Oil and Gas, Risk Factors, Alberta Apartment Buildings with Pierre-Paul Turgeon

Recorder 3 64

Podcast Transcription

Georges El Masri [00:00:01] Welcome to the Well Off podcast, where the goal is to motivate, inspire and share success principles. I’m your host Georges El Masri. Thanks for joining me. It’s Georges El Masri and on this episode I interviewed Pair Paul two of Sean. I’m going to say it French Way, who is an apartment building investor out in Alberta. He’s a former CMHC multifamily underwriter and a full time multifamily investor. He’s got a portfolio of over 160 doors. He’s analyzed hundreds of apartment building deals. Being a C, a former CMHC underwriter. So he’s got a lot of experience with this. And on this episode, we talked about why he’s able to increase rents for the first time in six years, how inflation has impacted oil and gas, and the general Alberta real estate market. The cap rates price per door for apartment buildings in Edmonton and Calgary. We also talked about four key risk factors during an acquisition. What you should be aware of, why evictions are easier in Alberta, and then the potential risk of rent control based on the upcoming election. So there you go. Another part of this is that Pierre Paul is hosting a workshop which will be happening on November 4th, coming up very soon. If you guys are interested, I posted a link in the description where you can register. And then also just a reminder to make sure to leave us a five star review on the Apple Podcast platform so we can continue to grow, share, good message out there, inspire people to invest. And if you guys want to get involved in some investment options, make sure to reach out. So go to well off dot CA contact me there and then you can set up a call in that we can talk about your goals and how we can help you reach your goals. There you go. Enjoy the episode. All right. I’m here with Pierre Paul, who’s been a guest on the show before. Thank you for joining me once again.

Pierre-Paul Turgeon [00:01:50] My pleasure to be here, George. Thank you for having me.

Georges El Masri [00:01:53] Yeah, for sure. I thought you’d be a great person to speak to. For those that don’t know, you are a multi-unit investor. You own multiple apartment buildings. You have a CMHC underwriting background. So I’m just kind of recapping because we already touched on this in the past, but how are you doing out there? I know you said you’re getting some snow. How is how is how are things looking out in the West End?

Pierre-Paul Turgeon [00:02:20] Well, like I said, from a still perspective, very good. We’re expecting somewhere between ten and 30 centimeters starting tonight. So I’m a skier with seasons passes to the Rockies, so I’m really happy about that. From a business point of view, as many people know from the multifamily investment properties, it’s been a rough patch here in Alberta for the last six years with the price of oil. But the wind is finally turning around for good, for the better. So from that perspective, I’m actually today I’m giving my first rate rent increases to my properties in six years. So it’s been like when I see a rough patch, you don’t have tight landlord tenant legislation like you guys have in Ontario, but we’ve had then of course, everybody has been crapping all over the oil and gas industry. But George, George that too is changing anyway. That’s a different topic. I don’t want to start on a rant first stuff.

Georges El Masri [00:03:19] I really care enough for you.

Pierre-Paul Turgeon [00:03:20] But allow me to say that people are realizing there is such a thing as energy security and it’s quite important. So and so. So the numbers for Alberta look up. I’m very, very bullish. Very bullish. And then I’m starting to raise more capital to make more acquisitions. So that’s how bullish I am.

Georges El Masri [00:03:44] Well, that’s the interesting thing, because obviously, we’re I would think we’re technically in a recession at this point. Absolutely. Yeah. Yeah. So we’re in a recession. We’re seeing these higher interest rates, but we’re also seeing inflation and higher gas prices. So what does that well, like what’s what are you guys experiencing out there? Are you seeing that? I mean, maybe single family homes and like residential home prices are falling, but because rents are increasing, does that mean that commercial properties are increasing in value?

Pierre-Paul Turgeon [00:04:20] That certainly is the expectation. And let me caution you, as you know, Georgia, I’m out east quite a lot or a lot less, says Corbett, obviously. But, you know, I was there speaking May at the multifamily conference. I’ll be there again in 2023. That’s the Ferguson’s organizing. But the point is, you know, I know the interior market. I follow it very well. And yeah, things are much different to what you’re experiencing. There is a correction of single home prices in Ontario, Vancouver, somewhat as well. But most Ontario, because the market was over overheated. As you know, we don’t we’re not experiencing that in the single market. And the reason being, you know, it’s been an economy that’s been down for six years. And so we haven’t had an overpricing of assets in Alberta. Our rents are below are some of the lowest and house prices as well. So which helps with my positivism, if you will, in that, you know, Canada’s got a got to get like 450,000 new immigrants a year is the target that the federal government has. And you know what? The housing costs in Ontario. So if you look and it’s as soon as I’m done with this, I’m going to be shooting a video here in my studio and have some of these stats more people are moving to from Ontario, speaking of which, to Alberta for those reasons, great job opportunities with the price of war now being at a good point and we haven’t seen the end of that. You were saying gas prices have increased. They have, but then they came down a little bit. So that’s partly why the inflation came down a little bit. But this is far from over overtime. You can expect gas prices to continue to go up. So in a nutshell, it’s important for people that are listening to your show, George, to understand our reality is Alberta is much different than what is being experienced in Ontario or Quebec or lower mainland British Columbia in a nutshell. So yeah, period. Yeah. Anyway, I don’t want to ask the questions because you don’t really let me talk. I’ll talk. Okay.

Georges El Masri [00:06:37] Well, just something that I thought of as you were speaking is are electric vehicles a threat to your economy, in your opinion?

Pierre-Paul Turgeon [00:06:47] That’s a joke, George. Sorry, I don’t mean to be sarcastic. It’s a joke. So many issues. So let me backtrack a little bit. This this kind of stuff I follow a lot, like I’m talking with daily basis, energy transition and all that and these various sources. Because if there’s one thing I did not know when I started my career as a full time multifamily investor when I left CNBC and all of that. If there’s one risk factor I fail to underwrite to assess properly. And I would say that CMHC also failed to do that. And some of those organizations that perhaps you belonged to that kept telling us by an Alberta by an Alberta who shall remain nameless. But you can read between the lines. There were all of us, you know, do well encouraging us to buy in Alberta. So the one risk factor I did not know, did not consider enough was how dependent Alberta is on oil and gas. So since then, the last six years, I make a very big point of reading on that multiple sources to have a better idea of that risk factor. Hence the reason now I’m very I’m very bullish on it, but we’ve been hijacked and I’ll be very blunt and blunt. People out there are not going to agree. I don’t care. I’ve got great here. I’m allowed to say and I can support my thoughts. We’ve been hijacked by eco terrorists across Canada. Unfortunately, our prime minister kind of supported that. But realistically speaking, the technology to enable us to all of us drive EVs electrical vehicles is nowhere near is not in the near future. We don’t have the that we don’t have enough batteries yet. You know, we need to get those minerals, those special earth minerals to build these batteries supply, which a lot of it comes from Asia. Needless to say that the relationship with China is not so great these days. We have some of it in Canada, but it takes time to develop that. We have a vast country. We don’t have charging stations that go far. I was just telling we’re expecting 20, 30 centimeters of snow. So this is nowhere near a threat. And we have been hijacked by eco terrorists the last six years that took over the agenda and make us believe that this transition can be done overnight. Look at what’s going on in Europe. It’s a disaster. People are going to freeze in Europe, george, this winter. There’s people going back to National Forest in Germany to cut trees down. They’re reopening coal plants and nuclear reactors. It’s bad. So this has all been you know, we need to make this transition. Don’t get me wrong. Like in a couple of weeks, I’ll be hunting. I’m a mountain guy. I’m outdoors all year round, literally. I can’t buy fish, you name it. I do it all. So I’m very much pro-environment. But we can’t pretend that we have all the means of the wherewithal to effect an energy transition by 2030, like some of the ridiculous targets have been set. So, no, I don’t buy to that B.S. And it’s not based in science. It’s just based on higher promises at COP 25 or whatever those cops are and the next one. Cop 27 So yeah, no, nowhere near. But at the same time I do support making that transition. But let’s use science based technology to make set more reasonable targets longer. That answer. But you’re touching a very sensitive point. Like I said, I had to educate myself in these matters. And that’s my in my opinion and should be based on facts.

Georges El Masri [00:10:25] Yeah, I was I was more so thinking maybe like in in all 30 to 50 years, if that transition happened, what would happen to Alberta’s economy and to your portfolio and all that?

Pierre-Paul Turgeon [00:10:38] Well, so I think you used the proper time frame. We’re talking decades before we get there. But Alberta finally has understood that it needs to diversify. So from that point of view, I’m not worried. And speaking of which, in terms of diversification, even Alberta is becoming and is already a leader in making that transition to greener technologies. The oil and gas companies have created a consortium Edmonton’s been dubbed the hydrogen capital of Canada. And for all these years of enabling us to make that transition, carbon capture and all of that, it would cost a lot of money, research and development money to do these things. And Alberta is at the forefront of all of that. Is Canada’s leader and something that I want to point out to you as well, even carbon emissions from the oil and gas sector and the last decade had decreased by 30%. You don’t hear that very often. It’s not very media catching because it goes against, you know, the agenda of, you know, energy transition, but or the of the terrorists, the agenda of eco terrorist, if I may call them. But so I’m not worried about it, but. The other reason as well, George, this is a trend. Like I said, I’m just about to shoot a video after I’m done with this interview. What’s going on demographically in Canada? We are moving away from a society where everybody owns a home. My three young children have now three young adults. Very likely they’ll be renters. So what you want to do is plan for the future. And I know I’m not a slumlord. I agree my units to higher finishes, not high end, but we’re know above somewhere between middle end and high end, if you will, because, again, our country is moving towards a society of renters. So we need to cater to those people’s needs. So I’m very optimistic in that regards. And by then, 30 years from now, yeah, it still makes sense to be in the multifamily investing business. It always will. That’s all I can say, because people need shelter always.

Georges El Masri [00:12:56] So sure. What kind of numbers are you looking at right now in your market? Are you investing in like downtown Alberta or where are you exactly?

Pierre-Paul Turgeon [00:13:06] So I tend to stick to what I know. My portfolio is in is in Edmonton and I’m looking at.

Georges El Masri [00:13:14] What I meant. Edmonton.

Pierre-Paul Turgeon [00:13:16] Yeah, no. Yeah. Got it. Yeah. So although I live closer to Calgary, I’m just 20 minutes west of Calgary. I, I stick to what I know best and it’s Edmonton. The reason being that it’s more diversified as an economy compared to Calgary’s economy. And that’s, that’s what I know, that’s what the portfolio that I do. So in terms of valuations and I don’t think I answered your question. Values had been fairly flat, but where there’s the most growth is in Alberta. So we have folks that you’ve had on your show recently, friends of mine as well that are from GTA investing out here. So that tells you something, right, that there’s I’m not the only one that sees a lot of potential. So that’s an ongoing trend of investors either coming from lower mainland British Columbia or GTA and elsewhere in the country coming to Alberta to invest in multifamily property. So that will put pressure on values, in my opinion. And again, the good news here in Alberta is we don’t have a restrictive landlord tenant legislation that you have in Ontario. Basically, you can increase your rents once a year by whatever the market can bear. And it’s like I said, today’s the first time in six years that I’m finally getting rental increases. Yeah, but we have some catch up to do because operating expenses have kept increasing in the meantime.

Georges El Masri [00:14:39] So now, okay, let’s dove into this a little bit. Let’s say you’re you have a property that you’ve just acquired which is outdated. The units are all outdated. They need a lot of work. You have some issues there. You have squatters, whatever. What would you do from that point in order to turn these units around? What would be your process?

Pierre-Paul Turgeon [00:15:01] Squatters. That’s a pretty extreme situation. I’ve never had that.

Georges El Masri [00:15:06] Well, let’s say you don’t have, like, a bunch of squatters. Maybe there is. Maybe there’s a couple of tenants that aren’t paying their rent and then the other units are all just outdated and whatnot.

Pierre-Paul Turgeon [00:15:17] Yeah, well, that could be a gym in the rough, right? That’s where there’s what you call a value add project, Georgia. And all of us always look for that, that kind of project. Then it’s a matter of it’s always a matter once you find a deal. Right. And that’s clearly, as you know, this is what I teach as well. I don’t know if you mentioned that, but I do have a workshop that’s a three day workshop where I teach this and an old version, you know, version online version of that course, you need to look at the risk factors very clearly. Every time you look at a deal. There’s four key risk factors in every real estate deal, property risk factors, that’s physical condition of the asset, the market risk rate and valuation and the investor or borrower risk factor. And I’m speaking a little bit like as a as a former underwriter where but these are the four key risk factors that you want to look at. So you just got to take each one. One is so and then arrive at a valuation that makes sense based on the condition, based on where the property is located in the marketplace. Is that a is that is that a classy kind of neighborhood or class B.S.? Right. So you make price adjustments in that regard. But in Alberta, these value add projects and like I said, one of your guests recently on your show. Right, is very aggressive doing this, following this particular strategy here in Alberta. The good news is that if it’s a complete gutter, then obviously you can charge whatever you think the market rents can be at that time. And I’ve done that several times, but our legislation here is more flexible. We don’t have in terms of the tenant landlord tribunal; we don’t have the long delays that you guys have. So if we need to evict tenants here, it’s a much faster process. I can’t justify that. And again, the rents can be adjusted to market averages, whatever the market can bear in terms of rents that particular moment. So I definitely look for projects like that. They require more work on one’s part, but with the right team, the right property manager, the right contractor in Alberta and appreciate in Alberta, the housing stock is a lot younger, newer than what it is out east. Right. It’s not uncommon in Ontario to find 100 year old multifamily properties and stuff like that. For us, they tend to be built more into 6070. So it’s a younger, you know, housing stock, if you will, in Alberta. In Alberta.

Georges El Masri [00:17:56] Okay. And I know you answered part of the question, but if I wanted to get into like more detail here, just for my own curiosity. So, yeah, you take over this building, you’ve got these old units that are occupied by tenants. You want the tenants to move so that you can renovate the building. What would you do in that situation? Are you filing with the board to evict for renovations? What would be a procedure?

Pierre-Paul Turgeon [00:18:23] Yeah, that’s certainly something that you can do, to be honest with you. I for me, I don’t handle this stuff. It’s my property manager, so I wouldn’t pretend to be the most knowledgeable when it comes to the landlord tenant legislation in Alberta. You could you could do that. I’m assuming you can’t do that. So don’t take my word for it, because literally, George, I don’t pay somebody. The one thing I would probably do, though, which I can do and I have done, is also if the tenants is unwilling to move by you just increase the rents by quite a lot and there’s no nobody to stop you from doing that. Yeah, that’s often a strategy that I’ve used for undesired, you know, tenants basically. So that’s, that’s what you would do that. Absolutely. But think, I think I know where you’re coming from. You’re coming from, you know, tier where it just is very difficult. Yeah. In Alberta this is not as difficult to do that. Nowhere near that. The landlord tenant legislation is a lot more permissive than it is in Ontario, to be honest with you. Well.

Georges El Masri [00:19:24] Well, the thing is so I know last year when I was talking to a lot of investors on the podcast, a lot of them are going out to Nova Scotia because they didn’t have rent control and whatnot. And then next thing you know is they put in rent controls. So all these investors that were going for that reason got stuck. Do you think that that could apply to Edmonton and Calgary to these areas, or is that something you feel like wouldn’t happen for a while?

Pierre-Paul Turgeon [00:19:51] The risk is always there. We have a new premier that’s that hasn’t run into a general election yet. I think it’s scheduled and. Next. Next spring. But there is the NDP, Rachel Notley NDP. And I suspect if she were to come on board that she may well implement more restrictive landlord tenant legislation. So unfortunately, it’s part of the business. So there’s a risk. The UCP, United Conservative Party, I’m not super impressed. So there is a chance that we might have next year an NDP government, and it would not be surprising if they did bring that on, which again would be a shame. We have a severe housing crisis in this country. One of the problems, one of the issues is exactly that overly restrictive landlord tenant legislation. So developers are not interested in building more. Obviously, rising costs, the biggest problem being also with the municipalities do not grant enough building permits. So those tenant landlord legislations, when they’re overly restrictive, they hamper the market. They don’t help. They don’t help it. So that’s. But there’s a risk.

Georges El Masri [00:21:06] Yeah. Yeah, there’s I guess there’s always that risk. But I mean, for the time being, it seems like a very, very good option for certain investors, especially those out of province investors that are going in, pouring all this money into these buildings, upgrading them, and then increasing their value, either refinancing or selling the building.

Pierre-Paul Turgeon [00:21:26] Yeah, but like I said, Jorge, like I did my bio Cooper I was an Easterner that’s been in Alberta for 20 years, but even when my butt was still sitting in a cubicle that CMHC, people come from out of province, they do need to understand the nature of this market, which is at this point, very. Reliant on oil and gas industry. Okay, we are diversifying, but that’s certainly a factor that one needs to take into account when coming to Alberta. Diversification is not something that just happens overnight, so there’s a risk there. But overall, I’m very optimistic about Alberta for sure.

Georges El Masri [00:22:13] So what would be the not that you necessarily like her, an economist or whatnot, but I’m sure you have lots of knowledge on this. What would be the factors that would impact oil prices like what we’ve seen the last couple of years is very low interest rates, borrowing rates, which caused inflation to increase, which then caused oil prices to increase. Would there be other factors that would impact oil prices?

Pierre-Paul Turgeon [00:22:37] Well, the supply of it. So obviously now with yeah. Do follow this stuff quite a bit. The geopolitical situation now as you know, Europe does want to buy oil from Russia anymore. So that that’s a major factor that’s going to have an impact on oil. What caused the price of oil to go down significantly the last ten, 15 years was what we call fracking, right? We do some here in Alberta, but mostly in the United States, which allowed the United States to become almost self-sufficient or certainly produced huge amounts of oil. The problem with that is, first of all, demand for oil is not decreasing, despite, again, whatever claims that people are making that we can make this transition for decades. George time to I had lived a great life with my portfolio and pass away before I’m expected to have an issue with my portfolio because it’s located in oil or oil country or oil province in Canada. So it’s going to take a while. But what you need to understand about fracking, you know, they did drill a well and they pump water to bring that oil to come up to the surface. Those wells, they get depleted at a rate of about 3% per year. Within four or five years, you got the oil. So you got to drill another one. Okay. And I’m going to summarize this a little bit for you, but they gave it all and the musical chair kind of game has been able to go on because, you know, Wall Street was financing that. But you need to understand that that that the supply of oil is not necessarily that great. I’ll do that, of course, in the Middle Eastern countries like Saudi Arabia, not like that. But the price of oil came down because we had lots of it. We have an oversupply. Now we’re seeing the opposite, you know, phenomenon going on, maybe because also we don’t want to rely on the oil from Russia. So over time, I’m very, very confident. But I would say in the next 20, 30 years. But beyond that, of course, we have to come up with new technologies that we have to do. We’ve got to move away from fossil fuels, there’s no doubt about it. But that’s developing. Economies do need a lot of oil still. They don’t have electricity not everywhere like this. There’s a lot of challenges. So that’s why energy security needs to be taken into account, into this this dialog. And it wasn’t before. So now we’re paying the price for it.

Georges El Masri [00:25:23] Okay. All right. Why don’t we go back just to touch on a little bit of the market now, I guess, in Edmonton, because that’s where you invest. What kind of cap rates are you seeing at this point? What would be maybe price per door or that kind of thing, if you can just share with us some of the numbers.

Pierre-Paul Turgeon [00:25:39] Yeah. So, you know, like as you know, real estate is very specific. So I can talk like if you take a city like me, whether it’s Calgary or Edmonton are both cities have a river that kind of separates the north from the south. Calgary is the border and in Edmonton it’s the North Saskatchewan River. So you can always find different pockets of markets. But to give you an idea, let’s say in Edmonton, which ia1 building, it’s the prime area, a University of Alberta area where my daughter lives. She actually lives in one of my buildings. Obviously, values there would be significantly higher because it’s a more desirable area. We’re looking at the kind of values that I’m seeing these days, $130, $130,000 a day or something like that. Right. Or more. 100 and 4050 depends how close you are to the university, etc. If, on the other hand, you pick a neighborhood further north or north of the river, not necessarily too close to downtown, because close to downtown it would be similar values I just mentioned south of. Here in the university area. But these days, the kind of listings that I see, you can get a decent property for, you know, 105, $114,000 a door easily. So in terms of cap rates, that translates into something like five, five and a quarter, maybe a little bit lower, you know, depending on the condition, the year, the age of the property. But yeah, it’s there. Higher Capri Sun in your neck of the woods for sure. Or again, Vancouver. So there’s some decent values here for sure. In Alberta, there’s some decent projects. If you if you look at property. Yeah. If you look closely.

Georges El Masri [00:27:27] Very cool. Yeah. That’s definitely the rates are higher than we see here in Ontario and most of our like most of the GTA I should say.

Pierre-Paul Turgeon [00:27:36] Yeah, for sure. For sure. Yeah.

Georges El Masri [00:27:38] And so yeah, you’re getting I mean, aside from the oil and gas industry, are there any other major markets in Edmonton? What would people generally do if they’re living downtown?

Pierre-Paul Turgeon [00:27:53] In terms of terms of what I’m not sure following your question.

Georges El Masri [00:27:56] So my question was a little unclear. But aside from being involved in oil and gas, would be would there be any other major industries that people would.

Pierre-Paul Turgeon [00:28:04] Be focused on in terms of the economy? Yeah, that’s one of the reasons why I also choose to invest in Edmonton. The economy compared to Calgary is economy is more diversified. Yeah. So all the manufacturing sector to support the oil and gas industry is in Edmonton. It’s obviously our provincial capital. So accordingly you have all the civil servants that feed, you know, the government and that work for the government and so on. So as an economy it is way more diversified than Calgary. Yeah. Calgary, however, values are higher just because that’s where the head offices of the oil and gas companies are. Mm hmm. They tend to prefer to be here in Calgary versus Edmonton. And the reason being that we’re closer to the mountains, we’re less than an hour from the mountains. So people that have a similar lifestyle to mine. We ski all that stuff, so we hike. So but the Edmonton, the Calgary market also has a lot less apartment buildings. The housing stock is a lot smaller in Calgary compared to Edmonton, so your price point is significantly higher. For example, Calgary, an apartment building, you’ll pay easily over a couple hundred thousand dollars a door. Generally speaking, by the city. Remember I said that they were in Edmonton. You could get something if you’re lucky by the door on 15th. Seems to be where listings are at right now. South of the river would be more like 130, 40, $50,000. Calgary, you’re looking at much more at ten, no more than ten, 20, 30, $40,000 more and above the $200,000 mark in Calgary because there are less, less apartment buildings to invest in. So.

Georges El Masri [00:29:55] Okay. Got it. I mean, there’s some good stuff here. Maybe you just to touch on the recent changes in the market and how it’s impacted your business. So yeah, obviously prices have come down in general. People are more afraid, they’re spending less, but rents have gone up. So tell me about some of the adjustments you’ve seen. Have you seen any changes in the values of your buildings, in the appraisals and that kind of thing?

Pierre-Paul Turgeon [00:30:23] Yeah, like I said, today is the first day, November 1st, where I’m giving the first rental increase to my properties and my six properties in the last six years. In the last six years, as you can easily imagine. Operating expenses have continued to go up, including the carbon tax, including property taxes, utilities and all of that. Therefore, my net operating income, which is the driver of values for apartment buildings, are five or more units. So people need to understand that the Y is not your net cash flow, but it’s your income, property service, your debt. And obviously my own Y has been going down. It’s an interesting question, which I teach quite. I put a lot of emphasis on that. Even in recent weeks, I’ve been teaching a masterclass on fun at cap rates. The magic of cap rates revealed. Actually, there’s once more. I think you’re at your podcast probably going to be broadcasted later, but I talk about that. You know, most of us we talk about cap rates because it is the income capitalization approach to arrive at the value ratio in a way is the driver of the value you take. You’re in a way that the property generates divided by the average cap rate for comparable properties in your marketplace, you’ll arrive at a value. Mm hmm. There are some. This is called in approach, income capitalization approach. It’s not called the size of the income capitalization rate, meaning that there are flaws. And what we’ve experienced in Alberta, technically speaking, a lot of people’s lives, including mine, have come down. You would expect values to crash, but they have not. They were they might have come down on paper technically. But if you’re not selling, you know, the values are not moving. You don’t have comps. So some people have been desperate to sell their assets. That’s a great deal for somebody else that comes in and buys it at a lower valuation. I’m not one of those. I’m a long term holder. So in that regard, it’s been an interesting sort of value set, not crashed. And literally, like I said, it’s one of the slides that I have in my presentation. If you look at valuations, on average, they’ve been fairly stable and because people see what I’m seeing, others, including a former guests that you’ve had on the show recently, are coming out from a duty to invest in Alberta. They see what I see and they’re bullish. So values have not crashed at all. So it’s it goes to show that even though, you know, there’s such a thing as the income capitalization approach. Yeah, I think the and one divided by the average cap rate, you’re supposed to arrive at a value. It’s not a perfect approach. That’s what I meant to say. So it’s one of those things, you know, values have not crashed significantly. You think there was another component to your question, George? You remember that for that the interest, I think.

Georges El Masri [00:33:31] I like maybe. What adjustments have you had to make. Yeah.

Pierre-Paul Turgeon [00:33:34] With whether you were talking about adjustments in the industry. Yes. So this is an important question that that I really like that question despite the fact that my anyway, my end wise I speak generally for all my properties were reduced. I continue to the kind of adjustment I made is to continue to inject money into my properties, to bring them up to a higher standard because people don’t want shaggy carpets anymore. People want nice final flooring like I have in my own house. And so making sure that the units are catering to what tennis now want. Okay, so looking to the future. So that’s sort of what the kind of adjustments I’ve been making. And now, like I said, we’re finally entering into a great phase with lots of potential for Alberta. I am ready. My units will be the first to get rented out and at the top dollars in the marketplace, those that didn’t see this coming, their units will still remain vacant for a lot longer than my units. My properties are in good condition. So that’s one adjustment in terms of other adjustments in recent years. I think people may or may not know, but there’s two ways of financing your apartment building. Right. There’s a conventional way, which is not T-shirt financing. And then there’s a huge issue with financing. Conventional lenders don’t publish their guidelines, their underwriting guidelines for when they get a deal, they will assess it, risk it, and based on their perception of the risk factors of work, your risk factors that it was mentioned earlier, and they will give you whatever loan amount they feel that they’re comfortable giving you. Okay. CNBC and I have them right here. CNBC has published guidelines. Right. So you kind of have a better idea of what to expect from seriously. But at the same time, when CNBC gets a deal, even though they have published guidelines based on the risking of the application of financing application, they will lower the loan amount to whatever they want. All the lenders and commercial lenders included to have that DeRogatis. From that perspective, people need to know. From a CNBC perspective, there’s been a couple of policy changes that were quite earth shattering. Is almost an understatement. One of them in 2020 when the COVID began, where the use of equity take out funds is restricted. Now, in the past, guys like me and the large rates, by the way, the boardwalk and all the reeds used to refinance buildings, take some of that money and do whatever they wanted to do with the money, including return of capital or dividends to investors. Now, this is not allowed for serious future financing, so that was a bit of a damper on my business model and that of a lot of people. You’re allowed to use those equity takeout funds to build another apartment building, to pay out a construction loan or to increase the energy efficiency of the building and a few things like that. But so that’s one big change. There’s another big change for Sammy, too, that people need to know about. It was it was last year, January of 2021. If you buy an apartment building between or was it five and 24 units? Yeah, five and 24 units. You need to submit an appraisal to charity in support of your value. I think this is a positive thing, although it’s an extra expense, right? 20 $500, maybe $3,000. But at least he has the market value. The market value for the asset is support, because in the past some of your listeners may know Cimic has always been very harsh on value. They would always use the value. The lending that they would use tended to be below that of market value. So hopefully now. So those are a couple of changes in the industry that we all have to adjust to. The other big thing that’s CMT has come out with this show, which sees a life select. I’m not sure if you’ve heard about that or not. So it’s to promote the construction of housing or retrofitting. So there’s three kind of buckets are the three social outcomes that they’re pursuing is greater affordability. Then it’s environmentally friendly and then accessibility. So obviously you can get its worth for people to look at. But don’t, don’t go crazy I would say, because there’s also some downside to this program. But basically, let’s let me pick one example, affordability. If you can either retrofit some of your units and charge rents below the median income for your market area. And she has a chart called a medium income for, you know, for renters in your area. And you keep a certain number of these units affordable for, let’s say, ten years. I think you can go up to 20 years, then you get some benefits, namely the premium mortgage premium is a lot lower, can be if you get 100 points, let’s see, the highest I think the premiums 1.1%. Right. Versus four and a half percent. The highest premium bracket for future financing. You can also get longer amortization, George, up to 50 years if you get the maximum points. Yeah. And a lower DCR as well. So there’s it’s well worth looking into it. Same idea if it’s for accessibility or like I said environmentally friendly buildings you get so you can you benefit from these other advantages, low grant taxation, lower premium and so on. So it’s worth that. So but it’s a mortgage. Agents and brokers are super busy processing these kind of applications. This program came out in March of this year, so it’s called Square, which is MetLife Select by encourage people to look at it.

Georges El Masri [00:39:39] All right. Thank you for sharing a bit about that program I see behind you there. You’ve got a couple binders with some information. So do you. It looks like you’ve got some sort of course going on. Do you want to tell us a bit about it?

Pierre-Paul Turgeon [00:39:50] Yeah, so people can always find me. George at Multifamily Investing Canaccord, we got a workshop, depending how your podcast or when your podcast is broadcasted, but I’ve got my three D kit in Multifamily Investing Blueprint Workshop this coming Friday, November 4th to the sixth. Time and time again, people read it over nine out of ten because the people that follow exactly the blueprint George to become very quickly successful people can go to my website and check out the testimonials, but it’s experiential. George For example, I was just talking about Sandwiches and Ally Select, which is a brand new product that came out in March. So what I do is I’m going to explain to people in greater detail how the program works. And then we use case studies in class. We crunched the numbers. I’ve got a very simple spreadsheet, same one that I used to use at CNBC. And within class we analyze a bunch of case studies so that by the time people leave the workshop, they know what they’re doing, they know what financing looks like. I’ve got a bunch of charts over the years that I create the entire investment process and offer to purchase a flowchart with the various documents. You’ve got to get a flowchart describing the various financing strategies based on the financing circumstances of your deal and all the underwriting guidelines which insure the financing versus conventional financing. You got a beautiful workbook that you can take notes. So, you know, I have a few copycats in the country teaching, multifamily investing. They were students of mine. Now it is what it is. I guess its own success when people start emulating you. But nobody can beat me in terms of having prepared this workshop to this level of detail. When I speak, I present different viewpoints, as, you know, I used to be. So I wear different hats, literally write this when I speak as a former underwriter world. Except of course, I’m first and foremost now an investor. So when I present a perspective, a different opinion as an investor, I wear the SAT and of course I used to be a lawyer that did real estate. So I’ll express my viewpoint as a former lawyer as well. So I give people a lot of perspective and hands on experience to be very successful. And like I said, year after year, the students rated over nine out of ten of the people that follow the blueprint. They’re becoming successful. So yeah, people are interested, if not broadly have we’ll have a sale, a Black Friday sale for the on the main course and you get lifetime access to the on the main course. Plus I answer your questions personally in the on demand course. And in 2023 I’m coming with a brand new version shot in 4K with all this fancy equipment that I have around the year. So the course does deliver. So if people are willing. You know, George, like I said, soon, as soon as soon as we’re done this interview, I’m going to be shooting a video about why, despite all the. Mayhem and geopolitical situation. High inflation. Increase interest rates. Invest in a park to drinks. If you have, like me, a long term investment horizon, it’s one of the best asset classes. Apartment buildings are known to be resilient countercyclical meaning when the going gets tough, they continue to perform very well and coded during the Great Recession of 2009. I’ve seen it time and time again. Great asset class to be invested in. So if people want to learn how to do it. But I just want to warn people, George, this investing in larger apartment buildings is the big leagues of real investing. I kicker’s not loud. Don’t bother taking my course or writing offers. You’re going to be written off by the stakeholders, the realtors right off the bat. So but if you’re serious, you’re committed, not just interested. Invest in apartment buildings, come into my workshop. They’re the same tools that I use myself due diligence, checklists, inspection checklist, and I keep coming up with new tools to help people. So I thank you for giving me a chance to make a pitch about it. But yeah, if you can’t broadcast this November 4th to starting, so I encourage you to sign up very soon. Bit of.

Georges El Masri [00:43:50] Hope. Where do people go to find out about this workshop.

Pierre-Paul Turgeon [00:43:53] Yeah I support at multifamily best in Canada dot com, but I’ll send you a link right after we hang up by George if you want to add it. That’d be great. I’ll do that. So.

Georges El Masri [00:44:03] Okay. Sounds good. Great. Thanks for sharing all this. It’s always good to learn about different markets and learn about other provinces and what’s happening there. So I appreciate your time and we’ll definitely have this out before the weekend so that people can go out and register for a workshop.

Pierre-Paul Turgeon [00:44:21] Very grateful, George. I appreciate it. You be well. Take care.

Georges El Masri [00:44:24] Okay. You as well. Thanks for listening to this episode. Your support is truly appreciated and if you can share this with a friend or family member, that might benefit from the information. Remember, our goal is to motivate and inspire others to take action and to build wealth and to become well-off. Enjoy the rest of your day.

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