much a cost and capital intensive. idea, if you are willing or if you believe that your speculation in condos is that the market will take these prices higher, I would encourage you to look at other opportunities and properties in that same market space where you can buy in, find a strategy that will hold you over and pay your bills. And if you don’t get too close to paying your bills, with the intention that as the equity goes up, you reverse that equity back into the property and increase the density, maybe it’s 2345 years from now. But the reality is, is that you at least have the ability to do it, you can change the use, if you buy a condo or a box in the sky, you have no choice. If you buy a property that has, you know, a 30 or 25 to 45 foot frontage and some depth to it, depending where you are, obviously, you can increase the size of that property right or the density within that property. So that feels like a more strategic play, then it just becomes where do you do that? Where does that make the most sense?

Erwin  

I don’t know, I want to start to see where it doesn’t make sense. And don’t even touch on where it doesn’t make sense.

Steve  

Where where it doesn’t make sense is when you’re in a bunch of new construction. So anything that’s been built in the last five years, those houses for the most part are in very tiny, small, lots really, really big house very small lot. So right now, I don’t know how that makes sense. Yet. It feels like that’s just not going to work. For the time being plus the purchase prices are very high, you’re paying up in the $900 million, depending where you are across the GTA. So that’s kind of tough, that doesn’t really make sense.

Erwin  

I’m sorry, just add to that a lot of these houses with attached garages, there’s no basement underneath those garages. So we actually lose the last square footage of again, the business model doesn’t really seem that often makes sense for what we’re trying to do. We want to get size basements, because that’s what tenants want.

Steve  

Yeah. And I think ultimately, like people will start to solve that problem as time goes, but you’ve got other it’s like an apple tree. If you’re looking at the apple tree, you go and pull the best and the rapist first, why waste your time pulling the one that’s not ready to be eaten yet. I see those properties as part of like that unripe and not ready to be eaten yet, portion of the tree. There are way more opportunities right now because we’re at such an early stage to this new strategy, that there’s no reason to go force yourself to make something very complicated.

Erwin  

Where does I speak to novices all the time. It’s only because we’re in this industry doing this regularly every day. I got chirps on the weekend for calling our strategy boring. Because for an offence is actually quite exciting. To us. It’s like we like boring. We like repetitive. We like low hanging fruit.

Steve  

Yeah. Okay. So where are you? We’re chirped is kind of important to write. But I think ultimately, look, here’s the deal, right? A lot of people get into real estate investing. And sometimes they’re not going into it necessarily with eyes wide open. Sometimes you need to look at it like what’s best for you. You really want to own 100 doors. There’s a lot of people who tell tell me at least I talked to people and they tell me they want to own 50 to 100 doors. And then when they actually wrap their head around what that means they take a beat and they think about it. They’re like, actually, I don’t know, maybe I don’t, I don’t think you do if unless unless it’s like, you know, most of the time those people are that’s a business, you’ve created a business structure and your business needs to have a lot of moving parts, you need to be able to manage it, you need to be able to find it, fund it and all these things.

Erwin  

It’s a new career. It’s a new career.

Steve  

If you have a real job right now, like a lot of the people we talk to, you know, they’re they’re executives, they’re marketing people, they’re doctors, they’re lawyers, they’re people that our careers are already established,

Erwin  

the career wise are already in their highest and best use. Yeah,

Steve  

there’s no reason for them to be taken out and try to figure out how to start becoming a real estate entrepreneur. In that degree.

Erwin  

We’re not saying don’t do it, it’s just that for most people, most of the time, I’ll be

Steve  

your highest and best use,

Erwin  

I might not be your best. And also you’re risking a lot.

Steve  

You’re well I understand. I understand that you’re taking on another job. I think that’s the biggest thing, right? You’re taking on another job.

Erwin  

You’re you know, I was talking to a multifamily investor for example, like say your negative $200 per unit. I was talking to an apartment building investor a pretty good one. And he said you’re negative say you’re negative 200 bucks per unit enough. You have like three duplexes, right, you probably survive that your negative 200 across 100 unit portfolio. So each unit you are doing

Steve  

and not to mention, you’re probably not sleeping, your stress levels are high, your family life suffers.

Erwin  

The timeframes are very different.

Steve  

What are you accepting by doing it? So sometimes it’s ego driven. Sometimes it’s driven by FOMO Sometimes it’s driven by the seeking of cashflow, just like they’re like I just want, I just, I’m just looking for cash flow, and I can’t make the cash flow numbers work on a duplex. I totally understand that. For me, I always tell my clients, the number for me when I do the math is usually like 650,000 to 700,000, it gets really tough. After you get over that on a duplex or single family that make anything makes sense, I get that. But this new avenue and what we’re seeing, as far as Bill 23 is concerned, as far as the City of Toronto doing their density, bylaw changes, other cities are following suit, I think you really need to reassess or look at whether multifamily and large apartment buildings is actually what you need. Maybe you just need two, or three or one really, really good conversion project that kicks out a good chunk of cash flow for you, and has a minimal management occupied quality to it. It’s very simple to manage, there’s only three units or six units, you don’t have to manage 600 and still generate in some of the numbers we’re seeing, you know, 1500 to $2,000 a month of cash flow, depending on how you’re buying them.

Erwin  

And Steve, you’re actually politics the listener I know, Steve well, so actually, no, you’re finding cash flow?

Steve  

Yeah, no, I am. And I don’t put people into that. Now, at the same time, I’m very much encouraging my clients to get creative, because this is going to be not the common thought process. For a lot of people. They’re not looking at it the same way. But I am walking them through these processes to show them and kind of, I don’t know, if it’s just take a lot of the fear away of what a renovation construction project could be. If you’re adding these densities. It’s not easy, right? It’s not finding an apartment building, that’s not on MLS that has good cash flow and return zero ze

Erwin  

months and years of process to get those deals come to you

Steve  

that work and like it’s like, Nothing’s easy if it’s worth getting, right. So at the end of the day, I just really want people to start to look at these projects. And I’m here to kind of work with my clients to break down the fear hurdle that they have to get over. It’s mostly fear. There are professionals like architects and planners and designers and high level contractors and things like that, that are going to do a lot of the heavy lifting for you. You just need to be able to kind of know the vision and know where you’re going. And that’s mostly what we’re doing for a lot of our clients jumping into this strategy.

Erwin  

And since your clients are my clients, what I tell clients is like, I have a question all the time, like wanting to buy apartment buildings. And I explained to them the stabilisation period is five years, right? Yeah, money’s going out the door for five years. Like for many, they’re paying tenants to leave, and then they’re renovating. And so you have like 10 units, you know, every few months, you’re renovating a unit, that’s this money going out the door. Right, versus I invest in most Banagher clientele invests as what I call a side hustle as a part time thing. And so you know, even though it’s not easy, per se, but our renovations are usually done within six months, right? And then I’m done. I can wipe my hands clean, my properties rented, and I can go back to living my life. Alright, so another lucky three months, but again, I don’t have to worry about it, versus like a five year stabilisation period. And so for most people that are in their highest and best use career, right, get back to living, get back to your career about your day job and get back to living and just let the market do its work.

Steve  

Yeah, I would just add, you’re also now new construction 18 Rent caps are subject to change, right? You’re not following that older thing you might survive brand new, typically brand new, brand new everything in a rental, you know, if you do a renovation project, for the most part, you’ve updated that you know that that property inside and out. So you’re not absorbing any old boilers or any old systems that are going to break down on you. There’s really no surprises once you get through a project like this, you know, their permits,

Erwin  

permits, we have independent city inspectors come inspect it. Right. Yeah.

Steve  

And you problem solved any solutions that need to be done. So I think ultimately, there’s a lot of tangible things that happen and there’s also some non tangibles that are all benefit to the strategy. So So where does it work? That was the question you’re asking me so for me, I’m out here on the east side. I like to to put my clients into the mindset of having a bit of exposure to larger market appreciations. It’s just facts, they’re gonna run up faster when the market starts to climb. Larger city centres with higher populations are gonna rise faster. And then we Catalina we kind of add to that and we put in some smaller markets that make a lot of sense as far as fundamentals are concerned with job opportunities or location. And then we put that into play as well so that they get some there’s some higher cash flow from those smaller markets because The prices are cheaper. So right now for me, it’s Kingston as my big city and Belleville and Quinny west as my smaller markets, maybe Nappanee, maybe Ottawa is kind of also on my my mind. I’m looking at it a lot right now, the numbers are, are significant and they’re high in Ottawa. But I have a lot of my clients actually calling me from Ottawa. So, our clients are calling from Ottawa. So what I’m looking at when I’m talking to Ottawa people is like, they’re like, I just can’t make anything work in Ottawa. So I’m looking for a new market. Well, then maybe your smaller market is Kingston, but don’t give up on Ottawa because I think if you can get the Capitol together and get some of the properties in some of the prominent neighbourhoods of Ottawa, you’re going to do a lot of big numbers there in Ottawa, I think we’ll have to follow suit to what Toronto is doing. Very soon its population is exploding. And they’ve kind of sprawled to the far reaches of bar Avon and Ken Kannada, Streetsville. And anything they get their hands on, they’re expanding very quickly. So Kingston for me right now is the is the prominent city centre that I’m looking at. And the last four to six months have been very Kingston oriented for for our clients.

Erwin  

Can you walk us through some recent deals that you’ve been doing with clients in Kingston?

Steve  

Yeah, so the way that I’m looking at this market, you know, obviously, I’m not by no means that I grow up in Kingston. It’s not a market that I’ve been there for, you know, a decade. So I put it in the perspective of I like markets that I haven’t grown up in, I’ll tell you why I come in them with open eyes. And I don’t have recency bias, I don’t have location bias. So I’m not looking at that property that’s there. And remembering when that property nostalgically sold for $400,000, that happens to a lot of people, when they when they’ve grown up in a town, they can remember what it was, they can also remember what that property is always been used for. So I don’t come to cities with those perspectives, what I do is I spend about six to eight months really diving into a city and learning the ins and outs in the streets. And then I take the strategies that I know from other larger markets that I’ve worked in are working, and I start to figure out how they can apply to this marketplace. So I’m now into this Kingston market for a substantial amount of research and time, what I’ve found is that the best avenue is to kind of be close to the university for some of those density projects. Queen’s University obviously is in Kingston, I’m looking at the southwest side of Kingston, you know, sent the city centre for those density projects, they tried to increase units within those footprints. For the most part, a lot of our clients are seeing the best avenue as additions and bump outs and things like that on a lot of those properties. If they do have an existing garage, which we’ve just had one, I think you showed it on your student rental webinar a few weeks back, it already had a 900 plus foot square foot garage on the backside of one of these properties. So we’re going to use that structure and go through the process with that structure. But that structure is going to come with some variances and some things that go along with it, which is just, you know, part of the process. So ultimately, we’ve been looking at those as our main deals the last couple of weeks, and if they are existing student rentals. I think it’s worth noting that it’s getting harder to finance student rentals and lenders and the banks are not so happy. They’re not jumping up and down to get student rental deals right now. So getting those main properties to be duplex or triplex and then looking at adding units in there and garden suites or additions is kind of the angle there to the suburbs. Kingston we just had a deal closed on a property that we’re going to probably do some content on very soon. Our clients again coming from the Ottawa area, purchased a bungalow raised bungalow with a walkout basement to the back on a 80 by 176 foot lot and it had a garage that was built by a gentleman that had his dream of having this like perfect man cave shop garage. So the garage already had toilets in plumbing already had 100 amp panel already has a basement, which is very uncommon. The back half had a basement included, which you’re not going to use as living but it’s good for mechanical rooms and things like that. And this property was purchased for under $650,000 In a fantastic neighbourhood. We’re going to duplex the main house and we’re going to convert the garage into a garden suite unit. When all of a sudden down we’re looking at somewhere around 2300 on the top floor. I know you like numbers so I’ll give you some numbers 2300 on the top

Erwin  

our listeners like numbers. This is a quick comment about numbers. I like dollars all right. Dollar numbers I think the whole like like with with all these new influencers out there. They’re the worst I got a units or I don’t know, whatever number, I can’t remember profits, I care about cash flow camera profits about improvement to your net worth, those are the numbers that matter to me. I don’t care about any other metrics.

Steve  

Sorry, continue. Okay, so we’re seeing like 2300 is probably the number that we’re going to be getting for the top floor,

Erwin  

plus, plus a plus some utilities,

Steve  

plus some utilities, probably hydro at the minimum, but we’ll say plus some utilities for the time being lower level, probably somewhere in the neighbourhood of 19 100, is what I’m hoping for that it’s a big unit. And it’s got very high ceilings and windows and a rear separate entrance, the property itself, far off at the back of the property has some, you know, really nice, like, there’s no neighbours directly to your earlier point, there’s no neighbours directly behind this property. So there’s a lot of space, it’s just a really good environment. So 1900 is more than reasonable out of that basement, and then the garden suite, we’re going to be pushing into a 2200 2100 at the minimum, plus utilities because it will be separated off. So we’ll have that kind of structured that way. So

Erwin  

for the listeners benefit a garden suite is essentially like a tiny house on the property in the backyard.

Steve  

This one’s actually adjacent to the to the main house, it’s like right beside it.

Erwin  

My apologies. This one existing garage will be

Steve  

garage. Sorry, my apologies garage. Yeah, no, I might have been not clear about that one. Garage suites.

Erwin  

That sounds like a terrible name. You’re gonna advertise a garage suite? No, I’m gonna call it tiny home. I’m gonna call that tiny home. Okay, it’s pretty,

Steve  

you know, this is the thing that when you’re looking at these projects, every city is going to call them something different. Kingston is unique, because they’re three unit bylaw that they passed last year has numerous names for the structure. This one is going to be probably an adu accessory dwelling unit. Some can be called tiny homes, some can be called Garden suites, it actually depends on a lot of nuance within the building of the structure as to what it gets. But for this particular one, it’ll be adu. And yeah, so it’s a pre existing garage, we’re looking at a build out cost very similar to what we see in our duplex conversions. Somewhere around 125 $240,000 Is the budgeted number for both the basement conversion and the garage separate so double that 120 to 140. But when all is said and done, the numbers are there to support it. It’s in a very, very good neighbourhood. And we anticipate the values to only go up as appreciation and market increases.

Erwin  

So I’ve run the numbers and the cash flow is quite significant. Assuming you’re paying a lot of cash, the amazing thing was, even if you’re paying entirely home equity line of credit, you actually have a you have a chance to be slightly positive still.

Steve  

Yeah, yeah, I would agree. And I think that for a lot of my clients, what they’re doing is, is this, this is the time period in which we anticipate or, you know, smarter people than me are anticipating that you’re gonna see a dip in interest rates probably into next year.

Erwin  

We’re gonna midterm long term. Yeah, I

Steve  

think I think ultimately, there’s a refinance probability into this time next year of where the clients are going to look to pull some do readjusting and probably not just pull some cash out, because you know, pulling cash out kind of kills cash flow, but restructuring debt, so that it is carried correctly, I think that’s more an accurate way of describing it. Just to help the cash flow numbers go. And all of all of our clients are not taking a very short, narrow approach to this, there is a very long 510 15 year horizon on these investment strategies. Because they’re, you know, listen, like you’re in your your late 30s to mid 50s, you still are actively working, you’re still making income. You’re hoping to have something put aside for future use and for family. You’re creating revenues through a business that you have, these things are all still happening in your life. Most of our clients are not on the sidelines of their career, living on beaches, that’s not my typical or are typical client, they’re still actively working. They just are trying to put some really good hard assets together so that they’ve got something put away for when the day comes that they want to be on a beach.

Erwin  

And then what about tenant profile? We mentioned the Queen’s University is nearby everywhere the students are renting to we’re renting to.

Steve  

So here’s my approach to all of this. I think that students are always going to be a demographic of tenant profile, right? in Kingston and in Queens. I always remind my, like, my clients or anybody who’s talking about student rentals, like when these beautiful homes were built in the 1920s 30s 40s 50s. Like if you had told the person who built these houses that you were going to chop up their houses and put it you know, five to 820 year olds into these houses. is still in fear, they would have burned it down themselves, you know, like they would never have allowed this to occur. These homes are beautiful. They’re like great neighbourhoods with big old trees and things like that. So students are a profile. Yes. But I think it is becoming increasingly more beneficial to create, as opposed to just chopping up bedrooms, creating duplex or triplex units with unit mixes of like three bedroom, two bedroom, two bedrooms. Kingston, for example, as an eight bedroom cap on every property. So you can never put more than eight bedrooms on any property in Kingston as as of their new bylaw. Before you could now you can’t. So you need to find a unit mix within those eight bedrooms, that gives you the highest cash flow potential out of each unit. I think that that then allows when you start to separate the houses up that way, it allows you to be a little bit more diverse in your tenant profile. You could have some students, you could also get some grad students, you may get a young professional or two if they’re not all having to live like dorm styled, you know, sharing of one kitchen type of house. So chopping up the houses also expands your profile your tenant profile into a different tenant use mix. Kingston as a city is young because of this vibrance of the university. You know, anecdotally I’ve been talking to a lot of people you know, I live in Prince Edward County way. Talk to a lot of the people that live here business owners, prominent people, a lot of their teenage children go to Queens just happens to be the the generational process. I’m hearing more and more from these people that their kids just aren’t coming home from Kingston, they thought they would finish school and come home. And they’re just now 2223 Living with a couple of friends, they’ve got jobs, or they’ve got a job in Kingston or remote, you know, and they just like the city, it’s a really pretty city, if you’ve never been there, it’s a really beautiful, pretty city prominent waterfront, just really good, great energy there. It’s a bigger city. So it’s got, you know, a bit of things you got to live with, and places you don’t always want to go. But for the most part, very, very, very pretty city and safe. So people are just hanging out and they’re, they’re staying there. So I think you’ve got a mix of young professionals, you’ve got a mix of students, grad students, and then you’ve got the hospital there, and you’ve got nurses and doctors and things like that as well.

Erwin  

Now my experience in the, for example, my St. Catharines properties have a similar experience. I’ve seen some I have some graduated students who stay with their friends in the property, which I’m fine with, you know, they make an income, I still have their guarantor form signed, and their parents. So you know, I’m fine with that as well. But yeah, things are changing. Things are changing in terms of

Steve  

listen, I think you nailed it. I think if you talk to the people that are in the educational system, I think the education system is changing. I think universities are going to be changing over the next 1015 years, I think young people that are looking to enter a job market are changing. So I think all of these things kind of have to be taken into account, the only thing that’s constant is change. And we are in a very, you know, Pivotal change. Right now you’ve got a lot of things happening on a macro economic level, a lot of things happening as far as tech is concerned. And I think just in general, as real estate investors or as people working with real estate investors, we have to keep remembering that just because you’ve done it for the last 25 years, you may have to find a new way to kind of deliver.

Erwin  

I’ll say two things about that. One thing that hasn’t changed is I don’t know when real estate hasn’t been a good investment for the areas that we operate. But I had something that I haven’t told you about yet. This past weekend when I was at the conference. At a conference I met a custom homebuilder who just launched a product line of modular homes, specifically tiny homes. And nice. I asked one of the one of the executives there. I think to the executives were there, the operating out of Brampton, I asked them Can you give me a ballpark price on a two bedroom, bathroom? Two bedroom one bath, tiny home garden suite. Don’t do it modular they’ll pour the pad to switch between this the 600 square foot house in the pad at the ballpark me 175,000 column on Oregon. I was meant to mention to your political visit them. In case you’re interested, sorry, listeners are having a private conversation. Next week they’re actually breaking ground. He was saying they’ll have their permit in week and they’ll break down two weeks for the very first one. But this price point is so for listeners benefit again. And then they said like utility hookups. Still, we still need that. So they’re saying I can range between 10 and 35,000 but still we’re talking about like 200 And somewhere around 200 grand for a tiny house, versus if you were to build it from scratch stick frame. You know, the prices we’ve had folks talk on the show is like, high two hundreds, maybe 300,000 We’re looking for

Steve  

and take into account the rent rates, right? Like we’re seeing very strong rent rates on these things just because they look and feel like your own personal space. There’s no noise transfer, we’re not dealing with like feet steps like footsteps over top of you. You’re not dealing with like low, shorter Windows darker feel like it’s your own place. So yeah, I think this is very, very much front edge thing, significant thing that’s that’s occurring in our marketplace, I think you need to be aware of it. I also think that the term gardens we is also, as a person looking for highest and best use, I am finding myself that I’m getting tunnel vision. So I’ve worked very hard in the last few, maybe six weeks to not just get so Uber focused on certain parameters that have to be on a property in order to get a garden suite onto it. Because the way Bill 23 is written, it’s looking for density on existing infrastructure that can be within the same footprint, or an additional footprint of the house. So depending on what market you’re going to, you may find it easier or even within the city, you may find it easier to do an addition than to do a garden suite. Maybe that’s the truth. But you just don’t want to get such tunnel vision that you’re like, I gotta fit a garden suite on this thing. I am now looking at certain parts of the city with the mindset garden suites work here. And certain parts of the city that say maybe, but maybe it’s an addition. And I think that being able to be a little bit more flexible is going to help you as well. Always thinking is use just highest and best use all day long. All day long, right. And kudos to all the smart people. Brian Carr, especially who pushed that through my brain over the years, I think that it’s it’s a smart thing to do. And ultimately, it is your future. There’s no way you can make three, four $5 million houses, if that’s what it will be in 1015 years from now, how do you make that work for the average person, which is not going to happen? So you need multi generational income coming from the same?

Erwin  

A great point. So you’d like it, we’ve focused a little bit too much time on garden suites garage suites. But I can I cannot agree more. We’re at a higher level, you and I are always thinking about like, How can I add anything? I can add in a second suite, a third suite of force we even fifth? Right? They all have different complexity. It’s not the easiest for beginner. But again, because we’re living breathing it. And also because we’re friends, we’re all doing it. That’s a little bit easier for us to to understand. So can you be given an example of a property you’re looking at? Or just we’ve done recently with a client?

Steve  

Yeah, so we have a current student rental that we’ve just firmed up on. You want to be a student rental, you want to do a duplex I just used duplex the last two weeks ago. So we have a student rental that we’ve just burned up on. It was a very long due diligence process for this property for us and our client, but it’s gone really well. And by doing it, we’ve really, you know, look through this property with very close, close eyes, it will be on Union, which is a main thoroughfare in Kingston. It’s a beautiful old red brick home, and it will be an addition put off the back now there is existing students coming in with that deal. So we’ve got some time, you know, there’s some revenue coming in. That’s going to buy us some time now. But there isn’t a good example, in the case. Where is that revenue from this student rent positive on this property? The answer is no. It’s not theoretically, in its first year it will be cashflow negative. That is just the facts of that property.

Erwin  

It’s not uncommon for a development project. No. Cash flow state one.

Steve  

Oh, right. So like that’s the thing, you’ve got to get your head around. Sometimes I know for a lot of people that’s determined. It’s like how do I carry all of these things. But if you have the the means and you’re able to see the long term, you know, for our client, it’s like look, you’re going to be doing an $8,000 All toll at the end of the year. It’s an additional $8,000 You’re going to be paying on this property that’s just built into our budgeting and our scheme. And it’s part of the carrying to get us into April of next year. The good part is is that there’s no way that we’re doing this renovation, the actual construction needs time, it’s going to need some some really good planning and some time to put through. There’s no point rushing that so this project will allow us to take the next three, four or five months to get all of our ducks in a row. Get all of our professionals in line, submit to the city have our conversations gives us lots of time to do everything we need. And we hit the ground running in early 24 to get This project built out with an addition on the back half, which will turn it into a complete triplex.

Erwin  

Sorry, is this the one that you’re going? You’re just putting an addition on? As you call it bump? That’s right.

Steve  

Yeah, yeah. So it’ll probably be, you know, I, it’s hard to say specifics, it will be its own separate unit two bedrooms scheme with one bath, two bedroom, one bath, full kitchen off the back, the second floor of this current house, and then there’s a loft on the top. So those to the second floor in the loft will combine to unit number two, and that will be a three unit property. And then on the main floor, we will be doing most likely a two bedroom, one bath mix on the main floor of the house, they fall works out what am I at that’s 237, if I can fit the other one bedroom or the extra bedroom on the main floor, which is the plan so that we have a three bedroom on the main floor three bedroom on the second floor and a two bedroom on the addition, that would be ideal that would keep us within our eight unit cap or a eight room cap. And that’s kind of the plan. But we just got to go through the logistics of how that all lays out plays out.

Erwin  

Can you explain that to the listener the benefit of doing an addition versus a separate structure, like a garden suite or

Steve  

so for this particular property? What made sense it could have, it could have had a garden suite, we by all accounts could have done a garden suite, a lot of these cities are using a 10% lot coverage equation. So if you want to build a garden suite, and your property has a total square footage, so your frontage times your depth, let’s say your total square footage is 680 square feet. After you take that, or 600 partners 6800 square feet, after you take out the coverage of the building and the coverage of any other structure, you’ll have an idea of how many square feet you can build your garden suite. So let’s just say for an assumption, it’s 630 square feet is what you’re approved at, after you’re 6800. Because we’ve had to reduce a couple things. So it’s not a straight 10% equals what I can build. But that’s the idea. In this particular property, we got more use from the existing lot. By making it an addition than we did from putting it as a garden suite. We could cover up to 70% of the property roughly when we were all said and done. And our setbacks on either side of the property were more favourable than if we did it as an addition than if we did it as a garden suite. So there’s a lot of like moving parts.

Erwin  

So Steve, just just for listeners benefit setback is how far

Steve  

or how far? That’s right, how far the new structure has to be off of your property lines on all sides.

Erwin  

Right. I mean, to me, in some ways, there’s penalties extremely restrictive, I believe one city to the north of us has has like a five metre setback.

Steve  

In this particular case, you know, it was a 3.6 aggregate setback aggregate meaning that the combined distance on either side of the addition had to be 3.6 metres. So that’s very favourable compared to what we were looking at with the gardens we which was I believe, 1.6 on all sides and, and just different things. So it just made more sense. It’s easier to build it out just easier. Yeah,

Erwin  

yeah, easier return on investment, like be higher,

Steve  

and you’re adding to an existing beautiful building a new addition that will fit in line with this old Victorian home. So it’s one of those things where the actual value of the property just, it just all makes sense. The Golf term would be you’re playing it as allies. We showed up. And this is what was here. And it’s been there for 100, almost 100 years, this is how we’re going to play this hand.

Erwin  

Yeah, it’s the highest and best use of the hand we’ve been dealt. That’s right. But you did choose your hand.

Steve  

Very, very, very specifically. There’s a bunch of properties, right? Like we looked at properties in and around this house. For the last three, four months, we’ve been watching houses all around this property. But for one reason or another, they just didn’t equal what this property had to offer. And it’s not because it’s, you know, the best property, it may not have been on certain features. But when you take it as a whole, the deal makes the best sense for my clients moving forward. And so that’s kind of how you’ve got to look at it now. You have to depend on your designers and your planners and your architects. So having that Power team built into our system helps because we can get very, very smart educated people that are very familiar with dealing with the city to give you opinions on what is most likely possible, which is

Erwin  

generally more better in my opinion, because I don’t trust anyone. I Take that opinion over a commission salesperson. Let’s just remind everyone that even though we are commission salespeople

Steve  

as, as the commission salesperson in there, the problem that I have, you know, with just pitching a deal and running away, is that ultimately, I can’t sleep at night like that. So when I’m talking to designers, you know, I’ve done as much research as humanly possible, other than being going to school to be that designer going through going through the planning, going, meeting with the city, fully doing the research before any clients were involved. That’s the due diligence that the Commission salesperson has to do, you have to go and find out all the information so that while

Erwin  

you’re on Steve property, that’s what we do. We just furthers

Steve  

I have no intention to speak for anybody else. What we do is to make sure that you’re taking that that due diligence period that study time, looking into everything you can possibly look into, you’re not perfect, but you need to at least be you need to at least do the things you got to do to understand the plan for the city.

Erwin  

OSHA says we’re working with the consultants, the plant the designer, the plant slash planner, to know that we can get our permit. And that we can close our permit before we would ever wave conditions on a deal.

Steve  

And or just as to add to that, and or we’re very clear of the not all I wouldn’t say risk, but of the avenues or channels that we have to take if there is a hurdle. So nothing ever works perfect, right, you may have to get a small minor variance on a setback on an existing structure. Nothing is perfect by the garage that we’re talking about for the other property that we said that was existing 900 plus square feet. That is not part of the bylaw. But we’ve spoken with the city we’ve gone through with the planners, we know what is going to be asked of us to get through the process. And we’re very confident that we can get to the other side with the people that we have on our team. At that point, it’s on the buyer and the purchaser and the investor to do a risk analysis, risk reward analysis and understand if this is the opportunity for you. Are you accepting of these terms, and if they are, then the least they have all the information they can gather, they’re not making an uninformed decision, they have considered everything that they can. And that is the goal to give everybody as much information as possible.

Erwin  

Speaking as much information as possible to the listeners benefit understand, we can make almost double the commission selling a pre construction condo. And it’s way more or less effort for us.

Steve  

Boring, you want to talk about boring investment.

Erwin  

But we made the point though, neither you or I just sleep at night, knowing that our for our clients like negative 500 $1,200 cash flow and I per property. Yeah, I wonder how these pre construction condo agents are sleeping at night, knowing their clients are just bleeding. And they themselves and those clients are likely losing sleep

Steve  

on piles and piles of money. I don’t know. I think everybody look, everybody is business. It’s capitalism. There is a need and there is a desire and I’m not, you know, not trying to poopoo on anybody. But I just feel like if you come at it with what is that intellectual honesty, I guess is that the term author, if you’re if you’re coming at it with that type of position, I believe I believe in the strategy. I believe heavily in this strategy. I believe that it is the future. And I really, really, really think that people need to start to consider it with more tension, because it’s definitely the only thing I can see that makes sense. The numbers that we’ve heard from from the builders is that it can take up to nine years to get a piece of property, from ground rod dirt, all the way up to a condo high rise turned over and occupied. In these these deals, we’re talking about 24 months to get eight to 10 units in the city of Toronto to bring three to four units, it could be only seven to eight months. I mean, the volume doesn’t you can do more volume this way. It’s the only way that the numbers make sense. And I just believe wholeheartedly in one that this is the way to go.

Erwin  

Speaking numbers. Can you walk us through the the numbers on this Bumppo project on this edition project?

Steve  

Yeah, so we’ve got the property under we’ve purchased that around, I believe it’s 845 is the purchase price. We are fully anticipating a construction budget somewhere in the neighbourhood of 400,000 to 500,000. The current value of the property when all said and done will be right around that same number of 1.3. After the pullback we still are seeing 1.2 to 1.3 for a property like this fully converted. Rent wise we’d be probably looking at currently student rental per room rents in Kingston are anywhere from 900 to 950. A room for a nice one for us.

Erwin  

I’m sure there’s cheaper for crowd.

Steve  

There is definitely by all accounts, there’s a lot of cheaper, I’m talking about just the specific. And generally, we’re going to be looking for our same general mix of 2000 2000 to 2300. For these units, when they’re all said and done, utility separated.

Erwin  

Fabulous, Steve. Alright, Steve, I’ve taken up enough of your time. Any final thoughts? First of all, where can people reach you, if they’re interested in learning more about

Steve  

Instagram, at I went on the east side, under scores are in there. So you have to reach out, you know, and sometimes I’m guilty of not checking all of my like message folders and Instagram, I’m not the best at that. So if you do reach out, I’m in there. But you know, reach out to our team, I would say it’s a good option Calendly links, and all of those things are available. QR codes are available, we have a upcoming, or we are always doing our coaching. Meetings monthly, right? By so they can always reach out through those. And generally, just I’m not hard guy to find a guess you can find me.

Erwin  

I’ll put your cell phone number in the show notes. Don’t worry.

Yeah, exactly. Give away all of my home address

Erwin  

everything be great. Yes, a number. Yeah.

Steve  

You asked me for parting thoughts. I’ll give you one parting thought before I go. I think that and you and I talked about this before we went on negative voices or just negative things that are going on, it’s been a year of a lot of negativity, the ergonomics? Well, three, again, I’m already at the optimist,

Erwin  

the gold standard ended in 1971. All right, continue, sorry.

Steve  

My personal view is that I’m working very hard to embrace the opportunities and try to get to the point where there’s you can see the positivity, because I know that there’s a lot of bad things happening. But there is also opportunity everywhere. And I think that if people are open to it, this could be a really good time for you to start to learn and start to get into it. Start to take control of your own destiny and start to look at options that may help you. Maybe not today, but within the next three to five to 10 years. So reach out and find good people and start to look for things that may push you out of your comfort zone, but may help you in the long run.

Erwin  

It’s good point. Yeah, I remember when I started doing duplexes, we started doing basement conversions, and we’re way out of our comfort zone. A big renovation budgets opening permits, we weren’t sure if you know, yeah, because there’s a new frontier.

Steve  

Yeah, yeah. New Frontier.

Erwin  

35,000. Budget. That’s crept up a little bit. Today, but yeah, I

Steve  

think that I think that at the end of the day, right, like, if you’re ahead of the curve, it’s going to be complicated, a little bit more than when you’re at the back end of the curve by then everyone’s figured it out. So

Erwin  

the prices will be a lot higher, What’s everyone’s figured it out? Everyone will

Steve  

be moving on, and everything will change. And they’ll have something new to talk about. But yeah, for sure.

Erwin  

Yeah. Cuz like when we started, like, again, our client owns a very first duplex in Hamilton, Ontario, for example, right now, there’s probably like, 300 of them, just in that one city. And yeah, prices have gone up significantly since we started. So yeah, and again, like properties are valued based on their income. That’s part of the factoring as part of the factoring. So if we’re forcing our if everything goes to plan, which we’ve already been doing it, either get in now and pay today’s prices, or you’re gonna pay tomorrow’s prices, which will be probably component of $1,000 more

Steve  

or focus on your business. Here, I don’t know if that’s true or not, I’m just blurting something out. But focus on whatever it is that makes you money personally, and put attention there as well. Because you need to figure out you don’t want to be using other people’s money is a dangerous term because it’s true. But sometimes you get caught up very overleveraged. And so you got to watch yourself with all of these things. I think that’s that’s just human nature and taking care of yourself and pulling back and focusing on yourself to is good,

Erwin  

right. And like Steve saying we have opportunities for folks to focus on. We do a free webinar at least once a quarter on how we’re investing when our clients are investing and we offer educational tours, usually at least once a month, as well as educational tours, a nominal fee, 20 bucks, plus taxes and fees. So we’re not selling like five figure coaching here. We’re offering people opportunity to buy the same properties we buy for ourselves. Alright, thank you, Steve. Thanks for doing this.

Steve  

Appreciate you. Thank you so much.

Erwin  

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

 

 

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