Podcast Transcription

Erwin Szeto [00:00:08] Hello, my fellow ambassadors. This is the truth about the best in show. My name is Erwin Szeto and I have been investing since 2005, including that longer recession than the last when we had the pandemic recession. I am referring to the financial crisis, the credit crisis of 2007 and 2008 with the higher probability of a recession coming. I can’t recommend enough that newer investors connect with veterans who have personal experience investing during the recession. The more real estate they had, the better. I personally had five properties with partners and those were good times. At the time, yeah, it was scary, but with a healthy dose of ignorance. We did just. Fine and I’ll go even more into detail at our real estate meetup in May. I was. I wasn’t that old, so. Yeah, well, not smart either. Anyway, so with things the way they are, being back in the gym is great in my opinion, especially not having to wear a mask to walk into the gym or walking out of the gym or yeah, because I’m often running late, so rushing the kids out of the car into the parking lot, out of the car and into the gym. It’s often very comedic and slapstick, like. Done. My former hand employment gym bag and my trunk. I try to shove all the stuff in my pockets, in the gym, trying to track down my shoes and the hole in my water ball, squeezing under an arm somewhere and while at the same time encouraging the kids to move quickly because they don’t move very fast and they don’t understand urgency that well. So they often require a lot of loud verbal encouragement. Sometimes their gym bag is stuck in my foot. Well, the car and my hands are full, so I have to verbally coach them on how to. I’m stuck the hand stick. I’m stuck and stick there. The gym bags, they have boxing gloves and stuff in the gym bag, so it’s a bit bulky. And then so on top of that, we have to deal with mass to well, I’m just glad we have one less thing to worry about at our last class mass. His name is his full name is Muslim all. But he goes by him as the gym owner and lead instructor of our kickboxing gym that we belong to. He welcomed me when I walked into the gym and asked if I had a minute to chat. He knows I’m late for class, so I do class too. So my kids are on time ish. But he that he starts me. So I’m wondering am I in trouble to pay my gym dues? The last thing I want to do is owe money to someone who’s one of our 30 professional fighters and has a dozen championship belts on display throughout the gym. So Coach Mass tells me my daughter Robin is doing great in class and is ready to test for her bronze gloves. That’s so she’ll be graduating from the belt system into what is to our exit test to exit the beginners program. So this is again, it’s a two hour test. So my daughter’s never done properly in our test. So this is a two hour test. It be by far the most comprehensive test of my daughter’s career. And I’m like, great. So let’s talk about couldn’t wait until after class. So, you know, the complete math goes on to inform me about Bruce, my son, who’s eight months younger. He’s not ready to test and asked how I’d like to proceed. So first I asked him if our kids would be in separate classes, which I don’t want, because that means twice the commuting. I don’t know how you parents do this shuttling around of kids when they’re in different programs because, you know, my time is better. Or at least our chair and his time investment have to be double, which is a no go for us. We’ll have to do it one day eventually but try to hold off as long as we can. Matt says no. The answer is no. They can stay in the same class. It’s just that they spend 50 minutes of class during the more advanced ups. Also share them that I teach my kids that one gets what they earn. And this is actually a great life lesson opportunity for me to tell my son he’s not good enough to grade, which is honest, but heads up is appreciated. But I actually wonder what other parents would do to deal with the situation. For myself, I couldn’t personally imagine arguing with the head instructor or Dave, who has 30 professional wins, 30 plus professional wins to arguing with him that my son deserved to test for his bronze gloves when I can totally see he’s not ready for it. My daughter is very good at her class. She’s likely the best in our class. And not just my opinion, she’s been asked to participate as the demonstration student for the recordings of her classes. I think they’re to be making an online course or something. But anyways, she’s been there. They’re actor, I don’t know, they’re demonstration student, whatever you want to call it. But we all know that her technique is absolutely fantastic. Warning to all those who are police and or race bullies. My daughter will be well prepared on the car at home. It’s just Bruce and I in the car as Robin had to stay on that day she had a fever non COVID related. I did the rapid test myself. I told Bruce how Robin will be testing for her bronze clock gloves, which my son understands. As Coach says, she’s ready, but he’s not. I asked Bruce if he’s fine with that. Bruce asked if he could attend the test with me to support Robin. That’s the response I was looking for. Apologies for the parent moment. That for. Me. Onto this week’s show, we have a pretty amazing story from Alfredo Romano, who grew up in affordable housing and now he’s building and developing a ton of affordable housing. He’s got three buildings on a go right now for a total of 400 rental apartments with rents well below market, I believe, he said 20% below market value for four rents and he’s got plans to grow that number to ten, ten buildings with over well over a thousand units in the short term future. These are armed elements and part of those investments were crowdfunded via ADI. We’ve had Steven from Avi on the show before, in case you’re not familiar on one of the more popular crowdfunding options in Canada. And I think it’s super cool that these options are available to those who have smaller bankrolls and that they be able to participate in the real estate investing market. On today’s show, Alfredo shares how his company, Three Properties Group, is able to work with the government who provide subsidies and he’s able to provide to his investors a return. Pretty cool as usual. None of this that’s shared today is an endorsement of anything. Please do your own research and due diligence. Pass results do not predict the future. Please seek professional investing advice. Everything here today is for educational and infotainment purposes, and I wish you all success in your investment returns. Please enjoy the show. Alfredo, thanks for coming on the show.

Alfredo Hermano [00:06:44] No problem.

Erwin Szeto [00:06:45] What’s keeping you busy these days?

Alfredo Hermano [00:06:46] Well, my business is my family. Two young boys are three and seven staying active, staying healthy. Actually, just before this, there was an essay I got out on the Bruce Trail to just in Hamilton to do a little bit of biking right over my head. So that was good. Keeping healthy.

Erwin Szeto [00:07:08] Good for you. Yeah, I know. Golf. You live on a golf course?

Alfredo Hermano [00:07:12] I live right in front of a golf course.

Erwin Szeto [00:07:14] Yeah, it could have been Tiger Woods.

Alfredo Hermano [00:07:17] Probably not.

Erwin Szeto [00:07:21] Yeah, yeah, yeah, yeah, yeah.

Alfredo Hermano [00:07:23] Tiger Woods is half, half Asian, isn’t he?

Erwin Szeto [00:07:27] His mother is Thai. Thai.

Erwin Szeto [00:07:29] So that was pretty cool because I think. Did you watch The Last Dance with Michael Jordan?

Alfredo Hermano [00:07:35] Oh, yeah. That was that was good enough.

Erwin Szeto [00:07:37] Phil Jackson teaches like meditation and stuff. And that was a big part of that was I was a part of Tiger Woods upbringing as well, was meditation and to see a lot of winners who meditate and have strong mental mindsets for it.

Alfredo Hermano [00:07:53] Yeah. As a me, I mean, he’s so well known for his mental concentration, really. I mean, that’s incredible.

Erwin Szeto [00:08:02] I was one yesterday.

Erwin Szeto [00:08:03] Oh, really? Yeah, that’s incredible. Yeah.

Alfredo Hermano [00:08:07] People are I think there’s big hype him going into the into the tournament. Right.

Erwin Szeto [00:08:12] To be your kids, man. Never working all day. He just made Tiger Woods money. Yeah. So we have a lot to talk about today because this was fun. But this podcast is like I get introduced to all these crazy ideas like morality and real estate investing. We’ll get there when we get there. And Oh, yeah, oh, boy. We’re going to get some people complaining about what we’re talking about today.

Alfredo Hermano [00:08:34] That’s okay. Controversy is good.

Erwin Szeto [00:08:35] So you mentioned businesses owning businesses. You got what do they do?

Alfredo Hermano [00:08:39] Mostly construction and development and GC constructors. Three H Properties Group are the main businesses keeping me busy? We have a few other businesses, but you know, COVID hasn’t helped that and in the last few years. So they’ll resurrect at some point, you know, some online rental sharing programs and stuff like that. Some, some pretty cool stuff.

Erwin Szeto [00:09:01] But I thought I was busy.

Alfredo Hermano [00:09:03] You’re busy, you’re busy.

Erwin Szeto [00:09:04] I took four days to respond to your email.

Erwin Szeto [00:09:08] I don’t know how you manage all of it. Yeah.

Erwin Szeto [00:09:12] So you mentioned construction. Yeah. Is that kind of how you got started in real estate?

Alfredo Hermano [00:09:16] Yeah. Yeah, exactly. I started my first business out of college. Right. And grew up pretty, pretty aggressively over the last, I’d say, you know, I’m dating myself now close to 20 years. And I opened up offices in Washington, Washington State and Texas. We have our head office in Vancouver, offices here in Toronto, but mostly focus on commercial multifamily construction and boom, 2020 COVID hits and $40 million of our business disappears. And so we had to shift to, you know, make a big pivot. So that’s why we’re doing, you know.

Erwin Szeto [00:10:00] What were these projects that just went poof.

Alfredo Hermano [00:10:02] A lot of our businesses in. The hospitality industry.

Erwin Szeto [00:10:05] Versus the U.K..

Alfredo Hermano [00:10:08] Exactly.

Erwin Szeto [00:10:09] That’s coming back real strong.

Alfredo Hermano [00:10:10] Yeah, there’s it’s unknown when that’s coming back. Right. And so we were building theaters commercial they called Family Fun Centers. Family Entertainment Centers. It’s like a Dave Buster’s.

Erwin Szeto [00:10:23] Yeah.

Alfredo Hermano [00:10:23] Like those kind of places. Right. And, you know, obviously, COVID hit that. So like a puff of smoke overnight. Everything disappeared and still hasn’t come back, so. Yeah. Challenging times.

Erwin Szeto [00:10:34] And you were able to sleep at night?

Alfredo Hermano [00:10:36] Well, fortunately, I was. You know, when I when all this happened, it was when myself and my sisters had and my mother went to the Philippines for a three week holiday. And that three week holiday turned into five months of being locked down in the Philippines while this was happening. So it was a pretty crazy time, too.

Erwin Szeto [00:10:57] They’re still having challenges.

Alfredo Hermano [00:10:59] Still. Yeah. Yeah. And it was a real, real eye opener to see like how COVID was, you know, handled in the Philippines, as you can only imagine with the current president who built a pretty bad reputation of human rights.

Erwin Szeto [00:11:16] Were you able to eat?

Erwin Szeto [00:11:18] No, no.

Alfredo Hermano [00:11:19] We were safe. We were, you know, very fortunate. I have real estate in the Philippines. So we stayed at my place there and lots of lots of room for the kids to run around. And it’s sort of a blessing because, you know, pre-pandemic, I was just going bananas with business and hadn’t spent so much time with my kids. And I got to actually slow things down, you know, get a little healthy and get some rest and spend time, spend a lot of time with the kids. But business was just, you know, disappearing like, you know.

Erwin Szeto [00:11:54] What did you do? You have staff and salary.

Alfredo Hermano [00:11:57] Exactly. Yeah. You know, there was there was a bit of a tough moment, actually, at one point when, you know, prior to government subsidies and help, there was a moment where, hey, we didn’t know how long the pandemic was going to be. We actually, you know, funny enough, we were at the house and I was saying to my sisters and brother in law and stuff like that, and they’re saying, hey, you know, we got to prepare. This is this is like March. We got to prepare. And potentially this pandemic can extend to me.

Erwin Szeto [00:12:31] And so let’s.

Alfredo Hermano [00:12:32] Let’s like settle in, you know, and try to make do with everything and hope that, well, we didn’t get back till August. Right. So. So life was pretty different than what we have here.

Erwin Szeto [00:12:46] And you weren’t even here and you try to deal with this stuff. So different time zone.

Alfredo Hermano [00:12:50] Yeah. So you’re trying to deal with business, checking in with a team, you know, you know, unfortunately, a lot a lot of layoffs had to take place. You had to really relook at the business itself and like what business you had and, you know, your resources and all those kind of things and try to make the best decision. My decision was always like how I built an amazing team overall with like very low turnover, totally total commitment, amazing people, family, right? Like I consider those that work with me, you know, my business family and to have to let people go, oh, it just killed me. So I tried to figure out ways, as creative as I could, with the resources that I had to keep people as long as on payroll, as long as I could. And, you know, fortunately enough, we kept about 75% of our staff or 80% of our staff for the majority of the pandemic post subsidies that ended last October. You know, we’ve had to make a few more changes, obviously, but we’ve kept our staff pretty intact, which is amazing.

Erwin Szeto [00:13:55] It’s like the projects that started that they finished.

Alfredo Hermano [00:13:59] No, they, they were all terminated.

Erwin Szeto [00:14:01] That’s even mid project midfield.

Alfredo Hermano [00:14:03] Yeah. And bring in unbilled. Yeah.

Erwin Szeto [00:14:05] So you have some or they were deal frame.

Erwin Szeto [00:14:08] Building.

Alfredo Hermano [00:14:09] Or they were tapered down like they you know, for example, you know going to build a theater now 12 auditorium theater they’re only going to do five. And we were, you know, we’d built three of them already, that kind of thing. So things really just took a turn for the worst. And I mean, and all those businesses are still struggling today, right? I mean, streaming has decimated the film industry, but we move on. Right.

Erwin Szeto [00:14:38] So you mentioned a pivot, not there’s a happy ending to the story. Yeah.

Alfredo Hermano [00:14:42] Yeah, no, exactly. We had three properties. I mean, we actually launched three properties in 2017, but because we were so busy with all our other businesses, we didn’t actually shift to that until about 2021. So, you know, we’re still trying to recover from what took place from the start of the pandemic and. Also, interestingly enough, 2017, there wasn’t that much focus on affordable housing, and there wasn’t that much.

Erwin Szeto [00:15:12] Because it wasn’t a problem.

Alfredo Hermano [00:15:12] Yeah, it was.

Erwin Szeto [00:15:14] Well, no, I’m joking. I joke a lot of.

Alfredo Hermano [00:15:17] It and funding. And it wasn’t in the public’s eye. Like, people weren’t really talking about it as much as they are today. Right.

Erwin Szeto [00:15:25] And so you can see rates have been low as long as I can remember. So it’s Fresno and thought about it. I remember when I was doing forecasting for my own real estate investing report. Interest rate vacancy rates were like never higher than 3%. That’s probably a problem.

Erwin Szeto [00:15:40] Yeah.

Alfredo Hermano [00:15:40] No. And it was. I’m not sure why. Must have been other policy focuses that the government had, but it was really at the beginning of COVID when the significant funding had been, you know, placed in affordable housing. The public’s perception and public’s concerns about the housing problem had really been exacerbated. Right. With people moving from the urban core, moving to smaller communities, and those people from smaller communities had to move out of those communities and all those kind of things. And so for us, you know, the stories positive because we were able to take all our staff reshift, you know, pivot all their efforts from, from what we’re doing in the commercial construction stuff to affordable housing development.

Erwin Szeto [00:16:32] Okay. So how do you convince people to invest in affordable housing?

Erwin Szeto [00:16:37] Because it’s, as you.

Erwin Szeto [00:16:38] Say, affordable. Like there’s no money to be made.

Erwin Szeto [00:16:40] Yeah.

Alfredo Hermano [00:16:41] I mean.

Erwin Szeto [00:16:42] And then investors, I think that’s not what any investor wants to hear.

Alfredo Hermano [00:16:45] Yeah. No, I mean, I think the way what I always say when we meet with potential investors, if and I ask a question, you know, if you can invest in something that does good for the community, but also where you can do good business. Why not? Right. Why not take a look at it? And so that’s what we’re trying to prove out. I mean, we’re the majority of affordable housing has been carried on the backs of, you know, one non-profits, co-operatives and government for how many years? And I think the movement for private industry to get more involved is starting to increase. I mean, the US, which is a little more developed on the affordable housing side. And our first fireside chat with Jonathan Rose in March, where he’s been in affordable housing for the last 30 years. You know, these policies and programs that are in there, you know, and he’s able to the last for the last 15 years provide as investors, you know, a 6% consistent return with a 15% IRR for the last 15 years, doing 100% affordable, you know. So he’s able to he’s proven out our model, basically.

Erwin Szeto [00:17:56] So why isn’t happened here?

Alfredo Hermano [00:17:57] Because it’s still it’s still in its infancy.

Erwin Szeto [00:18:00] The problem is pretty bad. The problem is really the problem. We no infinite.

Erwin Szeto [00:18:03] You know.

Alfredo Hermano [00:18:05] It’s a gigantic brontosaurus.

Erwin Szeto [00:18:08] Yeah, right. Oh, I would I would choose a meat eating dinosaur to continue. But I’m not a vegan dinosaur. But okay.

Alfredo Hermano [00:18:15] That’s amazing. And, you know, I.

Erwin Szeto [00:18:16] Guess I just think you’re the different.

Erwin Szeto [00:18:19] Is the brontosaurus like a T-Rex?

Erwin Szeto [00:18:21] Yeah, that’s right. Yeah. I would say that’s. I think the problem is.

Alfredo Hermano [00:18:25] Yeah, absolutely. Hey, I don’t know. I can’t say who I.

Erwin Szeto [00:18:29] But you know how we’re getting out of this. All right?

Alfredo Hermano [00:18:31] What’s that saying?

Erwin Szeto [00:18:32] You know.

Erwin Szeto [00:18:32] How are we getting out of this affordability issue?

Alfredo Hermano [00:18:34] Well, hey, there’s movement, let’s say, right? I mean, CMHC has this vision and goal to have by 2030. Everybody in a home.

Erwin Szeto [00:18:43] Right.

Alfredo Hermano [00:18:43] Boy, that’s a big goal. That’s pretty lofty. And I’m on the phone at least every couple of weeks with folks from CMHC. And what’s great is that you’re hearing a lot of willingness to look at different ways of looking at the housing problem. Right. Different ways investing structures, different innovative approaches. Partnerships are key in all those kind of things. So that’s uplifting to see such a, you know, substantial organization have that interest. So, yeah, I mean, I can’t answer the question of, you know, is this is what we’re proposing the solution. Right. But I think it’s a combination of all the things that are happening, whether it be, you know, mixed use developments where there’s a portion of affordable, you know, where they’re it’s 100% affordable, like our model. It’s nonprofit. You know, there’s all those approaches, I think are key.

Erwin Szeto [00:19:37] Okay, well, let’s focus on one of your current projects. Sure. Like the King Street, one that’s about that’s like I honestly.

Alfredo Hermano [00:19:44] Main Street.

Erwin Szeto [00:19:45] Sorry. Main Street art had lived like 100 meters from that location. Oh, you did. Yeah. Oh, no, I honestly just lived up the street from there.

Alfredo Hermano [00:19:51] Oh, unlock.

Erwin Szeto [00:19:52] It. Yeah, just off. Like, just.

Erwin Szeto [00:19:55] I was on George Street.

Alfredo Hermano [00:19:56] Okay.

Erwin Szeto [00:19:56] Yeah. So, man, I think I sold that house for, like, 600 or something, and I saw what my neighbors just listed for 1.4.

Erwin Szeto [00:20:03] Oh, I wish I was like, I wish I could buy one. And that’s part of the problem with this is this is crazy. This is crazy.

Alfredo Hermano [00:20:10] Nuts.

Erwin Szeto [00:20:10] So can we use that one of your main street property as an example for what you’re doing? So let’s tell the listener what it is. You’re doing it at Kisha the address.

Alfredo Hermano [00:20:19] Yeah. It’s four or five Main Street, West Hamilton. Yeah. So what we’re doing there, it’s, it’s a project 96 unit building, seven stories. Our model is, you know, 100% affordable. But the key to our model is we partner with non-profits to. Be able to get access to grants, loans, forgivable loans, exemptions, development costs, church exemptions, property tax abatement, you know, and a whole gamut of things that help our model make it profitable and commensurate in terms of investment with other real estate investment opportunities. And so for that project, one of our biggest one of the biggest keys to our model is finding properties that are on within the within a transit corridor that are already zoned for our purpose. So we can find properties that are, you know, that allow for six, seven stories, 150 unit buildings that that are about half an acre to an acre in size. Brilliant. You know, so we’re starting out in Hamilton with this four or five project. We’ve got three others in development. And our goal by the end of the year is to have ten projects and in the pipeline are roughly about 1500 units.

Erwin Szeto [00:21:46] And then how do you investors through all these opportunities, just as they are?

Erwin Szeto [00:21:51] Yeah. I mean, the majority.

Alfredo Hermano [00:21:52] Of our investors are investors who are looking to make an impact.

Erwin Szeto [00:21:57] Right.

Alfredo Hermano [00:21:57] They have been involved in real estate or there, you know, high net worth individuals or they’re just folks that are really keen on taking their money and making a change in in our future. And so, you know, one of the biggest problems that we face today, of course, is affordable housing.

Erwin Szeto [00:22:19] And then you mentioned earlier what the other gentleman is doing for his investors for returns. I know you can’t tell people what the prospective returns are, but what idea do you give them?

Erwin Szeto [00:22:30] Yeah. So for our model.

Alfredo Hermano [00:22:32] Because we try to maximize all the grants and loans and forgivable loans, exemptions, etc., you know, our model is one where we can provide a return of capital pre stabilization possible position and we’re looking at providing a, a six and a half to 7% return. And then and then the exit strategy is a refi or a sale of the building. But since our model is one where the refi strategy is key for us, is our main is our main strategic position, and we’re going to provide a return that is in perpetuity. So once we provide, you know, capital 100% of capital back upon refi, we’re going to still provide a return in perpetuity.

Erwin Szeto [00:23:23] It’s interesting.

Alfredo Hermano [00:23:24] Yeah. So it’s a so it’s basically an infinite return. So and I’ve heard it’s called the, you know, the holy grail of investing, right?

Erwin Szeto [00:23:31] Yeah. To make a return on investment. Yeah. Because we’re returning their capital.

Alfredo Hermano [00:23:34] Yeah, exactly.

Erwin Szeto [00:23:36] So how do you. Are you refinancing like everybody else is doing that you’re going to like you’re going to a commercial lender.

Erwin Szeto [00:23:41] Yeah.

Alfredo Hermano [00:23:42] Well, what’s unique is that CMHC also has its own direct lending programs, but also it also has a commercial mortgage side. Right. And their commercial their commercial side, they provide insurance to commercial lenders that will provide terms that are almost equivalent to the direct lending programs. And so, you know, long term amortization, 50 year terms, lower rates than the market. And, you know, combine that with grants and loans and the numbers make sense.

Erwin Szeto [00:24:18] Interesting. Now, in all these people, hey, Justin Trudeau. This wouldn’t be possible without them.

Erwin Szeto [00:24:23] Yeah. Yeah. Yeah.

Alfredo Hermano [00:24:24] I mean, I think it’s I mean, you look at what’s needed and affordable and government assistance is absolutely what’s necessary. That’s the only way the model works.

Erwin Szeto [00:24:35] Because private people do this like a regular bank won’t lend you tens of thousands affordable. Your rents are ten 20% low below market value.

Alfredo Hermano [00:24:45] Exactly.

Erwin Szeto [00:24:46] Yeah, that’s crazy.

Alfredo Hermano [00:24:48] So, yeah, we’re our model is a combination of what’s called deep affordable and market affordable. And so deep, affordable tenants pay around 50%, but their rents are subsidized and the market affordable is pay, you know, up to about 15, 20% of market. Right.

Erwin Szeto [00:25:08] Can you give an example? Like, do you know what your projections are for? Like, what are you building? What are you building up to a four or five Main Street.

Alfredo Hermano [00:25:15] So this will be a purpose built rental building, 96 units, seven storeys. It’ll have all the amenities that are, you know, it’ll not only.

Erwin Szeto [00:25:25] All gym simulator.

Alfredo Hermano [00:25:29] You know, floatation.

Erwin Szeto [00:25:31] No, no, I’ve never heard of that in the condo. No.

Alfredo Hermano [00:25:34] But, you know, it’ll have a gym. You know, it’ll have a. Community gardens. It’ll have, you know.

Erwin Szeto [00:25:41] Parking.

Alfredo Hermano [00:25:42] Parking and will actually, in fact, have a larger laundry space to kind of treat that as a, you know, a community space as well. And we have a commons area where it could be treated as a business center for various programs or just a place for people to gather. So we’re trying to really create a community in in our in our buildings, because not only do we want to treat our tenants with dignity and respect, we also want to create a place where they can call home. You know, because a lot of the affordable housing developments that have been built in the past have this sort of, you know, I don’t know what the best way to describe it, but, you know, not very appealing, you know, esthetic. Right. And more of more of like a Soviet potentially, you know, facility. Right. But there are so now with what we’re trying to do is we’re trying to create design excellence. We’re trying to create, you know, trying to implement ways to make the building look unique, you know, and, of course, within a budget, because it’s an affordable housing project where we don’t have the we don’t have the budget that, you know, market projects have. So we try to be creative with the resources and the budget that we have.

Erwin Szeto [00:27:05] And are looking for cost savings to be a green technologies have been mentioned and I’m I don’t think I’ve heard of it before used in Canada is you mentioned shower water recapture. Yeah. Just to recapture the heat as well.

Alfredo Hermano [00:27:20] Yeah. There’s, there’s many technologies and that’s what’s also really unique about affordable housing projects. I think they’re very they’re leading edge on that from that respect. Like for four or five, we have we’re trying to aim for a net zero electrical use of and that kind of thing reduces the long term operational costs of the building, which then helps support.

Erwin Szeto [00:27:42] Affordable.

Erwin Szeto [00:27:43] And affordable.

Alfredo Hermano [00:27:43] AC Lily Exactly. And you know, and things like solar panels, things like heat pump systems, heat recovery.

Erwin Szeto [00:27:54] Heat pump in the thing.

Alfredo Hermano [00:27:55] Heat pump for the various units, right of heat recovery systems and sewage and sanitary grate and or envelope and all. There’s so many different, different approaches to ensuring the building is energy efficient.

Erwin Szeto [00:28:11] Uh, other than electricity, are you going to try to keep people accountable at all to their water usage? For example, is this one thing that they don’t like about condos is people cold because they can’t really tie the expense back to themselves. They find that condos, people who live in condos, I find them more wasteful.

Alfredo Hermano [00:28:31] Mm hmm. Right. Yeah. I mean, we all have. We’re actually looking to partner with Tel a smart buildings, and they have, you know, digital meters that help not only digital meters but from, you know, a single mobile device. You can open and close doors for viewings. You can you have, you know, as you said, water, you know, water analysis, water use analysis. You have energy use analysis and all these type of things, which I think are important because you’re right, there is the potential for that.

Erwin Szeto [00:29:03] For you to split by mistake. So on a leaky toilet.

Alfredo Hermano [00:29:07] Absolutely. Absolutely.

Erwin Szeto [00:29:09] I don’t think everyone appreciates. But if your if your toilet if you can hear it running, that could be a couple thousand dollars a month. Absolutely. Just wasted water.

Alfredo Hermano [00:29:15] Yeah. So you have somebody helping monitor that, right? And you have you have very various options of and levels of digital monitoring, but you want to cover the basics like that.

Erwin Szeto [00:29:28] That’s pretty cool. Yeah. And then what stages do you accept invest your money just at the beginning. Can people buy these units.

Erwin Szeto [00:29:37] Yeah. So, so just.

Alfredo Hermano [00:29:38] You know, so our model.

Erwin Szeto [00:29:40] I don’t nothing about.

Alfredo Hermano [00:29:42] Questions. Big questions. No. So our model is all rental. We’re focused primarily on rental. There is affordable ownership as well. That’s not what we focus on. We will focus on affordable rental. And so in terms of investments, you know, we we’re actually launching a new project just actually in the next week or so. It’s on Barton Street. I’m sure you’re familiar with Barton and Barton.

Erwin Szeto [00:30:06] What was the intersection?

Alfredo Hermano [00:30:07] That’s a barn in Ottawa. So this project is.

Erwin Szeto [00:30:10] Yeah, we talked about that. That’s a wonderful location.

Erwin Szeto [00:30:12] Yeah. So this big.

Erwin Szeto [00:30:13] Time for up and coming.

Alfredo Hermano [00:30:13] Yeah, absolutely. It’s right beside center mall Marketplace Mall. It’s yeah, exactly. And there’s a lot of a lot of traffic on Barton Street foot traffic as well. And yeah, that’s a seven story building, hundred and 64 units of amazing design on that building. We were we had a little more flexibility and I think, you know, don’t call me any, but we may be winning. Some my words, I think to the uniqueness of our design shout out to Rebel House, our architectural team with amazing design. But yeah, that building is being launched to investors. We did a teaser just a week ago and next week we’re going officially to our investment group and forever and making the opportunity available. So four and a half million bucks for raising and to do 160 in a building.

Erwin Szeto [00:31:04] So the raise a lot of questions ask and then your involvement is you’re also the like the general contractor.

Erwin Szeto [00:31:12] So the.

Alfredo Hermano [00:31:12] Term is construction management and that’s we’re primarily a management company but acting in a similar capacity as general contractor. Yeah. So we have full control. That’s one of you.

Erwin Szeto [00:31:22] Big time because not everyone’s allowed to do this.

Alfredo Hermano [00:31:24] Yeah. One of the things that that gives us that.

Erwin Szeto [00:31:27] I do I’m not allowed to do this.

Erwin Szeto [00:31:29] From here.

Erwin Szeto [00:31:30] I won’t be allowed to do this. No lenders going to let me be the GC on this.

Erwin Szeto [00:31:34] Yeah.

Alfredo Hermano [00:31:35] Yeah. I mean but we’ve been in the business for 20 years. Right. And John so, you know, we’re building two condos in B.C. right now. So but yeah, I mean, it’s, it’s something that gives us control over the whole process. So from Brett, from the get-go, you know, one of the some of the problems that developers face is that they get a building that their architect designs incredibly in. It’s beautiful, but then they are challenged with the budget because, you know, the architects not focused on that, but because we’re involved right from the get-go, you know, we immediately look at our design and how it impacts our budget and make those numbers were.

Erwin Szeto [00:32:13] It reminds me of those condos in Hong Kong where there’s like a hole in the middle of the.

Erwin Szeto [00:32:16] Condo. People could live there, man. That’s practical. It cool. Yeah.

Erwin Szeto [00:32:22] You throw something big through it, but 4.4. $5 million raise. So how are you raising the capital?

Alfredo Hermano [00:32:30] So where you go to are existing resource, existing investment group. And basically we have a structure, a structure for raising the LP funds and we make it available to them for the, you know, for the next couple of weeks. And but also what we do with our projects is that 1/2.

Erwin Szeto [00:32:53] Your existing investment group, these are high net worth, but really, really high net worth.

Alfredo Hermano [00:32:57] High net worth. You know, in some cases, institutions, pension funds.

Erwin Szeto [00:33:04] Or institutions have appetite for.

Alfredo Hermano [00:33:05] This family offices. Yeah, in some cases, you know, institutions have now, you know, a lot of these you know, I think we talked about you mentioned the ESG, right? And so a lot of corporations have created funds or have allocated funds to doing impact. And a lot of them are interested in affordable housing because that’s an area that they’re focused on.

Erwin Szeto [00:33:27] Got it. Got it. And this fits their return profile as well.

Erwin Szeto [00:33:30] Yeah, well, a lot of.

Alfredo Hermano [00:33:31] These organizations aren’t looking for huge returns. Right. And mind you, a lot of them invest.

Erwin Szeto [00:33:37] I know they’re not looking for huge returns, but they’re usually looking for low risk as well.

Alfredo Hermano [00:33:40] Yeah, no, they’re looking for low risk. They’re looking for, you know, a stable income. Yeah, they’re looking for, you know, decent returns. But most of our conversations are about impact. You know, if they had a choice about, you know, if they had one investment that provide a decent returns and they had another investor in the provide a decent returns and also had an impact. They’re going to choose the, you know, the ladder. Right.

Erwin Szeto [00:34:06] Interesting.

Alfredo Hermano [00:34:06] So and that’s those are the investors and joint venture partners that we look for. You know, those we have the same vision. They have the same values. And there’s a lot of them out there.

Erwin Szeto [00:34:17] Right. Because these investors aren’t going to go, hey, you know, you get 20% more rent if you renovate this person.

Erwin Szeto [00:34:23] No, no, no, no. Okay.

Erwin Szeto [00:34:26] All right, Adam, wrap it up.

Erwin Szeto [00:34:28] So I’m kidding. I know you are.

Erwin Szeto [00:34:36] So I remember reading the article, and that’s how it was when I reached out to you. Because you have involvement with Avi? Yeah, because we’ve had Steven from 80 on the show. Yeah. A super cool concept. And then where does Adi get involved in this process?

Alfredo Hermano [00:34:49] So good question. And shout out to Adi, Stephen and Mitch. So Adi, same thing. So as soon as we make the offering to our investment group, they’re part of that group. They’ll commit a certain level of investment per deal. And we love bringing them in because what they do is they make investment available to everyone. Right? Right. And right now, our investment community are mostly accredited investors.

Erwin Szeto [00:35:16] Right, very accredited.

Erwin Szeto [00:35:18] So the majority are all you know, the family.

Erwin Szeto [00:35:22] Offices are not just.

Erwin Szeto [00:35:23] Accredited. They’re very credible. Exactly.

Erwin Szeto [00:35:26] They’re multiple times. The requirements to be accredited continue.

Erwin Szeto [00:35:30] But I love.

Alfredo Hermano [00:35:31] The fact that you can get, you know, anybody and everybody involved at a low risk because they’re not allowed to invest. More than a certain level. And they’re basing it on, you know, the majority. Right. And so and to have them not only be our partner, but because they’re building a great reputation around, you know, focusing on more on impact. You know, that’s, you know, the same value alignment.

Erwin Szeto [00:35:56] So I remember I didn’t know much about that. Even I hadn’t had them on the show. Sorry, Steven.

Erwin Szeto [00:36:00] So. But he told me the max.

Erwin Szeto [00:36:02] Investment was 1500.

Erwin Szeto [00:36:03] Dollars. Exactly. I had to have him repeat it three times. Really.

Erwin Szeto [00:36:07] Really do. The example I’ve given before on the show is I don’t have our ESPs, because, honestly, it’s not enough for me to be interested. It’s not it’s not a significant amount of my money for me to be interested. And then I’m going get some hate for this. Like, it’s I completely understand why it exists and who it’s for. Yeah, it’s not for me because I have way too much stupid stuff going on. And, you know, I got. I have to learn to talk, apparently.

Erwin Szeto [00:36:33] Yeah, yeah, yeah. Right.

Erwin Szeto [00:36:34] And that’s somehow our priority over an educational savings plan.

Erwin Szeto [00:36:37] But it’s not about me.

Erwin Szeto [00:36:41] Until I is with investors there. Often I’ve seen a type I don’t understand why they’re often taught, you know, have one partner in a real estate venture because it’s too hard to manage lots of relationships. Yeah. Versus. And he’s got the exact opposite direction. They have thousands of investors.

Alfredo Hermano [00:37:01] With.

Erwin Szeto [00:37:01] Thousands of relationships on just one project.

Alfredo Hermano [00:37:05] Yeah. They, I mean, on, on four or five Main Street, they raised half a million dollars. And I think I can’t remember the number of investors that were in there, maybe 2000 or something like that. Oh, my word. Risk is spread pretty, pretty amazingly. But yeah, I mean, I, you know, I’ve been on I’m also a member of Audi and you know.

Erwin Szeto [00:37:27] Oh, you’re able to invest in your own project then.

Alfredo Hermano [00:37:29] Yeah, absolutely. And so the whole platform is so frictionless, you know, everything that is at is provided to an investor who isn’t well versed in real estate, can really understand it and invest well.

Erwin Szeto [00:37:43] It’s way easier than getting a Cosi property right on offer when the damn offer inspections, insurance, get a mortgage.

Erwin Szeto [00:37:52] It doesn’t get there. No, it doesn’t stop.

Alfredo Hermano [00:37:54] There. So you still have to manage it, ensure that the value stays right. Like, I mean, it’s.

Erwin Szeto [00:37:59] Going to be, you know, over five years. Management, maintenance tenant. Absolutely. Five, ten, 20 years longer.

Alfredo Hermano [00:38:05] Right. And anything I mean; anything can happen in that situation. Right. And it’s challenging.

Erwin Szeto [00:38:11] Crazy stuff happen again. I think that is super cool. This is not endorsement by any means cause they give me nothing for it. But I think it’s super cool. It was a I was at a cryptocurrency presentation and as always, they can’t tell you how much how much you should own. But the lady suggested by $1 of Bitcoin. All right. Hopefully she won’t get sued for giving financial advice.

Erwin Szeto [00:38:35] By one point. Okay.

Erwin Szeto [00:38:37] But her point was get off of zero and don’t have zero because at least if you like, break the seal, then hopefully that opens the door to a greater journey of learning more. Right? You want to get into construction, but you want to get to socialize housing. Maybe you want to be a landlord. Yeah, right. So but that doesn’t happen until you break the seal, right?

Alfredo Hermano [00:38:54] Interesting. Yeah.

Erwin Szeto [00:38:55] Yeah. So this is a very easy way to break this year because a dynamite understanding is you can do a minimum of a dollar. But that does make sense because the fees.

Alfredo Hermano [00:39:02] The fees, yeah, I think the fee is a $25 a year or just a year.

Erwin Szeto [00:39:07] Not even a month.

Erwin Szeto [00:39:08] Yeah, yeah, yeah.

Erwin Szeto [00:39:10] So. So invest more than $25. I don’t.

Erwin Szeto [00:39:12] Know. Yeah.

Erwin Szeto [00:39:14] But that’s pretty cool because that is about impact and that’s, that’s why, that’s why they do best even three times what the maximum investment was, because it’s hard for me to get a financial impact as an investor. Well, investing 5000 bucks, so.

Erwin Szeto [00:39:27] Exactly right.

Erwin Szeto [00:39:28] But human impact more for socialized investing essentially.

Alfredo Hermano [00:39:32] Yeah.

Erwin Szeto [00:39:33] You leave space for everybody else really get in. Yeah. Rather than just the big.

Alfredo Hermano [00:39:37] Fish and exactly that. Right. Because primarily real estate has been, you know, mostly invested in by people that are accredited or people that have wealth and you know, to get the vast majority to get involved, as you say, you know, get the get your get your foot in the door, basically, you know, start opening up your eyes to other things that will help you improve your financial situation.

Erwin Szeto [00:40:04] Reminds me, I have one share of Tesla because it’s too expensive. So I just want to.

Erwin Szeto [00:40:08] Write a piece of Eli and all the action and mostly to kill my family wasn’t bought this year it’s more to the kill my FOMO. Yeah.

Erwin Szeto [00:40:17] I got a piece. I’m in the door.

Erwin Szeto [00:40:19] I got foot in the door.

Erwin Szeto [00:40:22] We talked barely before we were recording about the co-ops and ours. Oh, it was a it was a presentation that you were giving about around. I’m sorry. I’m sorry. Yeah, but I didn’t notice it. It is kind of sad that I know what you’re. Talking about in a presentation how a bunch of affordable properties will no longer be affordable, probably pretty soon. Explain what that is about.

Alfredo Hermano [00:40:48] Yeah. Yeah, absolutely. I mean, if I.

Erwin Szeto [00:40:50] Didn’t know it, principally one person out there also doesn’t know.

Alfredo Hermano [00:40:52] Yeah, absolutely. I mean, this is that particular example was an article that came out in January about this year. This year, the city of Kitchener, city of Kitchener. So there’s a co-operative or bunch of cooperatives that have that own affordable housing. And I think there is a I can’t remember the exact numbers. I look back and I know it’s but something around a couple thousand and so you know.

Erwin Szeto [00:41:20] Couple thousand apartments.

Alfredo Hermano [00:41:22] Apartments and these apartments.

Erwin Szeto [00:41:26] Were.

Alfredo Hermano [00:41:27] Built about 40, 50 years ago on long term mortgages and to be kept affordable for that term. And so now, you know, of course, buildings only are only have a life around 40, 50 years. And, you know, the changes. Major changes need to take place or improvements. And so not only do they face the end of their mortgages ending and, you know, although they have a lot of equitable value in these properties, they don’t have significant cash flows. So what do you do with these properties? And, you know, their only options are at, at least at this point in time, is to either sell and then it gets sold to, you know, a private, private industry. And private industry is looking to maximize profits. And what ends up happening is you have displacement. You have all these folks that are. That are.

Erwin Szeto [00:42:18] That’s about out.

Alfredo Hermano [00:42:19] On the street. Yeah, it’s.

Erwin Szeto [00:42:20] But they’ll have stainless steel appliances and, like, granite countertops and hardwood floors and. Yeah, that’s not a good thing.

Alfredo Hermano [00:42:26] No, it’s not good in the sense that you have displacement and you have all these folks and that’s happening across the country. And, you know, it’s I think one of the biggest problems and opportunities that we have in the future, which is under the under a category called preservation. And so what was that was what the chat was all about with the with Jonathan Rose. But yeah, I think there’s, you know, there’s billions and billions of dollars of assets that are all at end of life. You’re hearing some sad stories about renovictions. You’re hearing sad stories about people being left out on the streets. You’re hearing, you know, rat infested elevators not working and all those kind of things. And there’s currently today there’s no solution for that. So, you know, I’m trying my best with my team and our partners to try to lobby government and lobby, you know, various institutions to get involved in trying to find a solution for preservation.

Erwin Szeto [00:43:25] And you’re just talking about preserving affordable housing or.

Alfredo Hermano [00:43:28] Preserving affordable housing? Yes.

Erwin Szeto [00:43:29] I don’t know. Many people are talking about this.

Alfredo Hermano [00:43:32] No, it’s not. That’s why it does not. Many people talking about affordable housing in general. And but it’s building preservation is really you know, it’s more of a. Might be more focused on in the future as we get the supply up of affordable housing because that’s still the challenge in the U.S. the majority of affordable housing development is preservation. You know, out of out of all the projects that they did and I think it was, you know, a year ago, they only built like 50 to 60000 new units of affordable housing.

Erwin Szeto [00:44:06] The rest in the state. Sorry.

Alfredo Hermano [00:44:08] Yeah, that’s it. That’s it.

Erwin Szeto [00:44:09] That’s another.

Alfredo Hermano [00:44:10] Exactly.

Erwin Szeto [00:44:10] For a population of 300 million.

Alfredo Hermano [00:44:13] 350 million people. No. And they have they have you know, their numbers are in terms of people like in Canada, we voted, you know, the total waiting list for people waiting for affordable homes is roughly around 300,000 people in the US. It’s like 20 times that. It’s like 6 to 10 million people. Right. It’s a giant number. And so, you know, preserving existing, affordable is, is something that they’re focused on.

Erwin Szeto [00:44:41] I see multiple challenges.

Erwin Szeto [00:44:43] Not even for you guys. Yeah.

Erwin Szeto [00:44:47] Am I allowed to call you guys? Which is another apology. I’m sorry, folks. When you’re buying property, there’s other people that want the same properties as you. How is that working out? Are sellers sympathetic or. Yeah, there’s one of them, actually.

Alfredo Hermano [00:45:02] And, you know, it’s been amazing. It’s been an amazing journey so far because not only are sellers empathetic because we’ve got a lot of problems in society today. Right. And that’s another probably podcast for, you know, but the you know, the sellers are we’re not only not only sellers, but our consulting teams of other stakeholders. Everybody is very empathetic to the problems and want to get involved and want to help. We had one of our consultants say to me the other day, you know, I said, Hey, I know you’re busy. Hamilton, Hamilton, construction and development industry is going bananas right now. And so I said to him, I go, Hey, you know, heads up. I need your assistance on a on an environmental study on this project and the next week, because we’re closing on it and we’re going to do due diligence, just a heads up. And if you could fit it in your schedule, please let me know. He’s like, Alfredo, because of what you’re doing, because you’re developing affordable housing, you’re my priority. And so that’s pretty consistent among the various groups. And so, yeah, so sellers are open to finding out a way that they can also have an impact. Right. But our model is, is one where we’re focused on secondary markets. So instead of paying, you know, 20, 25% of our total cost of a development like in the urban core, Toronto Vancouver’s, you know, we’re looking at, you know, markets that, you know, these secondary markets that have a little more affordability and a lot of available land for development.

Erwin Szeto [00:46:37] Mm hmm. Other than Hamilton, where else are you looking?

Alfredo Hermano [00:46:41] St Catherine’s. We’ve looked in places like across the country from Ontario. Southwest Ontario is ah is one of our main focuses, but all the way to heading west to B.C.. So we’ve looked at Regina, we’ve looked at Winnipeg, we looked at Edmonton, Calgary, various, you know, smaller cities in B.C., Victoria and Nanaimo.

Erwin Szeto [00:47:04] But you’re starting in Hamilton.

Alfredo Hermano [00:47:05] We’re starting in Hamilton.

Erwin Szeto [00:47:06] My Hamilton well.

Alfredo Hermano [00:47:08] I live in Hamilton.

Erwin Szeto [00:47:09] You didn’t always.

Alfredo Hermano [00:47:10] Know. Yeah, that’s.

Erwin Szeto [00:47:13] Like Hamilton.

Erwin Szeto [00:47:14] Interstate. And you’ve had some nice experiences in other parts of Canada.

Alfredo Hermano [00:47:17] Yeah, yeah. Originally from Vancouver, moved to Hamilton, 2015.

Erwin Szeto [00:47:21] Upgraded. I understand. Okay.

Erwin Szeto [00:47:23] Yeah.

Alfredo Hermano [00:47:25] I had super happy, amazing family, community, you know, amazing place. Still tie in strong ties to Vancouver there every couple of months families there so.

Erwin Szeto [00:47:35] Yeah that’s pretty wild because it maybe it’s the grass is greener on the other side but you know, I just love Vancouver and we’re like, you know, like we’re going back we’re going to Vancouver in the May, we’re going to do a real estate meet up, stockbroker meet up. I don’t have all the details yet. My wife put it in my calendar for like.

Erwin Szeto [00:47:53] For.

Erwin Szeto [00:47:54] Like 630. So at the time changed. I’ll be 930 our time. Yeah. I’m like home. The kids can’t be up that late and there’s. We don’t have a nanny in Vancouver, so I figured that.

Erwin Szeto [00:48:10] Yeah.

Erwin Szeto [00:48:11] I love Vancouver.

Alfredo Hermano [00:48:12] Yeah. Beautiful place, beautiful place.

Erwin Szeto [00:48:15] Beautiful people, beautiful culture. And like, people are chill.

Alfredo Hermano [00:48:18] Yeah.

Erwin Szeto [00:48:18] Compared to here.

Alfredo Hermano [00:48:19] Well, you know, funny enough, we brought on a new controller just recently, and she’s out of Kitchener, and she was getting on onboarded with our team and, and our head office is in Vancouver, and my chief of people is in Vancouver. And so during this process of onboarding, there is a big noticeable difference between the different. You know, from the West Coast and Ontario. So, yeah, definitely, definitely a lot more relaxed and chill for sure.

Erwin Szeto [00:48:53] How many employees do you have?

Alfredo Hermano [00:48:54] 30. We used to have closer to 50 pre-pandemic.

Erwin Szeto [00:48:59] And then but then all the people on the tools they’re contracted out.

Alfredo Hermano [00:49:04] Or we don’t have. Yeah. So construction management, we only have the management team, project managers, project coordinators, development managers say superintendents, you know the rest of the stakeholders are all, all our contracted. Yeah.

Erwin Szeto [00:49:19] Mhm. Parts of the construction industry have bounced back have they not. But I still see cranes everywhere and I understand just from hearing what I hear on the ground, like they can’t hire enough people.

Alfredo Hermano [00:49:31] Yeah. I mean, there’s always been a problem with skilled trades and in construction, the pandemic made it even worse because a lot of folks, you know, in the construction industry, the average age is, you know, over. I think the average age was over 4550. At some point, maybe it’s changing. These are old metrics. But, you know, with the pandemic, with a lot of people experiencing such despair as particularly in the commercial side of the construction industry, a lot of businesses went bankrupt or, you know, guys are saying, hey, I just you know, I’ve been in this business for the last 20, 30 years. It’s time to get out. And that happened. There’s, you know, a lot of attrition. And so, you know, a lot of a lot of folks. And that’s been one of the problems also that has impacted the cost of construction. Mm hmm.

Erwin Szeto [00:50:21] We talked about morality and real estate investing. That was in your emails and our email exchanges or what we knew morality for. So I think I’ve mentioned to you and Praveen the you know, it’s I think you’ve seen it, too, like the common apartment building investment model is to buy something. I know many companies like their strategies to buy something that needs not a lot of work that’s being rented for under market value. And their goal is to turn over tenants, renovate, raise values. That’s not a moral investment. I don’t mean to push you. So I’ll start off by saying when people tell me those things, then I’m not interested. So all of us first versus our friends who are trying to build something in Waterloo. I’m interested. You’re building. You’re creating supply. I’m interested. Right. Versus again, buying something existing. And then, however, they’re asking us to leave or whatever. I just don’t know where they go. Like someone who’s paying, like, $1,000 for a two bedroom. Like, where do they go? Right. And that’s why that’s. That’s for me. That’s my main morality issue with apartment building, investing for that style of investing. So that’s why it’s a no for me. I’m not. I’m not judging anyone. It’s just for me. Right. What’s your what’s your view?

Alfredo Hermano [00:51:40] Well, a little bit at a bit of background. I mean, immigrant family from the Philippines, you know, parents careers had changed dramatically when we first moved to Canada in the late seventies, early eighties. And, you know, pizza delivery driver with, you know, single income. Right.

Erwin Szeto [00:51:57] Your parents? Yeah.

Alfredo Hermano [00:51:58] And so, you know, we grew up in affordable housing. And so my career has been about, you know, giving back because I saw and firsthand experience, you know, the having a being in a situation where paying rent was still a challenge. But isn’t the challenge that people face today? My parents were able to have their kids go to good schools and then eventually go to, you know, good colleges and universities and do something for themselves and give back to the community. So that’s where that’s where it starts. That’s the base of, you know, my morality. And that’s what backs a lot of my decision making. You know, giving back to, you know, being fortunate to grow up in Canada, you know, and giving back to the community. Super important. Yeah. I mean, that’s with the problem of affordable housing. You know, not only are we trying to do good and give back but trying to find a way to make it a sustainable, profitable business model so that we can encourage the rest of the private industry to get involved. You know, so, you know, hey, I want to I want to go to sleep at night and sleep well and know that what I do every day is having an impact. Mm hmm. Again, we just have so many problems in society today, you know, why not do. Why not do it if it’s not going to be me or not going to be, you know, someone else? Like, who is it? Who’s going to be? And you know, you’ve got young kids. I’ve got young kids. I want to see their futures be different than what we know right now. Looking pretty bleak from an environmental perspective, a real estate perspective. Right. I mean, it’s we’ve got to make changes. We’ve got to do something about it.

Erwin Szeto [00:53:45] That’s pretty cool. Are your investors public about how they’re investing? I only mention it because there’s a lot of rhetoric about, you know, hatred for rich people. And that’s what’s your project?

Alfredo Hermano [00:53:57] Financialisation of real estate. I know that, too.

Erwin Szeto [00:54:01] Yeah, I’m part of the problem.

Erwin Szeto [00:54:04] Admit it too.

Erwin Szeto [00:54:06] But then mind my defenses. You know what else is someone supposed to do? This is if are saying don’t hit their player, hit the game. Yeah. The game is central bank money printing inflation. Yeah. We as investors, we get a lot of tax breaks for being investors.

Alfredo Hermano [00:54:25] And really, if you’re not investing your money in contributing to the economy, the economy is not going to turn and it’s not going to turn over. And opportunities and jobs aren’t created. It’s over there. You know, things have to move, you know, and what we’re trying to do is to create a model that’s sustainable because just like the kitchen, our problem that’s being faced, we don’t want that to happen. You know, 40 years from now, we’re trying to create a model that, you know, beyond that, that folks had been fortunate enough to be, you know, living in the affordable projects that we develop don’t have to be kicked out of at the at the end of the term. Right.

Erwin Szeto [00:55:04] What are some of the challenges that city run affordable housing? What do they face?

Alfredo Hermano [00:55:09] Well, I mean, being government backed, a lot of those, you know, the income model, you know, a lot of these buildings have been affordable for so long. So the so the level of income is so low that, you know, they don’t have much room to make changes, to make improvements.

Erwin Szeto [00:55:28] So they don’t even keep up with inflation on their rents.

Alfredo Hermano [00:55:31] No.

Erwin Szeto [00:55:32] Oh, boy. Yeah. This is a that’s a recipe for disaster. Yeah.

Alfredo Hermano [00:55:36] I mean, so that’s one thing that we do. I mean, our rents are, you know, there’s government, you know, rent control that is in place. And, you know, we stay within those guidelines.

Erwin Szeto [00:55:47] So. So then your buildings will. I don’t know if I that’s rent to call me or buildings but. The rents will be indexed to inflation at least.

Alfredo Hermano [00:55:54] I mean, as I said, like it’ll be to, you know, that the government.

Erwin Szeto [00:55:59] Got it.

Alfredo Hermano [00:55:59] Controlled.

Erwin Szeto [00:56:00] Which, which hopefully keeps up with the inflation.

Alfredo Hermano [00:56:03] Which keeps up with inflation. Absolutely.

Erwin Szeto [00:56:05] Because otherwise these businesses. Businesses, I don’t know the right word for it. Affordable housing won’t make it. No, it.

Alfredo Hermano [00:56:13] Won’t if it. You have to be practical. Right. I mean, and government money is finite.

Erwin Szeto [00:56:19] Right. I don’t feel that way.

Erwin Szeto [00:56:23] By changing any foreign plans and childcare and dental plans. I’m happy for a loan. Yeah.

Alfredo Hermano [00:56:30] No, in. Hey, that’s. That’s today. Right. And, but the you know, I would say that my perspective is that it’s finite. And so if we can find a way to make it sustainable, then that would be amazing.

Erwin Szeto [00:56:45] Any thought to making your buildings co-op?

Alfredo Hermano [00:56:47] No, no. I mean, our buildings are going to be you know, one of the things about real estate as well, and why I’ve been involved in construction and real estate, it’s a great legacy asset to have. Right. And, you know, I think the goal for all of us is to work hard and one day does not have to work hard. And so I’m just I’m you know, part of our model is keeping it private. Interesting. So, you know, and by having, you know, over my career develop thousands and thousands of buildings. Be able to build wealth for myself and my family and for the next generation. And while giving back to the community.

Erwin Szeto [00:57:30] That’s pretty cool because we talked about earlier about the examples that I shared before. A recording is like two well-known known failed during the Pandemic Mountain Equipment Co-op, which is no longer called Bat Mountain Equipment Company. I don’t.

Alfredo Hermano [00:57:45] Know. Actually, I didn’t follow that. And what happened with them?

Erwin Szeto [00:57:48] The C stands for something else besides co-op now sort of. The acronym stays so. Oh, really? Yeah. Acronym stays. It’s no longer a co-op. It’s not a co-op. It’s privately owned.

Alfredo Hermano [00:57:56] So it’s still messy.

Erwin Szeto [00:57:57] I guess. Okay. And then locally, mustard C Co-op field and just reading into MSE like management wasn’t tight. Just their inventory control was just poor thing. The story that was given was, I think certain piece of hiking equipment. They happened to find it in their storage, but it had been sitting there for like three or seven years. So actually worked out. Normally you sell, you know, when you have excess supply, you, you know, you heavily discounted, put it on clearance. Yeah, but thankfully they found it. And there are the sell for, you know, full list price because, you know, during the pandemic. But that was more of an insight into how poor their inventory management was.

Alfredo Hermano [00:58:38] How long did you say five, seven years?

Erwin Szeto [00:58:41] Yeah, it was in inventory for that long. And it was noise lost in inventory loss. And they found it, I don’t know, because they were looking for stuff to sell.

Erwin Szeto [00:58:51] Yeah.

Erwin Szeto [00:58:52] And then just one. I have questions and I wonder like how is quality of management in a co-op? Because you don’t get talented people running businesses unless you pay them. Yeah. Right. So like the whole sunshine list thing and then like, I don’t know, people are being vilified for making what they do, like CEOs of hospitals, for example. But my thinking is you don’t get talent unless you pay for talent. Yeah, right. Yeah. So that’s part of my. Where was I going with that? I don’t know. Like, do co-ops and real estate work different things? And that’s kind of the kind of what we’re talking about with the city running affordable housing in Hamilton, for example, or a bunch of these properties are in uninhabitable. Yeah.

Alfredo Hermano [00:59:32] Yeah.

Erwin Szeto [00:59:33] Like I think one project, I think 60 or 70% of it was vacant because people couldn’t live it. They weren’t being kept.

Alfredo Hermano [00:59:40] Yeah. Yeah. The, the history of, of, of the city housing in Hamilton is that actually it was what I understand it to be is that they were an amalgamation of a significant number of non-profits that I think we’re actually going bankrupt. And so city housing stepped in and took them over. And so, you know, they already started with problems, right, financially. But there is a lot of folks that were living there. And so, you know, what are you going to do? Something had to be done. And so they stepped in and came up with that solution. But, you know, is that the solution for the long term? You know, that’s yet to be determined because.

Erwin Szeto [01:00:23] I remember within two years; I won’t say which political party. I’m sure people can guess, but one of the leaders said, I don’t want to see developers making money, money off the back of Canadians. Right. And then here we have nonprofits, I don’t know, leaving a whole bunch of problems for the taxpayer. So that work out.

Alfredo Hermano [01:00:45] Well, not well, because there are billions and billions of dollars spent originally. So if all that gets converted to private, then, you know, look at the lost dollars there. Right. And so I think that, you know, back to that comment about preservation being a potential, you know, or not potential being one of the biggest issues and opportunities I think need to be resolved in Canada.

Erwin Szeto [01:01:16] Are you working with the city on any existing affordable housing that they own that they’re operating?

Alfredo Hermano [01:01:20] We’re having talks about opportunities to partner up. I don’t think we’re talking about existing properties only, only because the financial model today with grants and incentives and loans, etc., that are there but won’t support a preservation model. But they do support new construction, new builds.

Erwin Szeto [01:01:41] I mean, they should bulldoze some of these places.

Erwin Szeto [01:01:43] And.

Erwin Szeto [01:01:44] Build high rise.

Alfredo Hermano [01:01:45] In some places. Absolutely. It makes sense financially to do that and it’ll contribute back. You know, if you demolishing a ten unit building and put it up, you can put up 300 units that will have a unilateral positive effect. But what do you still do with those ten, ten, ten families that are living there? You still have to be fair and find a solution for that.

Erwin Szeto [01:02:08] It’s more likely three families, just three of the seven of the units earning. And you can’t live in them.

Erwin Szeto [01:02:11] Yes. Yeah. Yeah.

Erwin Szeto [01:02:13] But yes, we do have to relocate them.

Alfredo Hermano [01:02:15] Yeah, exactly.

Erwin Szeto [01:02:15] And that’s not easy to do.

Alfredo Hermano [01:02:17] No.

Erwin Szeto [01:02:18] Hmm.

Erwin Szeto [01:02:18] Anything else you want to cover today?

Alfredo Hermano [01:02:20] Hey, I mean, I got a few shout outs at the end of the answer. How much time we have left?

Erwin Szeto [01:02:25] But I need to show the people.

Erwin Szeto [01:02:29] You’re showing to the city at all. Anyone listening? We should show notes.

Alfredo Hermano [01:02:33] No, I don’t think I’m promoting folks in the city, but I’m building relationships with the folks at the city. I think, you know, not specific names particularly.

Erwin Szeto [01:02:45] But I’ll have to say, like the people the people I’ve dealt with have Hamilton. They’re very progressive people. Yeah, you wouldn’t you wouldn’t know they’re public servants if you drive by talking to them. Yeah, but they, they have vision, they’re not NIMBY. Right. They, they want change. They want they want density. Yeah. Right. Which is not typical of city municipal employees. Yeah. Sorry. Continue. No.

Alfredo Hermano [01:03:09] That’s an interesting comment, because, you know, that’s one of the reasons why we moved to Hamilton, having grown up in Vancouver and seeing the changes over the last 30 years in Vancouver, seeing, you know, Richmond from where which is where I grew up in, you know, from farmland to giant powers and see, you know, Vancouver.

Erwin Szeto [01:03:30] And it’s a very high income area.

Erwin Szeto [01:03:32] Yeah, absolutely.

Alfredo Hermano [01:03:33] And see how what the impact of the what was called the Skytrain, the rapid transit, the rail line and all these other lines that had just had a huge impact to the city and its growth. And that’s what’s exciting about Hamilton with the LRT coming and all the transit. Yeah, the rail transit and all the other investments taking place in Ontario and connecting the whole grid together. I think that’s amazing. And I mean, it has to be done because the population is going to continue to grow. You know, there’s the government’s bringing in, you know, one and a half million people over the next three years, and that’s a substantial increase to the population. But Vancouver seeing how it grew and the type of the type of the developed society and the regulations and all that stuff that is now in place is what happens over time as things, you know, become more, you know, sort of set up, right? And now Hamilton, we’re in this growth stage and other areas in Ontario, and it’s really exciting to see that and to have these folks at the city be open and be willing and look at innovative techniques, look at partnerships. In all my experiences, all my conversations have been all positive. And even from the administrative staff, they’re very supportive, you know, and they’re always, you know, attentive to you, to your files. And I think it’s been great.

Erwin Szeto [01:05:03] Yeah. And are you you’ve been talking to the mayor as well, because he’s got to be wanting to, you know, posing in front of your buildings.

Erwin Szeto [01:05:09] And so we’ve.

Alfredo Hermano [01:05:09] Had conversations with Fred and other councilors are very supportive. So we’re getting a lot of support. You know, whenever I ask, you know, how many? Private industry developers are getting involved in affordable housing. The name. You know there’s not. You can count more than you know the fingers that are on one hand that are involved in doing affordable housing. So make sure.

Erwin Szeto [01:05:32] Everyone knows how a you’ve a benefit of construction business. I don’t know. Maybe come back in another episode on how someone else could start. Yeah, absolutely. I can see someone with, like, three properties start getting into affordable housing. Yeah, well, we’ll chat about that when we’re done recording, because I got to go.

Erwin Szeto [01:05:48] Yeah.

Alfredo Hermano [01:05:49] But yeah, no, I would love to, you know, just chair that, you know, we’re launching our partnership project. I mentioned that just in the next couple of weeks. So if anybody’s interested, when.

Erwin Szeto [01:06:00] Was the date? Because I don’t know when that people are going to hear this.

Alfredo Hermano [01:06:03] Oh, we’re launching that probably around middle of April.

Erwin Szeto [01:06:07] Middle of April.

Alfredo Hermano [01:06:08] And a couple of shout outs I’d love to shout out to our official charity Foundations for Social Change. I think Pravin might have mentioned that when we first chatted.

Erwin Szeto [01:06:19] Talked fast, dude.

Erwin Szeto [01:06:21] So foundations for social change.

Alfredo Hermano [01:06:24] You know, it’s they’re basically a direct giving model. I’m not sure if you’ve ever heard of that, but what they did is they did a trial in Vancouver where they gave 50 people 70 $500, no strings attached. And the majority of those folks are stable financially. And so, you know, and you think that the opposite would actually take place. And so what, you know, you’re you know, these folks will have the money to buy their clothes for getting a job. They can now afford some food and they can now afford rent. And so they’re not no longer struggling on a day to day basis and are able to improve their lives and get back into the game of life, get back into society. So they’re making some pretty cool headway. And they’ve got this new program, the Greenleaf program, where they’re going to be raising $3.8 million. And they have a control group of around 400. And they’re going to be giving about 200 of those folks 80 $500 each. And seeing what the impact is, getting tons of support. Media was getting a lot of, you know, various institutions interested internationally in what they’re doing.

Erwin Szeto [01:07:40] How you track what they do.

Alfredo Hermano [01:07:41] That I don’t know. Oh, yeah. So it doesn’t very much.

Erwin Szeto [01:07:45] Of a charity too. And logistically, running a charity is not easy. Handing over money is very easy. Understanding the result of that.

Erwin Szeto [01:07:55] Yeah. No.

Alfredo Hermano [01:07:55] There, there. Yeah. I think I mean, they’re, they’re very sophisticated in their analysis and their studies. But, you know, they are very simple. And in the folks that they’re giving the money to.

Erwin Szeto [01:08:05] But they’re mostly about like a prepaid credit card that they’re tracking or something.

Erwin Szeto [01:08:08] I’m not sure. I think there’s no strings attached.

Erwin Szeto [01:08:11] Just to track.

Erwin Szeto [01:08:11] Oh, yeah.

Erwin Szeto [01:08:12] Just like, I don’t know, I don’t hang them a stack of.

Erwin Szeto [01:08:14] Cash, so they’re kind of a piece of plastic. Yeah, you know, for sure. Yeah.

Alfredo Hermano [01:08:18] I suppose that, you know, for sure.

Erwin Szeto [01:08:19] Or this is a chain that we’re using talking about digital currency.

Erwin Szeto [01:08:22] Right. Okay. So.

Alfredo Hermano [01:08:23] Right, yeah. No. Yeah. So. So they’re our official charity. Shout it out to Audi Invest. As I mentioned, we’ll be bringing them into our Barton Street project as well. And as well, we we’re doing our next fireside chat this June. This time it’ll be with them on Nov end of Northern Development, a developer out of California. Amazing story. You know, similar situation, talking about preservation again and what they’re doing in the U.S. Hopefully we could bring in some of our I’ve been trying to get some, ah, CMHC partners to get involved, if that’s possible. That would be amazing. Just to get the perspective of what’s taking place in Canada and how it compares to what’s happening in the U.S. and if there’s any learnings that we can take, please take from that. I have a.

Erwin Szeto [01:09:07] Third project coming up to and Hamilton again. Isn’t there another project as well in Hamilton for us?

Erwin Szeto [01:09:13] Yeah.

Alfredo Hermano [01:09:13] Yeah. We have three projects that we’re working on Bourbon Street and then we got this Queensland road project that’s taking place. We’re looking at launching another project in St Catherine’s and like I said, we’re trying to put ten projects in the pipeline by the end of the year.

Erwin Szeto [01:09:29] And then increase in road a couple hundred units as well. So yeah, similar idea.

Alfredo Hermano [01:09:32] Exactly. Our model doesn’t change. Like that’s what we’re being disciplined about is that it’s, you know, 150 units are already zoned 6 to 7 stories. Grants and loans are all similar and expected, so the returns are all the same. And so we try to we’re trying to create scale, basically. That’s one of the biggest challenges that are taking place in affordable housing pre-pandemic. The city in Hamilton alone had only built 350 new affordable housing units. When there’s 7000 people waiting on a waiting list.

Erwin Szeto [01:10:04] Is that small? Yeah. I thought the list would be a lot bigger. Exactly.

Alfredo Hermano [01:10:08] Exactly. You know, well, that 7000 person list continues. Our family list continues to grow. Right. And so that’s not only happening in Hamilton, that’s happening across the country. You know, and so. So, you know, we’ve got to do something about it. And we’re trying to we’re trying to lead by example.

Erwin Szeto [01:10:27] And then there’s some of the ridiculousness in the media about, oh, we don’t have a housing supply issue. We have all these houses in Saskatoon that aren’t that are boarded up. These people in go live there. Okay.

Alfredo Hermano [01:10:37] So there is a housing supply issue for sure. I mean, you know, statistics I mentioned this during our fireside chat is that Canada is, you know, on a housing capita per capita basis is the lowest among the G7. And for Ontario just to meet the national average would have to build 650,000 new units.

Erwin Szeto [01:11:02] For that to happen.

Erwin Szeto [01:11:03] Over what time period?

Alfredo Hermano [01:11:05] No, no, the just does not know that it’s going to happen. But I’m just saying that to get to the national average and why are we having this housing crisis and why are prices so high? Why are rental rates so high because of that deficit. Right. So, yeah, lots and lots and lots of stuff.

Erwin Szeto [01:11:21] We have a provincial election coming up.

Alfredo Hermano [01:11:24] Yeah.

Erwin Szeto [01:11:26] Too optimistic. Oh, man. Added another. Something else to ask. Oh. So trying to be in a queue for you so that you don’t get all these crazy emails other than the ones that I send you. First, I want to be an investor. So if someone. So you mentioned that there’s kind of like two rounds of investment. There’s the there’s the one you from your private investor group. What are you looking for there? What is so what are some of the do to qualify for that.

Alfredo Hermano [01:11:48] Accredited investor, $100,000 minimum investment. You know, obviously it’s similar alignment of.

Erwin Szeto [01:11:56] Well, they wouldn’t be investing.

Erwin Szeto [01:11:57] Exactly.

Erwin Szeto [01:11:58] I know you’re asking me, what’s this return like? Yeah. Again, like in person. I don’t know. Dogecoin.

Erwin Szeto [01:12:04] Not really.

Alfredo Hermano [01:12:05] And then for, you know, as I said, we’ll be bringing Addy on board as well so make that available to them. So the groups.

Erwin Szeto [01:12:12] Amazing. Yeah. All right. Any final words you wanna share?

Alfredo Hermano [01:12:16] Well, hey, investing in affordable housing is possible and it’s needed. So, you know, if anybody is interested on. On your show and your listeners know, please get in touch. And we’d love to be we’d love to meet them.

Erwin Szeto [01:12:31] How can we get in touch?

Alfredo Hermano [01:12:32] They can reach out to by email.

Erwin Szeto [01:12:37] Okay, I’m going to warn you, emails are forever. Okay. This is on the Internet. That’s right.

Alfredo Hermano [01:12:41] That’s a good point.

Erwin Szeto [01:12:44] I’ll check out ours.

Alfredo Hermano [01:12:44] Website at three H properties dot com. And you know, we have a we have an email there at info at three H properties are common and you can reach outreach out to us that way.

Erwin Szeto [01:12:55] Fabulous. All right. Thank you. All right.

Alfredo Hermano [01:12:57] Well, thank you very much, Irwin, for letting me share my story.

Erwin Szeto [01:13:01] Yeah, that’s cool stuff. You’re doing more to change the world than I am.

Alfredo Hermano [01:13:06] You’re doing lots, my friend. You’re doing amazing.

Erwin Szeto [01:13:08] Thank you. Thank you.

Alfredo Hermano [01:13:09] Thank you.

Erwin Szeto [01:13:18] 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 the 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, register for free for my newsletter at WDW DOT Truth About Real Estate Investing Dossier into 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.

Erwin Szeto [01:14:31] Mm hmm.

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