Closing on 5 Apartment Buildings and 177 Units in 2022 With Quentin D’Souza

Recorder 1 21

Podcast Transcription

Erwin Szeto [00:00:07] Hello and welcome to another episode of The Truth About Real Estate Show. And my name’s Erwin and I have a quick rant on rent control. I posted on my Facebook and Instagram just last week an article about how 100 plus prospective tenants lined up to view a rental property in Dublin, Ireland, their government wisely. This is sarcasm. The government wisely implemented rent control so the rents do not keep up with inflation, forcing landlords to sell their investment properties. The next property owner may move into the property, thus reducing rental supply or a new landlord, typically one with deeper pockets. Some of these are massive investment funds. Now they’ll want a return on their investment. Hence they’ll turn over the tenants rent, renovate and raise rents as supply and lower rents are forever gone and the rich just get richer. Understand that rental developers are people who build purpose built rentals. They do not like rent control. Hence we saw a whole bunch of projects get canceled when rent control was reinstated by the government. No capitalists in general likes their prices to be controlled, so it’s down to the government and the socialists to build a surplus in opposing illiquid that. I got my bread. I’m going to do what I can to take care of myself, my family, my kids in terms of rental housing. So my team at I to estate team and I will provide an update and drill down into what investments we’re getting into, including turnkey properties. And you wouldn’t believe it. Thanks to this market correction, we’re actually seeing more and more opportunity for triplex conversions going from single family to three, and we’re just talking about like a supply. My clients and I were creating supply, sometimes doubling or tripling of one property, a single family home. We’ll get into the details around strategy or renovation plans, budgets and of course, checking and cash flow. So you don’t want to miss it on Saturday, November, September 17th, it’s Saturday morning. Doors open at 830, our offices and also Ontario. Just two more meetings into the West Hacker Conference on Saturday, November 12th. I’ll post the link in the show notes to register for our meeting. There’s much more to learn out there, and there’s always much more to learn. And of course, networking with likeminded folks and wealth building to be done on the personal front. Our new Tesla Model Y, we’ve had for about three weeks now. It has been quite an experience. The electrical quotes were steep, so we had to upgrade our panel and have an electrician to install the Tesla wall units just to test the volume and just the charger. Nothing fancy. It’s not a battery or anything, but the charger itself is $700. Or you can just use driver alert if you happen to have one in your garage, which we do not. We do not. The learning curve of owning and driving a Tesla is really different. I would compare it to my old analog Nokia that I had back in the year 2000, 22 years ago, versus a modern day iPhone. That’s completely different. The technology inside of Tesla is really impressive. For example, we dropped off the Tesla to get wrapped for the protection on the front end and so many times why not? And I was just curious if they started work yet. So I checked my Tesla app and I could turn on the cameras within the car and it did check where it was and also the exact location. So I know they moved my car. Also, the Tesla operates under one pedal driving because if you take your foot off the accelerator pedal, I used to call the gas. Now that’s not gas. So they call it the accelerator pedal. So that’s my call to which take your foot off it or ease off of it. The regenerative braking kicks in and it’s actually pretty abrupt. It’s a pretty hard brake. That’s what it feels like. To the point of that is to recover any energy wasted during the braking process. Hence I actually really brake anymore. So it’s pretty cool. Also really cool is the autopilot feature, which is the fancy cruise control. It’s especially good in stop and go traffic as the car will come to a stop if the car in front of you stops and when the car in front of me goes, the car will go without you really having to touch anything I do. Just that they keep my hands on the wheels wheel to know I’m still there once in a while. Charging hasn’t been that bad. We’ve taken it on a road trip already up to Blue Mountain Village. And the. This thing was our hotel for the weekend. They had a great parking spot for our Tesla where the free charging station right next to the lobby. And again, it was free. Not that charging the car is expensive for a 0 to 100% charge. We’re talking about $8. And then for our daily usage, Jeremy, we use less than 20%. So we’re talking about the cost of a Tim Hortons double. It’s really an expensive to drive it. Of course, we would not have never considered by the Tesla without that $55,000 plus interest deduction for tax purposes. Thank you, Justin Trudeau for giving the rich such a lovely tax benefit. Understand almost every luxury vehicles over 50 grand. The Tesla model Y was significantly. The most expensive car her own. And we’d never do this deal without this monster tax credit. Thanks to our lovely government. You mean more of a tax implication? I left him a link to Cherry’s article on the on the tax savings for buying your Tesla or equivalent electric vehicle. Speaking of rich people, this week we have the very successful Quint D’Souza on the show. There are tons of coaches and multifamily experts out there. But my experience, Quentin, is one of the best. I know many of his past students, including Steve Phillips on My Island real estate investment team, and I know many of its investment partners. They’re all like what Clinton logic was to leave it at that. Not many have a successful track record like Clinton’s. So you probably want to pay attention to this show. He’s on the show today with Terry, actually, Terry Stephen delivering the interview as I was hosting a golf event with fellow seven figure entrepreneurs. So Terry and I had to quote unquote, divide and conquer. You don’t conquer anything, though. I don’t know why you can see that term. I actually prepared the questions that I want to ask, thinking personally about building, investing, investing in the U.S. or to find cash for these days and what the future holds. You know, the same stuff you would ask for someone with hundreds of units in their portfolio. Yeah, it’s pretty successful. You don’t know. I also like the short title. Clinton has closed or closed on 177 units this year alone. He’s always looking to level up. Clinton’s an old friend. He’s the chief education officer and founder of the Germ REI, a really, really great long running working group that meets monthly in the German region. His other four books, including the most recent The Action Takers, Estate Investing Planner and the Challenges to the Amazon in that we’re going to search Amazon. You can search Quentin D’Souza or again, the name of the book, The Action Takers, Real Estate Investing Planner. Obviously, Clinton is a big time investor. Please enjoy the show.

Erwin Szeto [00:07:01] Hi, Quentin.

Quentin D’Souza [00:07:02] Hey, how are you doing, Gerri?

Erwin Szeto [00:07:04] Welcome to our Truth About Real Estate Investing show. And welcome to my very first podcast hosted Beauty Show. I know. I hope we will be doing okay. What’s keeping you busy these days?

Quentin D’Souza [00:07:17] The thing I’m buying apartment buildings we closed on in March, we closed on 17 unit and a 24 unit 24 unit was in Kingston, 17 unit was in Bellville. We’re closing on 100 units at the end of this month. Next month we’re closing on 20 unit and another 16 unit. So we’re buying apartment building. They’re keeping me. That’s keeping me busy.

Erwin Szeto [00:07:44] Sounds a little bit busy, but the house, how is the summer house being housby, not being a baseball dad?

Quentin D’Souza [00:07:52] It’s been really good. My oldest son got on to the York Bulls baseball team. So we’re going to be doing a lot of that in September and October. He has doubleheaders every weekend. My younger son is doing House the baseball, and we were really enjoying that. I did a trip to Machu Picchu, the Inca Trail with my oldest son. We did a week at the end of June, and we and then both my sons, we did a whitewater rafting trip at the beginning of August for about four days. So we had lots of fun there. So that’s.

Erwin Szeto [00:08:26] Amazing.

Quentin D’Souza [00:08:27] Yeah, it’s been good.

Erwin Szeto [00:08:28] Yeah, I hope baseball is worse than hockey in terms of training schedule and then also competition schedule.

Quentin D’Souza [00:08:35] It definitely is a lot. It’s a lot of time. But now that he drives the older I. Yes. And so that makes it a lot easier. So he is able to drive himself to practice. My older son works out like every day, so he goes for like two or 3 hours, takes the car and goes and works out, comes back, right? So like, it just it makes it a lot easier and then we just show up to the games.

Erwin Szeto [00:08:58] Okay. Yes, that is very that’s like, I would say, 80% of the battle. Yeah, yeah.

Quentin D’Souza [00:09:04] Oh, yeah. For sure. There was a lot of chauffeuring going on between Laura and myself, just, you know, getting the kids to different events and stuff like that. And now with the older one driving, sometimes you can take the younger.

Erwin Szeto [00:09:17] One and oh, that’s amazing.

Quentin D’Souza [00:09:19] Does pops out quite a bit for sure.

Erwin Szeto [00:09:21] How do you like go? I don’t know if I would ever be able to like completely like drive the car, take the car and not worry about that.

Quentin D’Souza [00:09:29] Well, I mean, you still worry about them. The other thing was he’s not driving my truck. We bought another car and using this one, we call it the family car.

Erwin Szeto [00:09:38] Oh, okay.

Quentin D’Souza [00:09:40] Yeah, right. And it’s neither my wife’s car nor my car. We’re, you know, yeah, we have a third vehicle, so. And it’s just like a little Hyundai. I can’t remember. It’s just like a little Hyundai. And, you know, it’s great for getting from A to B and so it’s worked out well.

Erwin Szeto [00:09:55] That’s awesome. Yeah, amazing.

Quentin D’Souza [00:09:57] And he’s been really good about, you know, we make sure that he contributes to the. You know the car. So he’s paying for his insurance then? Yeah. And then, you know, after the first tank of gas, because that’s to get to work and to go to the different places. He’s paying for anything additional to that so want to make sure that he has some responsibilities to you know, when it comes to keeping and maintaining the vehicle any tickets he’s going to pay, so.

Erwin Szeto [00:10:25] Oh, yeah. For sure. Yeah. So like, like going along with that line, I know you have been an educator for many, many years before you jump into being a real estate investor full time and you’ve got a wealth of knowledge to share, and how are you educating your kids? Because your kids are I mean, my kids are eight and seven. They’re relatively young, maybe ten years behind your kids. How are you educating them and how are you developing their financial sense?

Quentin D’Souza [00:10:53] You know, it’s being open, having conversations. So at dinner time, my wife often says that we talk about finances quite a bit. Oh, yeah, right. And it is something that I never did when I was a kid. But I’m making sure that we talk about it now. We talk about, you know, prices, we talk about inflation, and we talk about just different concepts, real estate and the purple book, right? Robert Kiyosaki book. Yeah, we I would have them listen to that when we did car trips. So I did I put on there like the audio book version when they were younger and when I took them on long trips, I would just put that on and we would talk about concepts, you know, and like definitely encouraging the older one to read books and, you know, making sure that that he reads the books. Right. So that’s been good. The younger one, he’s still, you know, he’s interested more in cryptocurrency and fees and that sort of thing. So I’m encouraging, you know, I bought one of his fees, all right. So I was like, sure, I’ll buy it. I don’t know. Yeah, yeah. Right. So I’m encouraging them to experiment to do that. But yeah, I mean, it’s, it’s always, it’s always about sharing and just telling them what I’m doing. Like I’m often saying, look, I’ve raised this, we’re buying this, this is what I’m doing, right? So I’m pretty open about it so that they understand what I’m doing. They don’t understand the details and going into it. But if they are interested in, I’m always happy to share more. Right. So that’s.

Erwin Szeto [00:12:28] Really cool. Yeah. I’m trying to make Bruce do these burpees as they do as he does burpees; he earns like $0.10 per burpee. And so he’s doing a lot of buffets lately. It was by accident that we discovered that Bruce was Bruce is only seven years old, so he’s like quite young. He doesn’t really quite craps the, the concept of money. So it was by accident. He loves going to he loves going to the gym with me. So my trainer offer him $0.10 for Burpee because he’s always reading the book at a gym. Right. And so he started doing but he got so excited about doing burpees because of the money that I realized, Hey, you’re actually very motivated by money. I’ll just pay you to earn that money. And then a few weeks later, we got in our falls and we were at this breakfast place, which is totally a tourist trap anyway. So they charge $5 for a cranberry juice, a glass of cranberry juice, and Bruce wanted the cranberry juice. And I said, That’s fine, so you have to pay for it. It’s $5. And then I said, How many burpees do you have to do? 500? But he’s like linking the two and he’s regretting it. So he’s linking the two. I know it’s not at the right kind of science to match it to. Nobody is going to pay him to do burpees ever. But it’s kind of like introducing that concept. I think introducing it and talking about what you do, I think leading by example is also extremely to me, it’s extremely important. I’m trying to live up to that standard.

Quentin D’Souza [00:14:00] Yeah, for sure. I mean, like they really need to know that, like, there is different ways to earn money as well too, right? So that that’s, you know, time for our right and that’s definitely how everybody starts off. Right. And then there’s other ways like investing your funds in order to have your money, make money for you to write in. That comes later on. But that’s great. That’s a definitely a fundamental concept for them to learn. So that’s pretty cool. I like that.

Erwin Szeto [00:14:31] Hey, for burpees. Yeah. So you mentioned that you have been so busy proposing closing properties and then are scouting properties to buy as well. Can you share with us where or how you’re investing in finding these deals? Because majority of the people are complaining like there was no deals out there. Maybe there are more deals now after the interest rate has gone up so much. But before people were complaining like, I can’t find these deals.

Quentin D’Souza [00:14:58] Well, luckily I have a book on that topic called The Finding Properties Toolbox.

Erwin Szeto [00:15:02] That’s also.

Quentin D’Souza [00:15:04] It goes into a lot more detail, but with there are a lot of different approaches to being able to find properties, particularly multifamily properties. And it’s more about the relationships that you have than it is about the marketing strategies. There are a lot of like. I get like every week I get mail from realtors, from people who want to buy directly, like who’s purchased a list in our, you know, mailing apartment building owners directly. I get phone calls from brokers asking me whether I want to sell my buildings. Right. So there’s that approach to doing it. Another approach is talking to, you know, the people who are interacting daily with apartment buildings. So talking to property managers and saying, hey, listen. Especially because I’m not a realtor. So I can say, look, a property manager, if you have, you know, of one of your clients that are looking to sell, I will pay you $5,000 referral fee if I close on the building and are happy. I’ve paid a property manager $20,000 to close on a building and then I refinanced all my money out of the building like two years later. So. But. But, I mean, like having those just because I know I can do that, I do that. You can talk to trades and be able to find that. The other thing is that develop relationships with realtors and brokers who that’s what they do daily, that’s the relationships that they have are with building owners. That’s where you’re probably going to get your biggest result is developing good relationships with people who are actually in the trenches day to day, dealing with the relationships that they’ve built over the last ten, 15, 20 years to connect with other building owners. And now they’re connecting. What they’re trying to do is connect the buyer and the seller together themselves. That’s who. So if you can build those relationships, those are three different strategies that you can use to, you know, be able to pick up multifamily buildings. And if you want more, go pick up a book.

Erwin Szeto [00:17:13] So what’s the percentage of your property purchase through the strategies that you mentioned, or are they also on MLS? How many are through your relationships or your network and how many are really through the public? MLS I saw this listing like the rumor or the story that I’ve always been told is that when you buy multifamily, it’s never on MLS. Those are like probably the last ones that you would look at.

Quentin D’Souza [00:17:37] I don’t think I’ve bought a build apartment building off the MLS at all. I don’t think so. Not that I can think of off the top of my head, no. The other 25 plus buildings. None of them have been on the MLS. Wow. Not that I can think of. Usually it’s relationships. Yeah. I’m just trying to think if there was one on the MLS or not. And no.

Erwin Szeto [00:18:00] But that already gave me the that all the all the is the percentage that you know, if you want to get into the game, you’re not just relying on MLS, you have to develop these relationships.

Quentin D’Souza [00:18:12] I mean, that is actually why people tend to want to partner with me is because I’ve developed all those relationships and you know, I’ve been able to like to have the deals that that make sense. And I have developed partners who get deals as well. And like all of that stuff is things that have been developed over the years, right? Yeah. I often make jokes sometimes that MLS is where good deals go to die, like especially in the apartment building space. But I mean, if I was to list the property I would probably want to listed on the MLS. Yeah, right. Yeah. Because I know that I would probably be getting the most I could four for them. Now, if you developed a relationship with a broker and they’re able to give you the price that you want and it makes the most sense because based on cap rate and net operating income, you get the price that you want. Then why even go to the MLS at the same time? Right? It doesn’t make sense. So I don’t know. There’s a lot of have pros and cons I guess, but when it comes to buying properties, it’s always been based on relationships, the relationships that have been developed for sure.

Erwin Szeto [00:19:22] I have to say early on in my career I was very focused and very narrow minded and I would just find myself in the Home Office cranking numbers and crunching tax returns and doing all these things. And it wasn’t until recently like just to be fair, I, I am still at heart an introvert. People don’t call me an introvert, but I am at heart very much an introvert. If you push yourself out there to do the network and make yourself known is not my own nature. Are you an introvert? Yeah, you are.

Quentin D’Souza [00:19:55] Oh, yeah. I’m a big introvert. Oh, yeah. Oh, yeah. Sometimes you can see me at parties, and I’m. I’m just sitting there looking. You know, I do push myself to be able to go out and talk to people. You know, most people would call me an extrovert, but I’m not like I am. It’s just not you know, I like to sit and think, honestly, I would rather be going for a walk by myself than I would be in a party with a bunch of people. Like I would rather be hiking or, you know, camping. And I’m good with being by myself. You know, it was funny. I was at a retreat once and people were all talking about like what they would like to do. And I was like, Well, I’d just like to be on an island by myself for a week.

Erwin Szeto [00:20:42] And I don’t think I’ve got that extreme yet.

Quentin D’Souza [00:20:45] Well, you know, I just sometimes, like, you know, I when I was in university, I did tree planting and tree planting had enabled me to pay for university and I got paid per tree, but I would be working by myself for 8 hours, just like hard labor. And that was fine with me. I was good, like, you know, you crave at that point, you start to crave being social with people, right? Because you’re often by yourself. But I was okay with it, right? Like, you know, everybody is different. You got to kind of do you do have to talk to people. You do have to do events. And, you know, but it’s about pushing yourself, right? I’m a very goal oriented person. We I like to do traveling. I like you know; I like to do and push myself to do new things. And that makes me get out of my comfort zone. And the only way to grow is to get out of your comfort zone.

Erwin Szeto [00:21:41] Right. I agree.

Quentin D’Souza [00:21:42] Sometimes I tell people if you want to change, especially what you’re doing, add a zero to every deal that you do going forward. Right. And all of a sudden you move from a $1 million deal to a $10 million deal. Totally different. Right. And that’s going to push you out of your comfort zone. Right?

Erwin Szeto [00:22:00] It’s kind of the Tenix mentality.

Quentin D’Souza [00:22:01] Yeah, absolutely. And it’s tough for everyone, right? You have to decide for yourself if that’s for you. But if you want to grow, you need to do something different. You can’t grow by doing the same thing over and over again. You need to grow by doing something different. And then once you find something that you’re happy with, then you just, you know, you can continue to it to a point. But what gets you to one place is not going to get you to, you know, a different place. You have to change what you’re doing.

Erwin Szeto [00:22:28] Absolutely. So speaking of that, changes and going into different markets and buying multifamily, because we talked about earlier on between us that you grew from, you didn’t start buying multifamily unit. No, like one unit in one count right from the get-go. There was a journey from your beginning, from the beginning to now. And you also quit your job focused on this full time. I want to revisit that story a little bit because I think to our listener here, there is a lot to learn from you because a lot of us are attracted to real estate because they want financial freedom and dreaming one day that, hey, maybe one day I can quit my job with the real estate portfolio. How did that happen to you?

Quentin D’Souza [00:23:13] Well, I mean, what ended up happening was that I, I built a small portfolio of properties, mostly single family homes and duplexes, and I ended up with about $5,000 a month in cash flow that had come from my portfolio. This was back in 2013 and 2012. I had bank had been in banking that money aside and then 2013, I needed to make that decision whether to continue or not. Now, when I quit my job, I really only had that one source of income. I was running the DERM Real Estate Investor Club and that gave a little bit of income, but it wasn’t as much as my portfolio was. And then when I quit my job, I added another form of income which was flipping properties which allowed me to, to gain. And all I was doing was the same buy, fix refinance strategy that I was doing before. But instead of refinancing, I was just selling them off. I always have a backup strategy. Whenever I did those projects, I always have two or three different ways to exit a property, either refinance and hold or refinance and partner with somebody or sell, which is what I was doing at that time. And I was just I was just selling them off. And what was useful about that and I don’t think a lot of people realize this is when they quit their job. You’re not going to get financing anymore. Yeah, it becomes much more difficult to do that. Now, you could go to be lenders. There are different ways to go about doing it, but it becomes a lot more challenging. So what I ended up doing once I realized that that wasn’t going to be how I continued to grow unless I. I partnered with other people who would qualify. And I did. I’ve. Done that before. But what I ended up doing was moving to the apartment building space where it wasn’t based on my qualification, it was mostly based on the building qualification. Right. And that allowed me to scale and continue to grow. And then as I refinanced those assets, I was able to recapture some of the equity that I could reinvest into other projects and to do what I needed to do with that. So, you know, I think that one, two, four unit properties are great for people to start to create that that base layer of financial freedom. And then once they take that, they get to a point where they say, okay, now I’m going to leave my job. You know, I’ve created this great base of income. Now it’s time to think about moving to apartment buildings for sure, and maybe even just before you do that to move to apartment buildings, because I think that is where you actually create wealth. You create net worth and you’re not creating. I think sometimes the mistake is that people think that apartment buildings, you know, they’re not a great cash flow generator. The thing is, is that you have to change your thinking into how that cash flow comes to you, because in an apartment building, you may be reinvesting all of your cash flow into the asset. But in in year three or year four or five, you refinanced all of your money out. Right? And then in year six, you do it again. Yeah, right. And the really the challenge is to make sure that you’re not extracting too much equity. So the capital gains aren’t. There’s not you extracted so much equity that there’s you can’t pay the capital gains if you decide to sell the asset. Right. So that’s a that’s a problem. But that’s not a problem with, you know, 1 to 4 unit properties. Right. And so it’s a different model. And I think that as you grow in what you’re doing, depending on where you’re at, that’s when you need to decide on what you’re switching to. Right. Have a great chart where I show, you know, people start off in the build phase and then they move into the growth phase. Right. And when they move from the build phase, they have high leverage, right? Because, you know, everybody starts off with high leverage. And then as you’re building, your leverage starts to decrease, then your cash flow starts to increase. And as you get further along in your real estate investing career, you end up with very low leverage, higher cash flow. But that takes time to be able to get to that point. The issue with real estate is that you can be equity rich and cash flow poor. Yeah, right.

Erwin Szeto [00:27:36] And so lots of clients are like that going negative every single year.

Quentin D’Souza [00:27:41] Yeah. And the challenge is okay well then how do I, how can I leverage those one, two, four unit properties in order to access some of that equity? And maybe you lend it out, maybe you do some, some other strategy in order to create a cash flow from that. But that is really a problem with 1 to 4 unit properties in the multifamily space. It’s based on net operating income. And because I can add increase my rents, I can increase the value of the building. Thus I can refinance the asset a lot easier and then recapture that equity and put it to work again into more assets.

Erwin Szeto [00:28:19] So what’s the typical loan to value when you refinance? When it comes down to the multifamily space.

Quentin D’Souza [00:28:25] It just depends on the debt coverage ratio and it depends. So let’s say you’re going to see a mid C financing, you’re probably at a 1.2 debt coverage ratio, but that could mean an 85% loan to value depending on the asset. And we just did was at a 17 unit. Yeah. The 17 unit was a 40 year amortization, 85% loan to value. Wow. But the debt coverage ratio is 1.2 on the asset. Makes sense.

Erwin Szeto [00:28:52] Yeah. If you can get 40 have. Yeah. That’s amazing.

Quentin D’Souza [00:28:56] Right. And that’s in the multifamily space. Right. So and it is very different but could I qualify for a car loan? This makes no sense. But this is the banking system, right? Instead of taking a loan, I’ll just pay for it in cash. Right. And then that. That’s fine. It’s just a different way of doing it, unfortunately. Right. But because I don’t have a T for income in the same way, I have to make sure that my corporate books are in order. I can show what my corporations are making, but because I don’t take it personally, because I don’t need it. Right, I may not be able to even. It’s such a weird, weird situation.

Erwin Szeto [00:29:36] Right? Yeah. Yeah. That’s how our banking system work.

Quentin D’Souza [00:29:38] That’s right. In Canada.

Erwin Szeto [00:29:40] Yes. So. Okay. Now that you mention in Canada. So I’ve seen somewhere that you’ve invested in the States.

Quentin D’Souza [00:29:48] Yes. Oh, yeah. Yeah.

Erwin Szeto [00:29:50] Yeah. How is how are those investment coming along?

Quentin D’Souza [00:29:53] So I have I’ve got properties in Tampa; in the Tampa properties I bought in 2018. And because I couldn’t get financing, I had to purchase them cash rate, I couldn’t get financing on them. And then I got a foreign. Like, what do you call it? Like a foreign buyers loan or whatever? Yeah. And it was like a 7% interest rate at 65% loan to value, which was a real pain. But since that time, just earlier this year, I actually was able to get a loan with a financial institution that had in Canada that had an office in Florida. And so what that enabled me to do is get a 75% LTV at a rate that made sense, which was like 4%. Yeah. The properties in Tampa had actually doubled in value since I had purchased them. And you know, now it’s still cash flow is about $2,000 per month on those assets. And you know, and I’ve got different I’m involved in different projects down in the in the US, but I see my stuff in the U.S. as a hedge against the Canadian economy gives me the opportunity to get paid in U.S. dollars. And, you know, that’s really the main reason for investing in the U.S.. Yeah. And it’s important to, you know, from a tax perspective to avoid double taxation. Yeah, right. Because if you’re not structured properly in the U.S., you could really like it can really mess you up. And I find that a lot of advice out there is bad advice because it’s old advice that doesn’t work anymore. Like Use LLC and things like that, which just don’t work anymore.

Erwin Szeto [00:31:35] Right. It’s not just like we had in our practice. I mean, this is the truth about real estate investment show. But I can’t help to talk about some taxes. We’ve helped a few of our clients doing some structuring lately with their U.S. purchases, and we found that with our experience, even with the great limited partnership structure, we see some crazy number of taxes the combined between the Canadian and the U.S.. It’s crazy, even with the proper tax structure, and it’s almost like a cost of doing business outside of Canada that people often don’t account for. So that’s the part that I always wanted to do, a sort of a presentation on. Eventually one day I’m not ready, I’m not there yet.

Quentin D’Souza [00:32:19] So that would be a great presentation, I’m sure.

Erwin Szeto [00:32:21] Yeah, yeah, absolutely. So, you know, a lot of investors in different stage in their journey. And I mean, I want to and I never really invested in never made a leap to invest in, I guess in the apartment building. We want it to every time. Like I went to the multifamily conference, I see all these people taking all these massive action. I talked to Sarah. I see that all everyone’s doing all this massive action. The only hope I have is like I have my own accounting business that I do have to take care of. And my husband, Irwin, has his own real estate team that he has to take care of. We have businesses. And how much of the involvement, the day to day involvement do you like? How much time do you need to do this thing?

Quentin D’Souza [00:33:09] So that’s a trick question.

Erwin Szeto [00:33:11] I’m not because.

Quentin D’Souza [00:33:13] You need to, but it depends on how you answer it. So what I would probably say to you is then you partner with somebody who is somebody who does the day to day work and you don’t take on the amount of work that’s required in order to do this and build the relationships and do all those different things. So you don’t have to be that person that oftentimes I have I have conversations with business owners and usually professionals like doctors, dentists. I’ll talk to just different people who are busy. And instead of being you don’t have to be the person who is the operator and do the day to day to benefit from apartment buildings. You can be a partner and it’s okay.

Erwin Szeto [00:33:58] Okay. So how does that how does that number work? Tell me, tell me. Pretend that I am the crazy rich Asians. I’m not. And I am the how does the number work? Like if I were to put in like $200,000 and invest it in one of your projects? How does it work?

Quentin D’Souza [00:34:16] Well, I can’t really present something like that on a show like this. But like, in general, what happens is that you would take your funds and you would own an actual piece of the building. You’re actually an equity owner in the project. This is not like a fund, right? Like you’re actually an equity owner. So that is shares that are equity positions in the building. But what happens is that within that within that structure, there are people who are, you know, more active. And those people will have a higher percentage, but they end up doing the business plan. So they’re working on, you know, the day to day operations of the building. They’re also doing the you know, making sure that the property is going to be able to be refinanced and pull all the funds out. So usually what happens in year 3 to 5, we’re looking to refinance the building and make sure that our partners are able to get back the funds that they invested. But they still own the equity share of the building. Oh, right. And so if you think about that from a return perspective, that in 3 to 5 years, that’s very lucrative. Yeah, right. And I mean, nobody can promise anything, but I’ve been doing this since 2009, you know, and I, you know, I work with people that I like and that like me. And I think you don’t have to be the person who is in the day to day. Now, if you wanted to be the person who is and this is the other side, if you want to be the person that is going to be in the day to day, there are lots of great people that have courses and that that you can learn on, you know, how to do underwriting on a multifamily building to make sure that you’re able to carry out a business plan. Right. You need to spend time and effort into learning that business. You need to be able to develop the relationships and go out. Like, I’m often like maybe once a week at least going out for lunch or meeting somebody. This morning I was here, I was meeting. I was you know; I’m always meeting people and building my relationships. And that’s something that you’re going to have to be able to do if you’re a busy business owner, you don’t have time to do that, right? So you have to keep in mind that there are a lot of things in the background that you need to do as well. You could just buy a building off the MLS. That’s definitely something that you could do, but that doesn’t mean that you’re going to be cashflow positive when you’re doing that, and it doesn’t mean that you’re going to be in the position to refinance in three years. But it could mean that you still own that asset, right? So it just depends on like how you want to go about doing this. Anybody can buy real estate. You don’t have to be you know; you don’t have a Ph.D. to do that. The problem is, is that, you know, buying the wrong asset is going to be a lot more expensive than just partnering with somebody and getting doing the right thing. Right. Because like apartment buildings, like if you end up with an asset that’s losing money every month and then you have to put in 100,000 or $200,000 for renovations, and then you have to pay somebody to leave. And then you have the LTV issues that come up. You can be out like hundreds of thousands of dollars, which is very different than, you know, dealing with one, two, four unit space. And that’s often why I say start off there. Right. But I often have like we are usually, you know, working with people who are working in the one, two, four unit space, don’t want to get into the commercial space, but know that that’s where they want to go. So when they sell in our site or, you know, they may work with us. Yeah, right. There’s just different ways of doing it. Like, yes, you can definitely do it. How much time is really based on the amount you want to dedicate to it? Right. That’s the success you’ll have, right? If you want to be a great multifamily investor, expect to spend, you know, 20 to 30 hours just like every week working on that business to a point where at some point you’ll know what you need to do and then you’ll be spending a lot less time doing it right. Just like any business.

Erwin Szeto [00:38:24] Absolutely. 100%. I like when we go to events, we often get pumped up and think, Oh, it’s super easy. Like tomorrow, the day after the event, I would hear or see my clients. They all like I’m doing. There’s my go is this big and I’m like happy for them. It’s just that at the same time I’m looking at my own personal situation like, Can I just quit my accounting job and just do this full time? And that’s not something that I can at this point I want to do. And so that’s why I’m like, I need a realistic picture in terms of how much time commitment you need. I guess with any business is the same.

Quentin D’Souza [00:39:00] It’s the same with your like, how long did it take you to get to where you are?

Erwin Szeto [00:39:04] A long time. And then. Years. Ten years. Nine years.

Quentin D’Souza [00:39:08] Yeah, and same with me. It’s taken me that long to be able to build my portfolio to the size that it that it is and develop all the relationships and the business partnerships and all of that that got me to this place. So, yes. Can anybody do it? Yes. Anybody can open an accounting practice. Can you can you be a successful accountant with a successful practice? That’s very different.

Erwin Szeto [00:39:29] Yeah, absolutely. I agree. 100%. Yeah. Now, speaking of all these investments, where do you think the interest rate is going to go?

Quentin D’Souza [00:39:37] Oh.

Erwin Szeto [00:39:38] The million dollar all.

Quentin D’Souza [00:39:40] All right. First of all, I hate that question because I get asked all the time.

Erwin Szeto [00:39:43] But I have to ask.

Quentin D’Souza [00:39:45] I know. And but the thing is, is that interest rates are just an expense. Let’s not get like people get all caught up with what’s happening in the last 30 days and lose sight of what happens in the next ten years from today. Because if you think about interest rates in the fact that interest rates have gone up, you’re probably thinking, you know, because the 1 to 4 unit market has lost 25% in the last six months or whatever it is, you’re losing sight. The fact that in the last ten years that same asset would have probably tripled in price. Yep. Is that like. So let’s start to focus on whether the property cash flows and makes sense as cash flow positive. And you’re able to carry that asset based on, let’s say, ten year rates. Can you carry that asset based on ten year rates? And that way your stress testing, whatever you’re buying and you’re able to hold that asset for the long term because if you’re able to like if you’re able to hold that property and everybody out there, I want you to think about if you bought whatever property you lived in ten years ago, what is it worth now, right? Yeah, probably worth a lot more. Yeah, right. Especially if you’re in a market that makes sense. Like, you know, we have population that’s coming to that area, we have different sorts of employment. We see governments that are investing into the infrastructure in the area. We see all of those good things that make the economics of an area good, right? If we’re doing that, that’s what we should focus on because the interest rate is just an expense. It’s just like property management, it’s just like property tax. It’s all it is. It’s an expense. Let’s not get carried away is what I want to tell people. Look at. Stop thinking about what’s happened in the last 30 days and start thinking about what’s going to happen the next ten years and then make sure that you’re buying properties that are cash flow positive. Oh, I’ve always said that if you buy a property that’s cashflow positive and then your plan is to hold it for ten years and you stress tested the asset so that you know that you’re going to be able to withstand, you know, rates that go up. Then what does it matter what interest rates do?

Erwin Szeto [00:41:59] So that’s such a tricky answer as well. The reason is because then it leads to a lot of the questions that maybe I don’t get, but a lot of our clients would be asking those questions. How do you find these cash flowing properties? Because it seems like it’s disappearing. Like I think Durm and Hamilton is where I invest and I know you invest in derm heavily are losing that 1 to 4 unit space. So how do you find the properties that would sell? At least let’s not go to cash flow positive. Let’s just go into like cash flow neutral. How do you at least find that properties that would be able to give you enough rent to support everything.

Quentin D’Souza [00:42:42] While let’s say prices decrease 20 to 25%. Yes, all of a sudden you’re going to see assets that make more sense. That didn’t make sense before. Yeah, the trick is to stop being fearful and, you know, start being greedy because this is what everybody else does. They’re being fearful. Aside from that, what ends up happening over time is that you move out from a from a market and you move further out. But you want to make sure that the economic fundamentals are there with whatever market that you’re interested in. So maybe instead of being in like ten years ago, I could have bought a property in Pickering and it would have been cash flow positive. I’m not going to buy property in Pickering. That’s cash flow positive today. Right? So I’m going out to maybe Bowmanville to be able to buy a similar asset. Now, I’m still in the Durham region, but I’m going further east, right? Maybe I’m in Peterborough, maybe I’m in Kingston, maybe I’m in Bellville. Right. And I’m looking at different markets. As long as all the fundamentals are there for the market. And you see the long term macroeconomics are there and then the fundamentals are there that helps you to make a decision on where you’re going. I may be called the Durham Real Estate Group, but we have people from all over the place that because it’s not about that, it’s about buying cash flowing asset. So maybe what it is like people need to start thinking about a different area like if it. Area doesn’t make sense right now. Move to a different area that does it don’t get pigeonholed.

Erwin Szeto [00:44:12] Well, we have we work with a lot of clients who buy pre-construction homes. And they feel comfortable because they know what it’s like less to maintain because it’s only a pre-construction condo for sale. So there was only 800 square feet to maintain. There’s only so many appliances in there. And so a lot of these people are unable to get financing. They are running into different challenges and not but they see the capital gain appreciation because they tie up your money for a number of years. And therefore, there is not, I guess not for us appreciation, but the market has gone up over time and then they see appreciation and they see the success. Would you say that over the last ten years to me, I’ve seen so many different deals and some people are doing great. Some people have developed systems and are truly successful. But there are mistakes that we may. But to be honest, like I’ve seen in my own portfolio, we’ve sold a couple of properties that are barely breaking even, and I feel like we’re breaking even. We’re lucky because thanks to the real estate boom, rather than like my own success, my own decision making, I don’t I don’t know if I’m explaining myself well enough. I think what I’m trying to say is that we stay because of the asset class. It has been going up. And can we continue to can we operate smartly and can we take advantage of the growth, is what I’m trying to say, instead of relying on luck.

Quentin D’Souza [00:45:41] Yeah. And I think, like I’ve got to say, I’m not like I am not a fan of pre-construction anything. I think that that’s more speculation than anything. But this is my own personal opinion and everybody does it their own way. So however you want to do it, yeah, I prefer to buy an asset that that is cash flow positive from day one and continue to manage it. And, you know, I think that there you have to decide I’m saying that from my perspective, because I don’t think it’s wrong for people to do that. You just have to decide for yourself, why are you doing it? Like, if you’re doing it to pass on intergenerationally, a condo to your kids and you want to be able to do that, you know, maybe that that’s a great asset or you’re looking to add net worth or you’re just trying to make a quick buck. Like, whatever your reason is, are you trying to create cash flow so you can quit your job? All of those things kind of push you into different assets, right? Like when I’m buying, if I’m not buying, but if I were to buy a pre-construction, I’m betting that today’s price that I’m locking into is going to be lower than the price that it’s going to when it’s completed is going to be sold. That right. And whether I take possession of that asset or not is, you know, it’s just going to depend on what I decide to do. Now, the tax consequence is going to be different depending on whether you’re holding that asset or not holding that fugitive. Right. And so that plays a part. But not everybody talks about that. Right?

Erwin Szeto [00:47:11] Oh, I try to just be I try to every other videos is about assignment HST and then assignment income. But people don’t like to hear it.

Quentin D’Souza [00:47:21] Yeah, well, they don’t like it, but that has to be part of that. The, like the thought pattern of those people and I like to buy assets that I’m going to hold on for the long term. I’m not looking to do quick flips. And I also think that sometimes those pre-construction condos are marketed as quick flips. Right. And I just don’t it’s just not me. That’s my point of view. I think that, you know, if you’re buying that asset, it’s cash flow neutral right now. I would say, how can you change the way that it’s run right now in order to change the way that the cash flow comes from that asset? Do you need to go back to your tenants and say, listen, you know, I don’t think that this is I’m not making any money here. Maybe I can pay you, you know, a couple grand to leave. And, you know, we can. And the tenants maybe I can I can do something else to make sure that that that cash flow is there in that asset know. Like, I think we’re only locked in because we think we’re locked in. Right? There may be other ways to go about doing this and, you know, thinking about the different ways that we can create cash flows from an asset to make it different helps us to be able to hold on to that asset. So, you know, I understand what you’re saying. The other thing, too, is like, you know, there are rules that we can take advantage of. For example, if you have a unit that’s been created, I can’t remember the date as that like November 2018 or something like that. If it’s built after that, you’re not in rent control in Ontario, for example, and that allows you to like if you are cash flow neutral, all of a sudden you bump up or if you built a basement suite from an unfinished space that basements. Maybe is not under rent control, but the upper unit is. But that basement unit can make maybe make you cash flow positive in a way that allows you to hold on to that asset. Right. So let’s like let’s be creative. Let’s think of ways that, like, I’m a total, you know, I like to think different ways to be able to do things. Not always one way. Right. And yeah. So like, let’s, you know, what I would say is, okay, let’s take a look at that, that asset and see what we can do with it in order to make it cash flow positive. There’s lots of ways to do that.

Erwin Szeto [00:49:38] That’s amazing. Well, thank you so much. You’ve shared so much with us today. And I am very thankful to have you on out as my very first podcast host guest. So thank you so much. And for anyone who wants to reach out to you all, find out more about derm REI. How do they reach out to you?

Quentin D’Souza [00:50:00] You can go to Durham, REI dot CA. Or if you want to reach out to me, I can. I’ll do a 15 minute call if you are the right criteria. If you go to Quinton D’Souza dot com and then you can, we can chat and see if there’s a good fit.

Erwin Szeto [00:50:15] Yeah. Awesome, awesome. Thank you so much for coming on again. Wealth of knowledge as always and appreciate it.

Quentin D’Souza [00:50:23] No, no problem at all. You did a great job too is awesome.

Erwin Szeto [00:50:26] I just need to ask questions and at my next twist to it. Yeah, that’s it. Yeah. Awesome. Thank you.

Quentin D’Souza [00:50:31] Oh, you’re welcome.

Erwin Szeto [00:50:40] Before you go, if you’re interested in learning more about an alternative means of cash flowing like hundreds of other real estate investors have already and sign up for my newsletter and you’ll learn of the next free demonstration webinar I’ll be delivering on the subject of stock hacking. It’s a much improved demonstration over the one that I gave to my cousin Chubby at Thanksgiving dinner in 2019. He now averages 1% cash flow per week, and he’s a musician by trade. As a real estate investor myself, I got into real estate for the cash flow, but with the rising costs to operate a rental business, it’s just not the same as it was 5 to 10 years ago when I started. Never forget the cash flow reduces your risk. The more you have, the more lumps you can absorb. And if you have none or limited cash flow, you’re going to be paying out of your pocket like I did on a recent basement flood at my student rental in St Catherine’s, Ontario. If you’re interested in learning more, register for free for my newsletter at WWW. Truth about Real Estate Investing dot CA. Enter your name and email address on the right side will include in the newsletter when we announce our next Free Stock Anchor demonstration. Find out for yourself what so many real estate investors are doing to diversify and increase their cash flow. And if you can’t tell, I love teaching and sharing the stuff.

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