Apartment Buildings, Negative Cash Flow, Renovations with Mike and Mark

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Podcast Transcription

Georges El Masri [00:00:01] Welcome to the Well Off podcast, where the goal is to motivate, inspire and share success principles. I’m your host. Georges El Masri Thank you for tuning in. This is another episode of the Well, our podcast, where today I interviewed Mike, Raquel and Mark Baltazar. They are multi-unit investors that specialize in apartment buildings. And on this episode we talked about why Mike is still driven to work after so many years of investing. Even though he’s got assets, he’s got cash flow. What is it that makes him want to continue working? We also talked about buying value add properties where they negatively cash flow off the back, what some of the things they’re able to do to convert them into these positive cash flowing assets. We talked about setting expectations around turning units over. Sometimes when you buy a building, you might want or expect that you’re going to be able to turn over a bunch of the units, but that may not always be the case. So you have to account for these things. And then we talked about the renovations that they put into their units, why they’re spending 40 grand to renovate their units rather than 20 grand like some other people are doing. What does that lead to in terms of rent? And we talked about separating meters. So does it make sense to work on separate gas meters, water meters and hydro meters? They give you their take on that. And then finally we discuss stay up to date on financing options, commercial financing options. There are some pretty cool products out there. So we kind of touched on that a little bit. I know you guys are going to enjoy this episode and if you do, I hope you’ll share it with somebody who will benefit from the information. Make sure to leave us a review on the Apple Podcast platform. And if you want to connect with me, there is a bunch of information on well off. Joseph, I appreciate you guys supporting this and tuning in every week. And I know you will have a successful investment future if you continue to absorb information. Enjoy the episode. Okay. I’m here with Mark Baltazar and Mike Rockall, who are first time guests on the show. It’s great to have you guys here. You have your own podcast. I know you guys are into multi units for the most part, so I know marksmen on the show before. But Mike, this is your first time. Do you want to tell us a little bit about yourself?

Mike Rockall [00:02:20] Yeah, I’ll dove right into it. So at a young age, 17, 18 years old, I always used to think if my parents had bought one other property, where would they be now, 25 years later? So there was a lot of interest in investing in real estate from a from an early age. Didn’t know if I want to flip houses, invest long term, didn’t know much about it, but knew that it was something that interest me. So I got into construction background, became a licensed plumber early on and I believe at 24 I bought my first triplex now didn’t know much about it was just starting off in. I was actually the guy who gave my money to an expert and kind of learned through their expertise and then on the second one dove into it with a partner. But we were the active partners, the hands on guys. I think we got up to about 42 units and kind of was capping out from a mortgage standpoint. So started looking into multifamily and 2014 bought my first multifamily apartment building and kind of went from there into the Maltese.

Georges El Masri [00:03:23] Nice. So how did you guys get together? Because I know you guys work together on certain things. How did this relationship happen?

Mark Baltazar [00:03:32] So we collab. So it was a mutual friend. So I was doing flips before multifamily and done a bunch of flips. And so my partner on the flips was friends with Mike and then and then we collaborated. I forget actually how it happened, but we collaborated on it on a flip. And so it was the three of us, me, Mike and this other partner on this flip, and that was the first project that we collaborated on, and that was 2017 77.

Mike Rockall [00:03:57] Yeah. So, so I was still working actively as a plumber and I was just getting my realtor license because what happened was I was planning on leaving my full time job as a plumber and figured, how am I going to substitute my income? What am I going to do day to day? The portfolio probably would have been able to substitute it, but then what is my day to day look like? So I said, Let me get my realtor license. And the mutual friend that Mark’s talking about, you guys were off doing flips. I said, let’s add a flip into the mix so I can be a realtor, have a flip and leave, kind of very seamless out of my job. And yeah, got into one that was, you know, a bit of a flip project and started working together ever since.

Georges El Masri [00:04:36] Also, I noticed that you have had some listings in Hamilton. Um, how did you get in that market? Do you invest? Is that like your primary market?

Mike Rockall [00:04:47] Yeah. So what I started off, I believe 2010 was the first triplex I bought in Barry and built that portfolio of about 40 units and very 2012 I transitioned into. Hamilton hmm. And bought. I think it was a triplex with a fourth unit for 240 grand back then and had a couple of 240.

Georges El Masri [00:05:09] Yeah.

Mark Baltazar [00:05:12] Yeah.

Mike Rockall [00:05:12] Yeah. Even the 12 unit I bought in 14 at 700 and change for 12 unit building back then. But yeah. To 2012. Started investing in there and then you know friends of friends just asking me, oh I think you’ve done well. You know, where should we be parking our money? Can you help us out and really start focusing in the Hamilton area?

Georges El Masri [00:05:32] Yeah.

Mike Rockall [00:05:32] Yeah. And just that’s kind of how I how I moved into Hamilton. And that’s been the primary spot where I’ve been investing.

Georges El Masri [00:05:39] Yeah. So what are you guys focusing on now? Like, are you guys still working together on multi-use or have how has your strategy changed at all?

Mark Baltazar [00:05:46] Yeah. So I mean, we’ve built the brand, you know, peak multifamily, which is really focusing on commercial multifamily. You know, we’re essentially a boutique private equity real estate firm. Right. So, you know, we we’re the operators. We find properties. We operate whatever that means. And then just renovations, the property manager managing asset and work with accredited investors that, you know, want to add. Commercial real estate specifically multifamily to their portfolio given the risk profile and they invest with us and we and we you know; we manage the asset for them.

Georges El Masri [00:06:25] When did you start doing this? Because I know like even when I met you, you were basically just flipping at that point. You kind of just started dabbling with this a little bit.

Mark Baltazar [00:06:32] 2018 was the first kind of that we collaborated on a 14 unit.

Georges El Masri [00:06:35] Yeah, yeah. Okay, cool. And how’s that going for you so far? Like raising capital and working with accredited investors and all that?

Mark Baltazar [00:06:43] Yeah. I mean, I think it’s, you know, I think when you start off, it’s like I mean, then you have to have a brand if they have a track record. I think we’re at the point now where, you know, the challenge is finding enough inventory to kind of keep up with some of this investor demand. So that’s it’s a good problem to have. And yeah, I mean, I think it’s brand reputation people, you know, I think, you know, people look for a track record, you know, the first one’s always the hardest one, right? Because like, you know, you haven’t proven yourself yet. Really. Yeah. And then I think once that goes and you’ve shown that you’ve been able to generate, you know, what you said you’re going to generate, you’ve hit the proforma or exceeded it. That helps.

Georges El Masri [00:07:21] For sure.

Mark Baltazar [00:07:22] Yeah. So and then also, you know, from, from the flips are a lot of investors that invested with me on the flips that kind of, you know, had some success there with me. You know, it was it was an easier conversation for them or with them to come in to multifamily. And now, you know, the stuff that we’re doing, the education, the content, the podcast all help us. We just got to showcase our expertize for sure.

Georges El Masri [00:07:42] Mike You seem like it seems like you own quite a bit of real estate, you probably have some decent cashflow. Why is it that you’re still interested in growing and moving forward?

Mike Rockall [00:07:52] You know what, cash flow is not really there. We buy a lot of value add properties and they’re running negative, severely negative. Yeah. So yeah, we’re, we’re still looking at growing y I think I’m not yet ready to kind of retire, still want to stay active. And what we’re pretty much doing is refinancing, recycling that capital and buying more. Yeah, right. And sometimes when you’re leveraging a little bit higher than, than you should when, when I say should I mean to get into another property rather than getting, you know, a second on a property, you just leverage that one to, you know its highest it’s high LTV. Yeah until I hit that that I guess net worth that I’m comfortable with and I’m sure that will always be a changing target.

Georges El Masri [00:08:37] Yeah. So you mentioned buying these value out properties, the negative cash flow to start. How do you manage that? How do you maneuver through that to make sure you’re not putting yourself you’re overleveraged or you’re putting yourself in a dangerous situation.

Mike Rockall [00:08:54] Where typically raising for that. So when we’re doing our underwriting and kind of looking at the proforma, we’re, you know, factoring in what our monthly expenses are, what type of rentals we plan to do and we’ll raise for that negative. Yeah, we’ll have say if it’s a two year refi, we’ll have, you know, our net operating income at the end of two years projected know what we’re going to refi out and take it from there. But it’s typically raised at the beginning.

Mark Baltazar [00:09:17] Yeah, yeah. And I think, you know, it’s not a surprise that it’s negative. We know it’s negative. We know typically how long, you know, within a few months how long it’s going to run negative and it’s purposeful. Right. So we know, again, the value out strategy for those that don’t know it’s you’re buying you’re buying, you know, assets that are underperforming financially. Right. They’re not doing what they should do. And so we’re taking it on. It’s like buying a, you know, a poor performing business. Yeah. You buy it. You know, you instill perhaps new management, new systems, you turn it around. That takes time, right? So 18 months, 24 months. But we know going in that this thing is going to bleed for a little bit until we, you know, turn it around. And so like Mike said. Yeah. You know, you’re playing for that. You know, you know, it’s going to be negative, whatever that is, per month. And you just make sure that you have the capital to support that.

Georges El Masri [00:10:06] What is.

Mike Rockall [00:10:07] So I just want to jump in this, but you asked me about cash flow earlier. That’s always the struggle. So just for an example, we bought a building at 3 million bucks beginning in 2021, renovate it, probably worth about 7 million today. A lot of equity in there. So the question is, do we not refi it in cash flow like crazy and leave, you know, three or $4 million in the project? Or do you leverage it with a lender that will allow a second on top potentially? So cash flows break even, but now you’re pulling out, you know, two or $3 million to go off and invest in another project or two other projects. And where is that healthy balance? Right. Me as an active realtor, you know, a lot of my income is coming from there, so I don’t really need the cash flow today. Yeah, but I really starting to think, you know, if I do want to stop working as an agent or, you know, actively working, maybe we should leave some equity and we have this discussion. Are we ready? Are we not? What do we want to do? Like how many years before you start traveling, you know, three or four or five months out of the year and your active income sort of drops. But it’s always, it’s always a floating target in the conversation, right? Yeah. So it’s yeah it’s exciting.

Georges El Masri [00:11:15] Yeah. For sure. The way things are right now, the market’s so hot that people like multi units are obviously increasing quite a bit in value and sometimes you might not have the income from the building to support the price in that situation. Does that drive you away from these homes or are you sorry from these properties or are you guys still going after them because of the value add opportunity? And if so, how are you making sense of these deals?

Mark Baltazar [00:11:41] We probably have a couple of takes on it. So I mean, like just one that we went after this week, you know, the purchase price just wouldn’t allow us to do what we need to do, right? Someone else bought it. It fits their model. Yeah, I think you have to scrutinize a little bit more, right? I think not every deal works. At least I think everyone has a different model. We have our own model. We have certain thresholds that we need to hit from an ROI perspective to make the to make the deal work. And yeah, you know, the pricing, you know, pricing is getting up there in such a way that some deals don’t make sense anymore. And I think I think what’s important for anybody in just like in residential and commercial, you have to have your number right with what number you’re not going to go above because, you know, as much as commercial is less emotional, probably in residential, you still kind of want to get that deal rate done, but you have to have a number, you know, at some point, deal doesn’t make sense anymore and she had to drop it. Yeah, that’s kind of your max, you know, your max offer. But I think the thing that, you know, we’ve learned over the last bunch of years and we help people as well, understand from a coaching perspective is that there’s a lot of things you can do with financing to make the deal work, to get it done. Yeah, maybe it’s a little more leverage, but in the end you’re are y still going to work out again you have to be comfortable with that. Strategy is a bunch of different things you can do. But pricing like anything is, you know, becomes an issue.

Georges El Masri [00:13:06] Yeah, for sure. Now if you’re if you’re getting into a building where the rents are really low and obviously the strategy is to turn over these units, what are some of the things that you’ve been able to do to successfully complete that since that process? You know, turning over the units and getting and removing the tenants and whatever?

Mark Baltazar [00:13:27] Yeah. So I think, you know, you know, in Ontario, right? I mean, the landlord tenant laws don’t allow you just to, you know, put, you know, evict someone, right? Yeah. And 13 you can use that. We typically don’t use that or we haven’t used that actually that you know that form of that strategy. I think a couple of things have it. It is a it is a risk factor, right. Because I mean, turnovers, the number of terms, the number of units you turn over factors into your ROI and you can make a building look really good on paper by saying you’re going to turn over 100 a unit hundred units. Yeah. How realistic is that? I don’t know. Depends on the building. Depends on what your finances are. You know, in a renovation, people don’t like living in renovations or, you know, areas or buildings that get renovated, noise, dust and such. So you have some natural turnover. You know, a lot of times you go into these buildings and people have thought about moving. They just need a little bit of extra help, sometimes financially, maybe they need help moving. Maybe they just haven’t been able to find a place so we can assist. So there’s ways to help people kind of achieve what they wanted to achieve a little bit faster than they may or may do on their own. But it is it’s an it’s an it’s a number like the turnover rate is a number that, you know, is not guaranteed. You don’t really know that. You have a guess. I think I think based on when we walk through a building, we look at the tenant, the age of the tenants, the profile, you kind of have an idea, okay, you know, maybe 50% will be able to kind of move out. Or maybe it’s less. Who knows, right? So it is something that you need to really pay close attention to for sure.

Georges El Masri [00:15:06] So. So, Mike, what areas because you’re not only an investor but also a realtor. So what areas are you finding are providing some good opportunities for investors that are looking for multi-unit properties?

Mike Rockall [00:15:21] Me personally, I like to tertiary markets anything outside of Toronto. I think you’re just getting a better bang for your buck. Like we’re in Berry. We have a couple of buildings in Berry. And the average market rent in Berry I think is higher than Toronto across the board. But you’re going to pay a higher cap rate than you would in Toronto, right? Same thing in Hamilton. I mean, you’re pretty well versed in Hamilton market. You’re getting a better bang for your buck. And I think our two bedrooms, we’re pushing like 1950 to 2000 bucks a month now. Crazy with the rentals that we’re doing. Yeah. So, personally, I like just outside the main core city. Mm hmm. But there’s also some analysis you have to do to make sure that cities. Right. Is their GDP growth is their population growth, is there that demand there for that city to continue to grow? Yeah. But yeah, I personally have always liked outside. Having said that, when you start working as an agent with some clients and bigger players who are building a portfolio faster than most and you’re not finding the inventory, you start to move into the Toronto markets. It’s just more inventory there. Yeah, you’re paying a lot more, but you look at some of the bigger reads, they all have buildings in these big major markets. Why? Right. That’s that question. How big of a portfolio can you build in these tertiary markets? Yeah. And I think if you’re staying, you know, under a thousand units or so, it should be easy to do. But once you kind of exceed Excel past that thousand getting to 5000, 10,000 units, you do start looking into those more stable, stable markets for sure. I actually wanted to touch base on the last question you asked about getting tenants out. One of the things that a lot of a lot of investors don’t look at is the rate in which rents are growing. So, for example, if you’re buying at a three and a half cap and you can’t get tenants out, but the rents are growing at 5% per year on average. You know, Hamilton seen brand growth of 10% for multiple consecutive years that Calvary drives down. Right. So now if say your average rents a thousand and market’s 15 and you’re buying at a three and a half cap when that market rate goes to 2000 and your average rents are still a thousand. Someone’s going to pay 2.75 cap or 2.65 cap, which is going to drive your value up regardless of turnover.

Georges El Masri [00:17:42] Right.

Mike Rockall [00:17:43] Right. So a lot of people are looking to I don’t think I can turn over that many units, but where is that rent headed and where how far down is it going to drive that cap rate? Mm hmm. Right. So that’s something else to consider when people are looking at turnover. Right. We have a building that’s probably made in 24 months, probably at 100%. We’ve had one out of 12 units turnover.

Georges El Masri [00:18:03] Hmm. Yeah, that’s pretty crazy when you think about it. But I guess it’s just the way it is. Like, there aren’t that that many apartment buildings available for sale. So people are willing to overspend a little bit just because of that potential, even though fundamentally, if you read certain books, you read certain theory, they say you should never evaluate a building on potential. But if the market is the way it is, you kind of have to. To some extent. Right?

Mike Rockall [00:18:29] Yeah. And I think I think obviously there’s some speculation and unsophisticated investor and you want to be looking at speculation. Is it speculation to some? I mean, it’s all how you take it, right? If your goal is to buy, you know, in a couple of hours from where you live and you don’t really you’re not comfortable investing in another country or another province you’re not going to buy if you’re not paying these prices and if you’re in it for, you know, and understand the real estate cycles, but you’re in it for ten, 15, 20 years, does it really matter if you’re overpaying 100,000, 200,000 today? It starts to get tough when you have five year capital and now you have to project and give a return to your investors within a five year period. Will there be some hiccups where there’ll be lower returns? Potentially. But, you know, I’m at the age where I’m going to be investing for 20, 30, 40 more years. Yeah, everyone’s talking about capital gains tax changing and things like that. Okay, I’m going to get hit with that anyways. Yeah. Yeah. What are we going to stop buying? Yeah. So it’s all, I guess, the mindset in the time you’re at in your investing career and also the capital, you know, is it five your money, ten your money and so on. Right. And sometimes like when I’m going up against someone else that I know, they’re in there like in an offer presentation and stuff like that. I’m saying to myself, Shit, these guys are holding for 20 plus years. They’re capital partners or long term. I can’t compete with that. Right. So sometimes I’ll back off because it’s like I can’t pay what they’re paying. Yeah, I know what they’re doing. I know their strategy. Yeah, right. So, I mean, it all depends. Yeah.

Georges El Masri [00:20:00] A little bit earlier, we were talking about the renovations that you guys are completing are driving up or allowing you to get really high rents. What are some of the renovations like? What kind of product are you putting into your units? I think that’s probably more what you do because you used to flip, I don’t.

Mark Baltazar [00:20:16] Know, you know, luxury vinyl flooring. Right.

Georges El Masri [00:20:21] What do you what are you paying for you for your flooring? Like three bucks a foot or something?

Mark Baltazar [00:20:24] Yeah. So I think it’s like 353 or so, so, so the it’s glued down so it’s like five. Mm. So it’s, it’s comfortable, it’s cozy on the. Yeah. Super durable. Mm hmm. Right. And then it’s like, you know, bulk something to install, right? So it’s not it’s not cheap price, not cheap stuff, you know, paint stuff, you know, that kind of stuff.

Georges El Masri [00:20:44] Why is it. Sorry, just to kind of go back. Why are you doing the glue down stuff?

Mark Baltazar [00:20:48] Okay. So we’re actually going to click now in certain units. So. So glue down works on concrete because there’s no shifting.

Georges El Masri [00:20:57] Yeah.

Mark Baltazar [00:20:57] Right. So when you. So again, kind of through trial and error, we’ve used glue down on wood. Right. And that shifts. Right, because that’s kind of the force, you know, contract. Yeah, that’s right. So, so we now learned that let’s kind of put floating click. Yeah. Those floors and so and then and that on concrete it makes sense to kind of keep the glue down. The benefit of glue down is that you know if something were to happen to one plank in the middle of the floor, you can take out that one, right, and then replace that one versus having to redo kind of everything to.

Georges El Masri [00:21:28] The wall.

Mark Baltazar [00:21:28] Pretty much. Right. So from the maintenance standpoint, it it’s a little bit easier. But what we found is on the on wood sub flooring, the gaps start appearing pretty quickly, especially during changes. Yeah.

Georges El Masri [00:21:39] Yeah. Okay. So vinyl plank now.

Mark Baltazar [00:21:44] Yeah, you could yeah. Yeah. You know, trim, you know, those are the basic stuff. You bathroom’s right. A basic bathroom.

Georges El Masri [00:21:51] What are you spending per unit?

Mark Baltazar [00:21:54] So costs have been going up, right? So, you know, about 40 K for the ones.

Georges El Masri [00:21:58] And this is like rewiring the unit, new plumbing, all that.

Mark Baltazar [00:22:02] Yeah, yeah, yeah. Typically enough to run new plumbing unless it’s, unless it’s, you know, you’re adding laundry in the laundry stacks.

Georges El Masri [00:22:11] Maybe not run new plumbing. Sorry, but I mean, yeah.

Mark Baltazar [00:22:13] Just like fake fixtures. Updating new fixtures. Yeah, yeah. Electrical the panels get swapped out. Right? So in these older buildings, it’s kind of diffuses or changes to breakers, typically 60 amps, 70 and what else? Douglas AC systems, you know, so those have gone up a little bit in price too. Yeah. Also, they, they’re, they’re heat pumps as well. So they also provide secondary heat. I don’t know how many tenants actually use it for heat, but.

Georges El Masri [00:22:42] Why are you using the Douglas AC system? Is that because it’s kind of reducing your ongoing costs? Like is it does it run on hydro and then the tenants taking on that cost?

Mark Baltazar [00:22:53] So yeah, the tenants take on the cost because most of the units we have are individually metered for hydro. Yeah, I think it’s just a nicer looking kind of unit, you know, it’s a nicer looking unit versus having something hanging out the window. Right. So can get a little bit more of that luxury feel. Yeah. What else. So the kitchens of course. New kitchens, new cabinetry. It’s quartz. Quartz counters. Right. Versus a laminate. So that adds a little bit of a, a luxury feel. What else are we doing. Oh. Ensuite laundry as well. Yeah, right. So, you know, stainless steel appliances. So, you know, it’s a self-sufficient unit, right? You don’t have to use the common area laundry, you know. And so that’s getting, you know, top of market rents.

Georges El Masri [00:23:35] Cool. I’m just want to I just want to go back to that AC thing. Does that also heat the unit or are you guys like do you have gas or typically or do you have some sort of like furnace that you’re paying for?

Mark Baltazar [00:23:48] Yeah. So all the buildings are run on a boiler system, kind of natural gas run boiler system. So that’s the primary heat. And then and then those heat pumps can act as secondary heat sources, although I don’t know how many people actually use it for heat.

Georges El Masri [00:24:04] Okay, so you guys are covering the gas. Yeah, in the building. But again, the AC unit that you’re using, they’re paying for it because it’s going through hydro. Yeah. Are there any ways that you guys have been able to reduce your ongoing expenses in terms of utility costs, that sort of thing that you’ve had success with?

Mark Baltazar [00:24:23] I mean, we’ve looked at we’ve looked at what’s it called, water metering. It hasn’t really made sense for the buildings that we have, because you have to add in, you know, two four hour to two meters make sense. But some of the units require four meters, sometimes six meters. So just the cost of that doesn’t really make sense. It doesn’t offset the savings LCD lighting we’re putting out LED lighting in most of the common areas or all the common areas and outside. Right. So kind of exterior lighting, those are kind of the big things that that we’re doing up in addition to the units, right. So yeah, the units. All the new appliances are energy much more energy efficient than what was there before. Right. And then LED lighting in the units too to awesome.

Mike Rockall [00:25:07] Was there. I just want to get back to those heat pumps. Don’t call me in this but I think if you have a high enough BTU rating. So some of the some of those Ducasse Caesar 12, some of them are 24. You can put multiple heads and then it can be used as a primary heat source. Mm hmm. Right. Meaning, if you put them if you put two or three heads, depending on your square footage and the B2 coverage is there, you could practically shut your boiler down.

Georges El Masri [00:25:28] Right. Right.

Mike Rockall [00:25:29] You just have to do all the units, because if you’ve done 60% of the units, how are the other tenants getting there?

Georges El Masri [00:25:34] Yeah, for sure. Right.

Mike Rockall [00:25:36] And some other things. I don’t think we’ve done it, but one majority of the building does have the heat pump and it’s used as a secondary heating source. You could tone your boiler down a little. It doesn’t need to be as hot and then put the costs on them. Yeah. Yeah. Just another. Another tip. Something to think about.

Georges El Masri [00:25:54] The. So if you did put, like, two heads on the AC unit, you would you need a 100 and panel, sub panel in each unit or it would still go on the 60.

Mike Rockall [00:26:04] Yeah. I think it still goes on the C. Yeah.

Georges El Masri [00:26:05] Okay, cool.

Mark Baltazar [00:26:06] Yeah. Because we have one building in Hamilton where some of the units actually the one unit has three heads. So we have one head in the main room and then one in each of the two bedrooms. And the panels. Yeah. The panels. Not 160. Yeah.

Georges El Masri [00:26:23] 60. Okay. So, so in that particular situation, you have three of those Douglas units in the one unit. That’s right. Yeah. And the one rental unit. Yeah. Okay.

Mike Rockall [00:26:33] But positioning is very important with those units. Yeah. So if you have, you know, a standard two bedroom with a hallway and then two bedrooms down at the end of the hallway. If you don’t have that Douglas AC head kind of pointing from your living room through into that hallway, you’re never going to get any cooling down there at all. Yeah. So tenants start to say, while we sleep at night, we’re hot. Can we install another AC unit? Can we put a window AC unit? And that’s what we’re trying to avoid that look on the exterior of all these windows. Yeah. So depending on the positioning, you’ve got to be careful because you will have tenants start complaining and then you have to add ahead and do construction at that point. So something to consider when you’re putting them in.

Georges El Masri [00:27:11] And what are you usually spending per head is? I think I’ve looked into it at one point it was roughly like two grand, 2500, something like that.

Mike Rockall [00:27:18] It’s quite a bit more. Now, some of the contractors are about 5500 to 6 grand. I think we’re getting them all in now for about 4343.

Georges El Masri [00:27:27] By per head.

Mike Rockall [00:27:28] Per head.

Georges El Masri [00:27:29] Jeez. So is it worth it? Is it worth if you put.

Mike Rockall [00:27:32] A second hat, it’s cheaper. Yeah, because that’s everything. Condensing unit outside. Yeah. And then the one head inside. Do you know how much mark for additional head.

Mark Baltazar [00:27:42] So I think it’s like three. Well one we were quoted like 25 to 30 to three grand for an additional head.

Georges El Masri [00:27:47] Okay. Yeah. Okay. Yeah. I guess you’d have to run your numbers and see if it makes sense to do that. But again, if you’re looking for a certain look and you don’t want those AC units hanging out of the window, then. Yeah, then it makes sense. Yeah. Any. Sorry. Where you going to say no, no, no. Go ahead. I was just going to say any other tips for investors that are that are in the multi-unit space, ways that they can maybe offset some of their costs or successful ways that you’ve had maybe with plumbing or something like that to reduce your water bill.

Mark Baltazar [00:28:18] I mean, plumbing, I mean, even just I think in one of very we replace the.

Mike Rockall [00:28:22] Air raid.

Georges El Masri [00:28:23] Generators. That’s it.

Mike Rockall [00:28:24] So low flow plumbing fixtures, aerators on faucets, LED lighting. Mm hmm. Just standard stuff. Yeah. But at the end of the day, what I think you have to look at is you put AC in a unit. Okay. It’s going to get you a little bit more in rent. Slightly more rent. But when you’re putting everything in there, you’re putting the stone countertops, you’re putting the, you know, AC units, the ensuite washer and dryer, stainless steel appliances, and you’re comparing it to, like condo style units at a discount. Yeah, you don’t have the amenities, and that’s why it’s discounted. You’re going to get those premiums. Yeah. So I think you have to look at if you were only to spend 20, what would your rent actually look like? And when you go into, you know, brand cafe, pad mapper and all the rental sites, you’ll start to see that, you know, guys that are doing $20,000 type rentals are getting 200 bucks a month less and 50. And when you’re looking at it from a cap rate standpoint, like spend the other 20, have it like, you know, condo grade and get that premium and rent. You’re also going to get a better tenant profile. Yeah, right. You’re going to attract that. So, yeah, I think you have to look at everything as a whole and then see if your budget and the capital you have allows and allows you to do that. Yeah, I think it was wise meter who we who we spoke to and the sub metering and a lot of condos that were built in that were or apartments that were buying. You typically have your hot and cold risers run for all the all the washrooms, all the way up to washrooms are set in the same spot. Yeah. So hot and cold lines run up kitchens. Same thing. Same spot. Hot and cold lines run up. And then if you’re adding your washer dryer. Or to, you know, a closet in the center of the unit and running a new stack. You’re going to have another hot and cold line run up. Mm hmm. So essentially, you would need six meters, one on the hot one on the coal for your kitchens, your bathrooms, and your laundry. Yeah. Where? Some of the buildings? Actually, it’s only one of the buildings that we have. They have their own hot water tank in the unit. Mm hmm. So what happens is a cold line comes into that hot water tank. That’s where you’d put the meter. Then off that hot water tank, you have a hot and cold line which feed the whole unit. Yeah. So in that particular building, it would probably make sense. But I think what you have to factor to is if someone’s paying $2,000 for a two bedroom unit, all in and that’s kind of the market 2000, whether it’s, you know, 1950 plus hydro, when you start adding all these utilities to the tenant, does their base rate decline?

Georges El Masri [00:30:52] Mm hmm.

Mike Rockall [00:30:53] Right. So what are you really getting by? You know, putting water on them? They’re going to say, oh, 900 plus water and hydro and you might have to discount to 18. So.

Georges El Masri [00:31:03] Yeah, yeah.

Mike Rockall [00:31:03] Right. Because now it’s getting out there, they’re uncertain. So we typically just stick to hydro separately meter hydro because that’s kind of common. That’s the normal people, see. Yeah. And I don’t think I don’t think sub metering water in a lot of cases will make sense. So we’ve just kind of.

Georges El Masri [00:31:20] Yeah. I guess the only benefit would be that people would be more careful about their usage if they know they’re paying for it. And like I’m sure you guys have seen situations where you’re paying for all the utilities and they’re leaving the windows open in the middle of winter because they don’t care. Yeah. But yeah. And another thing you mentioned wise meters. So I would be careful. Like I did a bit of research on them and I just googled them and they have a lot of really, really bad reviews and not that like, yeah, you might think as an investor I don’t care. Most of the reviews were from tenants saying that wise meter basically charged them for something and then they tried to contact them to reverse the payment because it was a mistake and they just never heard from them. And as an investor, I don’t want my tenants to have that kind of negative experience. Right. So it’s just something to keep in mind. Yeah.

Mark Baltazar [00:32:12] Anyway, for its headaches, it creates another ticket for property management. Yeah. Like. Oh, yeah. I haven’t heard that. I haven’t heard like, again, like we don’t have them in there. Yeah. Go so far to kind of investigate further because we figured just financially didn’t really. Yeah. Boost the ROI so much but good to know.

Georges El Masri [00:32:27] Yeah it’s, it’s just good to like I, I think it’s just important if you’re going to sign up for a service like that, just Google it and make sure that your tenants aren’t going to get stuck with a situation like that. Good old.

Mark Baltazar [00:32:36] Google.

Georges El Masri [00:32:37] Research. Yeah, exactly.

Mark Baltazar [00:32:38] Yeah. Yeah.

Georges El Masri [00:32:40] Okay. So how are you guys finding deals these days.

Mike Rockall [00:32:44] Huh? Building relationships. Spend a lot of time building relationships with brokers in the space. And a lot of the brokers that, you know, that I built relationships with, they’re typically in you go on the MLS, you don’t see a lot of buildings. Yeah, a lot of building owners go to these particular brokers because they have large databases been selling buildings in the world exclusively to I don’t even want to say their database. Some do, but some go to a handful of reputable buyers that they know can close.

Georges El Masri [00:33:11] Yeah.

Mike Rockall [00:33:12] Right. So I would say a majority of our buildings outside of one which was direct to seller have come through building relationships and trust with these brokers, which takes time. I think the first two years I started doing it, I don’t think I even got a deal done.

Georges El Masri [00:33:29] Yeah.

Mike Rockall [00:33:29] And that’s what I tell a lot of people is it’s consistency. Just stay consistent, pick up the phone and be transparent. Right. We put we put an offer in yesterday on a building that I pretty much told the broker that, listen, it’s not going to work for us. The price isn’t right. I’m not submitting. And I told them while we have our eye on another building, we’re not able to buy them both right now. And he said submit anyways. He’s like, Just do me a favor, submit. Now he works on a team, so I don’t know if he wanted to bring in an offer from his side, whatever it was, but we ended up submitting. We came in a little late, which we knew we would, but now it’s kind of I did him somewhat of a favor. I’m hoping in the future he does me.

Georges El Masri [00:34:12] A favor, gives me.

Mike Rockall [00:34:13] A kind of exclusive. Yeah. It’s just that consistency of working with these guys and, you know, having the relationship and transparency. And then there’s the, you know, direct to seller some of the campaigns, the direct calling, the mailers, things like that.

Georges El Masri [00:34:26] Yeah. Awesome. Okay, cool. Was there anything you guys feel like would be important to share before we wrap things up? Or do we cover most of the stuff you usually talk about?

Mark Baltazar [00:34:38] Um, I think, I think one of the other things, if someone’s getting into the space for the first time, like, you know, from single family into commercial. Yeah, I yeah. And we encourage, you know, people to really make sure they’re working with people that have done deals right. In our experience, whether it’s a realtor or mortgage broker or. Legal. The deals are fairly similar, but I think there are nuances definitely with commercial that you want the right people on your team. I mean, there are so many examples of, you know, residential investors that use the same broker in commercial. It’s different. Things get value differently. You know how to set up the financing really matters in any real estate deal and you know specifically, you know, commercial. So I think just, you know, it’s hard for people if they have a relationship with, you know, a residential real estate agent or, you know, mortgage broker or whatever other professional for years. It’s hard to have that conversation. Hey, you know, I’m going to use someone else for commercial, but and yet at the end of the day, like, you have to look out for, you know, your own business. And it’s really important to have experts. Right. And that’s one, I think, a pitfall and a hard conversation that people do have to have one kind of certain to shift over.

Georges El Masri [00:35:56] Yeah, 100%. Mike, anything else?

Mike Rockall [00:35:59] I’ll just stay on that track of having a multifamily team, focused team. Right where everyone is primarily in multifamily is that mortgage rules and lending and loan to values with different lenders. It’s constantly changing. Mm hmm. So a lot of times people have conventional docs. They’re starting off all the still doesn’t make sense if you’re staying on top of things. And we just had a webinar with Ed from First National and they have that new MLS’s Select program which allows you to potentially get 95% loan to value and a 50 year amortization that in some cases changes the game. Stuff we looked at a year ago that didn’t work would work right now because of that. Yeah, right. So if you’re not keeping up to date with the financing game and strategy and structure, it’s going to be hard for you to buy 50.

Georges El Masri [00:36:50] Year M putting 95% loan to value. Yes. Wow.

Mike Rockall [00:36:54] That’s on March 7th. What are we in March this week. Yeah.

Georges El Masri [00:36:57] Yeah, two days ago Monday. Yeah, yeah, yeah. Wow. So, yeah. Crazy.

Mike Rockall [00:37:02] Now there are certain criteria you might need, you know, affordable housing or accessibility or some efficiency. Yeah, but I mean, if you don’t know about that, you’re not going to look into it and the deal might not work.

Georges El Masri [00:37:13] Right, right, right.

Mike Rockall [00:37:14] So now even some of the properties that we were thinking about maybe selling because they’re complete or, you know, buying off our partners or whatnot. Now, the games were relooking at everything, saying, what can we do here? This is fantastic.

Georges El Masri [00:37:25] Yeah.

Mike Rockall [00:37:26] Yeah. Right. So just staying up to date with what’s going on because it’s forever changing.

Georges El Masri [00:37:30] Yeah, for sure. For sure. Okay. So to finish things off, how do people reach you guys and what services do you provide?

Mark Baltazar [00:37:39] So, I mean, we’re on social, you know, so like Link, LinkedIn, Instagram, Facebook, we do have a Facebook group, a private Facebook group of the apartment building, investors network, our website people multifamily. Okay. We’re podcast the multifamily and the Canadian Multifamily Investing podcast, which is just about commercial, commercial real estate or multifamily real estate. So we’re not we’re not hard to find.

Georges El Masri [00:38:09] Cool. Yeah. Anything to add, Mike or. That’s good.

Mike Rockall [00:38:12] Yeah. Yeah, we do. We do offer a coaching program. So if people are looking to get started in multifamily and looking for some guidance, we do a deal analysis like on a per hour type basis. Or if someone’s not confident, it needs, you know, another set of eyes from guys in the space doing it. We do we do offer that and that’s on our website as well.

Georges El Masri [00:38:33] Awesome. Okay. Thanks, guys. I really appreciate you coming on. And I know you’re both busy and it’s great connecting with you, too.

Mark Baltazar [00:38:38] Yeah, thank you. Thank you. Conversation.

Georges El Masri [00:38:42] Thanks for listening to this episode. Your support is truly appreciated and if you can share this with a friend or family member, that might benefit from the information. Remember, our goal is to motivate and inspire others to take action and to build wealth and to become well-off. Enjoy the rest of your day.

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