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Dave Dubeau [00:00:09] Everyone, David Dubeau here with another episode of the Property Profits Real Estate podcast today, zooming in from Beautiful Vancouver, one of his two locations for his business. We’ve got James Knull. How are you doing today, James?
James Knull [00:00:22] Doing absolutely fantastic, Dave. It’s a pleasure to get an opportunity as a guest on your podcast again, and I can’t wait to chat with you about real estate.
Dave Dubeau [00:00:29] Well, that’s what it’s all about. That’s what it’s all about. So if you if you’re living under a rock, you don’t know who James is. He’s a rock and roll real estate investor himself. This young punk already has a portfolio of over 300 doors, and he’s a very, very active real estate broker. One of the most successful in western Canada. Just opened up an office in Vancouver not that long ago, or it doesn’t seem like that long ago might have been right. The smack was that right in the middle or the beginning of COVID that you opened up that branch office?
James Knull [00:00:58] Well, yeah, pretty much. I mean, COVID hit and nobody seemed to be wanting to buy houses into a busy body to kick back. So I thought, you know, I feel like this is 90 120 day gift from the universe where I’ve got a freer time that I’ve had since I can remember. So it was the perfect time to build a business plan and do the research for the market, do some recruitment and just get it launched. So, you know, even though I’ve only been here since January, we basically closed our first deal in June of last year. So I would say June would technically be our first month of what would be full operation.
Dave Dubeau [00:01:33] Very good. Congratulations. That’s a great accomplishment. So James, we’re going to be talking today about transitioning from small deals, single family homes into multifamily properties, which is kind of what you’ve done in your own personal investing career. If I understand correctly, so why don’t we start off by you telling our viewers why you like multifamily more than single family homes? From an investment standpoint, if you do, absolutely.
James Knull [00:02:02] And you know, I definitely do. Everything’s all about pros and cons, but the pros for multifamily that I like is number one. It’s efficiency in terms of using capital. And I really, really like that. I mean, you know, it doesn’t take ten times more time, effort and work to find, buy, acquire and manage a $5 million building as it does a $500000 building. But lo and behold, you have 10 times the equity appreciating at market value. So once you are established, comfortable and are working at a larger scale, you can just get more done with less time. And that’s part of the name of the game. So it’s a very efficient way to deploy capital and those economies of scale apply both to your returns and, you know, the effective use of your time. The second thing I like about it is it’s a totally different way to add value to the building because in multifamily, we treat the building like a business. And so the more viable you make the business, the more valuable that businesses. So you’re not as much dependent on what the neighbor sells for, so much as how efficiently you can run the building and how profitable you can make the building, the more profitable the building, the more it’s worth. And there’s a lot of interesting ways to take underperforming buildings, optimize the way they perform, and add a lot of value in terms of like the value of the building, equity to the building in very short periods of time, which I really like as well.
Dave Dubeau [00:03:22] Yeah, that’s one of the things I love about multifamily is the value, like you said, is not based on. Emotion, it’s based on how much revenue is this property generating, right? That’s the bottom line, what the banks are looking, looking for. So, James, you know, we talk about this, hey, it’s not that much more of a big deal buying $5 million property than a $500000 property yet for somebody who hasn’t done it before. If somebody is, you know, kind of got a bit of experience during single-family homes and that sort of thing, now they’re thinking about getting into multifamily. The idea of, you know, getting into a $5 million property is probably a little bit out of their context at the moment.
James Knull [00:04:04] So what is the path
Dave Dubeau [00:04:06] that you usually recommend for what I call mom and pop investors to make that?
James Knull [00:04:11] Totally, totally. Yeah. And you know, I would say, even though it’s less time consuming, it is a big deal. It’s more risk. You know, if you if things go sideways on a $500000 property for the average investor Canadian, that’s a bit of a kick in the teeth. You lose some money, you know it creates it sucks for, you know, maybe a few years to recover from that if things totally go wrong and a $5 million building that that could, you know, for an average Canadian, that could be a reason to think about going bankrupt. So, you know, it’s that’s a big part of the jump is even if it might be physically possible for you to take on a building of that size, it still might not be wise from a risk tolerance perspective and an experience perspective because you know what they say in investing. You don’t want to put all of your eggs in one basket. Diversifying is a really nice way to go. And if all you had, all you can afford is that one building that can be a little riskier for a number of reasons. So I mean, the journey I took is I just picked away that single family houses for the better part of a decade. You know, I mean, I didn’t really. I bought my first house when I was 22 and didn’t even start thinking about my first multifamily building until I was thirty one. So, you know, it seems like a large portfolio, but you know, I’ve been at it for a decade and a half, so I didn’t really approach multifamily until I had 10 years of experience under my belt. I just was lucky enough to start really young. So I would say
Dave Dubeau [00:05:29] that first multifamily look like for you. What? What was your first one?
James Knull [00:05:33] Well, you know, I was I was a big student of the real estate investment network system. And so they have a lot of great resources to teach people how to invest in multifamily. They have a lot of great resources teaching people how to do joint ventures. You know, I mean, you’ve got your money, part or formula. And I follow something very similar to that. You know, we talked to a ton of people in our network about the fact that, hey, we’re thinking about buying an apartment building. If we found a building that matched criteria is, you know, ABC and x y z. Would that be something you’d want to hear about? You know, people. Yep, yep. Yep, yep. So we just planted a bunch of seeds on this hand and on this hand over here kept our eye out for deals. And when a deal came up that looked like it made sense, you know, we hustled our butts off. We underwrote the deal. We put together our little five pager on it and then called about 20 people that about 20 pitches and four of them were like, Yeah, let’s jump on board. So we created our corporation, got everybody to invest in that corp and put the deal together that way. So, you know, and again, that that whole process. Again, I can describe the process in 30 seconds, but that was about a year and a half of work. So for four people who are thinking about getting into it, it’s like that that’s not overnight success. I mean,
Dave Dubeau [00:06:45] over a year in 10 years, you had investing in single family.
James Knull [00:06:49] Exactly. So, you know, I mean, I guess it’s just like patience is a virtue. Like, there’s always opportunities in real estate and they, you know, over time, those opportunities get more expensive because real estate goes up in value, but their opportunities aren’t going to just stop coming one day. So, you know, it’s a bit more of a cautious type like I probably could have quote unquote been ready to get into multifamily sooner. But I did it at my pace and I was happy with that pace. And then, you know, a year and a half, I probably talked to 40 50 people for at least half an hour. Forty five minutes an hour, hour and a half over beers or whatever. Just about my vision for multifamily and made a little mental log like tick. Yes, they’re interested. Techno, maybe not tech. Maybe. and on this had just looked at forma after ProForm after pro forma learning how to analyze multifamily buildings model about look at the numbers crunched. The numbers put together the business plan. I didn’t rush it. And so when the right building came up, I was very, very confident in articulating why I thought the deal made sense because I’d looked at so many and because I had struck up the conversation with so many investors. We had a lot of people just buzzing around our immediate sphere of influence who said, Yeah, maybe or yes, you would be interested. So, you know, I mean, some of those people, we called them back six months later and they’d already bought something else. Okeydokey. And some of those maybes now. Yeah, actually, now some life circumstances change, and I do have the cash to invest. So it’s just it’s about planning a ton of seats you. That’s kind of the summary, I’d say.
Dave Dubeau [00:08:16] And then it sounds like you did a good job of staying in touch with people too, right? So it wasn’t just.
James Knull [00:08:21] Totally, totally. Well, and you know, on the air as a realtor, it’s a big part of a realtor job is to stay in touch with people. If you’re not staying in touch with people, you’re not doing a very good job as a realtor. So it really allowed me to double up my efforts because I’m keeping in touch with people anyways. And a lot of the times it was, oh, by the way, just that last little would you like fries with that on the conversation? Just checking in to see if a joint venture might be on the table one day and then making a note of it. And yeah, just being mindful of reaching back out to people when the time came.
Dave Dubeau [00:08:50] Yeah, I like what you said a few minutes ago about that, you know, slowly kind of scaling up, not being in a rush. It reminds me of a conversation I had yesterday of actually with Dan Sullivan from strategic coach. I don’t know if you’re familiar with strategic coach and Dan. Yeah. Anyhow, he posed this question. He said, You know, what would it take for you to 10x your business? All right. So initially, it’s kind of like, holy crap, you know, that’s kind of big to be thinking about all the one time. So I’m kind of having this mental freak out about that idea, and they say, well, hold on for a second, Dave. I don’t I’m not telling you got a 10 extra business in the next 24 months or three years. What if I told you at 25 years to do it as well? That’s a lot more doable now than thinking that I got to 10x my business or your portfolio or whatever it might be in the next 24 months. So again, it’s all a matter of perspective and realizing like I’m sure that you can attest to once you get started, once you get that first one under your belt, the next one is a lot easier. Would you agree 100 percent?
James Knull [00:09:59] You know, I feel like it took me as long to buy my first house as it did to take it, took me to buy my first multifamily building. And, you know, it’s actually speaking of 10x. And you know, my example of its, you know, a $500000 house to a five million dollar building. The first multifamily building I bought, I bought for almost bang on the money about 10 and a half times what I paid for the first house I bought. So and you know, it took me a year and a half to buy that first house. It took me a year and a half to buy that first multifamily building for 10 times the ownership power.
Dave Dubeau [00:10:28] Yeah, very, very cool. How many units, just like your office?
James Knull [00:10:30] was up first multi that you got into? It was a 12 12 unit and 11 of them were two bedrooms and there was one bedroom.
Dave Dubeau [00:10:38] Okay. Well, good size to get into. But yeah, and it’s a matter of perspective because a lot of people, you know, they listen to podcasts and they follow gurus and they hear people talking about 100, 150, 200 unit of buildings. I think that’s what they want to be getting into right off the get go. I’d say that’s pretty unrealistic. As far as your first kicking the can. So yeah, getting into hell, even an even a five plex now because at that point, are you getting it together or not? That’s a multi-Grammy. That’s a small apartment.
James Knull [00:11:10] Well, and I’m going to build on that because, you know, a lot of a lot of the people in the investor world, they are that mom and pop. I mean, we’re not talking, you know, if you’re going to buy one hundred and fifty unit building, you’re either coming in as a high net worth individual who can put some serious skin in the game because you’re going to be dealing with other high net worth. Individuals like the loan size and building of that size is going to be huge. These are institutional investors that, you know, they played a very professional commercial level. So if you’re not coming in with your own skin in the game with zero experience, you know it’s tricky as a mom and pop to go from, you know, picking away at one or two houses to putting together this large institutional great deal. And so, you know, I mean, that’s when you look at the types of institutions that are buying buildings at that scale. Typically, they’ve worked their way up to it, you know, I mean, it’s a rare success story for as we’re describing a mom and pop. So to go from zero to 150 unit building overnight, you know, it’s either going to be but putting a good chunk of your own investing capital in or working up to it by becoming institutional caliber by the track record you’re building to get there. So for people that are listening, I mean, don’t stress out about swinging for the fences on your first deal, you know, like do a deal that’s comfortable. Be very successful at it. Do a great job. And sure, your investors are thrilled. Keep your paperwork tight. Keep your record keeping solid so that when you go to deal number two, you’ve got something great that you can show people and then it. Just every good deal you do is a steppingstone into another great deal, and they’ll scale up naturally on their own faster than you think most times.
Dave Dubeau [00:12:43] One question I think that you’re perfectly aligned to answer, James, is. What’s the best way for a mom and pop investor going from single family homes into small Maltese? What’s the best way for them to approach a realtor about this and get them to take them seriously?
James Knull [00:13:03] Yeah, that’s a great question, because when you go from single family to multifamily, the amount of realtors that do that, that trade in that type of asset class goes way down. And you know, it’s just a smaller world, less inventory, less realtors, less players. And it’s easy to, you know, maybe once or twice you can waste a little bit of time. But if you start getting it to reputation as someone that can’t close or that can’t, can’t make a deal happen, then you’re going to be in trouble. So you know, that’s why I had that slow start, because I just reach out to everybody and said, Hey, send me your proforma, send me your performance, Amirpour. Your performance did my analysis, and until I got comfortable with working the numbers, I didn’t really start even asking for tours because I knew if I started touring buildings with no intention to buy, you know, eventually I’m just not there. My phone calls not going to get picked up. So, you know, I would say a good first step is to be able to really intimately understand what you’re looking at in a pro forma and be able to intimately understand manipulating those numbers because the proforma that you’re going to get from a realtor. And the way that a bank is going to take those numbers and underwrite them, which is just a term for the bank making their own version of the pro forma to assess the validity of the deal. If you can underwrite from their three perspective, you should be able to underwrite from the perspective of the vendor, which is what the realtor is going to put out there, the perspective for you as an investor and in the perspective of the bank, which is an underwriting. And that’s three different interpretations of the same set of numbers. And you know, for those are the people that aren’t spreadsheet people. What I’m saying is probably sounding super, not fun and intimidating, and I apologize for that. But just understanding how that those numbers interrelate, it’s going to it’s going to take some math. But again, don’t be in a rush. You know, if math isn’t your thing, then give yourself permission to take six months to figure it out for 12 months to figure it out.
Dave Dubeau [00:14:50] But once you go out with somebody copy, those are pretty good.
James Knull [00:14:52] That’s another that’s another way to do it, for sure. And I wouldn’t be opposed to that. I mean, I got to know how to do the numbers, but when I keep referring to, we, my business partner for the first 10 buildings I bought was the numbers guy. I was more of the property management guy and I was more the sales guy that brought partners on board. So that was that’s what I did. But, you know, being around it enough, I got to know the numbers too.
Dave Dubeau [00:15:15] Yeah, you got comfortable with. I loved what you said, a beginning there when you were first getting into this, his first big deal and doing your due diligence on the year and a half built up before you actually got it for you. I love the fact that you were planting the seeds. You were doing what I call getting the money lined up before the deal. Exactly how people can be a bunch of checks for a hundred 150 grand or what have you. But you did have a bunch of people that have put up their hand and said, Yeah, James, when you got a deal like that, I would be interested in taking a look at it right versus doing all that work with the due diligence and then getting something under contract and scrambling to start that whole process, which is the biggest mistake I see so many people do.
James Knull [00:16:00] Yeah, yeah, it’s really tough to go from writing an offer on a deal to investors with cash in hand and joint venture slash unanimous shareholder’s agreement with incorporated company in a 30 to 45 day condition period. It seems like a lot of time. I mean, it’s a lot of time for some things in life, but it’s not a heck of a lot of time when communication is going to go from your lawyer to you, to your partner, to their lawyer and back and forth. Yeah, yeah. So, yeah, lining partner’s up, planting the seeds, whatever we want to call it, like, if this is something you’re thinking about getting into, then have the conversations early just to like separate people into a couple of piles. Zero percent interest. Don’t bug them because at the end of the day, if they’re your friends or sphere, you’re going to see them at barbecues and parties and stuff. You want to be that guy. People that are maybes and then people that are, yeah, you know, I would. And here’s about the level that I’m comfortable participating in. And once you have those three piles when a deal actually shows up, you’ve got something to work with.
Dave Dubeau [00:16:58] Yeah, especially that last one of them said, Yeah, and definitely interested when you’ve got a deal. Fantastic, James. Well, time flies when we’re having fun. I love it. You’re doing all sorts of cool stuff. I know because of covered the whole thing. Taking your mogul mastermind online. If people want to find out more about you and what you’re up to, I
James Knull [00:17:17] know you’ve got
Dave Dubeau [00:17:18] offices never been to Vancouver, but we got people all over the place. Absolutely. Yeah, that works for everybody. Anyway, so what did they do to find out more about?
James Knull [00:17:27] Yeah, that’s the unforeseen positive of COVID is taking things online means that people can tune in from anywhere from the comfort of their home. So our eastern Canadian audience and our American audience has actually grown. Whereas before it was just, you know, if you’re not in person in Edmonton, Alberta, it’s not an event you can attend. So we do it on the third Wednesday of the month this month. I don’t. Well, this is getting published, but
Dave Dubeau [00:17:50] it will be a few months from now.
James Knull [00:17:51] OK, well, the April meeting’s topic was landlord. Whenever this gets published, if you go to Mogul Mastermind, okay, that’s where you can see the events and then to get in touch with us as a company to get in touch with me. You’ll see my name somewhere, probably in the link to the podcast. Facebook is my platform of choice to be contacted on. But you can also, I’m sure you’re going to publish my email or w-w-what emoji ul Moghul RG for Realty Group dot com. Check out our website or just Google my name. We put a lot of effort into making ourselves easy to find, so I’d love to connect with you and talk about Western Canadian real estate joint ventures, whatever you like. I love just sharing my story with people and chatting with whoever is interested in talking real estate and investing course.
Dave Dubeau [00:18:31] James, thanks so much. Always a lot of fun talking with me.
James Knull [00:18:34] Always a lot of fun. Thanks. Thanks for having me, Dave.
Dave Dubeau [00:18:36] My pleasure. All right, everybody. Take care and we’ll see you on the next episode. Bye. Well, hey there. Thanks for tuning into the Property Profits podcast if you like this episode. That’s great. Please go ahead and subscribe on iTunes. Give us a good review. That’d be awesome. I appreciate that. And if you’re looking to attract investors and raise capital for your deals? Let me invite you to get a complimentary copy of my newest book right back there. There it is the money partner formula. You got a PDF version, an investor attraction book dot com again. Investor attraction, book dot com. Take care.