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Challenges faced by multi-family investors in today's market with Cory Sperle

Challenges faced by multi-family investors in today's market with Cory Sperle
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Table of Contents - Challenges faced by multi-family investors in today's market with Cory Sperle

Podcast Transcription

Announcer [00:01:19] Tired of the 9 to 5. Tired of only dreaming about the things you want to do. Want to have more time for your family. More time for you. More time for you. This is the Breakthrough Real Estate Investing podcast, where we interview qualified guests in the real estate industry all across Canada. We want you to live life on your terms, and we want to help you break through to that life through the power of real estate investing. This is the Breakthrough Real Estate Investing podcast. Now your hosts Rob Break and Sandy MacKay.

Rob Break [00:02:05] Hello, everybody. Welcome back again. Glad you could join us again today for another great interview. As always, we have an amazing guest to share everything they know. Give us all those golden nuggets about today. Something really, really interesting that I don't think we touch on enough multifamily investing. So very, very excited to get to that. Good morning, Sandy. How are you?

Sandy Mackay [00:02:28] Morning. Awesome. Set up for the interview as always and just fantastic great opportunities in real estate. There's so much to be said about.

Rob Break [00:02:38] You're well rested or maybe not. I don't know. You just got back from vacation.

Sandy Mackay [00:02:43] And I don't know if I'm well rested.

Rob Break [00:02:44] I feel like. Yeah, I don't know. I saw some of your pictures. You looked like it was it was more just, like, nonstop party. So I don't know how rested you would be after that.

Sandy Mackay [00:02:53] Well, we went we were over Philippines and Thailand. Philippines. We work with a bunch of team members at that. Are there some virtual team members? And so we're visiting some of them went to one of their weddings. They're super fun and China is on lockdown. So there's no way no tourists come from there. It was a good time to be in that part of the world. It was very, very empty and so nice for tourists. We got to take advantage of that and enjoy some fun times and no lineups, no lineups for anything right on.

Rob Break [00:03:25] As everybody knows, they should go over to Breakthrough REI Podcast dot CA. There you can download all of our past episodes. You can get in touch with all the guests that we've talked to over the years and they can get our free gift.

Sandy Mackay [00:03:39] Yeah, the ultimate strategy is really. Well, if the real estate's go sign up for that. So you get that and never miss out on the show when you jump on our email list by doing that and not just our shows, but whatever else we've got going on events, speaking engagements, property tours, that sort of thing. So go grab that today.

Rob Break [00:03:57] What kind of events do you have coming up? Anything?

Sandy Mackay [00:04:00] Good question. You know, it's always.

Rob Break [00:04:03] Do this to you and you never know.

Sandy Mackay [00:04:04] No, I do have something coming up this time, something that's exciting that will be timely. Timely enough. I don't have the link to Syria. It's one thing we're doing is we're going to be launching and launching a new investment club, believe it or not, around the Avon area. So I've got the Keller Williams brokerage involved and I've got some great investor. Investor people that are in the mix there that are just really knowledgeable. And we got together over this year and kept chatting about launching a new club and decided to actually do that for finally. So January 20, 23. Don't have the date yet, but sometime mid-January 23 will be a relaunch of that and sharing it with everyone. Of course, anyone in the GTA area would be pretty easily accessible there in Vaughan and it will be out of a real estate to bring down some of your guests and whatnot, and that would be exciting. So that's something to come soon. Again, if people register for or less than they get. Get up to date with all that, they'll still they'll be fully aware in the coming couple of months.

Rob Break [00:05:09] And obviously stay tuned to the show. Yeah. And they'll and they can learn all about it. Also guys, go over to iTunes. Leave iTunes. I forgot about. What's that platform called again? Where everybody listens to everything.

Sandy Mackay [00:05:27] ITunes. Yeah.

Rob Break [00:05:28] You're confusing me over to iTunes. Leave us a rating review. You know, guys, it really helps. The show gets us out there to everybody who wants to hear really, really valuable information like what we're going to hear today. So, you know, just go over there. And if there's something that we haven't touched on, also, you know, let us know what you want to hear.

Sandy Mackay [00:05:47] Absolutely. Rob, what's going on with you in in Costa Rica? You're building some cool houses.

Rob Break [00:05:53] We are. We just actually got our permits. So it's been actually quite a bit longer of a process to get our permits here than what I was expecting it to be. But it wasn't it wasn't more red tape. It was more just every person that we had to go through was delayed, you know, longer than what we were expecting. So it was it was actually quite a smooth process. But we do have our permits now and we have the containers on site and we're going they got their welders; they got their plasma cutters and they're going to town. So that is going on. And we are also looking at a bigger chunk of land just up the road from where we are building now to continue. So if anyone's interested in purchasing a beautiful new three bedroom container home in Costa Rica, very close to the beach, about an eight, nine minute walk, let me know or if you're interested in joint venturing on future projects, let me know as well.

Sandy Mackay [00:06:54] Or raise my hand for that. Yeah. Okay. We can talk more about that. I finally. I won. I'm not sure if I told this. I, I, I guess I didn't win. I paid for a trip to Costa Rica. All right. Stay at one. One. My real realtor friends. Everybody is in Costa Rica. Is that a golf tournament or charity thing? But.

Rob Break [00:07:14] Oh, I see.

Sandy Mackay [00:07:15] Oh, got to use it at some point. I haven't booked anything, but I got to use it at some point. Where is it? It is tamarindo. Oh. So near you.

Rob Break [00:07:23] Very close by.

Sandy Mackay [00:07:24] Yeah. Yeah. So I did that and I was just kind of spur of the moment, but I said I. Costa Rica keeps calling. I got to find my way to get there at some point.

Rob Break [00:07:33] Check it out. So need do it when it's snowing, obviously.

Sandy Mackay [00:07:37] Yeah. Yeah. So I have to say, I got the accommodations settled. I got I booked the other parts, but maybe this winter we'll see.

Rob Break [00:07:45] Sounds good. Looking forward to it. And I'm also looking forward to speaking to our guests today. You like that little Segway? Good, huh? Sure. They were very happy to have Corey Sperling with us. He's going to be sharing some of the challenges faced by multifamily investors in today's market. So thanks for joining us, Corey.

Cory Sperle [00:08:08] Thanks, Rob and Sandy. And congratulations on Sandy starting a local club. I know now the pandemic's behind and all these local clubs are starting up again, so that's going to be really exciting. Congratulations.

Sandy Mackay [00:08:18] Thanks. Says Long John about it. Certainly the timing is for those easier to create that now than it was the last couple of years, right?

Rob Break [00:08:28] Well, we were doing it online and up until now. And speaking of online, I just had the privilege of joining Cory in the Real Estate Resilience Summit recently. Him and Elizabeth Kelly hosted it and that was online. It was like it was super cool, though, right? It was more immersive than anything that I've seen online before. So but I had the sorry, the pleasure of being a speaker. So I wanted to say thank you for that, too.

Cory Sperle [00:08:58] Rob That was great. We're definitely going to do another one. It was definitely something that most people hadn't seen, you know, the level of interactivity, you know, trying to align. 20 I know you weren't live, but I mean, we had most of the speakers, 20 some speakers showing them live all weekend. So it was, it was pretty incredible experience just to be able to host that.

Rob Break [00:09:15] Yeah. And the platform. I can't remember what it was called, but it's a really innovative platform. I think it, it allowed everybody to just really almost feel like they were actually there. Right. Joined by some people. Yeah. Yeah.

Cory Sperle [00:09:29] Very, very great. Booth set up expo booths. So yeah, it was cool.

Rob Break [00:09:33] And you got to share everything that anyone who missed it might learn right now. So thank you again for having us on our story. Thank you again for being here with us.

Cory Sperle [00:09:45] Happy to be here.

Sandy Mackay [00:09:47] I'll give you a little background for our listeners or viewers on Corey here and who he is excited to have. Beautiful cologne of British Columbia. I think you're our first guest from Cologne. Not our first guest from B.C., but possibly first one from Cologne. And you're a successful real estate entrepreneur and investment coach in the area there. I remember investing in Canadian real estate for 22 years, single family and multifamily projects. You're an expert on multifamily, like we mentioned, and focusing heavily on that nation, acquiring projects with significant upside potential and ten plus or ten plus apartment buildings in the last decade with value exceeding 25 million. And you're an authority on prairie, prairie, real estate markets, joint venture partnerships and raising capital and the ability to win deals with investors. Great thing to be believing in there. And students, tenants and communities. So welcome to the show.

Cory Sperle [00:10:43] Thank you.

Rob Break [00:10:45] So, Corey, in our usual fashion, we like to get started by you just telling us, you know, a little bit about yourself and your journey in real estate investing so far.

Cory Sperle [00:10:55] Yeah. So I started in 2000. So I'm a tradesman. Instrumentation. That's how I started. I had a pretty good income, but I didn't know anything about. About investing at all. So I actually got my first house was in Saskatoon. It was actually a house hack. So I actually became a landlord with my first deal, not really having any idea what I was doing. And then I started to work overseas. So I was trying to manage self-manage a real estate, you know, up, down with two different tenants from, you know, from across the world. And it was just a very just a nightmarish experience. So I quickly segued into multifamily. I did a few singles, but I quickly found out that, you know, I could scale up a lot faster in multifamily. So I started around 23, 24, just joint venture with people that had more experience than I did. So that was a great way to get in. I made some money, I got to learn the ropes and from there I moved from Saskatoon to Edmonton in 2005 and you know, we had really strong markets in Alberta. You know, it was the economy was booming. I mean, energy was booming right up until 2007. And there was kind of a cliff that went after that in 2008, but it was a great time to get in. So I actually bought my first building in 2008 and I think I'm on my 11th and 12th building now. I bought several buildings, you know, between the 2007 sorry, 2008 to 2015. Mark And then I kind of slowed down during COVID and now I'm actually on my second purchase. Since then, I've done about half of the deals with joint ventures. So I think I've done six deals with JVs where I've, you know, probably about 12, 13 million in property, probably about 5 million and raised. So the last couple of deals, I've just partnered with my own money, but I'm getting back into JVs now. So that's kind of the short resume.

Rob Break [00:12:41] Well, obviously we're going to talk about that because there's definitely a lot of ins and outs involved in having other people join into these kind of deals. So that's cool, man. Wow. Like there's a lot in there. You've talked a lot into those the last decade, so congratulations.

Sandy Mackay [00:12:59] What brought you to why did you choose what did you locations did early on like were you living in Surrey? Saskatoon is where you mentioned. Right. That is why this is true.

Cory Sperle [00:13:11] Yeah. So it's funny you say that like when it comes to niche, I mean, when it comes to multifamily, a lot of people, when they get in, they just kind of do a broad search and just throw a dart at wherever they see a building, not having any idea how they're going to manage it remotely. So I always say if you're going to buy a property, it should be close to where you live first. I mean, it doesn't really matter what it is, but for multi it's especially critical because even if you're hiring a property manager, you still have to be kind of babysit and you have to know what they're doing, at least off the start. So my first one was actually in a small town in Saskatchewan after I moved to Edmonton. So it was basically a 500 kilometer hour, kilometer drive to the building. It was a br, so it was 30,000 a door completely trashed. I just had a new baby. I just started a new job. So it was the worst combination of, you know, shit that you could possibly do. But, you know, we managed it. I managed to do it. I managed to hire contractors, managed to turn it around, held up for three years, and that really got the ball rolling. And then after that I bought the next two buildings in Edmonton while I lived there, and that's where I really set up my core team, you know, with realtors, property managers, you know, appraisers and experts and really, really built my team there so that when deals came up, they would funnel to me. So I start to get, you know, high up on realtors lists and then I would kind of, you know, I'd often get first dibs on properties and I've ended up buying a lot of property that way. And then in 2014, I moved to Florida, but I kept my niche, you know, in Edmonton because it's the markets that I really knew. And then I returned back to Saskatoon in 2016, and now I kind of have two areas that I work out of.

Rob Break [00:14:45] Well, here's an interesting question for you.

Cory Sperle [00:14:48] Yeah.

Rob Break [00:14:48] What do you think in those early days, like you were talking about all this adversity that came maybe not like some good and some bad, right? Like obviously anything involved with the building that was a problem is one thing. But then you're trying to juggle your new family and everything on the other side. So what do you think sets you apart as someone who would push through this? Like what kind of what gave you the drive to push through it where other people might say, Oh my God, what did I do? I'll just sell this thing and move on and pretend it never happened.

Cory Sperle [00:15:21] You know, that's a great question. And that's a question I don't think I've ever been asked, but it's a fantastic one. And it wasn't just the first deal. You know, after I got I did my first joint venture. I did it with Thomas Fire. And I realized, you know, how much value you could create with apartments because, you know, if you can raise your rent by $1, that's $200 in equity. So if you can, that's on one unit, you know, so if you multiply, do that, do the multiplying effect on that, you know, $100 on 24 suites is half a million bucks. So wow. Like, it's like that just blew me away. So trying to get set up at the time, you know, I enjoyed my job, but it wasn't really what I was passionate about. I really want to, you know, move my side hustle into something permanent. But, you know, as luck would have it, it's funny because almost all of the deals that I've had that have been really good deals have come at really challenging points in my life where I think in most cases I would be like, No, I just can't fit this on my plate right now. But over the years, I've learned that, you know, when these opportunities come, when the great deal comes in front of your eyes, you have to be awake and you have to realize that, and you have to you have to push forward. And I guess I would just kind of tell myself that, okay, it's not the greatest time, but, you know, just get it under contract, get the ball rolling on it. Things are going to smooth out later and they always did. And I'm glad I made those decisions, but it's very, very good question.

Sandy Mackay [00:16:44] Well, let's talk. What do we talk about? Multifamily properties in today's market? Why don't we focus on that a little bit and see what we can?

Rob Break [00:16:51] It's definitely changing, huh?

Sandy Mackay [00:16:53] Yeah, it's changing. It's probably I mean, my $0.02 before you jump in here is that the government is really trying to make us maybe go that way a little bit away from more of the single family as other, to try to save with some of the financing options that are out there at least. So know I'll let you share what you think, but.

Rob Break [00:17:12] I don't know if that would be premeditated by the government, by the way. They probably just want us out of all of it, just figure that, you know, multifamily is out of touch for most of us. So they don't have to worry about that right away. But they certainly want definitely, I think, sort of target the small landlords, maybe give them second thoughts. But yeah. What are your thoughts on that? Yeah.

Cory Sperle [00:17:34] You can talk to my distrust for the government all day long. Not I'll snag. We ended out with the CMHC MetLife Select Program, which I think you you're referring to. Right. But the market today is actually very interesting because on the one hand, it's challenging for new investors. We have had relentless increases in our expenses. So unlike single family, where you can pass off the utility, expensive tenants with multifamily, we have to absorb most of that. That includes the heat, the water, you know, all the all the regular stuff. The only thing the tenant really pays for is the electricity in their own unit. So, you know, we've seen a relentless increase in in utilities. We've seen a relentless increase in insurance as well as property taxes. So that's kind of the bad news. But the good news is the rental markets in Canada have never been stronger. Now, I know in Ontario standing where you are, it's been strong for a very long time. It's hard to say. You know, probably you would not lose money on a building. In fact, we bought a building that was probably have vacant. It's probably like you just won the lottery because you can actually raise your rents much higher than I ever could on the prairies. But even in my markets, you know, I went through a really rough time of adversity of, you know, 20% vacancy rates in Saskatoon in 20 1718, you know, and that almost broke me. And I had that on three buildings. So I was basically turning over units, you know, that were paying 1100, rewriting them for, you know, 900 after renovating. They're not going to move. Don't I was renting them for like 800 and that went on for almost two years. I bled through all of my capital, all my reserve funds. But now we're kind of on the upswing. And, you know, at least in Alberta, there is a there is a down for every ten years. You can go back to 1950 or 1940. And right now we're at the very beginning of a very strong rental cycle. I mean, vacancies are coming down quick. So on the one hand, it's challenging, but other on the other hand, it's the perfect time to buy in if you can find a decent property. Now, even people I've talked to in Ontario, I know a couple of realtors out there. You're not seeing the cash buyers anymore. You know, they're not showing up making multiple offers on these, you know, 12, 15, 18 plex as anyone, you may be the only offer at the table. So you can actually do your proper due diligence and you can go through the procedure properly. So from a from the standpoint of someone getting in, it's great. Now the sellers are being challenged because they want last year's prices. Well, who doesn't? I mean, I do. But if they're carrying debt, they're facing the same thing as everyone else's in rising interest rates and loans are being scaled back. So I think it's better now than it was a year ago, but you got to be cautious going in. But there's definitely way more opportunities today.

Rob Break [00:20:14] Yeah, that was the biggest breath of fresh air when we came here to Costa Rica was like a couple of years ago, being the only person in on the offer, right? Like that was just something that at that point was unheard of in in Canada. So it's it is great to be possibly even in that same situation nowadays. Over there.

Cory Sperle [00:20:37] Exactly. Exactly. And it's not unlike, like when I first started. I mean, first posted 88% interest rates, you know, and that was and I was doing cartwheels at the time, you know, and I'm not I'm not suggesting we're heading there now, but I mean, we're definitely rates now are higher than they've been since 2007, not least for fixed rates. Right.

Rob Break [00:20:56] So if we're going to talk about rates, how is the lending environment changed then since even last year?

Cory Sperle [00:21:03] Yeah, I know. That's a great question that's affecting everyone and a lot of new investors. They don't realize that they go and make the offer just like they did six months to a year ago. And then they go to their mortgage broker and realize, hey, I want a 75% loan to value and now I can only get like 60 or 50%. Oh, okay. So now you got to go back to the seller because so during COVID at that time when the rates basically bottomed out. So that was from April of 21 to February, April of 22, February of 21. I mean, the bank account of the bond was 3.3%. You could have got a CMHC mortgage of one and a half percent interest, 40 year amortization, you know, and just pulled out of a lack of equity. Well, that's not the case now. And now the bonds are three and a half. You're going to get a CMHC rate closer to five. So your loan is being scaled back significantly. Right, because the bank wants to see a cushion within your net income and what your mortgage payments are. You know, they want to see about a 30% cushion. So this is the biggest shocker for people. And I'll give you one example. One of my one of my students was going to buy a 20 plex in Edmonton, and he had a long opinion, 1.6 million. It was 2 million purchase price, which was which was okay, which is reasonable. And three months later he got the same loan, another loan opinion, it was 1.2 million. So they asked him to cough up an extra 400 grand by the same building. So, you know, it's kind of having the impact and artificially increasing cap rates. I don't know if we want to get into cap rates here, but it's on appraisals that's basically starting to show some I wouldn't say cracks in pricing, but pricing is definitely coming down. You know, the realtors I've talked to in Edmonton, now it's around 110, 120,000 units. You know, those numbers are starting to come down now because, you know, at first when rates first started to come up, the cash buyers came in and they kept chugging away. Right. But now those guys are those guys are kind of disappearing now, too. And now everybody's in the same boat, you know? So I'm looking at a building now. The government has been creative. They've come up with MLive Select where you can borrow up to 95%, 50 year amortization, but you're basically imposing rent control and yourself in a prairie market, which I'm not a fan of because I believe there's 40% rental upside in Alberta in the next five years because rents right now are still lower than they were in 2003. Rents are still lower than they were in 2014. Right. So go back eight years. You know, unlike Ontario or B.C., where we've seen massive jumps in rents, we're just at the start of this rental curve. So lending has is a humungous factor for people buying in. But if you do it right, you're going to do okay. And I say you need to do a five year old. This is why I don't recommend short term strategies now like, you know, bridge loans or BRZ for one or two years because we really don't know where those rates are going to land in a year from now. So if you can find a good quality building on a five year of all that, today's rates do it, it's a no brainer.

Rob Break [00:24:00] So in your market, have you seen the price point come down like somewhat proportionate to these to the I guess, the increase in the interest rates and that kind of thing?

Cory Sperle [00:24:14] Not yet. And because there's always a lag. Right. I mean, this was this was unlike this is pretty similar to 2008. Right. It takes the sailors a while. They get slot before they wake up to reality. And I was one of them. I was a sucker. But talking to the realtors that I know in Edmonton, there are a couple of deals just came through. You know, it was one was like a 50 sweetener and they traded in that 122 door range. But you know, their opinion and I've talked to more than one, they're saying this is one of the last of those deals. Now, as the deals are coming out, I think we're you're going to see some price pressures. I think that's probably going to go down to 110 or 100. But there's going to be a point where it's still going to be a good buy because we're at the start of the swing of the rental increases. So the rental increase in value just not is going to offset the interest. So that's kind of my thoughts on that. I still think it's a perfect time to buy if you find the right building, but you can patiently wait. But I wouldn't wait like you can't. You never time the bottom. It doesn't matter if you're doing well what kind of real estate you're doing, right? You're not going to hit the bottom. So if you see that, if you see a deal, that's good, you go for it. But I'm not nearly as aggressive as I was a year ago. Right.


 

Rob Break [00:25:22] So one of the first and here's something else that like I'm just trying to put into people's minds is like, you know, they're like, okay, well, how am I going to break into this? Because I don't know anybody. Like the good deals aren't going to come across my desk or whatever. But like when I first started as either it was, it might have even been the first or second deal I did as a wholesaler. It was a nine unit building. So, you know, like if people are thinking that way, there is there's nothing wrong with going out trying to like, you know, learn who maybe owns a building. If you see something that could use some upside, work on it, you know, to try to figure out who owns it and maybe reach out and see if they are interested in getting rid of it, right? Like that kind of thing. And, you know, put your name out there to everybody. Let them know that that's what you're looking for, right? They're just going to magically fall into your lap. But like Corey says, if you get out there and let everybody know that that's what you're looking for, then they are going to start to come across your desk.

Cory Sperle [00:26:25] And that's realtors, property managers, appraisers, mortgage brokers. Most of the deals I hear about aren't even through realtors. They're there through some of those other channels. But I love your example of people that are out of province that think it's tough to break into a market and it can be. Well, I'll give you a great example. I have a pending deal right now on an 18 wheeler, and the same realtor said there was a listing on MLS that had basically just gotten stale because that's what happens. They'll list that too high and it's just assumed that no one's interested in it. Just some random person from D.C. nobody knew who they were called and made and just made an offer and got the building. They didn't know anything about the Edmonton market, so it absolutely can happen. People just they see these MLS listings and they just automatically assume, no, it's overpriced, it's on the market, nobody wants it. Right. I bought three buildings that way from MLS, so it's definitely one avenue that you can score when it.

Sandy Mackay [00:27:20] The more you know the market you're in, the more you where you have an idea of what's going on there in the world. They have your team there to advise you and help you through that. The better you can actually look at those like for what they are, not just because, you know, hypothetically they're overpriced or whatever.

Cory Sperle [00:27:35] Yeah. And the property manager is key. I mean, my property manager, he's also an owner, so he knows the markets. It's funny because we'll go out and look at a building and a realtor will be like, okay, it's worth this much because the rents are this or X. And he's like, Well, I manage this building, this building, this building. And no, the rents are this. And because they're also owners, like I've done a walk through, I have the building under contract and you know, then you do the I don't like doing the haircut analogy, but we call it a retrain. So, you know, within seven days, I'll place a building under offer because you can't go and walk through every building you put an offer on. It's just not possible, especially not when you live in the same city. So we'll place it under offering. Then we'll go to have a walkthrough and then they'll just say, Well, it needs this and this and this. This is how much it's going to cost for renovations. You need to go back and ask for a reduction, and the first time you did it, I was like horrified. I was like, there's no way they're going to agree to that. Oh, no. But sure enough, and that's twice now that he's done that for me and the seller has agreed. So I've gotten two really good deals that way. So you can't be afraid to ask for a reduction as well, right?

Sandy Mackay [00:28:42] It definitely. You mentioned MLS's MLS Select Financing earlier and we want to touch a bit more on that or what that option looks like or what other options are similar maybe out there right now.

Rob Break [00:28:54] It sounds good. Right off the top, right? Sounds great. Whatever. Yeah. I mean, the pitfalls.

Cory Sperle [00:29:00] Honestly, like so all of all of my joint venture deals, I did conventional financing. I didn't do CMHC for the simple reason that my joint venture partners did not have to sign a personal guarantee. So if I had conventional financing, I could be the sole signer. And that's how I justified, you know, my 40, 50% equity stake in the building. Now, if you go CMHC, the chances are at least 50% of the passive partners, if not all, have to sign the guarantee. And that can be hard to convince a joint venture partner who's silent that, hey, now you have to sign this guarantee so that if something happens now, you're on the hook for this mortgage. So what's happened in recently? The other big change in lending is the conventional lenders have disappeared. I actually have one right now that I was hoping to renew and they just out of the blue said, well, you know, we don't we're not going to renew anymore. Well, why not? Well, we're not looking for anything less than 5 million or 10 million. And I owe them like one and a half. Oh and by.

Rob Break [00:29:55] The. They're not even renewing current mortgages.

Cory Sperle [00:29:58] No, no. Real multi not. And that's happened to me more than once in Saskatoon, the lender I had there to treat conventional mortgages. And these decided out of the blue. Well, we're changing our mortgage business. So too bad. So sad. Now, CMHC is a little different because once you get that certificate, you're good. But the lender doesn't have to renew the mortgage either. So I just did a BR, for example, in Edmonton. Hoping to go to the same lender I'd been to for, you know, decades. And they're like, Well, sorry, the lending environment's changed. We're not doing anything for less than 5 million. I was looking for two. So where? I had a pool of, like, ten banks that my mortgage broker choose from. I was now have now have two. Right? So this is the other big change. So say going into my life, I mean, I was in an affordable housing program basically created by the feds, you know, to incent landlords to keep their rents below a certain level, you know, so they compare the median rent or the rents to the income of the area. Now, this really disproportionately skews it in different parts of the country. So for example, in Everton, housing is really cheap, incomes are really high, so every single apartment building falls under the affordable category. So for people that live on the prairies, they just won the lottery. And all of a sudden, hey, I could borrow 95% loan to value 50 year amortization. The bank is only looking for a 1.1 debt service coverage ratio cushion between the net income and the payments. And people just like, you know, took advantage of us, took a massive equity. But you got to think about them for the leverage because, you know, you do that last year when rates were low. Five years from now, that's essentially an interest only mortgage. You know, you're not going to pay off almost any of the principal. And you better pray that that rate is at the same or lower than it is today or you're going to get a margin call. And I've seen this a lot. The other things happening right now.

Rob Break [00:31:49] Sorry, with this, are you guys are you saying that you have to keep the current rates? Is that what you're saying?

Cory Sperle [00:31:55] But you don't have to keep the current rents, but they have a cap on how much you can increase it. And you and you're in that for ten years. So for example, like in an expensive market, like I'm in Helena where, you know, I probably pay 300,000 a unit for a multi and but rents are super high here. Okay. But also the incomes in Cologne are very low compared to Alberta. You know, I would have to drop my rents, you know, here in Cologne significantly to even qualify for this program. Right. But in Alberta and it's tied to they call it the CPI, what you're allowed. So it's 80% of the units have to be tied to some kind of rent control, which, you know, the cap is I think it's like three or 4% that you can raise your rents a year. So the logic for most investors is like, well, I haven't been able to raise my rents for the last eight years anyways in Alberta, so I might as well take this program. It's great money. I'm going to take this money and redeploy it. But the gotcha is what the government does. You're essentially you're imposing rent control on yourself. Now, I firmly believe there's a 40% upside for rents in the next five years. Now, if I opt out of my life and just do regular CMHC, there's no cap on it. I can raise the rents to whatever I want, whatever the market will bear. So and if it is dividing like better, like 50% of investors, they're all in an M.I. But I can tell you this, the veterans, the guys that I've known, the guys in the sixties and seventies live on multifamily for decades. They're not going near this program with a ten foot pole.

Sandy Mackay [00:33:25] And how about the because Corey, there are a couple of other elements to it, right? The accessibility and efficiency is that.

Cory Sperle [00:33:34] Yes.

Sandy Mackay [00:33:35] Those play planning, those maybe change that in any way because if you can get that, that skips over, potentially skips over. If you get enough of the points that those two pillars of it, you can kind of avoid the affordability piece. Right.

Cory Sperle [00:33:49] Yeah, I think so. I have one friend who's looking into that, especially the efficiency part. So and these are great initiatives by the Government. I have to give them a little bit of credit here because, you know, if you step up and increase energy efficiency, you're going to save money and it's better for the environment. You know, if you add a wrap to make your to make your building more accessible, they're going to recognize they're going to recognize that as well. Now, the one the one real advantage of them, a lights on a do builds because if you're and I know of a few ladies like story and I loaded them into the do new build multifamily my life for that makes a lot of sense because you only have to tie I think it's one of your units or 20% to you know, to these rent up to these capped rental increases and they're allowed to raise the rest of whatever they want. So on a new build, it makes it makes a lot of sense. And I think that's where the accessibility and efficiency really come in. And I think you can score points on all three and really, you know, take advantage of this program. I just haven't talked to very many people who've done that. You know, most people have gone the affordability route and.

Sandy Mackay [00:34:51] Accessibility.

Cory Sperle [00:34:51] Is maxed out.

Sandy Mackay [00:34:52] Yeah, accessibility is tough for sure. Unless it's a new build.

Cory Sperle [00:34:56] You can't just throw an elevator into your building. It's not that. Yeah.

Sandy Mackay [00:34:59] And efficiency, perhaps. I think that's I think there's got some there's opportunities there for sure. I agree, though. Yeah. New builds, new build certainly has some perks to that that might make sense.

Rob Break [00:35:12] Yeah. So you mentioned that you were doing a BR right now or just recently on one of the buildings. So what does the potential risk increase right now in doing something like that?

Cory Sperle [00:35:25] Yeah, honestly. So the one I just did in LA Duke, it was 86,000 a unit. We just refinanced that 230,000 units of the bridge costs were astronomical. Right. You know, we had we're borrowing at 7% plus. There's points if you go beyond the 12 month period, they either increase your rate 3% or add more points. I know a guy in Ontario right now that's just doing one. He bought a building in Mississauga, 360,000 a door. He's doing a BR and he's going to take out his just br. He's going to take out his bridge financing with MLS Select. Now, the one I just did in Le Duc, I don't even know if I would do it today because that 7% bridge loan is now 12%. I'm actually I have a building under contract right now in Fort Saskatchewan, which is just on the outskirts of Edmonton. It's a premium building, hiring 25,000 a door, but the rents are low. So, you know, a year ago I might have did the first round, I might have did a bridge loan, you know, with cheaper rates. But now I just did the math on that. To borrow that much money for 18 units is $350,000. So that essentially adds 20,000 a door to the purchase price. So if I had 125 now adding another 15, well, I mean, I'm not going to go refinance that at 160 to be able to take out the interim financing. And this is the real rest of these bridge loans today, right? Super. It's super tight. And, you know, you don't know what rate there is next year. You know what rate is going to take out. Even with MLR, there may not be enough equity and take out your bridge loan. That's why I wouldn't do it right now. I mean, so.

Rob Break [00:37:04] Is there is there like. Okay, sorry. So explain this in a little bit deeper terms. So the bridge loan is so that you can renovate.

Cory Sperle [00:37:13] Yes.

Rob Break [00:37:14] Right. Okay. So you're taking a loan, a new loan, like a second against the property so you can go in, renovate, raise the value. So now like the bridge loan is how long typically.

Cory Sperle [00:37:27] Yeah. So they're interest only. So there's, it's the only real variable rate type of financing for commercial has mostly it's mostly long term fixed rates. So the bridge loans are interest only. They're tied to prime. They're usually prime plus five or prime plus six. They're usually for no longer than 24 months. So you can't do a bridge loan for five years. Right. You know, they will not they would not like to do that. So usually after the first year, you know, Harbor is a good example that they do a ton of bridge loans. So let's say the first year they'll do like interest only at 7%. Then the next, if you go beyond the 12 months, they want another 1% commitment fee. Right. So if you borrowed 2 million bucks, they're going to ask you for another check for 20,000 plus. Now, your rate is quite up, you know, 4 to 7 to like 11%. They really disincentivize you from keeping that long term.

Rob Break [00:38:18] Right. So there's all kinds of factors in play. Like, are you going to be able to get in and do the renovations? Like is unit vacant? How many units are vacant? You know, all of that kind of stuff. So maybe this works better on smaller buildings, that that kind of thing. But no, that's just and so let's transition this into, you know, for people listening to this who had no idea what Corey was just talking about. They can join your mentorship program. Right. And maybe get a grasp on what all of this means and how they can take advantage of it.

Cory Sperle [00:38:56] Yeah, it's called the Six Pillars of Multifamily. So it's a nine week it's a nine week mentorship program that I go through because a lot of this does can get pretty complex. Like I said at the beginning, I'm a big fan of this five year buy and hold 25% down factor. But the prices, I'm going to gradually increase the value over those five years and then refinance over. So it's the model that makes the most sense when you get into these bridge loans and interim financing. It gets a little trickier and it gets riskier. Now to throw even more on top of that, another go to strategies. A vendor take back. You go to the seller and you ask them to carry some of the financing, some or all of the financing. So this is something you're going to see a lot of as well, because I go to buy a building, I'm going to go buy a building. Robin let's say you're going to retire. And well, now I go to the bank and Mr. Banker is only going to give me 60% loan instead of 70. Let's say you're retiring anyway. Anyways, you want some income? Well, I can. I can offer you a higher purchase price if you carry the mortgage for 2 to 3 years, you know, maybe 80% loan to value. You make some money, you get to defer your gains over a couple of years, save some taxes. It's win. Right. And it's way cheaper than doing a bridge loan. So, you know, seller financing is not uncommon in single family, but I think in multifamily, we're seeing it more and more. And I think that's going to start picking up steam, especially as, you know, traditional bank financing is becoming more expensive, especially the bridge loans.

Rob Break [00:40:23] You know, and that can also really, really help somebody who's gotten themselves into, I guess, a situation where they don't have any, I don't know, other income or whatever. And the building's not covering them. Right. So someone retiring, like you're saying?

Cory Sperle [00:40:42] Yeah. Yeah, exactly. I, I don't want to breeze you. Just go ahead.

Rob Break [00:40:46] I was going to say I don't want to breeze by the mentorship program, though. So let's talk about how people can sign up for it. Like where? Where they go to join something like that.

Cory Sperle [00:40:55] Oh yeah. You can just go to my website. So it's just Alton Equity Score Artisan. And right there should be a there's a link to the Six Pillars program so you can go there and check it out. I also have a download feature on there, so there's a bunch of downloads you can have. I've done a bunch of webinars on different topics, but you can still get into the mentorship program, so you just have to go in there. We're running it from now until Christmas and then I'll probably run another session. I run it like usually twice a year, so I'll probably start it up again, probably around maybe in the spring. It depends if we do another summit. You know, I really like to team up with Elizabeth and do another summit, but it is a pretty intensive program, mentorship. I have people in there that have never bought a single piece of real estate to people that have done like 50 or 60 flips. And I have people that already own multifamily. So there's really something for everybody. I go right from the foundation of planning, you know, right to acquisitions, you know, how what are the strategies to do acquisitions, financing, property management? And then I've even started to get into syndication and doing joint ventures and raising capital because, you know, raising capital and JVs kind of go hand in hand. And a lot of people when they're starting out, I mean, they may not have five, six, seven, 800 grand to buy multifamily buildings because they are pretty expensive. So there are ways you can get in with JVs, whether it's active or passive partners. And that's a great way to get into the multifamily building.

Rob Break [00:42:23] Yeah, that's very cool. And we're going to have all the information in the show notes. If people missed that, they could go to the show notes and get in touch with Cory on the mentorship program. Sounds great.

Cory Sperle [00:42:34] Thank you.

Rob Break [00:42:36] Um. I don't know if we covered this, but I got here. What regulations have changed? So it's only certain regulations that have changed over the over the last little while for multifamily.

Cory Sperle [00:42:47] So when you when you buy a building, one of the big things you need for due diligence, there's three reports you need. So you need an appraisal which is kind of goes par for the course. You need a building condition report by an engineer and you also need and it's called an environmental site assessment. So an essay or a phase one, you'll hear the term phase one. So now, at least in Alberta, they've really started to change the regulations around environmental contamination. And it's mostly to do with Tier one and Tier two soil samples. So let's say you buy a building and it was in the vicinity of a gas station or dry cleaner, you know, dry cleaners, you know, horrible for contamination. So it'll trigger a phase two, which basically means they drill holes and they do soil samples. Well, to put it in perspective before, when they're looking kind of with a magnifying glass, now they're looking for a with a microscope. So you see any kind of trace contamination. So as an investor now, I'd say if you see this, if it's within a block or two from a gas station or a dry cleaner, it's easier to steer clear of it. I mean, I'm navigating a deal right now that is close to a former gas station site. So they brought in these regulations in 1990 and now going forward, it's going to be even stronger. And the second one is going to be, I think, with what's with the market kind of slowing down a little bit, a lot of these kind of newbie syndications are going to be in trouble. I think securities. Securities and exchange is going to be breathing down a lot of people's necks. Now, you know, we've had a few collapses in Saskatchewan, and you really got to keep you really got to keep on the level. You know, have all your documents signed work with accredited investors really don't take any shortcuts there. That's the nut. Another big one that I feel is going to be massively impacting in the next like in the next year for sure.

Rob Break [00:44:34] Have you ever seen something in the vicinity of like a gas station or a dry cleaner, like you said, and it passes phase one or does it go straight to phase two or something like that?

Cory Sperle [00:44:45] It can. So what will happen is on a phase one, it will get flat.

Rob Break [00:44:50] So is it like have you ever seen something there, though, that didn't get flagged on phase one or just it does just because it's in the vicinity?

Cory Sperle [00:44:58] Yeah. I could give you a couple of great examples. I mean, I know a good guy. I know a guy right now who got a phase one and it was near dry cleaner and he didn't like the fact that it was there. So, you know, he depends how you interpret the report. He somehow convinced his lender that it wasn't a problem. He got the financing. He went to try to sell the building. It triggered a phase two and the guy drilled this was about contamination and he just screwed himself. So you got to ask yourself, how badly do you want this building? Yeah, sure. You can buy it. You can find a B ladder; you could buy it in cash. But it's way easier to stay away. Right? It's going to happen. It's going to trigger the phase. Do you do this? You do the test and the seller pays for them. The seller pace with the soil samples. If it's clean, you're good. It's not like it's not like that's going to come back to haunt you five, ten years from now. Once you've done the once you've done the soil samples, it's not it's a non-issue. Now, some people would still be uncomfortable with the fact that there was a potentially contaminated site inside them. But for some investors, it doesn't matter. But I've seen this a couple of times where people gloss over on the phase one and that is just about it. All right. Like, that's the biggest risk to investors because you find contamination on your property, they can essentially shut you down, say, oh, look at this. Well, we have to remediate. All your tenants are kicked out, but the mortgage company still wants the mortgage. So what are you going to do?

Rob Break [00:46:21] It sounds bad. You need to know somebody who does the soil samples and also owns a carwash maybe.

Cory Sperle [00:46:27] Yeah. There you go.

Rob Break [00:46:32] Corey, what's next for you? What are your big plans?

Cory Sperle [00:46:36] I'm getting back into joint ventures. I'm going to continue to do to do education because I really love, you know, sharing my knowledge. I ran into a situation where I had a lot of people were coming to me from a province that came into Alberta and got themselves into some situations with multifamily that they shouldn't. I mean, even sophisticated single family investors, they invested in the wrong neighborhoods. They bought the wrong type of property. They hired the wrong manager. And I just thought, man, I got to I got to help people out here. And that's kind of how the mentorship was born. And I really love it. I want to keep doing it. I love analyzing deals for people, but I'm probably going to go back into syndication now. So I'm looking at actually acquiring starting a limited partnership and acquiring larger blocks because the other thing that's changing right now is I'm now seeing 50, 70, 100 unit buildings regularly coming up for sale. And that was unheard of in your you know; you never saw those listings. They went straight to Main Street Avenue Live and all the big players, you know, they kind of went to them under the back door. Now I'm starting to see those at least one of those listings a week. So they're available to all of us now. They're up for grabs. So, you know, my next step is going to be to start a limited partnership service my investors and keep creating those win wins. And that's what I want to do.

Rob Break [00:47:54] I love it. That's awesome.

Sandy Mackay [00:47:56] That's great time to be looking to invest in those types of properties. I think the market's near the bottom. Getting to the bottom would be there are some points there and I think, like I said.

Cory Sperle [00:48:07] There's never there's never a bad time to buy. It's just a matter of just finding the right property. But yeah, no, I agree with you. I think nobody knows where the bottom is. But certainly we've been through a rate hike shock. It's going to take a while to work its way through that system, but multifamily is going to continue to perform for a long time.

Rob Break [00:48:25] Well, the one point I was going to make is like, you know, because most of the people that listen to this show is are, you know, relatively new, I would say, to investing. And so I think that a program like what you're saying because so you made the point you said a lot of guys who have been investing in this for like 15, 20 years, they're not going to touch this new government program, you know, with a ten foot pole. But I think it actually does create some opportunity for newer people to actually enter the market. Right. Because they these guys weren't there 20 years ago and the other guys started. So I think that it actually does create some opportunity. And so that can be something that people can look into.

Cory Sperle [00:49:08] Yeah. I mean, you can if you buy a building with 5% down and you can if you find a building with enough value add on it. Sure. You can go with that high leverage. I mean, you're stuck in that program for ten years, but it's still CMHC. They're still going to give you you're still going to get a way better rate. For example, the commercial loan I'm doing right now that's conventional is six and a half percent. Well, I'll take four, four and a half percent under my life. Select. All day long, right over that. So you're right. It's still a great program for under the right circumstances.

Rob Break [00:49:42] Yeah. I mean, that's maybe they should take your mentorship program and then decide what to do.

Cory Sperle [00:49:47] Yes. Yeah, actually, yeah, we're doing it. Paul, I actually have financing experts on my show. We're going to be debating exactly that. The pros and cons for my students who are just staunch supporters of it, and the other half that are like, no way in hell. You know, I had a mortgage broker last year that was old school and he's like, No, this is an affordable housing program. This isn't for you. Don't go near it. And yet I have another one that say this is the greatest thing that ever came along, the greatest gift from the federal government. You got to get on board. So the opinions are kind of all over the place, right?

Rob Break [00:50:18] I mean, one of the biggest pieces of advice that I ever took was this guy, Jason Hartman. He's out of the States, needs to listen to his podcast all the time. And his motto was Refi til you die. Right? You have refi til you die. And so I picked up on that. I'm like, This is great. I love what he's saying. Okay, I'm going to adopt this mentality did for a while. And then, you know, there comes a point in time where you go, okay, hold on. Maybe we got to, like, shelf that saying for a little while here now. Yeah. So, you know, not everything works all the time. I think there's an adaptation that needs to be had to everybody's strategies. Right. But you can still continue to buy.

Cory Sperle [00:51:01] Leverage is leverage is key and over leverage can you can easily over leverage yourself. That's one thing you can do on this MLS program right by yourself to do that because if you keep yourself in rent control, your expenses aren't going to stay the same. They're going to continue to go up. So if you find yourself in a squeeze where your expenses are going up and you can't raise your rents, that sounds like being an Ontario landlord right there.

Sandy Mackay [00:51:24] Yeah, exactly.

Rob Break [00:51:26] Well, the 3% increase is more than we get. And so that's why that's when you said that, I'm like, okay, well, that sounds good. You know, we've got I think what do we have a 2%? I think we got a two.

Sandy Mackay [00:51:38] Two is I if I if that's the case right now. Yeah. It's one in.

Cory Sperle [00:51:41] DC one and a half or something here.

Sandy Mackay [00:51:43] Or one or point something.

Rob Break [00:51:46] Right. Right. Yeah. Anyway, uh, well, Corey, I really appreciate you coming on. I mean, you shared a lot. Obviously, there's so much deeper that we can go with this kind of stuff, but we've sort of just scratched the surface. But I want to say thank you for coming on and sharing.

Cory Sperle [00:52:07] Yeah. Thanks, Rob. Thanks, Sandy. It was great. I tend to get pretty passionate about this stuff when I start talking about scenarios. I got to kind of slow myself down, but hopefully your viewers got enough of an intro to multifamily to at least get them interested. Feel free to contact me. Mike by email. Cece Burley. Dalton Equities.com. People can email me all the time. I always respond and love to hear from people. Check on my website at dot COM and just fill out the contacts and set up. I've set up a discovery call with me and we'll see if we can help each other out.

Rob Break [00:52:38] Right on. So that's the best way for them to get in touch with you. What is it again?

Cory Sperle [00:52:42] Just. Just on my website. All in equities dot com a l t in equities you can just go to the contact form, just fill it out. And that's the best way to go.

Rob Break [00:52:52] Perfect. Again, thanks for being here, man. I appreciate it, Sandy. I love it. What's the best way people can get in touch with you?

Sandy Mackay [00:52:59] Any social media? Any social media platform. Pretty much or sandy at freedom reps dot com.

Rob Break [00:53:08] And people can reach me at Rob at Mr. Breakthrough dot CA. All right, guys, thank you for joining us. See you again next time.

Announcer [00:53:16] You've been listening to the Breakthrough Real Estate Investing podcast. We hope you've gotten some useful and practical information from the show, and we hope you've been inspired to take control and live life on your terms. We'll be back soon. But in the meantime, make sure to like, rate and review the show. And don't forget to subscribe and listen on Apple Podcasts and Spotify. See you next time.

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