Podcast Transcription

Erwin Szeto [00:00:08] Hello. Everyone. Welcome to the truth about real estate. Best in show. I hope you all had a great weekend. My name is Erwin Szeto for those who don’t know. I guess some people do know. I hope you all had a great weekend. I know I did assess Seth Ferguson’s multifamily conference and it was a huge ordeal for him being the first big real estate conference coming out of the pandemic. That was live from an in-person only. I get nothing out of this, but I’d recommend you buy the recording if you missed it. The speakers are great. Every one of them. I took notes from pretty much all of them. I did miss some speakers because I was just enjoying myself so much in the hallway. A lot of people I haven’t seen since 2019, so literally some people I haven’t seen since my own conference in 2019 at the Wow Factor conference. So it was great to just see people and teenagers hugs and smiles and no masks. Kevin O’Leary was especially excellent, I thought. I know you’re up some people the wrong way. He actually led off and explained it as it’s something his mother taught him to never tell lies. So you don’t have to track what lie you told to. And Kevin takes it a step further. He actually tells people what he thinks, even if they don’t want to hear it can see it gives people his opinion on their business or investment. Whether that are good or bad, right versus other sharks or dragons will only just say they’re not interested in investing. And let’s leave it at that. Versus Kevin will tell you if he thinks you have a bad business and you should stop, stop investing in it. So I share some of Devon’s values that my journey is a little bit different. This show isn’t entirely about you seeking in the real estate investment space. We do make mistakes, and we, of course, correct when we do. I’ve taken down at least two episodes, maybe more, when we had a bad sponsor or we mentioned a company that didn’t do good things. Paramount’s the name of that company, but I was years ago. That’s quite a while ago now. Yeah. The founders can’t be found and the cops can find them. So terrible, terrible things. Anyway, so along that line, as you expect with capitalism, there are many bad investments. There are many bad people out there. Just the speech just this last week, I’ve been chatting with investors. I chat with investors all the time, just chatting with one who had invested quite a bit of money into a growth tech stock that uses artificial intelligence. You’ve lost a bit of money on that. Another investor with three private mortgages from just a couple of years back from a company that most of us know the name of only one, only on one of those private mortgages has the capital been returned. Getting the rest back is unlikely. I’m hearing from sources that some retail out there are in trouble. Newer rates. Newer rates than that I’ve invested in and no one I’ve had on the show. Thankfully, my due diligence has kept me out of trouble and I’ve developed my screening process from just simply reviewing what makes deals go bad, even pre-pandemic. Any time a condo, a big condo development goes bad, I read into it. I want to understand what went wrong so that I can avoid problems like this going forward. So quick calls, notes. I’ve noticed some commonalities among fellow developers, and some of them are they’re paying interest to protect their debt financed as in the acquisition of the land. Is that financed? So just imagine if you’re like a condo developer, for example, it’s years. It’s going to be years before you actually have any money coming in. So if you’re paying interest on that piece of property that doesn’t have money coming in, that’s a risk. And another big risk is if it’s a less experienced developer, again, a commonality was often it was the developer’s first big project. And then you throw in a pandemic. Historical inflation on labor materials and you just have a formula for failure. And I don’t fault. People for. Deals going bad, but it’s not something I’m gonna put my money into direct. Let’s talk about crypto. Crypto investors like myself. I only have a small amount when I learned about one. I like to call myself educated. When I started reading more about it and talking to more people about Bitcoin, Etherium, for example, they’re both way down. But when I started looking into it and putting some money in, I knew the prices were high, so I was looking for a dip to get in. So yeah, we’re dipping now. I spoke to a successful apartment building investor just on the weekend and we know each other for quite a while. I know he made a killing. Boeing shares Boeing. You know, they make planes, jets and they have lots of government defense contracts. He made a killing after the pandemic crash, just owning that stock and he managed to give it all back on cryptocurrency. I do believe in cryptos. I don’t know that much. Hence, I’m focused mainly on just on Bitcoin and Ethereum, not even a large amount. My theory is that Bitcoin won’t likely come back, but that’s hardly a guarantee. Year to date, as I record this, we’re about mid-May, mid-late May, year to date, 2022. As I speak, almost everything is down, including real estate. From what I’m seeing on real estate that I follow like I personally invest in. We’re back to this summer prices at least, maybe even November from last year. So therefore we are down on the year, if not February in January, just tremendous months. Again, grateful for my clients who took action on that information and sold at the peak. The only things that are up this year in 2020 so far is oil in the US dollars. Even gold is down on the year. Gold down or even last I checked; it was down just barely. Just barely down. So basically, it’s even in this inflationary environment. Who would have imagined that what’s working though is boring investing investment properties with positive cash flow as in like, you know, tenants are paying your rent. That’s from extremely well and they’ve not gone down unlike. Well. The investors can hang on to them. Unlike people who speculatively bought single family detached homes in the GTA, for example, that will never cash flow. Or like a pre-construction condo. On the pre-construction condo side, I’m hearing some are having trouble qualifying for financing. I’m hearing this from mortgage people and from lawyer friends of mine. So yeah, some people are out there having trouble qualifying financing. I’m not even sure if they ever planned on closing. There’s got to be some people whose exit plan was to have signed and had no intention of ever closing, which would include getting financing, let alone becoming a landlord or rent out the apartment. So I’m sure we’ll see some softness in the areas that of the greatest speculation without cash flow like we saw in the stock market. On the stock side, generally, stocks that pay dividends a fair few significantly better than their speculative counterparts, like high flying tech companies that don’t actually make any money. For those who understand stock options, a disciplined approach to selling far from the money and using insurance has performed better than those who are who are less conservative. Slow and steady wins the race like Warren Buffett has hence will continue to teach defensive investing both in my real estate business and our stockbroker academy. Anyways, that’s what I’m trying to say. What I’m trying to say is that gains are easy to make. Keeping it is another matter. Slow and steady, like economically, fundamentally sound assets like that. Cash flow has time and time again proven to be a winning strategy and add to that time in the market. That’s why Warren Buffett is the most successful investor out there. I’m a value investor myself. I’ll be looking to buy this dip with a focus on quality. Speaking of quality, I mentioned earlier Kevin O’Leary presentation and especially his Q&A revealed a ton of great information. Unfortunately, Kevin wasn’t allowed to do any sort of fan interaction. I was supposed to have my picture taken with him as part of as part of being a VIP for the event, as disappointed. But then after seeing the Q&A, I was like, That’s awesome. I got way more value from Kevin’s thoughts during the Q&A than I would from getting a picture with him, and I’ll share my takeaways at a very nice real estate meetup as Kevin shares his thoughts on the crypto market economy. If there’s going to be a recession, those are two things. I took notes, took lots of notes and recorded part of it. And I need all this sort of information form part of my presentation on investing through a recession. And also at that meeting my team, award winning coaches will be sharing on the latest that they’re seeing on the streets in terms of real estate rental prices and resale prices. And our keynote, our long presentation will be around talking suites. Garden Suites is for most folks that are turning what was a single family home now into a triplex. And it’s what I consider the final major value add strategy for the vast majority of real estate masters. So it’s something you don’t want to miss if you’re in it for the long term. We’ll talk about renovation strategies to maximize rent, return on investment, of course, financing and building code zoning. This is a very new strategy. So we’re going to give you an update on where we are in each of those areas, because you need to know if you want to get on this on the ground floor. So don’t want to miss it. Saturday, May 28th, same time place 8:30 a.m.. At our offices, at our real estate. If you’re on my email list, you get all the information to register already. We’re doing it in person only that way there’s tons of great networking to be done. I don’t know how folks network over Zoom, you know when only one person can talk at a time. This is much better. And yeah, I’m really enjoying the in-person events again and again, only for those who feel safe to do so. You’re more than welcome to attend. Oh yeah. And of course, the networking has been fantastic in my events. We’re not like we’re not like other events out there because naturally, like many of my clients attend and they’ve done really well, they’re really nice people. We’re having more and more; more and more folks retire. And my policy has always to be to learn from people who have what I want. So we’ll have some from our recent retirees from real estate investing in the room, so you don’t want to miss it. So on to this week’s guest Christian. I second spell Fogel. He’s one smart guy with a difficult to say last name is a former tech executive who worked closely with Canadian tech billionaire Sir Terry MATTHEWS. For those who don’t know Sir Terry, I believe he’s still a top ten richest comedian. And as Christians, he’s implemented several. He uses a highly analytical approach at technology based strategies to maximize returns on his multifamily investments. Christian detailed the top tech apps and devices for rely on a past podcast. So check that out if you haven’t already. The water meter monitor alone could save you thousands of dollars via early detection of water leak. Christians are smart on the IQ side, as well as his ability to communicate his renovation and develop plans with the neighbors has enabled him to obtain their assigned support that he can go to the city and get his variances and permits approved. He shares how he’s finding deals, getting offers accepted in multiple offer situations, and even having smart sellers call him directly. Terry and I will be videoing and touring will be touring and videoing some Christian’s properties in early June as part of our Ottawa tour. We’re in town just for two nights or even hosting a casual meet up in Center Town on June 7th at 6 p.m., and on June 8th, the day after, Charlie will be the guest speaker at Oreo, the big Ottawa networking group at the Infinity Convention Center. There’s a link to register in the show notes on our website at issues about real estate investing dossier. On the email you get the shownotes. Why? Still to be on our email list, you get some quality information in a timely manner and it’s all free. Goes right to your inbox. Just go to my website w WW dot Truth About Real Estate Investing Dossier. Putting your name and email on the right side and you’ll start getting notifications on one of our hosting events or new podcast episodes and of course the show notes. So you can register for great events like Oreo on June 8th because Cherry on top is there speaking. Christian is a good guy and he’s not here to sell anything. Those projects are. He saw funds, his own projects with his own capital. And please enjoy the show. Hey Christian.

Christian Szpilfogel [00:11:41] Hey, Erwin.

Erwin Szeto [00:11:42] Good to see you again. What’s keeping you busy these days?

Christian Szpilfogel [00:11:45] You always love that question. So and you know me, I’m always really busy. So as we’ve had.

Erwin Szeto [00:11:53] I think you sound busier from what we discussed before we start recording but go ahead.

Christian Szpilfogel [00:11:58] It has been busy in our portfolio, continues to grow. We’re still doing acquisitions. You know, it’s interesting, I was having a discussion with a local realtor yesterday over lunch and he was saying that the housing market, there’s a lot of people starting to put listings on. I think they’re kind of worried that they’re going to miss the cycle, the boom cycle for sellers. And so he’s seeing a lot of people putting listings on, getting off the fence about it. So I thought that was interesting. But the other thing we talked about was that, you know, I’ve always said that just because the market’s hot doesn’t mean you don’t buy, right? You stick to your principles and your decision criteria for purchase and then figure out, well, you want to have certain, certain criteria, but you can find what you need to find even in a hot market. It’s just that when the market’s hot, they’re just harder to find. When the market is soft, they’re just a lot easier to find and meter criteria. And so we have done acquisitions even over the past year since we last talked, we bought another building that’s going to be a repositioning project in downtown Ottawa in the center town area. We bought a portfolio in a town called Almont, right, which is literally just outside the Ottawa border, the city of Ottawa border, very near Carleton Place, which everybody I bought in there about five years ago. And now everybody recognizes that it’s really doing very well. It’s a very interesting town that’s really growing. Almont, I think, is going to be probably the next one. It’s just 5 minutes away from Carleton Place, so we bought a portfolio there and I was talking to just before we went on air that one. You know, people say you can’t find cash flow properties in a market like this. Well, this was a portfolio of mixed use buildings that I end up buying at six carp. That’s what it worked out to and that’s with full conservative underwriting. So that assumes, for example, 5%, 5%, 5%. So property management, maintenance as well as capital reserves are built into that underwriting. And then the other key piece in there is the rents are about 35% under market. So it’s there’s lots of upside in this property as well. So yeah, it’s still possible. Just need to turn over the right stones.

Erwin Szeto [00:14:22] And so were these stones on IE6 or were.

Christian Szpilfogel [00:14:25] They were.

Erwin Szeto [00:14:26] These stones that you were turning over? How did you find the deal?

Christian Szpilfogel [00:14:29] So that’s a really good one. So this one we found, let’s say the deal found us. So I didn’t go looking for this deal. The deal came to us mainly because we’re really very active in certain markets. And so we were known and a realtor actually had this under contract for himself. He had done a decent job of underwriting, not perfect. So we cleaned it up and adjusted the price accordingly. But he had it for himself, but he wasn’t confident in being able to execute on the long term project. So he called us up and said, Would you be interested in this? We were literally his first call. And I did. So, sure. Send me the numbers. They’ll take a look at what you’ve got. I did a quick pro forma on it. I was like, Yeah, we need to take a look at this because if the numbers are right, this is either an amazing deal or this is a disaster of, you know, of a portfolio. So we arranged to see it the next day, went out, met the seller, met the realtor, and the buildings were in great shape. I’d say about half the units were already full. Actually, three quarters of the units were reasonably recently renovated and then a quarter were in really rough shape. Like they’re going to be total renovations straight back to the studs, renovations to those units. And then they had good quality commercial tenants on in the commercial units with decent triple net leases, properly structured. The leases was weird, but because the seller was a bit naive and kind of new to this stuff, but he hadn’t done a bad job of structuring the financials. But then a number of those commercial leases are coming up shortly as well. So this chance to reset those prices have already done one, actually. So that’s kind of how the deal came to us. And then the whole process of the acquisition was interesting. So it was a bit challenging because the seller, this is the only portfolio he’s ever owned and he’s only owned it for five years. He I think in hindsight he got in over his head and I think he just needed stress relief, which was the reason he was fundamentally selling it. And so because he was naive, of course, a lot of the normal due diligence process was difficult, simple things like I need estoppel for the commercial tenants, I need acknowledgment of tenant from the residential tower. And he said, you know, and I was just getting tons and tons of pushback on this stuff. And I had to keep explaining to him why we were doing the things that we were doing through the due diligence process. So that was a bit painful.

Erwin Szeto [00:17:08] How did the seller on this building inherit it?

Christian Szpilfogel [00:17:10] Like, well, he was an engineer who had some money and thought real estate would be a good thing to own. And he picked up three of these buildings on his own. He’s a clever guy in reality, but I think the stress of managing tenants was too much for them.

Erwin Szeto [00:17:32] The human aspect of it, because there was like tenant issues like can pay rent or something like that, or.

Christian Szpilfogel [00:17:37] There’s always tenant issues, you know, in a portfolio of that size, there’s going to be tenant issues and apologies.

Erwin Szeto [00:17:44] Let’s back that up. How many tenants are there?

Christian Szpilfogel [00:17:47] Oh, there’s total of 27 units in the portfolio. And it’s about there’s six commercial and then the rest are so 21 residential.

Erwin Szeto [00:17:56] That’s a lot of relationships.

Christian Szpilfogel [00:17:57] It is.

Erwin Szeto [00:17:58] Just try to remember that many names.

Christian Szpilfogel [00:18:00] Well, for a new person that it’s a bit overwhelming. Right. So fortunate. We’ve got processes to handle this. He also had some challenging tenants that he’s worked through. There’s still a couple of challenging tenants in the building, but he did a lot of the cleanup, to be fair. But I think it really kicked the stuffing out of.

Erwin Szeto [00:18:19] The gentleman, the three quarter of the units that were renovated. That was this gentleman.

Christian Szpilfogel [00:18:23] No, he did a little bit, but most of it was done just prior to his acquisition of the buildings.

Erwin Szeto [00:18:29] And how long ago was that? It was the solar acquisition.

Christian Szpilfogel [00:18:32] We bought it about five years ago. So no doubt he was selling it as soon as his fixed rate mortgages were coming up.

Erwin Szeto [00:18:42] That’s tough to do. You know what their financing was like? Because this is mix. This is mixed use.

Christian Szpilfogel [00:18:47] Yeah, it is mixed use. But the commercial space is literally just under the 30% mark. I think it works out to about 27% on average of the gross leasable area, which gives you a lot of flexibility. So I was able to finance this with CMHC backing it, and that’s a whole other thing. To CMHC, it seems to have turned a corner. So let me put it to you this way, and I’m going to ask it. If you’re doing CMHC on a commercial building, how long does it normally take for them to get back to you on that underwriting? How much do you have the provision for in your agreement of purchase and sale?

Erwin Szeto [00:19:22] I haven’t personally done commercial with CMHC. We’ve been doing our deals with the BDC.

Christian Szpilfogel [00:19:29] And at least two months. Yeah, that’s right. So most people, if you’re doing CMHC on a commercial multi-family.

Erwin Szeto [00:19:37] This is better for the other for the listener. You don’t know if you have financing until that time has passed. You’re in limbo for that long for financing. Sorry, continue.

Christian Szpilfogel [00:19:48] Yeah. Well, so with commercial residential building so that’s anything five units or more for residential and you can include mixed use as long as the commercial space is less than 30% of the total gross lease full area. So CMHC. So just for our newbie friends listening in, when you have CMHC financing, it does a few things. One, it technically allows you to buy it at a higher loan to value than you could get up to 85% loan to value if CMHC is insuring your mortgage. It almost always results in at least a four point discount on the interest rate versus not having it insured. And you can get longer amortization. I’ve had one building, for example, where it’s a 40 year amortization insured by CMHC. But the downside with CMHC historically has been the very long lead time. Typically, ten weeks is what we would budget for in our purchase and sale right to put in place. I heard somebody had CMHC funding or not funding the CMHC approval in about a week. Somebody mentioned that somebody at a Kingston mentioned that to me in December, and I was like, okay. I went back to the lender. I challenged them. I said, Hey, let’s see if we can do this in a week. Let’s get all the paperwork lined up, everything done so that we put it in, in the way that we expected. CMHC wanted to see it, know how fast the approval was for business days?

Erwin Szeto [00:21:19] No way.

Christian Szpilfogel [00:21:21] I have never, never seen this in my life.

Erwin Szeto [00:21:23] Can we see allocate some resources to LTV.

Christian Szpilfogel [00:21:29] And there is hope maybe on that side. But I do believe CMHC increase the size of their underwriting team, which I think is part of it, or we just get lucky.

Erwin Szeto [00:21:39] Can we have some of them for like aggregators cross-train these people? Sorry, Christian, just to back up.

Christian Szpilfogel [00:21:47] For.

Erwin Szeto [00:21:47] Folks not familiar with commercial financing. So you mentioned that you had ten weeks, that you allocated ten weeks for financing approval. Is that in your offer as in like a conditional period?

Christian Szpilfogel [00:21:58] Yes. Yeah. So that’s actually quite normal for commercial processes, especially during CMHC. Even so, we did a building a year ago and we had a short conditional period, even though there was 15 offers on the building that I ultimately bought. Yeah, multifamily are in rare supply and that’s a whole other discussion outside. But in that one I still put a conditional period, but I had the advantage of being a highly credible investor, right? So I had enough of a reputation with the real estate agents that they knew that I was going to be able to execute on this deal. And my conditions were really very simple for that one. It was inspection and insurance. So and really that was just to buy a couple of weeks to make sure we had some time for the due diligence period. And on that one, I knew I didn’t need CMHC underwriting, but even if I did, all it happens in the deal is if you underwrite it with the assumption you don’t need CMHC, so you’re going to just use conventional financing, 75% loan to value with the prevailing bond rates, which is how the interest rates are set and a standard amortization. Then the CMHC is simply upside. All right. So in a competitive situation, I’ll put it in with an underwriter on the assumption that I’m not going to get CMHC and I could make assumptions about that. Right. But I don’t want to I don’t want my business case to rely on it. So then you’ll still go ahead with the CMHC application and everything. Your business case just gets better as you have it. So it was four days on that. So we advanced our close on that purchase by about two months, and I wanted it because it was accretive to the set. It was it was effectively a six cap based on rents that were 35% below market. So it was accretive to the portfolio. And I didn’t want to wait. So we, we, we moved up the close by about two months. And then the big issue we had prior to close was, was insurance. So the age of the buildings, this again, this was on the main street of Almont. And for people who don’t know Almont, you’ll know it for one of two reasons. The founder of basketball, James Naismith. Right. That’s his hometown. And actually his statue is right in front of one of these buildings, which is kind of cool. And then the other reason people might know it is anybody who’s a Hallmark movie fan, a lot of Hallmark movies, especially Christmas movies, are shot in Elmont on Mill Street because it’s very picturesque. And these buildings are featured prominently in the backdrop. Cool.

Erwin Szeto [00:24:41] How far is Elmont sort of like a suburb for Ottawa? Is that how it works economically, fundamentally as an investment town?

Christian Szpilfogel [00:24:49] Yeah, pretty, pretty much. I mean, Almont is a power generating town. There’s a power station there right on the Mississippi River. And it’s beautiful, very picturesque in that area with the waterfalls and so on. But it is fundamentally a suburb of Ottawa at this stage, just like Carleton places. So as you know, I live in downtown Ottawa, the Glebe to be precise, which is inside the canal witness and I can get from my house to these properties in downtown Almont in about 35 minutes now. But if they’re close.

Erwin Szeto [00:25:26] I know it doesn’t seem like everything seems pretty close. Like what’s downtown to the airport drive.

Christian Szpilfogel [00:25:31] Oh.

Erwin Szeto [00:25:33] So I am jealous.

Christian Szpilfogel [00:25:34] Yeah, well, you’ll be jealous because you’ll live in Toronto, right? Yeah, that’s.

Erwin Szeto [00:25:38] Ridiculousness.

Christian Szpilfogel [00:25:39] So. So Metro Ottawa, if you will. So I’m going to include Gatineau. That’s about one and a half million people. The Ottawa side is just over a million people. Now, the way the city is structured is it’s structured along the river. That’s the primary growth area, east and west. So you can go, you know, edge to edge in Ottawa would take you just over an hour of driving with no traffic. North. South is a lot faster. So the city is kind of long and skinny. So if you’re downtown Ottawa, out to the Ottawa airports, about 20 minutes, 20 minute drive and it’s a very scenic drive, too, you’ll just go up if you’re in downtown Ottawa, you’ll just follow the Rideau Canal all the way up till you get to the Airport Parkway.

Erwin Szeto [00:26:24] So we just stay in the Glebe when we come visit.

Christian Szpilfogel [00:26:26] There’s no hotels in the Glebe. You have to stay in center town to be the closest and still be nice.

Erwin Szeto [00:26:34] So you live somewhere close to where the protests were?

Christian Szpilfogel [00:26:37] Somewhere close. Oh, we could hear them. Yeah. Oh, wow.

Erwin Szeto [00:26:41] We hear what I heard. Peaceful.

Christian Szpilfogel [00:26:43] Sure. Into here. I have a belief.

Erwin Szeto [00:26:47] That it was peaceful.

Christian Szpilfogel [00:26:48] Isolated bunch of buildings in center town. Right. So I had to go and check my tenants down there were a bit concerned, I’d say.

Erwin Szeto [00:26:55] Oh they were very close to it. Okay.

Christian Szpilfogel [00:26:57] Oh, yeah, yeah, yeah. My, my goodness. So you’ve got the Parliament District, right? Rather the Pearland precinct, which is very narrow, said the streets, and then you have center town and then you have the Glebe. So that’s the communities between Parliament and the canal. And these protests were primarily on Wellington Street and to be fair, it was reasonably peaceful on Wellington Street. I think everybody it was just a big party that was going on and that’s like the issues that we were seeing were mostly off of Wellington Street. The and the biggest issue well, there’s two issues, I think. One was there were people that had their horns on their truck and some of them were like effectively like a V, a rail train horn going off. And that was really disruptive. You could hear that for many, many kilometers. But for the people that were literally living within a block or two of that, those horns were going off regularly, like for about 20 minutes of every hour at all times of the day. And so that was, you know, really problematic. And I think that was one of the key things that really upset people downtown. And then you get sort of secondary people, people who use any protest as cover and a. It doesn’t matter whether it’s the trucker protest or any other type of protest.

Erwin Szeto [00:28:16] The G7, G20, they’re there. Just BLM. They’re there to hide in the crowd and cause damage.

Christian Szpilfogel [00:28:22] Yep, that’s exactly right. So you had people who were certainly doing that, right? People were trying to set fire to buildings and stuff like that. But, you know, and then there was a little bit of harassment as well, which really didn’t help. So, for example, there were people that walk in with masks on. So waiters, for example, going to their shift might have their masks on as they’re walking to work. Right. And be harassed about wearing their masks. And I think they were just intimidated more than anything. I’m not sure that there were many there were some assaults that certainly made the news. But I don’t think there was a ton of it going on. It was just the whole environment just wasn’t felt very peaceful. And I think a lot of people just didn’t feel safe. But the air horns were the worst. Honestly.

Erwin Szeto [00:29:07] They’re peaceful. I’m sure it’s funny because I just issued an N five for a tenant and there’s, you know, quiet enjoyment of property. So I know my tenants opinion is of quiet enjoyment is it seems all these people don’t they believe that air horns are still considered peaceful?

Christian Szpilfogel [00:29:25] Well, you know, I was fantasizing about maybe taking an air horn on a vehicle parking outside of one of their houses and just blasting the air horn at one and 2 a.m. and 3 a.m., etc.. We’ll see how peaceful they think I am at that point.

Erwin Szeto [00:29:40] Yeah, I don’t get it. I don’t get it. The whole peaceful thing. I just now I’ll drop it after this point. But if that was what my tenant was hearing that they’d call me and say, this is not peaceful. All right. So it’s not just me.

Christian Szpilfogel [00:29:53] We were dealing with that. I mean, we were getting calls most of it, though, as they recognized, there’s nothing we could do about it personally. But then we had tenants just making sure that security in our buildings was good, right? And short doors properly latched, that our intercom systems were working properly. We have cameras on a lot of our buildings. Right. So the tenants were thankful about that as well. And I had some inquiries are saying these cameras work, right?

Erwin Szeto [00:30:26] That’s funny. But they waited for this moment to actually ask if they were.

Christian Szpilfogel [00:30:30] Yeah. Oh.

Erwin Szeto [00:30:32] We were talking about this before. Before we started recording how to prepare for inflation.

Christian Szpilfogel [00:30:38] No way.

Erwin Szeto [00:30:39] And you’re smart. So, like, I like asking you because I’m crazy. I have all these crazy ideas, you know, I dabble in some Bitcoin.

Christian Szpilfogel [00:30:47] You know, it’s funny because, you know, as I was saying to some people, when it comes to predictions about anything in the economy, you know, even the best of us, I think, are only a little more accurate than random stats. MM. The economy is just so complicated. There’s so many moving parts in it. And for us to oversimplify it, I think it’s just a mistake. You know, we can see the effects of supply chain. We know what that’s doing in terms of driving inflation right now. Which is interesting, you know, because I think most economists would tell you that in a real GDP sense, the economy is probably going to grow by about 2% this year, and we’re running at about 2%. But I don’t think they’ve taken into account all the inflation that we’re actually seeing, because you can see we’re completely blowing the doors off of the actual inflation rate versus what the predictions were, which leads you to believe then that the real GDP may actually be in a contraction period. We may not actually see 2% growth this year. We’re going to actually see a contraction.

Erwin Szeto [00:31:50] That’s so weird, though. Anyone who wants a job has a job, it seems, or anyone you want.

Christian Szpilfogel [00:31:56] But on the demand side of it, you know, and that’s always the thing right when we’re talking about inflation is what’s driving it classically. In the past, it was demand side inflation and that results certainly in wage increases, etc.. Back in the seventies, it was it was averaging, what, about 5% inflation over that that period of time. Now we’re seeing it’s more like about in terms of GDP growth, sorry, that wasn’t inflation, 5%, that was GDP growth. So now our GDP growth is nominally 2%. Butter inflation rate is really very high.

Erwin Szeto [00:32:32] I think March was 6.7% and that was the biggest factor was gas prices.

Christian Szpilfogel [00:32:39] Yeah, absolutely. But it points to the fact that inflation is supply chain driven. Right. And it’s supply side as opposed to demand side, which is why a lot of people and a lot of economists think it’s going to be transient in nature. And I really hope it will. And my suspicion is it probably will. And then I think we’re going to get a very confused state with the Bank of Canada and the U.S. Central Bank as well, the Bank of England, because they’re going to have this quandary. You’ve got inflation going in one direction, which. They feel they have to address and they’ve already announced lots of rate increases. And we’ve seen the bond market respond over the last month and a half as well, where you see rates saying where’s up to five years went up very quickly. So you’ve got that on that side. But if the real GDP is actually contracting, then the government is going to start to think carefully about, well, are we moving into a recession? Right. And this is sort of a classic stagflation, stagflation type situation. So now you’re going to think, okay, what’s the central bank going to be doing in this type of environment? Are they going to prioritize inflation or are they going to prioritize economic growth? Right. And I think in the end, they’re going to cave and they’re going to support economic growth, which means then that interest rates would be probably coming back down towards the end of the year. And we were talking about the supply chain issues earlier. You’ve pinned one, which is oil, right? That everything’s driven by energy. Energy is an input to just about everything that we do. So if energy costs go up, it doesn’t matter what part of the economy you’re looking at. It’s dependent on energy. Even food is a big issue, right? Because energy goes into the production of food, everything from fertilizer to harvesting. And we’ve seen lots of increases on that side of it. You and I were talking a little bit before, before our session here. And one thing that I just came to realize more recently was the dominance that Canada has in potash. We have probably about 40% of the world’s supply of gas. It’s about 15 million metric tons. But the second biggest producer of potash in the world is Russia with Belarus. And that’s about 50 sorry. So Canada’s about 14 million metric tons. Russia is about 15 million metric tons. Right. Russia and Belarus. And of course, with the sanctions, that supply is kind of held off and put into context. The third largest producer of potash is China, with about 5 million metric tonnes. So we’re effectively cutting off about 40% of the potash supply, and that is going to have secondary effects, I think, towards the back end of this year. So you’ve got energy on one side, right? And then we’ve got the sanctions that are happening in Russia, in the Ukraine. And if those don’t lift in a reasonable amount of time, then we’re going to start to see impacts on our food supply as well. So all this stuff is just going to make for some really turbulent times coming up over the next couple of years at least, where the bank is going to be a bit confused about which way to do things. But I think at the end of the day, they’re going to double down on getting the economy right and stable, even at the risk that inflation.

Erwin Szeto [00:36:10] With all this new spending that’s in the federal budget and our provincial budget, they need cheap interest rates.

Christian Szpilfogel [00:36:17] Well, yeah, but, you know, some would argue that the federal government should have backed off in a lot of that stimulus as early as the middle of 2021. And I would tend to agree with that. But it’s kind of weird because you’ve got the Bank of Canada, of course, increasing inflation, right. But then at the same time, you’ve got the federal government in particular putting more money into the economy, which of course, helps to fuel inflation. So they’re kind of fighting a little bit against each other. And then you saw, too, right? Everybody thinks about the Bank of Canada and the overnight rate and how that’s going to affect the variable rate. But the other thing that the Bank of Canada did at the same time with that announcement is they shifted from quantitative easing to quantitative tightening. And that basically means, you know, where the quantitative easing is. Some people would just think of it as printing money, right? Which it sorta is, but really isn’t. Quantitative tightening is effectively not renewing the bonds that they did buy at that period of time, which means that there’s going to be some upward pressure on the bond market, has an indirect effect of, you know, affecting the fixed rates, if you will, because it affects the bond markets. The yields go up. And that’s one of the reasons that I think we saw the short term yields go up and why fixed rates went up recently.

Erwin Szeto [00:37:33] We’re probably seeing I see it on Twitter. I think we’re probably going to see like 4.5 soon on the five year fixed.

Christian Szpilfogel [00:37:40] It wouldn’t surprise me. So I locked in that portfolio that I bought in Almont. I was actually getting a bit nervous about it because my underwriting at the time with CMHC required me to have a total interest rate of no higher than 3.4 or five. And when I first started this, I it wasn’t really much of a risk. I think my interest was going to end up being around two and a half percent. And then when Russia invaded the Ukraine, it was actually a demand in the bond market which. Resulted in a drop in the yields. My interest rates actually dropped by a quarter point. And I thought, okay, well, at least I might be able to get some advantage out of this situation. But then within about a week or two, it went the other way. Right. And then people got nervous. And the, you know, in terms of what it was going to do, in terms of inflation, the economy, and then the yields started going up. And then when the Bank of Canada added fuel to the fire, it didn’t help. So ended up having to do a buy down on the interest rate in order to guarantee the interest rate at 3.45. But I had to put money into it at the close in order to get that done.

Erwin Szeto [00:38:51] As a percentage, how much more to do to put in?

Christian Szpilfogel [00:38:53] It wasn’t much. It was about 1% of the total loan value. You know, that was where the spread difference was about 2.12, right between what I was contracted with CMHC versus what the bond yields actually were. So for people who aren’t familiar with this, when you get an underwriting with, say, CMHC and they say that they’re going to guarantee the underwriting or the insurance for your loan up until you get to a certain interest rate. But when you’re doing a commercial fixed rate, it’s not something you can pre-negotiated. You can negotiate a spread, but it is completely dependent on when you buy the bond in the bond market. And so if the bond yields are going up, then that affects what your interest rates are going to be. So usually, you know, about a week ahead or even sometimes a day or two ahead of the actual close on the purchase. You have to do what’s called a rate lock. And the rate lock is basically where the lender goes to the bond market, buys the underlying bond, and then you’ve got that particular yield. And if anybody’s ever been through this, it’s about a 7 to 10 minute window. So they literally say you have to be on standby. So what they’re going to do is go to the bond market. They get a quote that’s live for 10 minutes. So you have to confirm whether you’re going to accept that particular interest rate. And you’ve got you know, by the time it gets you, you literally have 5 to 7 minutes to make that final decision. So it’s an interesting process. And then once that rate lock is in, you’re done.

Erwin Szeto [00:40:29] So it’s like a zoom call, like, what are you actually, you’re together on the floor of the trading floor.

Christian Szpilfogel [00:40:36] It’s done via email. Right. But they’re like, yeah, it’s literally done by email. But you’re on standby, you’re sitting there, they’re saying, look, we’re going to go to the bond market at 10:30 a.m., make sure, because we’re going to have probably about 7 minutes for you to confirm in total. Fascinating. Wow.

Erwin Szeto [00:40:55] What was it like the first time you did this? This had to be a little that like I don’t like that word throwback. They’re old bond.

Christian Szpilfogel [00:41:01] Well, you can’t do that, actually. So you can go. And you said, no, I don’t want that. Right. But most of the time, things are not so volatile. What you’re getting is the rate for the day. Right. And it might go up through the afternoon. But if you don’t like that one there, probably just go back to the market the next day. They usually what your hard pressed against is you’re closed. So you’re closed. You don’t really it’s hard to move in a lot of cases. And then you have at most in most cases, ten days before the close date where you can do your rate lock, but you don’t want to heat up that buffer because there’s the other side of it, which is, let’s say I do a rate lock ten days before my close. I have to now close on that date. If I don’t close it on that date, I have to start doing buy downs on that that bond. So it costs me like it costs a lot of money. Think of like 1% per day comments, penalties associated with that.

Erwin Szeto [00:41:58] So who walked you through this process the first time?

Christian Szpilfogel [00:42:01] Oh, I was totally naive the first time. Oh, no. That’s the best way to do it, right? I just I was just on a roller coaster ride the first time. I had no idea what was going on. So the. Buy your email. Okay. Yeah. To be fair, the lenders are really very good at managing all of this. So it’s not like I’m trying to orchestrate the lenders, just tell me what’s happening. And like I said, the bond yield rates, they don’t fluctuate that much in a day. Recently I’ve seen them fluctuate by a full quarter point, but most times they don’t. Most of the times they’re really pretty stable and fluctuate by you know, maybe five or ten basis points at the very, very most. So it’s not as normally it’s not that unnerving, but it was unnerving this time only because the bond yields were actually fluctuating. Well, when I say fluctuating, they were going up and they were going up fast and you’d see like quarter jumps easily each day. Right. Yeah. So it’s not a pretty process when the markets are really volatile, but you know, the vast majority of situations because I really don’t want to scare people either. Right. It’s just the vast majority of situations, I would say literally every other. Besides this one. It’s a very simple, normal process. You’ll do your rate lock. Everything’s going to go fine. Really not going to worry about it. But this time, it was a bit harrowing just because the yields had gone up by almost two full points right in the span of a few weeks.

Erwin Szeto [00:43:28] And then, Christian, you just like you said, like piles of cash waiting around for when deals are available.

Christian Szpilfogel [00:43:33] So what I did in this case was I was starting to stockpile cash because I’ve got a major repositioning project that I’m doing. So I’ve set aside credit, I’ve set aside cash, I’ve got refinances that are happening all the time. So all this cash was just kind of coming in.

Erwin Szeto [00:43:49] That’s yours. Your other partners involved or.

Christian Szpilfogel [00:43:51] No, no, no. This is just our money. We don’t take external investors, so we don’t take external equity investors at all. But we’ve got enough of the portfolio now that there’s always a refinance going on some property. So we’re extracting new capital all the time that we can use towards the project. So a good chunk of this was capital that was going towards a repositioning project that I have. But this deal with just too, too good to pass up, it was highly accretive to the portfolio. I mean, we advanced to close, I think I mentioned, by two months. And the reason was that it adds cash flow to our portfolio as soon as we close it with substantial cash flow. So you don’t want to pass those things up. And so I didn’t. But we have probably three or four other refis coming up at the back end of this year where we’ll be able to take out more cash for projects that we have on the go. So we kind of entered this discussion, I think, a little bit about what’s happening with the economy and.

Erwin Szeto [00:44:51] More specific, more about what are you planning to do with inflation. Oh, I actually had it at a commentary and totally agree with your point.

Christian Szpilfogel [00:44:57] No one really.

Erwin Szeto [00:44:58] Knows the idea of where the economy is going. One thing we can’t predict is the central banks will then generally they will, but there will be more money supply. That’s what I predict.

Christian Szpilfogel [00:45:08] I think you’re absolutely right. And that’s kind of where I was going before when if the bank decides to prioritize the economy over fighting inflation, we’re going to see loosening things like quantitative easing is going to start to happen again, which kind of increases the money supply. Interest rates will probably come back down or at least be moderated. So that stuff can all happen. But what I don’t do is rely on that, right? Because I just don’t know what’s going to happen. There might be another war. There might be a god forbid, another pandemic. Right. Anything can happen. And we just don’t know. So I really look at things on a risk management basis. So I take a look. So I look at things on a risk managed basis. And when I take a look at things like interest rates, inflation is something that I kind of like, you know, in the context of it makes my debt cheaper. Right. And that’s the way I look at I don’t think about it as, you know, it makes my assets worth more because there’s nothing that’s fundamentally changed about the assets. Their intrinsic value is the same. The only thing that changed was the value of the currency that you used to buy it. But my debt is tied to that currency. So with rapid inflation. So, for example, 6.7% year over year inflation you were talking about earlier? Well, my debt just got cheaper by probably about 6% as a result. So that’s great. Right now, the side effect, of course, is interest rates. And that’s where you need to decide how are you going to mitigate that particular risk. So a lot of people are in variable rates. I have no issue with variable rates. Then if you believe that you can weather and you know, an interest rate storm right in that, then variable rates probably make the most sense for a lot of reasons. But in my business, you know, there’s such a huge debt and asset value that a significant fluctuation in the interest rates could affect my operational budget. So I like to have predictability on that. And so for me, I look at more at fixed rates that match the duration of a particular project or objective. And it’s not unusual for even my larger competitors, if you will, some of the bigger companies like Hazel View or Minto or Homestead, they won’t even look at just a five year lock. They’ll be looking at a seven or even a ten, depending on how much they need to weather a particular storm. So in my view, predictability of cash flow trumps any potential gain I might have from a variable rate. Now, there is the other thing, too, that when you’re dealing with commercial loans, you know, almost every product is a fixed rate because it goes to the bond market. So it’s not like, you know, I have to make a lot of these hard decisions, but some of my smaller mortgages have a choice of being between variable and fixed. So I run it at about a ratio of I would say 75% of my mortgages are fixed products and then the rest are some form of. Variable, whether it’s line of credit or traditional first type mortgages.

Erwin Szeto [00:48:14] And then how do you hedge for all the renovations that you have planned? Because that’s like I was talking with a handyman just on Friday and he was telling me you couldn’t find any abs, plumbing materials. You went to like six different retail stores like Home Depot, Lowe’s. No abs.

Christian Szpilfogel [00:48:30] You have to you have to buy you have to buy well ahead in a lot of these things. So we’ve always had a process when we’re doing our renovation projects or repossessed more specifically in the repossession projects. We know the timeline that that’s going to work to. And then what we’ve typically done is buy the supplies when they’re discounted. So if we know that we’re going to be doing a full electrical overhaul of the building or we’re doing a lot of plumbing work, or we’re going to be buying, you know, doing hardware, floors or h-back systems, then when there’s a price break, we’ll buy it, then we’ll story. So that’s the way we typically deal with it. And certainly for retail stuff, you just watch for discounts, everyone else and everybody’s get a discount maybe once a quarter, once every six months where you might be able to get like a 20 or 30% discount on something.

Erwin Szeto [00:49:25] Or they’re storing it.

Christian Szpilfogel [00:49:26] Yeah, we store it so we’ll, we’ll pay for the storage costs. Right. But that’s, you know, it’s a lot less than if we have to buy it on the map. But right now, like if we’re I’m looking at heat pumps on a repositioning project that’s a 12 unit building that we’re doing, that’s a conversion of a seven unit to a 12 unit building. And my H-BACK guys told me that they need about 6 to 7 months lead time to guarantee that they’ll have the equipment.

Erwin Szeto [00:49:57] So does that timeline work for you?

Christian Szpilfogel [00:50:00] Yeah, it does because I’m in site plan control and.

Erwin Szeto [00:50:03] Right, right.

Christian Szpilfogel [00:50:04] Yeah. And then, you know, the city, right? It’ll probably take 6 to 7 months. So as soon as my site plan, I get it, I get a thumbs up that it’s going to go through the process. So I’m just waiting for feedback on that. As soon as I get the thumbs up on that, we’ll put the order in for the equipment, so we’ll have to pre-buy all that stuff.

Erwin Szeto [00:50:21] But what about the properties in Elmont? Like, don’t those rentals need to be done sooner than later?

Christian Szpilfogel [00:50:28] Well, we have to wait for tenant turnover, right. So we store stuff.

Erwin Szeto [00:50:31] Oh, sorry. Apologies, because you mentioned I guess about a quarter of them need to go back to the stud. There’s people living there now.

Christian Szpilfogel [00:50:37] Okay, I do. But I don’t know when the tenants are going to move out. But we some of the harder things to get or appliances, for example. So we are just we’ve been hoarding appliances. We usually buy them on a secondhand market anyway. So when we see stuff that we think we might need, we, we literally just go by, pick it up and we store it, right? So got it. Literally when somebody needs a new store over a new fridge, right? We get one to them the same day. We don’t go out and try to source it and buy it. We usually have them on hand.

Erwin Szeto [00:51:09] Christian for the for the novice, do you explain that? Do you have staff or are you and your wife are going out with a truck and picking up stoves and washers?

Christian Szpilfogel [00:51:16] And I’m getting too old for this, but my wife still tries to get me to try and move the stove and I will in a pinch. Right. But, you know, I don’t want to be lugging these things upstairs. I’m just not built for this anymore, you know? So we have people that will do that and we do have some amount of staff, although it’s been a bit more challenging through the pandemic. But then we also have subs as well. So we’ve got we’ve got a team of people that do stuff like that for us.

Erwin Szeto [00:51:43] Got it. Can you share how many staff you have?

Christian Szpilfogel [00:51:45] Yes, sure. We have five people. All told, a combination of four and four has got it and then we do as well.

Erwin Szeto [00:51:55] So again, for the more novice, like what would you recommend to be first hire?

Christian Szpilfogel [00:51:59] So bookkeeper or keeper.

Erwin Szeto [00:52:01] And then after that, when you say bookkeeper or the T for these of a contract.

Christian Szpilfogel [00:52:06] No, there’s stuff there’s. Yes. Especially when you’re first starting out. Right. But that’s a mistake I think a lot of people make right off the bat is you really do need a bookkeeper to keep your books straight because most people really don’t know how to do their books properly. I think kind of what I’m doing with the books, but even I won’t touch them. Right? My bookkeeper still ten times better than I’ll ever be and much more efficient. And it sure makes tax time a lot less expensive.

Erwin Szeto [00:52:32] My wife appreciates those things. Yeah. And then can sorry, could you go through what positions do you hire for versus which ones to use about.

Christian Szpilfogel [00:52:38] Friends, what you’re doing, really? I would definitely get a somebody can do some basic maintenance, right? Not necessarily a full handyman, but you’re going to need yard work done. You’re going to need someone to take out the garbage. You’re going to need somebody who can do some basic painting and drywall repairs. So we have a maintenance guy that does all of that stuff for us. And then we also have a column. We kind of refer to it as a hammer, but he’s really a builder, right? So he’s a builder. He does framing. You can basically do everything. It’s a bit of a jack of all trades and he literally moves from renovation project to renovation project. And then they supplement. So when we’re doing a full repositioning, we’re going to hire out the crew. So we’ll supervise the crew. Right. But we’ll have somebody who acts as a foreman. They’ll be under contract for that period of time. And we’ll bring in people that we need. Our plumber is a contractor. They’re always handy to have. I can do plumbing. I can do a lot of things right, but I don’t really want to do it.

Erwin Szeto [00:53:44] The shitty job. So yeah.

Christian Szpilfogel [00:53:45] Literally the times. But it’s funny that our plumber people, he does work for us and his main gig is actually real estate. So he’s a real estate entrepreneur now. He also has an appliance rental business. And he’s just a natural entrepreneur, but he still likes to do the plumbing. And he only does the plumbing for himself and for us.

Erwin Szeto [00:54:07] To fix appliances when.

Christian Szpilfogel [00:54:10] He doesn’t fix the appliance. Now he has an appliance rental business. So in Quebec, it’s typical that you get an apartment that doesn’t have appliances. That’s the norm. And so it’s quite an industry on that side where there’s rent, appliance, rental business. So tenants can either buy their appliance or they can rent their appliances. And so he has a business that literally just does that. But for the rental appliance, business is zero. I’m out of still buying your appliances. You put them in and then when they come off rental, he just sell them on the used mark and he doesn’t try and redeploy them at all and then he just buys more new stuff. Cool, dude. Yeah, well, the markets are all really dynamic, right?

Erwin Szeto [00:54:49] Christian, did you share? At what point do you go to outsourcing to a crew? Again, not everyone feels that returning you used was.

Christian Szpilfogel [00:54:56] Does all the repositioning.

Erwin Szeto [00:54:58] And repositioning. Yeah.

Christian Szpilfogel [00:55:00] Oh okay. Yeah. So it’ll completely depend on the nature of the project. Right. So normally what you want is for T4 staff, that’s where you’ve got a very steady amount of work. Right. Right. So if you’ve got work, that’s.

Erwin Szeto [00:55:16] Just routine.

Christian Szpilfogel [00:55:18] And you know, for the next few years you’re always going to have this kind of work. You might as well hire them honestly for free, right? If you’ve got work that can fluctuate, right? So you might have demand in one year, but it may not be there the next year. Then you want temporary staff that fall under for it. You’re still contractors, if you will, but they really just work for you or predominantly for you. And so you’re supposed to give them effectively a pay for it. So it gives you a bit of flex. And then you’ll have also subcontractors which are job specific contractors and you know, they’re invoicing you, that kind of thing. So that’s sort of a third tier. So when it comes to that third tier, it’s literally project by project for me. So we don’t do secondary suites, but a lot of your listeners will be secondary suites. And if you’re doing a second single secondary suite, you’re going to go you’re going to get a bunch of quotes from a bunch of different contractors in terms of how it’s going to get done, and then you’re going to pay them a contracted price or you through your time and materials as well. But it’s going to be for a fixed period of time. The project’s done and then move on to go do another job somewhere else. So our projects are similar to just beta, right? So we’re doing a 12 unit repositioning project. So in that case, we’re going to have to hire a crew of people, right, to do the work. And it’s always an interesting discussion with my accountant, right? Because on one side, you could just say the regular contractors, in other cases you do have the issue can be for a year depending on the nature of the relationship. Right. And Cherry would be a better, better person to speak to that than me. But depending on the nature of the relationship, right again and almost irrespective of the nature of relationship, it just allows you to flex. So I’m not constantly doing repositioning projects. I have them. They get it done right. Then I might have another one like a year later or six months later or two years later. So I’ll just take a crew on specifically to do that. And then when they’re done, they move on to their other projects.

Erwin Szeto [00:57:18] And I know Christian sounds like you’re pretty busy.

Christian Szpilfogel [00:57:22] That’s why. That’s why we have a builder on staff, right? So we can keep him one builder. Oh, yeah. But you.

Erwin Szeto [00:57:30] Projects, you’ve taken out a couple of disaster projects.

Christian Szpilfogel [00:57:34] You but like I said, a lot of those disaster projects. So the builder.

Erwin Szeto [00:57:38] Basically is their disaster before you set foot on a master plan but that you create disaster just to clarify.

Christian Szpilfogel [00:57:44] Mean we could do like an HD TV show on this kind of stuff, but I’ve certainly talked about them before, so we won’t recap them here for.

Erwin Szeto [00:57:53] Folks who had been listening to Christian when he was on previous episodes, the last one in September, some crazy stories with break ins and cops and cameras and. Yeah, yeah, cops leading to evictions. And it’s actually a great argument for why you need tech in your in your buildings cybersecurity.

Christian Szpilfogel [00:58:10] It has to go with that. We talked about one of my buildings had, you know, had all kinds of problems. It had a it was an acquisition where it was basically a ten unit building where we had two hoarders. We had a drug dealer. We had a guy that just liked to beat other people up. We had one good tenant and three vacant units house. And that building is beautiful now. It’s performing incredibly well. But the reason we have a builder and staff is he’s typically doing all the turnovers, right. So he’s it more of a jack of all trades? He can do everything right. So when we have a unit that needs refreshing, he’ll do that. He’ll take it all the way back to the studs, if that’s what’s required. And then when we’re doing a repositioning project, that’s typically a different crew that will hire out. So he’s not tied to that. Or if we have peak demand work, then we’ll just add contractors into the mix, right? So we did one of our office buildings with, you know, there’s obvious issues with respect to renting out larger square footage of space for office use during the pandemic. So we completely reconfigured them into individual offices and rented those up, increase the revenue by about worked out to roughly 50% increase in the revenue per square foot for the same space. But in order to do that, we have to hire a crew and to come in and rebuild all that stuff. So you’re often flexing up and down on these types of projects.

Erwin Szeto [00:59:39] And then you need before a recording, you’re even though you’re restoring, you’re improving these properties a lot.

Christian Szpilfogel [00:59:45] Some of the business.

Erwin Szeto [00:59:47] So you have three vacant units in a very I’m sorry about housing crisis in Ottawa and as well. And you’re saying you had a building with three vacant units? I’m guessing there was something wrong with the.

Christian Szpilfogel [00:59:56] Building that was and we talked about that in a former podcast, I think. But it was we did that acquisition back in 2017.

Erwin Szeto [01:00:04] But even your current your current downtown property that you Bob, it’s hard to track all these things.

Christian Szpilfogel [01:00:11] So we bought a seven unit roughly a year ago. That project we’re repositioning the, the building into a 12 unit building.

Erwin Szeto [01:00:20] Q Trying to paint a picture what the seven unit building is like? Is it like a three story or four stories, a purpose built? What does it look like?

Christian Szpilfogel [01:00:28] Yeah, it’s in center town, so it’s right downtown Ottawa. It’s in our premier area, if you will. But this building was built in 1901. Oh.

Erwin Szeto [01:00:40] Sentry home.

Christian Szpilfogel [01:00:40] Yeah, exactly. Now, interestingly, it’s just outside the Heritage Overlay district, so I don’t have heritage requirements, but I’m making it as part of my proposition for site plan control that we’re going to beautify the building and preserve the heritage, nonetheless. And while I’m doing that, because I need your favor, right? I need some concessions from them.

Erwin Szeto [01:01:02] They’ll play ball. They will like this is they will negotiate on stuff like this.

Christian Szpilfogel [01:01:07] Yeah. Yeah. They’re not unreasonable. You know, I think the city gets a bad rap half the time. I usually find that they are willing to be reasonable about things like this. But on something like this. So another building which I never told you about, we have another center town building. I was at Heritage Committee a few weeks ago, pleasantly surprised that as part of the Heritage Strategy, as a you know, as a secondary effect to the new official plan, they featured two of our properties as examples of what developers should be doing to preserve heritage within the center of town district. And we had two councilors, including a councilor I’m going to need support from for my new project. She was on the call as well. So it was kind of a, you know, call it out. And as well, I really thank you very much. I appreciate the fact that you featured a couple of our buildings. So in the site planning control, I’m just referring back to that as well. Right. And so my, you know, going in compromise, if you will, as to look, I’m going to do this because we like beautiful buildings. Okay, I’ll be perfectly honest. So we’re not beautifying these buildings because the city’s making us do it right. The city will give us incentives to do it, but we like to be proud of the buildings that we own. So with it, this building, the one that I’m talking about, the seven unit that we’re going to convert to 12, it has a lot of heritage value, can add a lot of character in the rest of the street has beautiful homes there period homes but the owners of all lovingly restored most of them. Right. So it’s really very nice. So that’s what we’re going to do with this building. So it is a three story building. It’s in what’s called an hour for you zone, which gives us an awful lot of latitude in terms of what we can do, even including height. So you have to respect things like transition between houses or between buildings. You need to respect what’s called massing as well. Also how much of a presence that has on the street and in the city basically asks us to do other things. They say, well, can you do something to prevent tenants from parking on the front lawn? Right. So City will put that design feature in. That’s fine.

Erwin Szeto [01:03:23] Can you. Would that be like rocks or like a fence or. No.

Christian Szpilfogel [01:03:26] What we typically do in our properties is we’ll put some sort of artwork in the front. So we’ll create some sort of stonework from a perimeter and we’ll create sort of a nicely landscaped interior to it. And then we put some amount of artwork in the front as well.

Erwin Szeto [01:03:45] Is there an address you can share as I can do a Google Street view?

Christian Szpilfogel [01:03:48] Sure. I’ll give you two addresses if you want to take a look at that. So one of the properties that was featured in the center town, the Heritage Plan, is 314 Frank Street in Ottawa. And even if you do a street view, I think it’s fairly current in terms of what it looks like. And then an example of artwork that we also did was this was a project we did back a few years ago on 442 McLeod Street, and that’s a six plex. So it’s a little one, but you’ll get an idea of the kind of artwork that that we might put there.

Erwin Szeto [01:04:24] Right. Fracturing looks a little overgrown. That’s why while you’re transitioning it, that’s a nice like a building.

Christian Szpilfogel [01:04:30] It’s a beautiful view. You’ll take a look at the all of the detailing on the front. We restored all of that work. Wow. That doesn’t look cheap.

Erwin Szeto [01:04:40] And I don’t really see much of this stuff.

Christian Szpilfogel [01:04:42] I’ll send you some pictures of what the gardens look like because the gardens are absolutely beautiful.

Erwin Szeto [01:04:47] Are they on your Instagram?

Christian Szpilfogel [01:04:48] They’re on her Instagram. And they’ll also be on our Facebook page. If people go to a reference group on Facebook, you’ll certainly see all the pictures there. We post them regularly.

Erwin Szeto [01:05:00] Hmm. So did the city. People like you don’t like my landlords. Not my experience.

Christian Szpilfogel [01:05:07] So, like, as a relative term. Oh. Oh, McCloud. Oh, wow. Yeah.

Erwin Szeto [01:05:16] Often on parks on that.

Christian Szpilfogel [01:05:18] No, it would be painful for their vehicle if they did.

Erwin Szeto [01:05:21] Oh yeah. Those. That’s by design, right?

Christian Szpilfogel [01:05:24] Exactly. So that’s the kind of stuff that that they ask us to do. So. So, yeah, that’s no problem. So we put that into our design. So we kind of show that we’re compromising. So what ends up happening behind the scenes in a site of planning control or later on in the Committee of Adjustments? If anybody’s ever been to a Committee of Adjustments, it’s basically set up where the committee is an elected committee, and then you go in to put your case forward. And if somebody wants to oppose it, they can come and give a counterpoint to the committee to say why you shouldn’t get those variances. But before all that happens, they also look to city staff to say, you know what their opinion is. And so if you work well with the city staff and you’ve shown that you’re willing to accommodate what they want and you’re not trying to just bully everything the way you want, then the city staff will say, Look, we support what they’re doing. They’ve done everything they can in order to not ask for these kinds of variances, and they’ve made concessions in other areas in order to enable this. Then you get the backing of city staff, which helps. And then the other thing we do with things like Committee of Adjustment is I’ll shop these plans to the neighbors, you know, the ten closest neighbors. I’ll just shop it with them. And then I will also shop at two key influencers on the street and tell them what the project is about, why it’s going to enhance the neighborhood. And I’ll ask them to sign off on a letter of support. Mm hmm. And then I submit those letters of support with my application and the Committee of Adjustments, and it usually turns into a nonevent. And I kind of in one scenario, we had someone who was objecting. Right. And that took a little bit more time in the committee adjustments. But in that scenario, because we had overwhelming support, the committee of Adjustments went in our favor without having to go to an appeal.

Erwin Szeto [01:07:14] In Hamilton, we have overwhelming support of our garden suites.

Christian Szpilfogel [01:07:20] For projects that have different acceptance by the community. And I look at it as a as a democracy, if you will. So if I’m putting in a project into a neighborhood that doesn’t really fit the character of the neighborhood and isn’t going to garner support of the neighbors, then I probably wouldn’t go ahead with it anyway.

Erwin Szeto [01:07:39] Right. Well, with Frank Street in McLeod Street, for example, did you reposition them?

Christian Szpilfogel [01:07:45] Did you.

Erwin Szeto [01:07:46] Add sweets? Did you add stories, additions, anything like that?

Christian Szpilfogel [01:07:49] Yeah. Frank Street was easy. So Frank Street, that was the there was a six unit building.

Erwin Szeto [01:07:55] Really didn’t tell me what it was. I’m sorry, Frank. Sure. You can tell your friends.

Christian Szpilfogel [01:08:00] Frank Street was a six unit building that we converted tonight. Okay? And we did that back probably about seven years ago. Okay.

Erwin Szeto [01:08:07] What did the actual units come from?

Christian Szpilfogel [01:08:10] That’s a pretty high walls or kinda. Yeah. So we had on the second floor there was a very large three bedroom unit. It had two bathrooms in it already and it was the previous owner was living there. So it was very spacious and renting out three bedroom apartments is actually pretty tough. No kidding. It is so.

Erwin Szeto [01:08:35] Uncommon.

Christian Szpilfogel [01:08:36] Well, the city would say they’d like to have families move in there. But in our experience, you know, I’d say 25% of the time it was families. And then the other times, it was people who, you know, usually students who wanted to rent an apartment and then each of them would use a bedroom. So we didn’t really want to do it as student housing. And then the other issue was that the revenue per square foot of a three bedroom is a lot less than the revenue per square foot of a one bedroom. Mm hmm. So what we did was we took that unit and we split it in half, created two very nice luxury, one bedroom units. But even on, you know, as is basis, the revenue per square foot went up by about 50% right off the bat for that same floor space. And then there was unused room in the basement. So we expanded there and we added two new basement micro suites in there.

Erwin Szeto [01:09:29] So the previous owner just left unused space.

Christian Szpilfogel [01:09:33] We did, because there’s another problem in Ontario. If you go above six units, then you get into the murder tax rate, the male rates that are in the male rate in Ottawa. So residential no rates is about 1.0, 1.5 somewhere around there. But as soon as you go above six units into your seven unit, you’re now in the murder class and upper class has a rate of about 1.4. So your taxes go up about 40% and your property taxes go up by 40% by adding a seventh unit. So that’s where I say, like, if you’re going to redevelop or reposition a product like that, then you’re going to take in about six units. Units seven and eight is kind of a valley of death, right? Like there’s literally no point to do it because you have that second unit and all the revenue you get from it just goes to pay property taxes. So and then the city wonders, why don’t we have more people doing seven and adding a couple more units, only six plexiglass like you guys talk, you know, basically you’re telling us through the tax system not to do it. Yes. So that’s why you need to really jump to about ten units before the business case starts to hold together and some would suggest up to 12 units first. And so the McLeod Street property that I showed you there, that one was originally a triplex and we did talk about this in a previous show. So I won’t get into the details on that one. But that was a troubled building, but it had a lot of square footage space on it. And we turned it from a triplex with one illegal unit and converted it to a six plex, a modern six plex that’s a beautiful building.

Erwin Szeto [01:11:09] And offers time to see some of these places when I when I come visit you.

Christian Szpilfogel [01:11:14] Yeah, for sure. Yeah, we’ll do that. We’ll do, we’ll go take a look at these the auto work or some of the Ottawa properties for sure. All right.

Erwin Szeto [01:11:21] So the talk about that know yet so June 8th we’ll be coming to visit you again share chair we’ll be speaking at Oreo.

Christian Szpilfogel [01:11:28] I yeah we’re going to have June eight at Oreo 7 p.m.. So we’re going to have both cherry jam and that’s Irwin’s better half only and Elizabeth Kelley will be there as well. So we’re going to have both of them speaking out, eating.

Erwin Szeto [01:11:49] Pasta and Oreos. The largest real estate organization and not allies and not.

Christian Szpilfogel [01:11:54] Yeah, we refer to it as a clover. Yeah. It’s the largest of the organizations and the most active certainly within the city. We have about 400 full time members and they don’t all show up for meetings, but they’re almost there. And we’ve also done an association with the Eastern Terrorist Landlord Organization, which represents all landlords. And what we did there was an alliance where they do our lobbying. So particularly with the municipal governments, and we’ve had some great outcomes on that side, which you can certainly talk about as well.

Erwin Szeto [01:12:31] We’re running out of time on that part.

Christian Szpilfogel [01:12:33] On the Oreo piece though, we went back to live and hybrid two meetings ago starting in March. So we do our meetings in person at the Infinity Center and then we also promote members or members that are quite comfortable coming in person come in through Zoom and it’s an interactive discussion so people on Zoom can still participate with what’s going on stage as well and Q&A is still work, etc. And members that are presenting while they’re on Zoom calls, it’s all seen from within the Infinity Center. So it’s a real cool set up that we’ve got on the. So we’re still going through a few teething pains on it, but it’s pretty neat.

Erwin Szeto [01:13:12] Where can people find out more about Oreo and want to tell me about.

Christian Szpilfogel [01:13:16] It to go to our website, Oreo dot org. So let’s build on our real estate investors organization. So REI 00. org. And they can always reach out to me if they get lost.

Erwin Szeto [01:13:30] And where can they reach you?

Christian Szpilfogel [01:13:31] They can reach me any number of ways. Christian Still, Vogel on Facebook is an easy way or via email.

Erwin Szeto [01:13:38] Christian At Aussie there, this is internet. This is for life. You sure you want to share your email? Well, have your website in the Contact US page.

Christian Szpilfogel [01:13:48] I don’t know. I don’t get too much spam. The most spam I get these days is purely from people trying to tell me why I should be trading Bitcoin.

Erwin Szeto [01:13:56] Trading Bitcoin. Do you do any bitcoin? Any gold, silver, bitcoin?

Christian Szpilfogel [01:14:01] I do. I focus on real estate. And, you know, a discussion we had earlier, we were talking about the economy is the punch line through that whole thing is the smart money right now is putting their money in hard assets, right. Whether it’s real estate, whether it’s certain precious metals. I’ve seen Bitcoin now describe it as a hard asset, although I’m still struggling to get my head around that. And trust me, I’m a technology guy, okay? So I’m not shying away from Bitcoin because I don’t fully understand them. I think it’s an interesting area to investigate. Right. But it’s not the technology that scares me. Hmm.

Erwin Szeto [01:14:37] Well, what are your friends from the tech world saying? Are they the divided?

Christian Szpilfogel [01:14:40] Yeah, I’d say that tech investors. So people who are technology background and are investors, most of them, I would say, have thought about Bitcoin more in the context of the experimental hobby and not necessarily as a serious investment vehicle. And I’ll admit I do get worried when everybody is talking about any specific investment class. When I go and get my haircut right, then the barber is talking to me about Bitcoin and how he’s trading. When the Uber driver starts talking to me about Bitcoin trading, when I get approached endlessly on Facebook with people who want to be my friends but only really just want to sell me bitcoin trading stuff. I get nervous about that. It makes me think that there’s something not quite right.

Erwin Szeto [01:15:31] Right. They’re all trading.

Christian Szpilfogel [01:15:33] None of them are holding. No, the trading people are trading. That’s what I’m typically seeing. People aren’t necessarily holding. You’re trading. Even my 86 year old father was asking me, how do I get into Bitcoin? It’s always said that. Is this just for play money, right? Or are you doing serious investing? Because I think you really need to do a lot of studying on this. But if you just want to if it’s play money, you don’t mind losing it. That’s fine. Right? Right. I can help you with that. But that’s kind of where it stops the.

Erwin Szeto [01:16:00] Remember any time people talk about trading gold.

Christian Szpilfogel [01:16:04] Well, exactly. And I think that’s because a lot of people don’t fundamentally understand what crypto really is. And when we take a look at something like Bitcoin, to me the equivalency is gold. You know, it’s a storage of value. Right? But what a lot of people are doing is, well, all right, you know, yeah, there’s a lot of speculation as to where they think it can go, but it’s just speculation. But what a lot of people are doing is trading on the volatility. Right. And just like people do in the stock market, they’re technical traders. So there’s that piece going on. The Etherium is really kind of interesting because it’s more of a platform where other things can be built on top. So I’m kind of curious to see the companies and the business opportunities that emerge on that platform, because that could be interesting. But personally, I prefer assets that generate some form of a dividend, right? Real estate is a great way to do it. And when we talked about earlier, it’s effectively a storage of value in an inflationary times. It’s one of your best hedges for sure, because regardless of what the market does, you’re still getting an income stream out of it.

Erwin Szeto [01:17:10] The price of to buy first go up. I got lots of two by fours in my house. My house is on. I get worth more, right? So hopefully no one breaks into my house and steals my two by fours it.

Christian Szpilfogel [01:17:22] You just go back one podcast; you hear about those stories.

Erwin Szeto [01:17:25] And you can.

Christian Szpilfogel [01:17:26] See it’s not the two by fours, it’s the copper.

Erwin Szeto [01:17:29] That’s not enough copper. My property is still hopefully I’m.

Christian Szpilfogel [01:17:32] Not going to go into the walls.

Erwin Szeto [01:17:37] Thankfully we’re all in places, all tenanted, so hopefully they’ll do. Mike Harper There’s been a blast. I know we can go on for another hour or three. Thank you so much for your time. Any final word you want to share? Could you imagine if people are still not convinced to own hard assets?

Christian Szpilfogel [01:17:54] No. I mean, it’s become so obvious after a while. Right. And sometimes I think it takes wisdom of time. Right. To kind of be able to see the history for yourself. Right. I got into real estate in 2005 and in terms of, you know, picking up rental assets, if you will. Right. Obviously, I had my house I had done some land stuff before that, but it was never really serious. And now I look back and think I really should have started a lot earlier because at the end of the day, they’re not making any more land. You know, cities are still continuously growing. Rural to urban migration is a real thing. And then even if you’re not in a high growth area, at the very least it’s a storage of value that generates cash for you. So it’s an asset class that I think everybody needs to hold. And the only recommendation beyond that is that I think people shouldn’t just buy willy nilly. I think people really do need to get some level of training, some level of education, maybe some level of coaching or mentoring to make sure that they go about it in the right way. But it’s one of those asset classes that even if you do the wrong thing, time will forgive it. Right. Time cures a lot of mistakes in real estate.

Erwin Szeto [01:19:13] Time for the central banks to create more money.

Christian Szpilfogel [01:19:17] As they create more money. Yet again. I will say it again. When they start printing money, your debt fundamentally gets cheaper. Protect yourself against the interest rate hikes if that’s what you feel you need to do. But your debt gets cheaper relative to the asset itself.

Erwin Szeto [01:19:32] And at the same time your savings go down in value.

Christian Szpilfogel [01:19:35] That’s right.

Erwin Szeto [01:19:36] For cash savings there.

Christian Szpilfogel [01:19:37] Yeah. Not only hold the cash you need for reserves, right. And if you can hold it as credit, that’s better. But yeah, I mean, just think about the price of the house that your parents bought, right? What did they pay? What was their loan value then if you just did it as an interest only loan from that period of time. So we’ll talk about the cumulative carrying costs. But if you had to pay off that mortgage now, you’d be with the note your Visa card. That’s ridiculous. Well, I don’t know. My parents fought in the sixties, so they would be whipping out of the car.

Erwin Szeto [01:20:10] And yeah, mine might have three mark. My parents are three mortgages on their first house would be music and maybe all my credit cards. Yeah, that’s pretty insane thing to think about. And then you’d want a house free and clear. My parents would be Scarborough. And that house is probably worth I can’t imagine it can’t be worth 900 grand.

Christian Szpilfogel [01:20:28] So I just one other mention, I guess is for contact. So we you know, I’m on Facebook, I’m on Instagram as well. Our company is before us right now. Ifer0us we have a presence on Facebook, a live first group. We’re on Instagram. And then of course, there’s our website for a dot K and I have a bunch of resources there for investors as well. We call it the Investor Hub, and that’s where I write my articles and they’re practical things. So I tend to write things that are going to be useful to people. It’s not market speak, it’s not, you know, market fluff. I have nothing to gain by that because I’m not really trying to attract people to my website unless you’re tenants. But for me, it’s just a resource that I like to create and share.

Erwin Szeto [01:21:19] You share a lot. Is it just for fun?

Christian Szpilfogel [01:21:23] Yeah. Yeah, I just I like to I like to help others. I like to give back to the community. You know, I don’t really have any commercial interests in in the sharing that I do. It’s really more about educating and helping others. I just want them. I like people and I like to see them be successful, quite frankly. But no, I mean, I don’t take external investors, so I’m not doing that. And my target market is primarily tenants. But, you know, helping landlords doesn’t necessarily get any more tenants.

Erwin Szeto [01:21:53] Because there’s plenty of tenants. So it’s not like we need to necessarily be over. Are you also volunteer as a vice president of Oreo?

Christian Szpilfogel [01:22:01] Yeah, that’s right. Yeah.

Erwin Szeto [01:22:03] I take much of your time.

Christian Szpilfogel [01:22:05] More than my wife would like me to contribute. Sure, but yeah, it’s a little bit of time, but it’s part commitments to evenings a month and then there’s some work in between. But I, Victor Menashe, Michael Chan of the vet, Turner, Jacob Homer and Brad Takei, we just volunteer our time to do this.

Erwin Szeto [01:22:28] And it’s unpaid just for.

Christian Szpilfogel [01:22:31] Volunteering. Yeah, it’s absolutely volunteer. And we do it. It’s just, you know, our obligation. We’re just members of the club that volunteer our time to do it, and then eventually we’ll tire out and somebody else will want to come in and basically do it. So, you know, people within your club have each take, you know, a lot of them have taken a turn to running the club. So this isn’t my club. It’s not Victor’s club, it’s the club. Right. And we each volunteer for these positions and get elected. Yeah. Cool, cool. So we have an election in May actually. So when you do come down in June, right? We’ll see if I still have a board position.

Erwin Szeto [01:23:08] Go see if we’re still invited.

Christian Szpilfogel [01:23:11] You won’t change a thing, right? So it’s all locked in for fashion.

Erwin Szeto [01:23:16] Great catching up with you. I’m impressed how much you’re up to. I don’t know how you do it and still, like, make the time to volunteer and talk to your neighbors.

Christian Szpilfogel [01:23:26] It’s fun. That’s why it’s.

Erwin Szeto [01:23:29] Amazing. It’s different than your tech job.

Christian Szpilfogel [01:23:33] Yeah. You know, more fun than your tech job. Although I had a lot of fun in tech, I really did. And anything I do, it’s not a job, right? It’s focus, it’s a hobby. It’s what I live and breathe. So I can’t do stuff halfway. It’s just not the way I’m wired in tech. You know, I was one of these people that work all the hours of the day. It really didn’t matter. But I enjoyed it and we built some really cool stuff over the years. And now that I’m full time in real estate, I’ve been full time in real estate since 2017. And it’s the same way. And I think I mentioned to you, my younger daughter joined our business almost two years ago, and she’s coming up through the world. So that excites me as well. I kind of want to see her eventually take over the reins. That would be wonderful. Cool. I could stop now. Honestly, I could stop. I could have stopped maybe two years ago. But I just have fun with this all the time, and as long as I have fun, will keep doing it. Amazing. All right.

Erwin Szeto [01:24:31] Congratulations, Christian, on your success. And I’ll see you June 8th.

Christian Szpilfogel [01:24:35] Yeah, hopefully in your nice shiny new Tesla.

Erwin Szeto [01:24:38] LC No idea when it’s showing up. And just like I would just like to say goodbye to these gas bills and make it rain. That cracked you crazy this morning. And I need to fill my car. That’s one of them. Use cases for having an electric vehicle. You know, when I leave the driveway, it’ll be a full. The fuel tank will be full. I don’t want them pump gas in the cold or rain ever again.

Christian Szpilfogel [01:25:01] Yeah, well, there’s definitely not. I mean, there’s no need to charge up unless you’re doing a long haul trip. Right. But I think it’s so electric. And I know we should probably wrap this up. I’ll tell you, electric vehicles. Electric vehicles are going to be really interesting in terms of not just what they do, including the autonomous vehicle side, but think about the innovation that’s going to start to happen related to the electrical grid. Right, because you’ve got all these cars that are there and they’re batteries are awful. I think about what happens when you’ve got, you know, basically load sharing that has to happen. You’re not relying completely on the generating site. So, you know, it’s a spin up, you know, a nuclear station in terms of turning the electricity up on that is, you know, takes a long time. That’s why they still have some natural gas generating stations. And then when you’re taking a look at wind or solar. Right, there’s fluctuations in variance that happens there. But if you’ve got these batteries spread out all over the grid, you know, if you’re an electrical engineer, you you’d understand the concept of capacitance. But basically what happens is you’re basically buffering all this electricity. But if you need to, you can kind of feedback to the grid, right at times where there’s a bit more demand on the grid. So it actually will be an interesting enhancement to the electrical grid over time. And this is going to take probably 20 years at least for this to happen because you’ve got to get smart technology to do it right, because the system is largely wired to feed demand as opposed to being able to go back the other way. But with the feed in tariffs programs, you know, with the people doing local solar generation people already have the cost of being able to feed back to the grid. This just adds another interesting dynamic to the overall mix they’ll be funding.

Erwin Szeto [01:26:55] I’m really interested in seeing what happens with Fossil Drive, which I think will happen before 20 years, and you can essentially have your car be its own Uber taxi. You can basically have a built in designated driver.

Christian Szpilfogel [01:27:10] Think about what that’s going to do to public transit.

Erwin Szeto [01:27:13] Or smoke it.

Christian Szpilfogel [01:27:14] Yeah, we’ve seen some towns already. Instead of getting their own busses right, they’re literally just contracted with Uber to be their public transportation. I think Ingersoll, Ontario was one city that did this probably four or five years ago. And there’s a few other cities I have to confirm that, right, because I’m just doing this from memory. But I thought that was an interesting shift. Now, if you go to autonomous vehicles, then that becomes much more feasible even in large, larger urban centers. Think about it as a feed into a main transit. So if you’ve got light rail that is part of your main corridor, well, you could have these autonomous vehicles bring people to those stations or at least main transit points. It gets really interesting.

Erwin Szeto [01:27:59] And it gets cheap transportation. It’s really cheap when you don’t have humans involved.

Christian Szpilfogel [01:28:04] We get to see this in Ottawa, right? Because Ottawa is one of the few level five self-driving tracks, test tracks in the world because of our climate. So Ottawa’s a hub for, you know, the evolution of autonomous vehicles.

Erwin Szeto [01:28:19] The streets of Ottawa or there’s a track, I mean.

Christian Szpilfogel [01:28:21] Some of the streets to come out in north. So in the major tech park there so on a Hertzberg and like it drives and Terry Fox drive that area that loop if you just stand there some days you’ll see some autonomous vehicles driving around too. So that’s cool. It’s becoming more and more common. Originally it was a special event and everybody would come out to see it, but you’ll still see them testing and then they’ve got even the traffic lights and so on have special transmitters in order to enhance some of the autonomous vehicle things that they were working on. But our test track is actually not far from the Infiniti Center. It’s probably about a ten minute drive from there and it’s a really neat little track there. But autonomous vehicles you talked about within 20 years; I think most people are predicting it’ll probably be about 20 years before the technology is really in what’s called level five full automation. And then there’s going to be another period of ten years where there’s a transition of those vehicles as well into the marketplace.

Erwin Szeto [01:29:29] That’s a long time.

Christian Szpilfogel [01:29:30] Yeah. I’ll send you an article that kind of describes the timeframe and the evolution.

Erwin Szeto [01:29:36] Are you crazy?

Christian Szpilfogel [01:29:37] Yeah. Cool.

Erwin Szeto [01:29:39] I’ll make sure not to buy FSD for my Tesla. Why did you buy it?

Christian Szpilfogel [01:29:43] Yeah, I did, for sure. Yeah, absolutely I did. Yeah. Just love that feature when, you know, I was just imagining, right. And I like to always tell my friends. So think about when you’re in in a mall, right? It’s raining cats and dogs. Your arms are full of things that you just bought and normally you’d have to try and run through the rain, get to your car, put this stuff in, or you’d have to have somebody with your stuff when you go get the car. But with a full self-driving, you can summon your car to come pick you up. What’s not to love?

Erwin Szeto [01:30:17] I’ll just order all my stuff on Amazon and Costco delivery.

Christian Szpilfogel [01:30:21] Now I kid it mine out. Right so the good thing is. It. They know I’ve locked in a January of 2021 prices. I will see when I actually get the car.

Erwin Szeto [01:30:33] So is you stop up before driving.

Christian Szpilfogel [01:30:36] That’s awesome.

Erwin Szeto [01:30:39] Amazing. Yeah. I’ll be your fun toy. That’s like a fun trick.

Christian Szpilfogel [01:30:43] Yeah.

Erwin Szeto [01:30:43] Christine, again, thanks so much for doing this. And I’ll see you June eight.

Christian Szpilfogel [01:30:47] Right. Well, we’ll probably see you in May, right at the multifamily.

Erwin Szeto [01:30:52] Yeah, that’s right off the bat. So less than a month. You’re crazy.

Christian Szpilfogel [01:30:56] But we’ll see you there. And then we’ll see you in June and.

Erwin Szeto [01:30:58] Amazing. All right. Thank you, Christian.

Christian Szpilfogel [01:31:00] Well, thank you for having me. Erwin and season.

Erwin Szeto [01:31:11] 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 to 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 that cash flow reduces your risk. The more you have, the more limbs 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 rental in St Catherine’s, Ontario. If you’re interested in learning more of Mr. or Free from my newsletter at WDW DOT Truth About Real Estate Investing Dossier, enter your name and email address on the right side will include in the newsletter when we announce our next Free Stock Hacker demonstration. Find out for yourself with so many real estate investors are doing to diversify and increase our cash flow. And if you can’t tell, I love teaching and sharing the stuff.

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