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Podcast Transcription

Sandy Mackay [00:00:31] Breakthrough Real Estate Investing Podcast Episode Forty-Nine.

Rob Break [00:00:47] Now. Hello and welcome to the Breakthrough Real Estate Investing podcast. We put this show together to inspire you and help you break through to the life that you want to live through the power of real estate investing. My name is Rob Break, and here with me, as always, is Sandy Mackay.

Sandy Mackay [00:01:17] Oh, Rob, how’s everything going tonight?

Rob Break [00:01:19] Really good. Really good. And we did something a little different tonight. We actually recorded our interviews before the intro because we had three guests on tonight or four guests, actually, but three two guests, two different guests and one couple who have all completed their first project. Because we’ve had a couple of people ask us about learning from some newbies and what they learned going through their first project. So, we thought we’d reach out to three of them tonight and talk about their projects

Sandy Mackay [00:01:52] and take it back. Old school, we used to do it this this way, so we’re going back probably two years.

Rob Break [00:01:58] Yeah, I guess you’re right, actually.

Sandy Mackay [00:02:01] So before you go on, let’s remind the listeners to check us out on our website. Breakthrough Area Podcast Dot S.A. I log on there and grab our free report, the seventh-grade materials you can trigger in your property starting right now. Totally free on the website there and go download it and have a quick read through. It’ll really help you really gain more time back in your life when you’re renovating, owning, and managing properties.

Rob Break [00:02:29] And you know what? We have gotten an amazing number of reviews now. We’ve got 71 reviews on iTunes. I’d like to tell you that they were all five stars, but actually only 66 of them are five stars. We got three four-star reviews and two three-star reviews. But that’s great, man. 71 ratings on iTunes, which I looked like nobody else really do, and what we’re doing has those kinds of numbers. So that was really impressive. And thanks everybody for taking some time to write down what you thought about our show, and I would encourage anyone who hasn’t done that to go over and have a look and help us. So, it really does get the information about this show out there to more people. Somebody who was looking through this person’s reviews would see it now that they’ve written a review for us, so it just exponentially helps us grow. So please take some time and go out there and give us a five-star review and tell us what you like about the show. I do have it looks like two more new ones since last time we did a show, Sydney, so they’re not too long. I’ll read those now. So, this one is actually by someone that calls himself Middle Class Man, and he says awesome. Canadian real estate investing podcast. I have listened to almost all of your episodes. Thank you so much for the great content and amazing guest interviews. God bless you and all the best. Noel and the second one is from D.A. Gilbert, another five stars. So, thank you very much. And it says great Canadian content, relevant and timely subjects brought to us by experts superstars in the Canadian real estate investing world. Rob and Sandi, love your banter. Also, love the way you get down to business and ask the hard questions and probe when we need more info. Break through real estate investing podcast is always cued up for my drive from Berry to Durham, York to Midland and more RBI. Meet up groups. Thanks guys. Great work. Well, yeah, so those are that’s a really good one. Thank you. Thank you very much. So, I guess to preface the guess that we have on they’re all talking about their first rental project. And the thing that’s really specific to all three of these guys is that they’ve done that with a buy fix refinance and then rent a project or a BFR for short, I guess, which is a pretty popular strategy. You can think of it sort of as a regular fix and flip. But in a lot of cases, they’re forcing a higher value by adding a secondary suite. But then you essentially flip the property back to yourself instead of selling it to somebody else. It’s not fair to say Sandy as

Sandy Mackay [00:05:27] hybrid and a hybrid of the fix and flip with the with the buy and hold. Really?

Rob Break [00:05:33] Yeah. So, I mean, it’s a good way to just add a forced depreciation where if you were just going to fix up a house and then sell it, you could make some money doing that. Lots of people do. But when you change the use, there seems to be a lot more of money being able to be pulled back out. Plus, you get to keep the property in the way. These guys have done it, so it’s really interesting, and I appreciate all of these guys coming on and taking some time to tell us about their first project. So, we had Sve Pavic, who did his project in Scarborough and then Sean Castellano. He did his in Oshawa, as well as Darren Walker and Danielle Oliviera, who did their projects in Oshawa as well. And they all actually had some different and interesting things to say about the process. And, you know, just their experience and what they went through, what they’d change. All of those kinds of things, the challenges that they had. So, I think there’s a lot to learn from that sandy. Totally.

Sandy Mackay [00:06:42] I think it’s a fantastic strategy. And you know, the cool thing is a lot of these, these projects that we’re talking with these folks about tonight are it’s either their first one or it’s like their second one. You know, they haven’t been doing this for years and years before getting into this. It’s a little more advanced of a strategy. Yet I think pretty much anyone their can oh, they’re going to tackle it, even if it’s your very first one.

Rob Break [00:07:02] You’re absolutely right. Like it was their first for each of these guys. It’s their first Renault project. Like, they seem to me that they had some buy, like a buy and hold before that. And then this would be their second one where they actually did a lot of renovations. And for the most part, these guys didn’t really sound like newbies. That’s one thing I got to point out is that they’ve taken the right amount. Well, now, of course, they’re like speaking about it in retrospect, but they did the right amount of education to get started and then they took action. And these are all the things they’ve learned along the way. Yeah. So, I guess, without further ado, here is our first interview with Sve Pavic. OK, so like I was saying today, we’re talking to people who have completed their first by fixing refined rent project. Right now, we have Sve Pavic with us.

Sve Pavic [00:07:58] Thanks, Rob. So, my full name is Svebor, which even four I’m from Croatia, actually from the Slavic part. So even further for that side of the country, it’s a very unique name. I guess my parents had to dig deep in some kind of ancient book in my country to find that name.

Rob Break [00:08:16] That’s like the equivalent of like a Trevor or something like that. Wouldn’t it be?

Sandy Mackay [00:08:20] Something it would like? Honestly, I think there’s only two or three people in the world who have the same name as me. At least that’s, what I can tell from a Google search.

Sandy Mackay [00:08:29] So that’s good. And it’s good.

Rob Break [00:08:32] Yeah, makes it unique. Exactly. All right. Well, thank you for being here again. Appreciate you coming on.

Sve Pavic [00:08:38] Yeah, for sure.

Sandy Mackay [00:08:40] Yeah. Great to have you. Can you give us a brief intro into your background and how you got interested in real estate?

Sve Pavic [00:08:46] Yeah, sure. So, I guess my story is probably like the same, I guess, with most people when they get into their adulthood. So, I was I was studying at university at the time, at U of T. I was originally in the business program and fate events turned and I ended up studying something else. And I, you know, I quickly realized that all of my friends who were graduating were having a really hard time finding a job in the job market. And even some of these guys, you know, had engineering degrees and stuff like that, and even them were having a hard time. So, I knew that, you know, the old education system are just going to university. Getting educated and getting a job is pretty much gone out the window. And from then on, I realize that, you know, I had to kind of secure my own financial freedom. So, I started doing it all a bunch of reading, and I’m sure everyone does the same thing, and they go to the rich dad poor dad books. So that was one of the big motivators for me and getting me interested in real estate, you know, reading as much as possible. So it was around university that I really got interested, I guess, in the whole passive cash flow. And then it was just what’s the best vehicle for that? So, I still think real estate is the best. That’s not one of the best vehicles for that. And then I how we actually got into it was we were really big on watching the income property show and that’s when I started reading about rental properties. And so, we were watching that show with Scott McGillvary and we actually ended up going to a bunch of his conferences. And so, we ended up learning a bunch through there, and I bought his books and stuff, which were really super helpful, and I recommend for anyone else. And then we just we just decided to bite the bullet and we did, and we purchased our first house by the time I was age 24.

Rob Break [00:10:38] OK, perfect. Thank you very much. So, tell us a little bit about that house, son. That’s the one that you did the that you’ve done the buy fix, refine rent on.

Sve Pavic [00:10:48] Yeah. So, I still think like the best real estate rental strategy is buy the fixer upper. Fix it up, you know, either yourself or by hiring contractors or a mix of both, which is what we did and then refinance and rent out the property. So legal basement apartment is the kind of bread and butter. So, we bought a detached bungalow house in the Scarborough area, which is one, I would say one of the best areas in the GTA to invest in. Still, because the price of detached bungalows is still affordable, relatively affordable, quote unquote. And you can find a lot of these, you know, houses that are built in the 70s that are all original. You know, have hardwood floors, all that kind of stuff. And as long as they’re maintained properly, you can pretty much fix them up for a reasonable cost. And the benefit of getting the bungalow and why the bungalow is such a good investment is because of the square footage and the floor plan of the basement. So, our so we built a legal two-bedroom basement apartment, and it walks out to the backyard. So, we have a pretty big backyard, and it has liked a very large window and it has liked an open concept kitchen living room area. And I think that is one of the big, I guess, selling points for that rental apartment. And, you know, most people don’t even, you know, are shocked when they see it because they can’t believe that it’s a basement apartment. So, like, what I would recommend is finding a detached bungalow with A. So, the requirements for us were a side entrance or a separate side entrance, already existing proper ceiling height. So, six-foot seven minimum under bulkheads and making sure that there is ample windows and egress. And ideally, some sort of walk out.

Rob Break [00:12:35] OK, yeah, just so that you have a different way for the person to get into the basement. Yeah, and that’s what you guys did. Put it in the lower level, right?

Sve Pavic [00:12:45] Yeah, we put like a basement apartment, but we actually built one completely from scratch, which I think is probably one of the most challenging renovations. It’s good in the sense of that. You can completely design the floor, plan yourself, but it’s also the most amount of work and probably the most expensive. So, like the return, investment is probably not as high as if you bought something that already had a kitchen and plumbing and stuff like that, you know, and then it was just a refresh and maybe a couple of walls. But here was we literally did the demo ourselves. We put it back to the studs and then we got an architect, and then we hired a contractor that did, let’s say, like about 80 percent of the work. And then we just did the stuff that we that we found that we could do reasonably like we did the demolition. So, we saved money there and the garbage disposal. And then we did the laminate flooring and the painting, and the kitchen install and backsplash and stuff like that, just like simple stuff.

Rob Break [00:13:44] So I think that the key really for everybody listening because there’s been a lot of requests for people who have just done their first project and sort of the troubles that they’ve had along the way. But you mentioned briefly that that strategy seems to be like the bread and butter of a lot of people. So, can you go a little bit further into that? Maybe tell us why you chose that strategy specifically? And like you said, you picked a project where you had to do the whole thing from scratch. That’s a big project for someone doing the first one. So why did you pick that as well?

Sve Pavic [00:14:19] I guess, I guess I’ll touch on, I guess, the challenges of real estate investing and specifically with looking for something with a legal basement apartment and in really the GTA, you’re basically once. So, we ended up finding an agent. So that was another part that I want to touch on. It’s really important to find a good agent that you can work with and one that has some level of experience in investing or has the right mindset, is you? Because if they don’t understand what you’re trying to do and if they’re not on the same page, you won’t even see the right type of houses. So, we had one agent who was showing us houses that, you know, the ceiling height wasn’t there. So that kind of stuff is important because it’s so costly to excavate, to dig down and do all that other stuff. You don’t have it in the budget to then also fix up and stuff like that. So that’s why you want the separate entrance. That’s what you want, the ceiling height and everything like that, because most of then your costs are literally just renovating and creating the basement apartment as opposed to excavating or creating a side entrance and so forth. So, the first thing is finding a really, really good agent, and that was actually a really hard challenge for us because we went like one of the agents went through like completely was not showing us what we wanted. So, we had to fire that person. And then we found another agent who was also finding it in a real estate agent who specializes in income properties. And investing is difficult. Like, there’s only a handful of them and Robin and you guys are like one of the few people that I know that I found online who actually do this stuff right? So, some of them might not be as public, they might just be her investing circles or stuff like that. So, but it’s very difficult to find someone who actually has the knowledge and they’ll and we waste a lot of time at the beginning. So that was the first thing. And then the second thing was finding the property. So, I guess the location is the hardest because you have to find a location where there are, you know, like it’s up and coming, but the prices have risen too much. So pretty much anything in Toronto proper is out of scope, at least for our budgets. So, our budget was we were targeting for 400 on a purchase price plus renovation. So, total we were all in for like 450. So we ended up finding actually a house for four hundred that we got that we got down from 30000 under asking and then we actually got something called a purchase plus mortgage, which is available through certain financing, which allows you they get basically the bank gives you money for whoever’s financing gives you money into your mortgage, so it’s actually rolled into your mortgage to do renovations. So, we got a $50000 renovation, which was rolled into the mortgage. So basically, you can like you can find these properties that are undervalued because they haven’t been renovated and you can do the renovation yourself. But you won’t necessarily be out of pocket for the renovation costs because at that point, you know, you’ve got to come up with a down payment, you’ve got to come up with the closing, you got to come up with the renovation. So, you know, that’s what it could be quite a bit of money versus. If you can find a purchase plus mortgage, that’s really helpful to know. That’s a good tip. Yeah, those are a couple of good things that I was learning along the way. So, I’m just I’m just trying to think of off the top of my head like these kinds of things. So, in terms of the action, so the area, I guess we looked in Scarborough, basically, you have to start looking at outside of the city core and you have to start. Looking further away, so the first thing is like, I why we wanted a detached property was because everything that I’ve seen, everything that I’ve read has, you know, every time any statistic I looked at, the detached properties have always increased substantially compared to Sammies. Not to say that semis are about investment. I don’t think that at all they can. They can probably be really good, if not better cash laws. But in terms of depreciation, detached properties definitely appreciate higher. And the fact that in the GTA, there’s less and less detached properties available every single year. It’s naturally going to increase in price. And then the second thing with the bungalow is the fact that we have a massive basement apartment. So that was really the key was we were we were looking for a house that we could build a basement apartment. So that’s and I guess most investors are looking that way as well. So, like unlike the traditional residential purchase, people are looking, OK, you know, is it nice enough three bedroom? But no, our main thing was honestly it. What is the floor plan, and can it accommodate a basement apartment for a reasonable price? And it is. And is it in a decent and good enough neighborhood? So that was our property, and we ended up in Scarborough. We’re also looking at Oshawa, which is where we’re looking now for our second property. But we went to Scarborough just because it was a bit closer for my commute and for work and stuff like that. And it’s still close enough to the city core that like I can get downtown without traffic in 20 minutes or get to the West End to my work in like half an hour and stuff like that. So, I’m still relatively close. So yeah, finding the neighborhood is really important that you can, you know, ideally a detached property is my preference.

Sandy Mackay [00:19:15] Zaky did touch a little more on the purchase, plus improvements like how much did you put down or what worked? What were the terms?

Sve Pavic [00:19:22] Yeah, yeah. So, OK. So, the purchase plus like it’s only off. So, it was this almost through Scotiabank. So, I know that I know that there’s a couple of other banks or financing companies that offer purchase. Plus, like not everyone offers it, and you have to qualify for it too. So, another thing I want to actually touch on was how much we put down. So I was under the mindset that the sooner that I bought a property and the sooner that we built it and, you know, had rent coming in, the better. So, whether it was five percent, 10 percent, 20 percent, whatever I could afford to get into that house, I did. So, we actually put down five percent. So that was like 22000 or something like that. Plus closing costs basically were around 30000, let’s say. So rounded off like four for the down payment, the closing costs and whatever all the other fees. So, we only put down five percent. So, we did get hit with that CMHC insurance and that was roughly around 10000. But that’s rolled into your mortgage. So, it does like set you back when you’re on payments, but in the grand scheme of things, you know, with the monthly payment, that’s how I kind of how I thought about it was what is the monthly payment going to be? Oh, and the term was 25 years, by the way. So, I couldn’t get a third like they’re really now they’re getting a lot stricter on financing. So, I couldn’t get a 30-year term. And you can’t with if you’re CMHC insured now. So as twenty-five-year term, so my monthly payment is a lot higher than if I did a 30-year term or thirty-five-year term. So, it really came down to the monthly payment and the down payment and then how much projected I could get in rent. And so, yeah, so on the purchase plus, I mean, there’s I mean, you have to work with a found a good mortgage broker. Yeah, like I would say, just find a good mortgage broker. And in terms of the plus, like, that’s kind of all kinds of the information I have. It’s like you apply to qualify for certain places will approve you. It’s not like you can get it everywhere, basically.

Sandy Mackay [00:21:15] Yeah, and you get 50 50000 in this case, correct?

Sve Pavic [00:21:19] Yeah, it was. So how they do it, I think, is 10 percent of your purchase price or something. So, we had like 400 or we yeah, it was a 400 thousand purchase price. And I think we got like 40 grand or just over 40 grand, but we were approved up to 50 grand. But then it’s basically I think it’s 10 percent of how much I think you’re maxed out at 10 percent of the purchase price of the property. I’m pretty sure that’s how it works.

Sve Pavic [00:21:40] Yeah.

Sandy Mackay [00:21:41] Perfect.

Sve Pavic [00:21:42] Yeah. So, but a one actually really key piece of information with the purchase was to not mislead other people. Listening to this is that you actually only get the money at the end. So once the project was completed,

Rob Break [00:21:55] yeah, so it’s not on, it’s not on a drawer or anything like that. It’s you do it and we come in and we appraise it. And if you’ve done a good enough job, then we’ll give you. Then we’ll give it to you.

Sve Pavic [00:22:05] And I’m sorry, sorry to cut you off. But that was a really important distinction because our mortgage, I guess with all the stuff going on like that was something I don’t know. I’m not going to blame it on mortgage broker or anything like that, but maybe it was like just an oversight on my part. So, when we got it, we’re like, OK, we’re ready to start build. I got to pay the contractor because they’re like, oh, you’re not actually getting the money until afterwards, and we have to come in and inspect it and make sure that whatever you paid for is actually done. So, I guess they also don’t want people, you know, taking. The money and then I don’t know, just doing like some flimsy renovation saying, oh yeah, that’s what I spent my 40 grand and then pocketing the money. They actually wanted security gains, the house, the value of the house, so they have their own appraiser that comes in. But they did prove challenging because for that duration of the project build, I had to pull off money from a line of credit, you know, which I heard a little bit of interest and then I had to pay off. So, if you don’t have a line of credit or something like that available and you’re banking on that money, it’s like you’re going to have to come up a way to finance that renovation, you know, worst-case scenarios on credit cards, but you don’t want to get there because interest rates are too high. But you know, as long as the bill doesn’t take that long, you should be OK. That was like my backup plan was. I was like, OK, worst case, I’ll throw everything on a credit card and in like a month, I’ll pay it all off. But I didn’t have to do that because I had another line of credit I could use.

Rob Break [00:23:27] No, good. OK, well, thank you. That was actually a really pretty in-depth look at that. So that’s great. Thanks. Now what do you think was the biggest challenge that you faced in your project?

Sve Pavic [00:23:41] Yeah. So one, I’ll tell you a couple, but one of the ones that I wanted to touch on was actually on the financing piece. And it’s the fact of getting a loan. So, I think the most, most people that are stuck up on that are the ability. So, I’m self-employed, I have my own company, I’m a I.T. project manager. I do consulting for that. So, the way that I show my income is very different than a salaried employee. So, one of the challenges that I faced was actually getting a proof of financing. So even though I had the all the money and everything like that, it was the bank still being like, oh, well, you only paid yourself, whatever, 40000, 50000 last year. It’s like, well, clearly, I made more than that, but I’m not going to pay, you know, because as a self-employed person, the more you pay yourself or you pay in taxes, so really you just want to pay yourself your expenses and keep the rest in the company. Yeah. So, but the banks don’t see it that way. Unfortunately, they used to. There used to be something called stated income where they used to be able to be like, OK, give me all your business papers and based on how much money your business is making, then we’ll kind of approve you on that. But they don’t do that anymore. So actually, we had to find a cosigner. So luckily my parents were willing to cosign for us. And that and that was literally just to get the property. And then we removed the cosigners as soon as the following year happened that I could prove, yeah, you know, with all the money, I paid everything and then we had the rental income too. So, we had all that. So that was fine. So, I think one of the biggest things is like, if you can’t get financing, my advice is finding someone who’ll cosign you like parents is the best place to start if they’re willing. And literally, it could just be like, Look, I need you guys just to back me on this for a year. You guys will get your name off and when your time and if they really want, you can even offer them like we’ll give you X amount of money a couple thousand, whatever, if it’s not a friend, if it’s not a family member, if it’s a friend, or you can even approach it with an investor and stuff like that. But just getting that financing is like is, I think like was tricky, especially as self-employed. But I would say find a way to make it work, and you can always go with a non-conventional financing role and, you know, go for something with a higher interest rate as long as it along the property will cash flow like it doesn’t really matter. You know exactly how much you’re paying as long as you’re making money from it. At least that’s my viewpoint. So, OK, so that was one of the big things. Another like really, really big thing. I think for us was we, you know, we read a lot of books. We watched all this all every single episode of income property we’ve seen. So, we’ve seen it, but it’s now OK. The actual fact of doing it and finding this property, and the thing is, is that you actually won’t know everything. You’ll never you’ll never have enough knowledge for everything. That’s one thing I’ve learned is like, you can’t wait until you get all this knowledge to do something. Actually, most of the knowledge you get is by doing something, the actual act itself. So, taking action. So, we immediately once we found the agent, we just started looking at houses. And once you look at enough houses, you can literally walk in the door within five seconds and tell, Will this house? Will this house work or not? From a floorplan perspective, from a legal perspective, for the basement apartment? So actually, the biggest challenge is probably dealing with contractors. And we got we almost got burned like we did get burned in a sense, but we almost got burned because our projects should have been six weeks. But in fact, it ends up being extended six months. And the reason was because the company that we hired, by the way, is a very reputable company. I’m not going to say their name because they don’t want to, you know, I want to bash them or anything, but I’ll never use them again. But they’re top company on home stars, so this is a tip for anyone. If you’re looking to hire a contractor, don’t only go on the reviews on home stars like actually call their pass references, look at their work, try to interview as many people as possible. So, when it up happening was this. Contractor like this big company, we signed the contract and everything like that. And then there was just constant delays and communication was terrible. It was pretty much calling them every single day just to make sure that they were working on some part of the project. There was countless mistakes happened, you know, because they’re there, they have a team, so they subcontract and then some down the line of communication failed somewhere and somebody fucked up and didn’t follow the floor plan or didn’t do, oh, sorry, excuse my language, by the way. You can believe that. But somebody messed up. So, there was there was a lot of delays. So, a big tip I can give people is when you’re writing the contract like that is the most important piece. Next to buying the house is if you’re hiring, a contractor is making sure that contract is tight, and even finding someone who will agree to your terms might be difficult. So, it was really difficult actually even getting bids for the contract like I had people show up and they just look at the base and be like a hundred grand. I’m like, well, like, break it down for me. Where did you get that? Like, Oh, it’s 100 grand. Are not going to do it. I’m like, OK, well, we’re not going to use you. So, after going through like 10 contractors, we found like three that were giving us a quote with a detailed breakdown and stuff like that. So yeah, I think dealing with contractors is the hardest in contract management. The good thing is that my work, I deal with contracts a lot and we deal with like $50 $100 million contracts. So, I kind of knew what to look for. So, the most important thing in the contract is you need an aside from the price and the scope of work is you need a fixed starting end date, and you need contract penalties into the contract if the vendor does not deliver on the specified timeline. So, I would put something in the contract the term of, you know, for every day that the project is not completed on time, five percent will come off the price or for every week, 10 percent off something that both of you will agree to. That’s fair, but that will also keep them because at the end of the day, the contractors, there’s going to be a payment schedule or a payment structure. So, they want like 10 percent upfront for materials and then 50 percent through the first stage and then 20 percent through the second stage. So, your job right to protect yourself, your job is how can I and this is not like greedy or bad is how can I protect myself? How can I keep as much money or have as much leverage at the end of the project? Because what I am happening with us is that we had all these contract penalties in place and everything, but we’ve already disbursed about like, let’s say, 85 percent of the money. So, you know, by the way, our basement costs $40000 to build, and then we saved about 10 to 20000 ourselves by doing everything else. So, it doesn’t cost, you know, $100000 to build the basement. That would have been pure profit for the other contractors. So, 40, 50000, you know, roughly is pretty decent if they’re doing like the, I would say like 80 percent of the work. And by the way, this doesn’t include materials, right? In terms of like finishes. It just includes contractors materials. So, yeah, making sure that contract is airtight, start end dates, contract penalties, that kind of stuff. Because worst case scenario, if you have to go to court, if these guys just flake on you, you know, at least you have something in place like it’s a lot of money to be dishing out and the work the hardest. The worst thing for me was coming home from work and seeing that no work has been done to my basement and the basement. Literally all it needed was firing two big doors and some and a few other things. And because they did the wrong measurements, something happened. The fire, two doors didn’t fit. The fire destroyed have to be custom cut. The supplier for the fire rated doors. For some reason they had a shortage. So then, like all of that, ended up dragging out and mistake after mistake and a being from a six-week project to almost a six month. The good thing is at the end, because of because of what was in the contract, we actually didn’t pay him the full amount. So, we kind of just they finished. And then because of the delays, we basically took them out and said, OK, we could rent the basement for X amount of dollars every single month, and it’s in the contract that you guys didn’t deliver on time. So, we’re just going to take that off the top. So, we actually ended up saving money. But you know, it wasn’t a real saving because we could have rented it out in that time, right? Mm hmm.

Rob Break [00:31:49] Okay, good. Interesting. So, what was a lot of lessons there? Yeah, there’s a lot of them

Sve Pavic [00:31:54] there, by the way. I just I just want to tell you guys that and for the listeners and stuff is that I will be also starting my own blog on real estate and also on other stuff like I, I sell on Amazon. We just open up our own Etsy business and stuff like that. My wife and me. So, I’m going to I’m very little wants more info. They can feel free to reach out to me. And when I, I’m still working on the blog, but I’ll have definitely more like in-depth into like what I’m mentioning here, but in even more detail in the blog.

Rob Break [00:32:26] OK. Yeah, great. And where do they go to hear about that?

Sve Pavic [00:32:29] Yes. So honestly, I’ve been wanting. I’ve been wanting to launch. You know, I’ve had I want to get at least a couple of base articles, some really good long articles up there before I do so for the time being. If everyone, if anyone wants to reach out to me, I’ll just give away my personal email address, which is my first name, SVT period. My last name. I see and then I can send them the link when it’s ready or when you guys put on the podcast or whatever we can always update. And maybe I’ll have the site launch by then, and I’ll probably definitely put this podcast on there for other people to hear.

Rob Break [00:33:05] Do you have the URL right now?

Sve Pavic [00:33:07] No, I don’t. I have like, I’m playing with a couple of ideas that, oh, I haven’t, I haven’t bought the domain name. I have a couple of ideas, but I might just buy a couple of them, but I don’t know what to like. So, like, nail down the name first too.

Rob Break [00:33:19] But OK, we’ll see.

Sandy Mackay [00:33:22] We’ll see what my

Sve Pavic [00:33:23] goal was to launch it before we did this. But with this, other business is going on. I’ve been busy with that.

Rob Break [00:33:29] So what lesson did you learn that you think was the most valuable out of all that?

Sve Pavic [00:33:35] Yeah, so is making sure that you have an airtight contract and making sure that you have contract penalties for the supplier? Finding the right contractor calling literally being like, who are your references? Give me a couple of your references and calling them and trying to escape them. Scope them out. And then also looking on that home starters and looking for any reviews that aren’t perfect because what a lot of these guys do is if there isn’t a perfect review on home stars or whatever the review website is, I’m not singling out home stars or anything like that. Whatever the review website is, if there isn’t a perfect review there, bill, even if they’re a big company, they’ll get someone to reach out to you and be like, hey, you know, we see you have a bad experience. Can we basically, you know, either get you to change your mind, you know, monetary wise somehow? So, I think a lot of those negative reviews don’t make it through or they just might be the end of getting removed or taken down or something. So, you know, don’t always trust the reviews, do your own investigative work, do your own detective work. And at the end of the day, the contract is what you’re going to end up falling back on. So, make sure that you get, you know, an airtight contract. And if you need to look just Google contract requirements or, you know, things to put in a contract and stuff like that. So, there’s a whole slew of stuff outside of that, but I think the contract penalty on the delay on timeline is the most important.

Rob Break [00:34:56] You know, something that I’ve sort of come up with, too, is that when you’re having somebody quote on job, I mean, obviously it’s not right for everybody to go out and do this on the first one. But if you get, let’s say, somebody to break it down, like when you found the right contractor, they broke it down and showed you exactly what they were going to do. Now, if you took their scope of work and gave it to the next contractor and said, this is exactly what I want you to quote on, then you would know when you look at one, their scope of work is exactly the same as the other one, and then you can compare the price that way to

Sve Pavic [00:35:31] yeah, that’s actually a really good point because you want to make sure that you’re comparing apples to apples to right, so you don’t want one guy quoting you for quartz countertops and another guy. You know what I mean? So, you want to make sure that the scope of work is identical. Ideally, you get, like you said, you get the person to give you the breakdown and then you just pass it to another guy. But you know, it was actually it was really difficult. It was really difficult getting these contracting companies to even give me a breakdown item. I was like, I think only one or two gave me a call breakdown like itemized by buy phase with an actual price. Some of them just priced it like, you know, like 10000 here or 15000 here, whatever. But it’s actually get, you know, a semi detailed quote was actually difficult. But if you can definitely do that and compare it and then you can even use that as a room for negotiation and stuff like that. Mm hmm.

Sandy Mackay [00:36:23] Is there one thing you’d change next time if you to do this? I’m sure you’re going to do more project again anyways, but what’s one thing you’ll change next time?

Sve Pavic [00:36:33] Yeah, there’s a lot there’s a lot of stuff that happens throughout the

Sandy Mackay [00:36:38] year, the most important thing. Don’t screw up again. Yeah, actually,

Sve Pavic [00:36:42] this is this is a big one. This is actually really, really key. And it’s not it’s to do with the building, but one. So, we did everything like legal, which I would recommend a hundred percent like, don’t. My recommendation is don’t invest your money in building an illegal basement apartment because it’s like, why risk financially all this money and time that you invested for an inspector to come out, rip it out? Or God forbid, there was a fire and something? Or, you know, legally something happens and now you have to go to court. So, no one, make sure that it’s legal. So, when you do it legal, you have to you have to follow certain building codes and your contractor will know this. But if you don’t, you can also call the building department. Each municipality has its own building codes and so forth. But above the building codes, there are certain things that I would have done differently. So, we did. You know you know, we did the highest rated insulation, whatever it was at the time, our thirty-four with a double eye wall, we did noise, noise, noise dampening glue. We did all of that stuff. But the one thing we didn’t do, and I should have done is and I forgot what the product is called, but it’s a type of sound. It’s not an actress on an income property on Scott McGillvary show. One time I thought it was overkill, but now I would definitely do it and I forget what it’s called. But it’s basically a type of paste that you paint on the ducts, and it reduces sound. And actually, the only sound that I could hear from the basement apartment tenants is through the ductwork. And it also depends on your layout. So, our layout to maximize the square footage, how our layout worked downstairs was their living room, their kitchen. Upstairs we have our two bedrooms, so we have our master bedroom and the other bedroom, like directly above their living room. So, we get the most amount of noise and then our living room is above their master bedroom. So, I didn’t realize how much sound actually travels through these ducts, and it’s way more than you would think. Like if you do research on, it’s basically like a pin size, like, you know, opening or something like that carries like a ridiculous amount of sound. So, so this this paste would have eliminated that. So, you did have some sound issues with the first tenants because they were and this is another lesson is, you know, tried to always rent to a little bit more mature. If you’re living there and someone that is on the same work schedule, is you. So, the first chance we had, they were kind of like, you know, in their twenties, early twenties and, you know, they were kind of going to school like part time working. But their hours were all crazy. So, the TV would start blaring, you know, at like 1:00 in the morning or 2:00 in the morning. And you know, we have the message going to be like, hey, can you guys just like, turn it down, you know, so. And that was. And I don’t think we would have really even had that issue had I taken that kind of like extra step and be like, OK, I’m just going to. I think at the time, it would have been like maybe five hundred to maximum a thousand dollars to do all the duck work and I could have done it by like myself. It’s pretty simple, but just the cost of material to just do all of that. And mind you, you can only do that when the walls are exposed exactly

Rob Break [00:39:40] once it’s covered up.

Sve Pavic [00:39:42] Yeah, if it’s if it’s covered up, you’re you know, you got you got no choice.

Rob Break [00:39:48] You know what? Say, I really appreciate you coming on tonight. You’ve shared a ton with a lot of advice for others out there on their first project. So, I really appreciate this and thanks again for coming on.

Sve Pavic [00:39:59] Yeah, no problem. I’d love to come on to another episode. I got a bunch of bunch of tidbits, lessons learned here and there, and, you know, stuff that you don’t really find out in books and stuff. But thanks, you guys for having me on. I appreciate

Rob Break [00:40:11] it. Yeah, appreciate it. Have a great night. Take care. OK, everyone, well, our next guest here with us today is Sean Castellano. And he as well has just completed his first buy fix and refi and rent project. So, thanks for coming on, Sean. Actually, you know, you’re at the point where it’s still pretty fresh. I mean, you refi actually hasn’t gone through. So, it’s more just the buy fix rent so far, right?

Sandy Mackay [00:40:42] Exactly. Just got to rent it in the last month. So just on the refi basis, as you’re saying.

Rob Break [00:40:49] Absolutely. OK, great. Yeah.

Sandy Mackay [00:40:51] So we don’t mind sort it out. Can you give us a brief intro into your background and how you got interested in real estate? Yeah, absolutely. So, I think I’ve always been interested in real estate since a young age, but I hadn’t really started researching into it, maybe until late 2010 2011. You know, after we bought our me and my wife bought our principal residence and stuff, and then we said we were just sick of the nine to five and we were looking at other ways to make money and real estate was something that we were really interested in. My dad’s a handyman. So, he took a little bit of the unknown away. Yeah, I had a little safety net there, so it was just a natural thing to go into.

Rob Break [00:41:35] So you say that was in 2010, 2011. So, what did you do like that wasn’t when you bought your first property, you did some education research and that kind of thing?

Sandy Mackay [00:41:47] Yeah, actually. Sorry. Let me backtrack a bit before 2010. Myself and my wife had a condo, and it just so happened that there was someone who worked at my dad’s work, and he was looking for a place to stay. He was from Montreal. My dad showed him our place and we said, you know what? We’ll rent it out to him. And it was actually a corporate renter. So, the rents were about $600 more per month because the company was paying. Yeah, no. That really opened our eyes. We say, wow, it was great. We rented that for a year and then we said, Let’s start getting into this full time and start researching more into real estate and how he could do this on a larger scale.

Rob Break [00:42:23] Oh, perfect. OK. OK. So then in 2010 or 11, you sort of really got the bug and so you ended up buying your first property. When did you actually close on your first property?

Sandy Mackay [00:42:36] Well, Principal Residence was born in 2010, but it was bought with the intention to rent the basement. So, we actually bought a property with a basement that was finished. And then so we kind of got into the game that way. Oh, I

Rob Break [00:42:49] see. OK?

Sandy Mackay [00:42:50] Yeah. So, we started 2010. Then we kind of went we tried lots of different strategies. We started with a buy and hold after that, and we went all the way to Calgary. We bought a property there just because, you know, the economic fundamentals were so strong, and we saw a large potential for growth. Now it’s kind of turned upside down, but it definitely we got it at a great price anyway. So that’s a long term buy and hold that was in 2013 that we bought that property. Then we did a little more research into real estate, and then we stumbled upon the Durham Group. And that’s how we met yourself, Rob. And yeah, then we then we got into the sort of the fix fixing and refining and doing that, and we found it to be a much more powerful strategy.

Rob Break [00:43:36] So you went out and you found a property, so I guess. Tell us a little bit about the property that you found and why it worked for what you were trying to do.

Sandy Mackay [00:43:45] Yeah. So first off, I think we were searching Rob for like three months for the property we put. We put a few bids on properties, but we were we lost those, but we just kept going. And the great thing is, we bought this property on New Year’s Eve, right? So, I think a lot of people weren’t willing to come out on that day. And because of that, we were able to secure it at a great price and it was a solid house. So, we decided we’d love at first sight. So.

Rob Break [00:44:17] So what types of things did the House itself have to offer that you were looking for?

Sandy Mackay [00:44:23] No, what I loved raised bungalows because, you know, you get that those large windows in the in the basement and it doesn’t even feel like a basement in a raised bungalow. And so, it had that feature right off the bat. It had it had high ceilings in the basement. It meant that six foot five requirements, six-foot five-foot requirements, that basement ceilings have to be out. And it met all the requirements that the city needed for it to be legal. So, it was also a solid brick house just and it was a great size. So those are the main things I liked about it. New Year’s Eve. Yeah. You know what you got? You’re going to you can find the properties in the right situation. They have seen a lot of people get good deals, maybe not on Christmas Eve, but right around Christmas and Thanksgiving and long weekends and things like that where people are snoozing. So that was interesting. But what was the biggest challenge you faced in this project? Being my first time, it’s I had to put together a team of contractors and finding that the right contractors to do the job was, I’d say, I’d say it was one of the biggest challenges. When I say the right contractors, I mean, people who. A, they had recent experience with working with the city, so they knew how to look ahead and anticipate challenges, and that was especially important for myself being a beginner in this in this, this industry. Also, because as you guys are, the building codes changed quite a bit. Right. So, as I say in recent experience, so I wanted contractors who are well aware of what the recent codes were, also contractors who they were timely, you know, whatever they said, they said they get back to me with a quote. They got back to me with a quote. A lot of countries came they I don’t know why they spend two hours with you and then then they don’t even give you a quote, right? So, I had a lot of that. A contractor also I was looking for that was honest and fair and quick to respond. And especially someone who can guide me through the process because I was, I was brand new and they would take their time to explain things, which was great. Great, in my opinion, because I wanted that. I want it to be handheld a little bit. So that was kind of hard. But at the end I found a great team of people

Rob Break [00:46:39] and we’ve heard that several times from other guests. Finding the right contractor is definitely something that’s hard to do. And even when you think you made the right decision, sometimes it turns out that it’s not. But I think if you build a good rapport with them and if you do those things like provide them with the scope of work that each of them can quote on, I mean, that’s kind of tough for somebody who’s just doing their first project, I guess. But maybe if one of them does write you up quote, you can always send it to the next guy and have him quote on the same thing for sure.

Sandy Mackay [00:47:16] Yeah.

Rob Break [00:47:17] What lesson did you learn that you think was the most valuable?

Sandy Mackay [00:47:23] I’d say if I could sum it up, I’d say stay in my lane sort of thing, you know, I was trying to be a little bit of a renovator as well as an investor. And it’s not the ideal situation there was. I spent like I did a little bit of the framing myself. I did some painting, some more complex task like the framing is a little more complex than just painting like I did back splashes. I did some caulking and some of the times had to get a contractor to redo the job because there wasn’t right. So not only did I waste the time I, they could do it in like a quarter of the time. And I had to pay more because I spent my time and then I had to pay someone to fix it. So. So I definitely learned to kind of stay in my way. Next time, I won’t be doing complex things.

Rob Break [00:48:13] And on top of that, too, I think you live pretty far away.

Sandy Mackay [00:48:16] Now I do. Yeah, but I was living in Ajax, so it wasn’t too bad. But I moved back to Mississauga in July, so. So. But by then, a lot of the rentals were done anyway. It was just like little things here and there. So, it wasn’t too bad, but.

Rob Break [00:48:29] Right, OK. OK, well, that’s good. OK, so the biggest lesson you learned, I think, was just don’t try to do it all yourself, right?

Sandy Mackay [00:48:39] For sure. That’s yeah, one of the biggest lessons down or

Rob Break [00:48:41] stay in your lane like you said. Good one.

Sandy Mackay [00:48:44] I think the thing you change or what would be a couple of things you change next time, or your will change next, I’m sure you’re going to do more projects. Yeah, absolutely. I guess it’s tied into the last point. I wouldn’t take on a lot of the, you know, the complex Reynolds myself at the time, too. As I was telling Rob before I, I was involved in other projects as well, like I’m doing renovations on my principal residence as well. I’m working a full-time job and I’m running a business and I have two kids to two and a four-year-old kid, so I wouldn’t take on that much stuff at once. And it wasn’t like a pure cosmetic renovation. There’s a little, a little more like the basement was totally redone, so it was I wouldn’t take on that many projects I wanted. It’s not. It’s not a totally hands off thing. Like, I didn’t hire a general contractor to do it. I was mostly the general contractor on the job, so it demanded a lot of time. So, can you take us through a bit more in detail on the numbers on this project? Yeah, absolutely so. So, we got it for three oh five the property. And at the time it was just a single-family residence and we converted into a duplex. The unanticipated costs were there was because it had baseboard heating. Basically, we had to the rule out in Auschwitz, if you’re converting from base bought to gas, they want, they want gas furnaces in both of the units. The downstairs and the upstairs. So that was sort of in on an anticipated price, I thought when we have to put one furnace in. So, all in all, they had to do that than we did two electrical panels. I mean, it’s like a true duplex. So, at the end of the day, after putting in three or five, the rhinos were worked out to about almost 90 on the property. And that’s with everything. That’s what I’m counting appliances, repaving a driveway. Those are all kind of the big cost. I even put in some new kitchen cabinets on one floor. But the real big cost was like, those things are like the furnace is like, you know, that’s 15 grand right there, you know, to run all the, you know, all the ducting and stuff like that. So, yeah, 90 grand and then the refi we’re hoping to get the comps are showing, I think it’s what, five twenty-five now, right? So, say even they came in. I did a worst-case scenario, like they come in at four seventy-five, then I would think, you know, even with those numbers, it’s still over an 80 percent return on investment when I calculated it. So, and that was because we bought the property at a great price. You know, I think we bought it a little undervalued, too when we bought it. They just 80 percent return. Not bad. That’s what people are buying a real estate like they don’t even believe that’s the I know that. You know what? That’s a home run. I don’t expect that to be on the second property, you know. But that was a great first property, Rob.

Rob Break [00:51:49] Yeah, it’s almost like one of those things where out of pure coincidence, you time the market right? And that’s not going to happen every time and people shouldn’t bank on that kind of thing. I think it was solid, even if the appreciation wasn’t what it is right now. Just everyone become. Be cautious, though don’t expect something like that. I think that one was more of a home run than most.

Sandy Mackay [00:52:11] Yeah. And at the same time, to right, it’s not a passive investment, right? That’s why I like to remind people. I calculated actually all the kilometers I drove, right, because you got to submit that to the CRA, right? And it was almost 5000 kilometers for this project, right? So, if you put that in perspective, that’s a lot. That’s just my drive driving kilometers. That’s not including all my time. I still have to calculate that, but the amount of time put into that deserves an 83 percent like the next property. The next property is not going to be as much time because I have a team now, you know, so it will be a little less than finding or finding the right people, finding deals and stuff. But if it was less than 80 percent, I’d be a little unhappy.

Rob Break [00:52:54] OK, so do you have any other advice for others on their first project similar to what you’re doing?

Sandy Mackay [00:53:00] It sounds cliché, but you know, like put together a great team, you know, people who can guide you. There’s so many moving parts in a renovation you and there’s so many things you’re not going to see, no matter how hard you prepare for it. So put together a great team of real estate agents, mortgage brokers, contractors, lawyers, put it all together and then take your time and just take action. You know, everyone says, take action is so true, you just got to take action.

Rob Break [00:53:29] Absolutely. All right. Thanks again, Shawn, for coming on. I really appreciate it. And you know, we’ll probably touch base again with you down the line, see if you’ve done anything else and how that turned out as well.

Sandy Mackay [00:53:40] Awesome.

Rob Break [00:53:41] Great. All right. Have a great

Sandy Mackay [00:53:43] night. Thanks, Rob, and Sandy.

Rob Break [00:53:49] So our next guests are Darren Walker and Danielle Olivera. And they have also just completed their first buy fix refi and rent project where all of these people sandy all added second suites. So there seems to be a trend here.

Sandy Mackay [00:54:07] Yeah. Seems like your plan is a good, good model to follow, for sure. So that’s a very

Rob Break [00:54:13] nice way to force some appreciation.

Sve Pavic [00:54:15] Yeah, really?

Rob Break [00:54:17] So welcome, guys. Thanks for coming on.

Sve Pavic [00:54:19] Thanks for having us up.

Rob Break [00:54:22] I had to twist your arm. Finally, you agreed.

Sve Pavic [00:54:26] Yeah, a little bit. You didn’t give it to you. Didn’t give it some thought

Rob Break [00:54:31] Oh, OK. So, what we wanted to do first was just sort of you guys to give us a little bit of a history of why you got interested in real estate investing. And I guess a little bit of a history of you guys, too.

Sve Pavic [00:54:45] Right? So, it all started with our first real estate investment was a student rental. We were getting our toes wet, so we wanted more of a turnkey operation is something that was already in place, already legalized and we would just take it over. We didn’t have to do any rentals with that, so it was an easy step for us. We got to learn all about how to navigate the financial world, banking systems and city permits. So that kind of gave us a little bit of, I guess, experience for us to take on our second project. So, our second project is what you were talking about where we purchased that refinance, renovate, and now have it as a rental. So that one was a lot more work on our part because it needed to be legalized and in order for it to be legalized, renovation needs to take place. So that required a little bit more work with the city regarding permits. Also with fire inspectors, building inspectors, GSA, etc. So, we had a little bit of knowledge from our first projects, but the obviously our second project was. Way bigger. So, we purchased it in, well, problem you can correct me here is that we purchased some Valentine’s Day and we closed in April. But does that make sense?

Rob Break [00:56:17] Yeah, I think that sounds about right. There’s another person purchasing on holiday, Sandy. Well, not really a holiday, but. You know, not many people shopping for now.

Sve Pavic [00:56:27] I didn’t get a Valentine’s Day gift that you’re not going to lie.

Rob Break [00:56:31] Well, actually, the funny thing is, I remember you guys, you guys are like, we have this contract side where we drop it off. My wife and I were out. Oh yes, I had to come to the restaurant and drop it off to me.

Sve Pavic [00:56:43] That’s right. A nice local joint you were at supporting local. Love it. So. So when that came into play, when we took possession in April, in the spring, prior to that, we had done some investigating in terms of what we needed to do. We knew that there was going to be some electrical work and we knew there was going to be a little bit of construction. So, we hired a general contractor, Percy, and an electrician. Plumbing was minimal, so we didn’t. That wasn’t a really huge issue for us. It was more the electrical, so we knew we just hadn’t done it. We knew we were in for permits and inspections before inspections, during and inspections. OK, so we were expecting it. But it was our first time, so it was also a learning experience for us.

Rob Break [00:57:38] Darren, who ran the project

Sve Pavic [00:57:41] to say the right thing here. It was more or less I was, let’s call myself the general contractor I oversee. I oversaw the entire project. I designed everything. Does that count the way you did all the design? I did all of the demo and helped with the initial part of the construction. But then we hired a contractor to complete the remainder due to my work schedule.

Rob Break [00:58:05] Yeah, no. It is a loaded question and I just wanted to see how you handle that. But so can you give us a little bit of. So, you guys, you guys needed to find the right property to do what you were looking to do? So, what was like, can you describe the property itself?

Sve Pavic [00:58:22] Well, we learned just from talking with you and reading and looking at other properties is, you know, there’s a few key things that you need to look for to make sure that you have the ability to legalize it. You know, ceiling heights and proper windows and ventilation tracts and the frontage you have enough frontage to create your extra parking space. That was our basis of where we wanted to start. And then conveniently, the first two where you took us on, we ended up finding property. So, we were all very picky when it came to neighborhoods. I personally met. He has different opinions, but I personally liked side streets as opposed to Main Street, more for traffic reasons and parking and an ease of getting into the property. I liked areas where they were close to amenities, i.e., shopping and transit, because I figured if somebody’s going to be renting the house, those are things that they may want to be closer. So those were also things that I specifically was looking for before I even walked into update. But I also normally say I won’t buy a house in a neighborhood that I wouldn’t live in.

Rob Break [00:59:41] That’s a good point, too. One thing with

Sve Pavic [00:59:43] Daniel and I were very, very particular, and picky as to where the location of the property is. I find,

Rob Break [00:59:51] yeah, I think that that’s something really that you’ve got to take away from this as well. Like, I have made some bad choices as far as location goes. And I mean, I didn’t lose my shirt or anything, but could have done much better if I had of invested in in a better area. So, I would say that’s pretty key point.

Sve Pavic [01:00:09] And actually one of the easiest ways to figure out is that is the location is, you know, talk to your friends and family, and just mentioned the street or mentioned the area and judge their reaction was just look at their face. If they if they would not want to live there or if they have a sour face or they have heard of bad experiences, you know, you can kind of get a feel for what’s going on in that area. And it will determine what type of renters are going to have as well. You know, nobody wants to deal with that side of things. It’s tough enough as it is. You don’t want to have to deal with tenants who are not paying, not showing up. It’s not taking care property.

Rob Break [01:00:54] If the only tenants you get are the ones, you’re afraid to talk to. You’re probably in the wrong area.

Sve Pavic [01:00:59] Exactly, exactly. So, the house to the right look as to the left that will also indicate what type of street or area, you’re in. Mm-Hmm.

Sandy Mackay [01:01:10] Yeah. So, what was your biggest challenges you faced in this project?

Sve Pavic [01:01:17] Yes, they permit. We got we got the world’s worst GSA inspector on this project generalized. So, we did everything. We did everything by the book and got all the proper permits and went through all the inspections and all that stuff and everything went off without a hitch. We did the initial ruffian inspection on the on the electrical side, and when the inspector first came, he was very happy with everything. You know, he just wanted to come back and see the final. So, you came back to do the final inspection. We were like a week and a half away from tenants moving in. And he noticed that he forgot to tell us we needed to change our service from a 100 or 200 in-service. So, he misunderstood. We applied for it to be a two unit, and he thought he was coming to inspect a single unit. Oh, all right. More or less told us it was you should have known better and that he is really sorry that he missed it, but we now have to change it. So, the problem we had is that the basement was completely finished. So now we were talking about taking some of the ceiling down to around new wiring and, you know, to get the new hydro wires in and change the panel and all of that stuff. So, I was less than impressed with. That it caused me a couple of weeks of some pretty serious stress and arguing with the wife and screaming on the phone, but regardless we were at their mercy, so that was probably the worst part for us. Yeah, and it was a really big eye opener because when we went looking for our next project, of course, we’re looking at panels and we’re noticing, you know, we know now what is one hundred versus a few hundred. And now we know if an inspector comes in, we have to say, OK, we know it has to be two hundred. So can you please confirm that the unfortunate part is that when we did the first one, we didn’t know and we were relying on his expertise, which just didn’t come.

Rob Break [01:03:21] An important point, though, to make note of here is that I have had it depends on the inspector that comes through because one will tell you one thing and one will tell you another. And it doesn’t matter if you’re talking about Electrical Inspectorate inspector or building inspector or whoever, it may be a plumbing inspector. Some of them will allow something and then you go and do it the same the next time and they’ll come in and say, no, no, no, no, no, this isn’t. This isn’t going to work. And you say, while the other guy said it was OK and they’ll just say, well, I’m saying it’s not so I’m the inspector. You got to do what I say. That’s the end of the story.

Sve Pavic [01:03:59] So I mean, how do you know?

Rob Break [01:04:02] Yeah, exactly, well, I mean, I guess you just got to be prepared for those little surprises. I’m sure most of us run into them at the same time, though, it is like I just speaking from experience myself. I have done several conversions where I wasn’t required to change it over to two hundred.

Sve Pavic [01:04:24] Interesting. So, wow. So yeah,

Rob Break [01:04:28] but you know you are at the mercy of whoever is the quote unquote authority over whatever it is you’re talking about.

Sve Pavic [01:04:36] So, yeah, so we are actually, and I don’t know if we touched on this, we it was not legalized when we purchased it and we went through the process to legalize it. And I know every township and city is different, but that also brings in a different layer. So, if you if you’re purchasing a that’s already legalized, any renovations you do are going to be at a very different level than if you’re going through the process to fully legalize it. This is also something to take into consideration because it just adds another layer of work and another layer of inspectors that are going to need to come through. Mm hmm. So that that should be noted that for anybody taking on that type of a project, there is a difference between something that’s already legalized and maybe it needs some updating versus something that needs to be legalized.

Rob Break [01:05:28] But it also adds another layer of forced appreciation as well. When you’re doing something on the scope that you guys did because you are literally changing the use of the property. And so now when the bank goes back in to reassess it, it’s not the same thing as it was when you bought it. That is another way of allowing you guys, which I think you did. I’m not even sure if what stage are with that but allowed you to pull out more money than you probably would have if you just said replace some cabinets in the kitchen or whatever it was and then called it an illegal basement suite.

Sve Pavic [01:06:07] Actually, you’re right, and everyone we spoke to said going through the process of converting it from a single unit to a two unit legally will increase the value of their home way more than anything else. And I don’t want to scare anyone away because the legalization process in our case through the city of Ottawa was actually fairly seamless. We did do our homework, but they also guided us in the two people at the city. Permanent Department were great and extremely helpful. I think what you need to do if you’re getting into that is make sure you put time aside to actually go and visit them face to face because you get more information that way.

Rob Break [01:06:56] That’s a good point. So that would that be your lesson that you think was the most valuable?

Sve Pavic [01:07:00] Yeah, I think that really helped the fact that we went in person. I want to say two, maybe three times that really helped. And yes, it’s a pain because, you know, you have to cut your workday in half to make your way out to the city. But their wealth of knowledge was great, and they pointed us in directions that we were not aware of.

Rob Break [01:07:25] Perfect. OK, well, thanks for sharing that.

Sandy Mackay [01:07:27] Yeah, that’s something I’ve found here in Hamilton, who is extremely useful to go in first. It kind of cut down weeks, weeks, the new schedule, just knowing what you really need to do rather than broken telephone all day long.

Sve Pavic [01:07:41] Absolutely. Yeah, we got we got infections a lot quicker. I feel like they were a lot quicker because I was able to in person whip out my calendar. They had theirs and book that day. So, I, I totally agree.

Sandy Mackay [01:07:58] Is there anything you’d change next time going through this? This whole process is one or two things that you’d do differently.

Sve Pavic [01:08:06] Um, I think we would look into increased soundproofing. We were on minimum spec for soundproofing, and I don’t think it’s enough. Like if I was to live in the basement. You can. You can still hear the people upstairs. So, I’d probably try to go like a little above and beyond if I was going to invest more money than we needed it into something, I think that would be part of it. It sounds a separate unit. Yeah, we did the minimum, but I mean, it’s minimal. It’s called minimum for everything. And we now know that. I mean, we haven’t had any major complaint, but you know, there is that sound issue, and for some people, they can’t handle it. So, I don’t know. I was doing something differently. We probably did a little more than we should have with the first one, just because we didn’t know what to do. Like, you know, we read it on the extreme and we repainted every room and it was it’s literally like a brand-new apartment when we were finished. I think. Going to continue down that road just based on the reactions we were getting from people when we were showing them the unit. You know, we heard things such as, oh, this is one of the nicest apartments we’ve seen in our show in a long time. And it’s the cleanest. And then the tenants we actually did rent to make a comment that kind of upset me, but in a good way, said Darren. We actually would have paid you more for this because of what you know of what we’ve seen. So, when you have, you know, when you’re getting anywhere from 18 to 20 showings on a weekend and you’ve just listed it on the Friday, it’s, you know, it says a lot of the work that we did and that kind of makes it feel like my design skills have contributed to not just getting houses there.

Rob Break [01:09:45] Well, I’ll have to get you to design my next one.

Sve Pavic [01:09:47] You know what? I’ll take it

Rob Break [01:09:51] some new side business. There you go. So, would you say that your advice for others doing their first project is renovate to the right level? I mean, or maybe a little above where they think they should?

Sve Pavic [01:10:03] I think if it’s a matter of, you know, that just that little bit extra and you can afford it, I mean, I’m not recommending that anybody go bankrupt to get it to a high-end scale. But if you have it in your budget to do a little bit extra, you know you’re planning on painting one room. A. Painting all of the room, you know, little things like that make a huge difference. And one thing, my biggest piece of advice and rob going on so you’ll find this money is make sure it’s clean. I mean, people love to see the place when you’re showing it, and that doesn’t take that doesn’t cost much.

Rob Break [01:10:47] No, it doesn’t. That’s perfect. OK, great. Well, guys, you know what? Oh, OK. And so safe to say that it worked out well and you guys are happy, and the refunds went through and everything, right?

Sve Pavic [01:10:59] Yes, it went really well. I honestly, I believe that the whole financial side of this is probably one of the most stressful portions. The actual renovations or any inspections are way easier than trying to figure out what the financial world needs from you to get this all done. We have these financial institutions and banks are in their own world and sometimes they are speaking Greek, but we have to roll with the punches in order to get things to move through, and you have to be patient for that part. We have a tough time with our second one was down to the wire for financing and all because information was misunderstood and lost. And you know, that makes it a little difficult to the renovation so far have been way easier.

Sandy Mackay [01:11:54] And I’m not getting any easier. I don’t think he is going to get more challenging and more complex.

Sve Pavic [01:11:59] I mean, they’re showing me reports and I don’t even know what’s going on.

Rob Break [01:12:04] Well, so but you guys did well and you’re going on to the next one and congratulations on that.

Sve Pavic [01:12:11] Thank you. We’re halfway through the next one. So, getting there,

Rob Break [01:12:15] I appreciate you guys taking your time out and I know I forced you to do it. So, I don’t know. I’ll have to thank you. Give you a thank you card or something like that. Yeah, maybe something a little more. I don’t know. We’ll figure it out.

Sve Pavic [01:12:30] Yeah.

Rob Break [01:12:32] What discount

Sve Pavic [01:12:34] the discount?

Rob Break [01:12:34] Other work? Excuse me. Yeah, I think we’re breaking up.

Sve Pavic [01:12:38] OK, but we’re losing it.

Rob Break [01:12:43] Sandy, do you want to tell people how to get in touch with you?

Sandy Mackay [01:12:47] Sure. If I don’t want to reach out and want some help over here in the Hamilton area, I can reach out to me on my, uh, my direct lines for one six five six seven three eight six. Don’t hesitate to give us a call.

Rob Break [01:13:00] And people can reach me at two eight nine two seven zero four six four as well as anyone can reach us at our email for the show. It is info breakthrough Aria Podcast UHS-II. Have a great day, everybody. All right, guys. I appreciate it. Have a great night.

Sve Pavic [01:13:19] OK, thank you.

Rob Break [01:13:21] Thanks. Bye. Now. Thanks, guys. Yeah, no problem. That was really good. I think you’re the first ones that didn’t hang up and when we say goodbye now.

Sve Pavic [01:13:53] You know why we were talking before? Yeah, we were talking before, but also because your pictures are still up.

Rob Break [01:14:00] Yeah, but everyone else just hung up when we said goodbye. Maybe they don’t like it.

Sve Pavic [01:14:04] Maybe this is sandy still here. Yeah. Yeah, yeah, yeah. Yeah. So, so you’re out in Hamilton?

Sandy Mackay [01:14:14] Yeah.

Rob Break [01:14:15] Oh, you’re not allowed to talk to them, guys.

Sve Pavic [01:14:19] Why not? We don’t go to them. We’re OK.

Rob Break [01:14:22] We’re breaking up again.

Sve Pavic [01:14:25] Yeah, yeah.

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