Table of Contents
Podcast Transcription
Erwin Szeto [00:00:09] Hello and welcome to another episode of The Truth About Real Estate Investing Show. My name’s Erwin Szeto, where we talk to real people with real results, repeatable results. And Amy, Reverend, check our guests before they come on the show. Funny thing about reference checks is as the benefit of being one of the old farts of the real estate investing community since about 2008 when I joined REIN and since then I’ve attended hundreds of other networking events, including Mastermind with many of the top investors in Canada. I’m lucky to have many friends in our community. Hence, reference checking is very easy. It’s often just one phone call away. Worst case, a text message way. And then the benefit of being at my advanced age is I see many investors in investments come and go, including many who lost their shirts in 2009. Some are no longer invest. Some were able to persevere. And I share these lessons with our coaching clients. Yes, we have coaching clients at my team, the island real estate team. We are licensed real estate professionals who provide coaching services to our clients in acquiring investment property. For all you budding realtors out there, I know there’s many of you among our 17 listeners, those of you who want to service real estate investors as clients. In my experience, the sooner a client is successful and that usually means in renovating and or renting out their property, it’s just the other tenant and rent coming in the sooner they buy their next property and send referrals. It’s a good business practice to have a lot of successful investor clients. I remember back in 2008, during the financial crisis when we were worried about the recession, major banks in the US were going bankrupt, you know, Bear Stearns and Morgan Stanley. And then the news got worse for us personally. A tenant in our duplex gave interest there moving out. We were so concerned because this was early in our investing journey. I know you veterans are all laughing right now because you love tenant turnover these days, but back in those days we didn’t have any mentors. There were no podcasts. The Internet was pretty weak in terms of getting information. We had no mentor, no coach. We had no veteran leadership to lean on. We thought we were in trouble, but we still went through the cycles. We posted our ad on to Gigi and the interest poured in. After a week of showings, we had four applications. Three were crazy solid. Now four applications doesn’t sound like a lot better. Understand? We didn’t really know what we were doing back then, so we actually made this novice move where we asked for and sorry, we required 200 cash or certified deposit of $200 to accompany a rental application or otherwise we wouldn’t review it. Sadly, we had to do away with this process because it became a pain to return money for declined applications. You know, come pick it up now. Can you just send it to me like it’s cash? I can’t just send it to you. What we learned from this experience is that when people can’t get a mortgage such as 28, 29, as it was the credit crisis after all, plus a devastating crash in the stock markets. Fear was at an all-time high, but at the same time, people still needed a roof over their heads. And we had in in our situation, our rent actually went up and we had a better tenant. So we were better off for the tenant going away, giving us notice and for the financial crisis in terms of owning a rental property. So yeah, in the end, fear was nothing. Lesson learned. Our biggest regret more. My biggest regret from those days was we only actually bought one house during that recession, which in that also in that recession barely put a dent in the real estate market back then. This is these times are very different. Rates were still quite low at the time and immigration was just so strong we could buy. Back then we were talking about 29. We could buy a bungalow in those days for under 200 grand in our target markets, which now sell for well over 600,000, and that’s even pre-pandemic. So we remove all the pandemic pricing, remove all that volatility. Prices more than tripled. But keep in mind, we typically only put down 20%. So that would have been like a 15 times return, 15 times return on money in ten years. I don’t think that will happen again, but I will take it gladly over the next ten years if it happens again. Our strategy has survived that generation’s recession and we’ve only improved upon our investment practices since. And if the market keeps going down for the next 6 to 12 months, which it could, if I bounce back within six months, we may hit bottom in six months no matter what. I still welcome the opportunity to buy for cheaper prices because to me, Canada and the Golden Horseshoe still offers a tremendous opportunity. And this may be our last and only opportunistic dip in the markets for this generation for the next ten years. So if you want to buy on the dip, economic winter is upon us. I believe at time of recording this we have a technical recession in the United States, and as such, I’ve asked all of our special guest speakers at the upcoming Wealth Hacker Conference on November 12th to be sharing all their best practices on how to weather storms. And if you speak to any of them, they’re all ready to buy in the dip. No different than our clients now. Wealth Hacker Dossier November 12 for details at the Toronto Conquer Center live in person only. So that’s near the airport plenty of free parking for our stock expert for example, Derek Foster. He’s net positive on the year. Stock markets down about 20%. I think on the year. I think Apple is down more than 17% this year. Never thought I would go down. So some great companies are down on the year. Derek Foster as an investor, is positive on the year. If you can believe it. He’s also reduced more of his holdings to cash. And he’s waiting for the bottom to back up the truck and buy more boring stocks. When I had Derek as a guest speaker at one of our stock hacker meetings back in mid-2020, Derek shared with us his picks, which were business advice folks. And this is steeped in history. This is back to mid-2020, so his picks are not the same thing as they do today, as we did back then right after the pandemic crash. Derek’s picks were well, he basically nailed it. His picking companies like Suncor, Enbridge, Berkshire Hathaway, Disney, etc. and I can’t wait to put my cash back to work and build me another start kayaking stream, another six figure stream via stock hacking. If you follow along, Terry and I will be talking more about it as we’re looking to increase our passive income. And in terms of passive income, I mean, cash and Walmart dividends in my life, just like Tim Collins and last month’s episode, last week’s episode. If you didn’t hear that Tim Collins generates over $10,000 a month in dividends a month. I think we could all use more cash in our pockets each month. Dahlia Barsoom Streetwise Mortgages is an author. She’s a financial wizard and has a brand new presentation to detail a beginner to advance investor’s journey in order to maximize marketability. While and of course, the strategy, this journey would weather an economic storm like the one we’re in. More importantly, just as importantly, maximize marketability. Jordan Anderson, Chief Operating Officer Bitpay Canada’s largest and first registered crypto exchange. Jordan tells me that he’d rather buy cryptos on the dip than an investment property. We’re on completely different ends of the spectrum. Obviously, we have different expertize and different education and different comfort levels. My opinion on crypto and blockchain is I can’t deny the future, including decentralized finance, and I want more education on the subject. And I can’t honestly find someone better to teach the subject than Jordan Anderson. He is an absolute living expert, imitating crypto and blockchain space and the West. We have much, much more. And while Hacker Dossier, of course, now we’re speaking we’re talking about our insurance investments as well. As well as something that’s all new in terms of retirement planning, something we’ve never spoken about before. But that’s something we’re spending more time thinking about and planning for. Ever since this lovely pandemic is so details that wealth hacker dossier my discount code for you is a five letter word truth. I want you to have the truth where the world is going. What the experts are investing their own money in. And when the when is most important and how to avoid financial devastation. If you wanna learn all these things. Wealth Hacker Conference is for you onto a personal level sharing. I had our first quarterly meeting one on one. No electronics, no personal electronics or screen time with the most important stakeholders investment partners, business partners in our lives, our kids. Robert and Bruce, they’re eight and seven years old, respectively. At Robin’s request, Cherry took Robin to a pottery class, followed by a manicure and pedicure. Thank goodness that wasn’t me. I don’t like people touch my feet at person’s request. I took them to a video arcade called Dave and Buster’s, followed by virtual golf. I don’t think we got it right, as I felt a bit at budget, enough time for dinner for us to chit chat as we didn’t end up eating dinner till around 8:30 p.m.. So it was rush, rush, rush right before bedtime. But done is better than not done. We’ll get it right next time. As you know, allow time for a proper sit down dinner, just us two to chitchat. The kids had a blast and can’t wait for the next quarterly meeting. Obviously we have to do each kid each quarter. So tonight, two nights from each quarter cemetery, Robin has requested that I take her to Legoland as she’s ever been to one. Bonfils, of course, not the one in Orlando, I think it is. And that’s what we’ll do. It’s her choice. What we do. For me, putting my phone away is difficult as I’m a serial multitasker and my phone is my job is I don’t know, I hear the term CrackBerry. I know when people refer to Blackberries. Yeah, my phone is like my crack. But quality time with the kids while they still want to hang out with us is short. So we’re going to try to maximize this time. A good friend of mine actually warned me that his 12 year old daughter flipped like a switch the day she turned 12. Nothing that day. But, you know, I mean, she refuses to be seen in public with him. And he shared with me how their text message exchanges consist of daughter asking him for money to go to Starbucks with her friends and not looking forward to that. If you’d like to do some reading on the subject around more quality time with kids, I recommend the book. I just finished it this morning. The family bought reading by Jim Shields. See if I read the book first before I did the forming of my son, I probably would have likely gotten it right. But you know, nothing’s perfect. Perfection is the enemy of getting stuff done. Ready, fire. Aim. Sorry again. The book is called Family Bought Beatings by Jim Shiels. I have a link in the show notes and Jim also happens to be an extremely successful real estate investor in Florida. Hopefully it’s okay with Hurricane Ian. I believe he is because I believe he’s on the east side once the. Is over. I look forward to booking more quarterly meetings, one each with my mom, my dad, brother and sister as well. That’s nice. Maybe we’ll get back to date nights as well with Cherry Red for me. Onto this week’s show. Our market update that we had two weeks ago with coach Tami de Tomaso was a hit based on the downloads timings. Tomatoes were just right there with some of our ultra-successful full time reality investors on the show. AS And that’s why I took our 17 listeners. I know we do have a lot of the big time investors on the show. However, understand in my experience, the vast majority of real estate investors are investing as a side hustle. Over 90% of my millionaire real estate investor clients are side hustlers in real estate. They all have daytime jobs. They still have. The truth about real estate is that folks who do make a full time career as an investor is a small minority. And for those who got in more recently, a lot of them are no longer. It’s really sad that this market has not done good things to people that were overleveraged. I remember asking a mortgage broker friend of mine, he focuses on real estate investors and he told me that maybe 1% of real investors reach ten or more properties. That number has gone up a lot since then. But my point is, do what’s right for you. No need to compare yourself to others with hundreds of doors. The truth is several investors are in financial distress right now. And also understand that’s not my context. I’m hearing this from other mortgage brokers and lawyers that deal with people outside of my client circle. They’re having challenges executing their flips or their buyers, or they overleveraged or they simply speculated that they can no longer afford whatever negative cash flows they were planning for with these now current interest rates. And also what the market what the market price is falling. In my experience, boring cash flowing starter homes is the bread and butter. And it’s been our bread and butter since our team since our team started in 2010. It’s worked out well. It’s faring well in this in this current economic winter. Star Homes, we’ve obviously evolved our strategy. We’ve taken starter homes now to force appreciation via innovations to increase cash flow such as basement sweet apartments. Or we did it used to do a lot more than rentals before basement apartments were legalized and all these strategies were pre-pandemic and post-pandemic. And it’s worked in general, working in the declining market as well. Hence, we have Coach Stephen Phillips here to talk to us today about investing in the areas east of the GTA and what in terms of terms of deals and numbers behind the properties investors are buying right now in today’s market. That makes sense. So in the show notes, I actually have screen captures of property analyzer spreadsheets. So if you want to see the details sorry, the numbers and the calculations behind the properties we discussed today, go to show notes. Truth about real estate based in dot CA or if you’re on my email list, they’ll go in a shop right in your inbox so you don’t go searching for it. If you don’t know Steve, he’s a member of my team. He’s a licensed realtor. He has a ton of real estate experience having owned and operated a kitchen and countertop business. His stuff was so nice that they caught the attention of HGTV Scout Mcgilvray and Steven’s business was part of over 20 episodes on Scotts shows, so Steven wasn’t necessarily in all the shows, but his businesses, his business, and his products were on the show. Steve grew up in the area which is east of the Greater Toronto area and now focuses on the areas east from Marshall to Kingston, but primarily the sweet spot of Bellville. Understand why we’re in Bellville. A lot of the smart money that I know that I know personally in Oshawa, they’re in Bellville as well. So follow the smart money. It’s never a bad idea. The most common requests we receive from new clients is, quote, unquote, I want a deal. So as a service to you 17 listeners, we’re here to provide you context into what a deal looks like. So please have your pens and paper ready, spreadsheets ready. Have a look at the show notes as we’re going to talk to current opportunities and the analysis behind them. On today’s show, I give you Stephen Phillips. See what’s keeping them busy these days.
Stephen Phillips [00:14:01] Oh, and this real estate market. A lot of things are keeping me busy right now. So, yeah, projects, clients, things that are on the go. People, kids, back to school, lots of things.
Erwin Szeto [00:14:13] Cinematical There. Yeah. So actually we’re recording this mid-September, but what surprised me was how busy we were in August because I actually forecasted a very quiet August like all of us were off for a week or two. All of everyone on the team, including yourself. Yes. Yeah. Investors were busy.
Stephen Phillips [00:14:33] Yeah, they were busy. We had, I know, out our way in Bellville, I did a fair amount of deals with our clients towards the front end of August, last weeks of July. A lot of those kind of closed out right around that mid-point and then investors kept contacting. But there was also the waiting for September’s announcement kind of out there. So there some people that were trying to get in before the announcement and some people just kind of hesitating and waiting until they heard the announcement.
Erwin Szeto [00:15:02] So we’re talking about the interest rate. Announcement from.
Stephen Phillips [00:15:04] The interest rate announcement.
Erwin Szeto [00:15:05] From Tech Maxx when.
Stephen Phillips [00:15:06] I took advantage of went out to Nova Scotia for a couple of weeks with my family because we haven’t been in multiple years to see family. And then came right back into it. And September is picking up right where mid-August left off. It seemed like we missed a beat on that.
Erwin Szeto [00:15:19] There’s again, I’m surprised again. You know, after two years of lockdown, I thought people would be. People are vacationing hard. Well, you live in a vacation area. You’ve seen how hard people are going.
Stephen Phillips [00:15:31] Yeah, but, you know, like surprisingly, you know, you say that. And I would agree, we do have a ton of tourism here with Prince Edward County. But I don’t know, it’s anecdotal, but it just kind of felt a little slower this year with some of our tourism. I think a lot of people took advantage of being able to leave the country. So I think that kind of changed things. There is definitely a lot of tourists here, like no doubt. But, you know, during COVID, like when there was a lockdown and you couldn’t like many people couldn’t leave the country. We were like in and it felt like you couldn’t even move on the streets here. It wasn’t like that. This okay.
Erwin Szeto [00:16:05] So if that was your baseline when you could not leave the country. Yeah, that’s not fair baseline because when I was in Bellville, when we did the tour and it was August, right early August, which.
Stephen Phillips [00:16:15] Was August.
Erwin Szeto [00:16:16] When I was in Bellville, every hotel was packed. The hotel, I stayed out of the pack. Dude, don’t you remember? We stayed in the very last Airbnb and all the telling the whole town, the shack.
Stephen Phillips [00:16:26] The shack that claimed Tammy. Yeah, definitely tough to find a spot.
Erwin Szeto [00:16:30] So for the listeners, benefit because somebody waited. Not me, not Steve. Somebody wait till the last minute to book our accommodation in Prince Edward County. So we got the very last Airbnb that was available and it was I don’t know, what year do you think that was built? In least the thirties.
Stephen Phillips [00:16:49] It was years ago.
Erwin Szeto [00:16:53] So 90 year old house was probably built by hand, though.
Stephen Phillips [00:16:58] The house was nice. That’s the big there was a nice house and there was a nice guest house. And then there was the shack, which I think was the original house that the family had moved and upgraded every year since. So yeah.
Erwin Szeto [00:17:12] Which didn’t help things. Yeah. Paint a picture for the listener. It was a beautiful, like 3500 square foot house with a pool attached to it, built within like five years. Beautiful house where the owners currently live. And then next to it was the second house that was built on the property, which was not a pretty typical starter home for most suburbs. But no. And then. But they rented that property. But that’s not where we were. Stay. We’re staying in what they call the shack. And we paid over $400 for the need for it. And it was a little one and a half story. And I believe that house that house was hand-built. I don’t even think it was it. No, it was tiny, 300 square feet.
Stephen Phillips [00:17:53] It was still logs. Yeah, maybe it was it was very small and very, very, very rustic.
Erwin Szeto [00:18:02] Rustic for any short term investors out there. We paid for over 480 for that place. It was embarrassing. Yeah.
Stephen Phillips [00:18:11] The county’s crazy. You. The county is crazy. I mean, and so there’s not a lot everybody’s heard about Prince Edward County. There’s not a lot of hotels here. That’s kind of the thing. There’s not a lot of growth. So it’s not a lot of growth in hotels. I think there’s limiting variables as to why there’s not a lot of hotels here, but it’s hard to build hotels here. So you’ve got the Drake Devon Char, which is a beautiful hotel but limited in room size. You have the Royal which just got built in Picton 28 rooms or something like that. Like it’s limited in room size. Yeah, they’re beautiful boutique hotels, but the word boutique has to be added to all the hotels, right? Like it’s not big. And so that’s why there’s so many Airbnbs, right? And they fill the void. But when they’re all booked up the overflow lands in Bellville because it’s, it’s about 35, 40 minute drive from the bottom of the county or at least the popular part of the county up to Bellville. So that’s why your hotels are all booked in. Yeah, it’s a hard place. They come and stay in the summertime without a plan.
Erwin Szeto [00:19:09] And just outside, as an outside observation, the whole area has like a feel of Niagara on the lake to me, because you actually have wineries there. You took a step to eat, took us to dine on a wine or at a winery, which is pretty awesome.
Stephen Phillips [00:19:21] Yeah, we’ve got a few out here that there’s lots of things to do. I think there’s, you know, definitely Niagara came first and then the county is kind of trying to do their part to stand apart and yet follow. And so yeah, there’s, there’s definitely signals and signs of both, but it is its own thing out here. The county is its own beast. It is. It’s an interesting place. Very interesting place.
Erwin Szeto [00:19:44] Niagara East. I recall it. All right. We’re not talking about wine. No, we’re not here to talk about wine because investors are buying. And what I want to accomplish with having you on being an expert of areas east of GTA is what our investors buying, because I think there’s tons of fear out there, some of it more to some not. If you’re in this for the five, ten year term like you and I are, or for looking for opportunity. But a lot of investors don’t know what a deal looks like. So what are investors buying today?
Stephen Phillips [00:20:15] What a deal looks like. Isn’t that funny? Yeah, I think.
Erwin Szeto [00:20:18] Deal is different, everybody.
Stephen Phillips [00:20:20] I think if you’re looking at it, it’s always a different thing. And I mean, when we’re having these conversations, I have a lot of conversations with investors. A lot of them are new investors. I think it’s key to first figure out what their time horizon is because that’s a better way to identify what a deal is.
Erwin Szeto [00:20:35] Boy, that’s not the time yet.
Stephen Phillips [00:20:37] Well, you better be good at them, right? Like, it’s not the time for a rookie flipper, that’s for sure. We have a couple in ours.
Erwin Szeto [00:20:42] And you better be good on the tools yourself.
Stephen Phillips [00:20:44] You better be good. Yeah. There’s no contract. So, like, you better be good at something to do with that. And you got to buy, right? Very much. Right now I’m finding that I have a couple of clients that are flip clients. They’re very, very experienced flip clients. They’re not like newbies. They’re very, very experienced. They know what they’re doing for them. They’re just looking for absolute best price right now because they need to pretend or at least project up or project what the property will be worth in 90 days. And there’s no crystal ball that’s telling anybody that right now. So you have to be uber conservative on your numbers and then try to buffer in as much of a safety as you can. So also, just as a sidebar to that, they’re also always looking to make sure they have a backup plan. What is the rent on this property? If I can’t dump it, if I can’t get it back in the market in time to sell it, what’s it going to rent for? And am I willing to carry that burden until the market comes back to where it should be? And I can start to move in prices kind of bottom and start to climb again. So yeah, I think those flippers are definitely out there, but they’re very much not for the it’s not for the faint of heart, it’s not for anybody who’s this is not television flip shows. This is like professionals. And so if you’re not that guy, be careful.
Erwin Szeto [00:21:59] All right. So I would say that I’ve spoken to many investors as well. And word is people, lawyers, this seems more of a type of buy and hold time, a time to be buying for hold for the long term.
Stephen Phillips [00:22:09] Of course, I think you’re absolutely right. I think all those people are ready, because ultimately, if you buy a product and that product goes on sale and you don’t know how long the sales are going to last, you should try to get as much of that product as you can afford to get you ready for when the prices aren’t going anywhere. And this is a great time to kind of stock up on your inventory. Good opportunities, even if the property is not going to be renovated right away. Stock up on it now and get yourself ready for down the line. So I have some people that are looking at properties that are finished and have garden suite potential. They’re not duplex yet. They’re still single family residential. But for the time being, right now, they’ll go cash flow neutral and yet they have the option and the potential of a garden suite add on in the spring or in, you know, maybe 6 to 8 months from now. And then that will take them to a positive cash flow position. It just depends on what people are looking for right now.
Erwin Szeto [00:23:04] So what are our what are our clients buying right now? Can you tell us a bit about them?
Stephen Phillips [00:23:08] Our clients are buying those. I think the last few deals that I’ve been doing have actually been kind of a couple of duplex conversions have gone through. I have one that just sold that we just closed on two weeks ago, end of August for a duplex or a two unit property that was all vacant unit, vacant possession, no renovations needed to take the property over and get it rented.
Erwin Szeto [00:23:30] Fabulous.
Stephen Phillips [00:23:31] Yeah. If you can find those right now, like they’re great. I think the whole key to that deal was to make sure we had vacant possession and then making sure that we could set the rents because rents are increasing. I mean, I’m sure you’ve talked about it more times. I’ve seen it just on a couple of weeks ago. Rents are increasing significantly. And so we want to try to get our rents established to today’s values because a year from now they may still be low. So we need to get them set as best as possible. And so that’s the advantage of that that deal there of getting vacant possession.
Erwin Szeto [00:24:04] I’m sorry, we’ve move on. What’s a turnkey duplex a go for these days?
Stephen Phillips [00:24:08] So there’s a very interesting question.
Erwin Szeto [00:24:10] There are because it varies. They can be really bad duplexes. There could be rundown duplexes. Absolutely.
Stephen Phillips [00:24:18] That’s always in the wheelhouse. And there’s also the variable of time. So the property that we did with our client was towards the first or the end of July into August. That price point, I don’t necessarily know if that’s still the same price point rate. Now for some of the duplexes of that size, it’s a bit bigger than some of the other ones. But I’m seeing Duplex is starting to come down to the mid to low force, which is significantly lower than even at the end of July. So the one that we picked up early in the year was pretty early in the month was closer to the mid high five, just under six. When we ran all of our numbers on that property, it was still in a cash flow positive position. There was no investment required other than the down payment. The property management was coming in around $200 to manage the duplex was a two bedroom on the main floor and a one bedroom upstairs. The two bedrooms are probably going to rent or should rent somewhere around $2,000 a month. Everything was split so that everything the water the water had its water and gas was included in the rent and the hydro was an additional. So 2000 we were going to pump in another 100 change for the split of those utilities to call 2150 for the two bedroom. And the one bedroom was going to be somewhere around 1800 to 1900.
Erwin Szeto [00:25:38] Well, way we were. But that’s a lot.
Stephen Phillips [00:25:41] It’s a lot. It’s a lot. It was a nice one bedroom and it was a loft it up at the top and it was pretty isolated. Could be as I’m also adding in those utilities, the base rent of that would be 16, 1650. And then we’re adding in the cost of those utilities to the rent as well. So which kind of pulls it up to that 1800 number? But yeah, 1650.
Erwin Szeto [00:26:02] That’s a lot for a one bedroom. It’s 104. There’s no doubt. We had.
Stephen Phillips [00:26:06] No vacancies. We have no vacancies here. We have no vacancies anywhere. The rental supply is very, very low. I think that for anything of good quality that’s close to transit lines, the prices have gone up. I think those rents were somewhere around 14 to 1500 this time last year and they’ve gone up.
Erwin Szeto [00:26:24] Okay, so hang on. So this one that we’re talking about, how much did you pay for this property that has two bed up, one bed down.
Stephen Phillips [00:26:31] 590?
Erwin Szeto [00:26:32] Okay. So I was gonna run some numbers. I’m like the worst agent at math and my calculator out. So 2000 plus 1800 times 12. So my annual rent is 45,600 by a five, 98%. If you if it was inclusive, you’d be, you know, doing close to 9%.
Stephen Phillips [00:26:53] Yeah. And so property tax. So here’s another thing. On a property like that, the property tax for the properties, 20 $300. So you have low expenses, low cost on a lot of your carry costs and then your rents are still creeping up into those numbers. Now we’re renting that property right now. So the market itself is going to tell me if how wrong I am or how right I am. But I think that.
Erwin Szeto [00:27:14] If you’ve no vacancy.
Stephen Phillips [00:27:16] Zero recency, there’s really you know, there’s not a lot I know room rentals right now. So let’s take a room rental for example the room rental rate here. I know the guy was one of the realtors and has a border house, I guess you could call it a boarding house where he was getting 850 a room on just a room rental on a in a boarding house that was quite undesirable.
Erwin Szeto [00:27:43] So I’m sorry you just posted there for listeners benefit of boarding house typical example is like a student rental. A proper one is usually licensed; each room is treated like almost a separate unit. So there’s fire safety for each of the bedrooms to be self-closing door could be fire rated dry wall between all the units in the flooring, in the ceiling hot springs. So it’s all highly regulated, probably at least annual fire inspections and like that, that would be a proper boarding house, 850 room and it’s not so nice.
Stephen Phillips [00:28:09] Yeah. And like who’s renting that, right. For the most part, what we’re getting, who’s renting those type of situations are either working at the military and or only here a couple of days out of the week, three or four days a week, and then they live back maybe in Quebec or something like that where their actual family is. That’s a pretty good tenant. Yeah. Like they’re great tenants and then some other ones are contractors. So just about job as a contractor or somebody working for a utility company or something like that. They’re not here consistently. They’re just here to do their job and then they go home. They tend to be the renters that are looking for those boarding houses like room rentals.
Erwin Szeto [00:28:43] That’s not so bad.
Stephen Phillips [00:28:44] Now, you do have students here. Student rentals, I know right now are going up 750 a room for the student rental population.
Erwin Szeto [00:28:52] For marketing, no vacancy.
Stephen Phillips [00:28:54] With no vacancy, and yet they’re all hungry looking for a unit. So it’s just very much.
Erwin Szeto [00:29:00] A landlord’s market.
Stephen Phillips [00:29:01] There’s just there’s no inventory. There’s no inventory. So I put them put the sign up, market it, see what shows up.
Erwin Szeto [00:29:08] For.
Stephen Phillips [00:29:09] And then pick the best quality. If you pick a better quality tenant and you got to take a 100 bucks off your cash flow, but you’re getting quality. Maybe you do that. But yeah, the market will tell where we’re at.
Erwin Szeto [00:29:19] Sorry, Steve, I want to finish up these at your favorite. I’m Kate. Would you do me a solid and send me the spreadsheet and then I can include a link to the show notes so folks know how much they want it. So for those folks, if you’re driving, you know, don’t worry, the spreadsheet will be the shownotes, at least a PDF or something like that. So you can see the numbers. But again, those numbers are great.
Stephen Phillips [00:29:40] And again, we’re looking at a property that at that purchase price right now, I don’t see a lot of the properties selling at that purchase price right now for my client. I mean, that was the market we were in when we made that deal. That was a good everything. There was great online and the numbers still work. And so moving forward, we’re going to keep moving on to the next one, get this one locked up, get it rented, see where the market rents come in. And then adjust.
Erwin Szeto [00:30:04] Well, even in my experience, the contractors, it’s hard to get a contractor and prices are going still going up. So they bought turnkey, which in my opinion is a good thing in this market because it’s so hard to get contractors now.
Stephen Phillips [00:30:16] I agree. I agree 100%.
Erwin Szeto [00:30:18] And your cash flowing day, you’re basically cash flowing almost immediately. You don’t have to carry the darn thing and worry about it and deal with the renovation. Significant renovation.
Stephen Phillips [00:30:26] I think the next property on that note, we just had a property close yesterday actually. It was one that was on our tour. We were here in Bellville. That property we ended up picking up for $430,000. So they do.
Erwin Szeto [00:30:42] Remember the asking.
Stephen Phillips [00:30:43] For 49.
Erwin Szeto [00:30:45] Got to under asking with conditions, right?
Stephen Phillips [00:30:47] Yes. Three conditions in the area. Three conditions I work appraisal conditions and my clauses right now because those prices are slipping. And if I go back to my first client, the first client that we talked about, we had an appraisal condition in there. So, yes, the prices were higher when we purchased, but we had our appraisal done the day before we waived our condition. So we knew that the appraisal was already in. We knew the file was closed, we knew everything was going to work and we moved forward with and they closed X amount days later. This one, we did the same thing quicker, close to the appraisal really didn’t matter and we got to well under value. So we were good. But 430. All right.
Erwin Szeto [00:31:24] Excellent. And then what was renovation budget going to be?
Stephen Phillips [00:31:28] So this is where it gets interesting. This particular client is also a carpenter, and so he gets to take care of a lot of the things himself. His budget is going to be somewhere around 100 K because he’s really delegating very little, just the things he doesn’t actually do, plumbing, electrical, things like that, h-back things like that.
Erwin Szeto [00:31:49] This is why I think it’s wonderful for young people to get into trades as I just seen so many people who are good trades become very good real estate investors.
Stephen Phillips [00:31:58] This person is a he’s younger than me and he is quite, quite smart, quite savvy. I would encourage the same thing. If you’re a young person who’s ambitious, get as many skills as you possibly can get because it’ll just protect you. And like, even if you delegate out to a contractor and that contractor is doing the work for you, if that guy or that girl messes up anywhere or they’re slow or they slow down or they disappear, you can jump in and finish. So you’re never at this moment where you’re dependent on anybody. You have a level of independence. And so even that is a huge benefit.
Erwin Szeto [00:32:35] So fantastic. Okay. So for 30 by 100 year rental budget now, what are they renovating a kitchen or to a whole business? Reconversion.
Stephen Phillips [00:32:46] So we’re doing a duplex? Yeah, we’re doing a duplex on that property. Full basement rental and duplex. And then the upper floor. We’re taking the kitchen from its existing place and kind of moving it half a room older and giving it a little bit more space.
Erwin Szeto [00:33:02] Excuse me. You’re moving the kitchen over. This is pretty significant.
Stephen Phillips [00:33:05] It is, but it’s if you see the layout, I’m going to show this at our at our upcoming meeting. The layout is pretty conducive for this move, actually. It’s not too intensive. And it works out because the client’s a carpenter. It’s not as intensive as it may have be for some other people. So it’s not that big of a deal. Yeah.
Erwin Szeto [00:33:26] Fantastic. I love it. I love I love efficient use of real estate. I love efficient use of anything.
Stephen Phillips [00:33:31] Yeah, we ended up we had a room, we had two living rooms, essentially. We had a front living room in a back living room and then this tiny little kitchen in the middle that you would zigzagging through to get to the back living room, which was an addition that was put onto the property. So why have a little tiny kitchen? It doesn’t make any sense and have two living rooms. So the client is looking to move that into the back and make it a kitchen and then have a proper kitchen and then actually use the old kitchen for his laundry and the storage. We’re going to convert that space properly.
Erwin Szeto [00:34:00] So significant to ask, how many square feet is this house? It sounds big. If there’s two living rooms, it.
Stephen Phillips [00:34:07] Was the additions throwing me off. I would say it’s like a standard bungalow, like a larger size, 1200. You walk through it. But that was the second one we went through. But yeah, I hesitate to say an exact number, I don’t know, off the top of my head. But it’s a larger bungalow, but it’s a traditional bungalow, a three bedroom, one bath, and then the kitchen, the living room and then the basement.
Erwin Szeto [00:34:30] So you’ve got a house for like around 360 square foot and that’s before accounting for the basement.
Stephen Phillips [00:34:36] Yeah. Yeah. And then like the rents there.
Erwin Szeto [00:34:39] Thank you. I think that’s again for a second. For all these people who buy condos, 360 square foot, you can’t build anything for that price.
Stephen Phillips [00:34:50] As opposed to your 600. That’s right.
Erwin Szeto [00:34:54] You know, and this came with the land, folks. You can’t build anything for this price.
Stephen Phillips [00:34:58] Let’s talk about the land.
Erwin Szeto [00:35:00] Before we get there. But, you know, buying for less. Then replacement value is a nice thing to do. It’s a good investment criteria. I think we’re I think we’re getting that here. You can’t build this house like if you minus the land. I don’t know. What do you think? Lots more. Hundred grand.
Stephen Phillips [00:35:16] You know, it’s hard to say out here. I’ve seen some of them go on a lot higher. Call it 150, 180, 150.
Erwin Szeto [00:35:22] Okay. So 40, 30 grand less 150 for the lot.
Stephen Phillips [00:35:26] Big lot.
Erwin Szeto [00:35:27] So you’re saying the building is worth about two 8200 square feet. So it’s $2.33 a square foot is what you buy. Right. Plus basement. It’s a 233, a square. You cannot build it.
Stephen Phillips [00:35:38] When you start putting it that way. You’re making me nervous, like I’m doing the math wrong. Yeah. No, it is though. Business. I don’t see how you could build this house. No, I don’t see that. And I think that’s a common thing. That is part of the deals that I’m looking at right now. A lot of the deals and we’re looking at, I don’t think even if you had to gut the entire thing inside, it’s hard to build it back up at the price you’re buying it for. I can’t even imagine.
Erwin Szeto [00:36:02] So I’d argue this is looking good so far.
Stephen Phillips [00:36:07] Yeah, I like this deal. I’m really excited about this deal. Well, it’s a big lot, right? It’s a huge like all the.
Erwin Szeto [00:36:12] Lots and belvoir here is how big.
Stephen Phillips [00:36:14] Huge. Right. I got the dimensions. Don’t have it offhand. I think it was a 50 and change by 140 we could pull some stuff. It was. Yeah, it was a doozy of a light. We walked it. So anybody who was on our tour will know that light was good. If you want to come and see that the numbers will be showing them on Saturday. But yeah, the light was beautiful and garden suite potential. So the thing about Bellville, just if you’re not aware we can do garden suites in Bellville, but they fall under our accessory apartment or accessory dwelling bylaw. So you can’t do both the duplex bungalow and the garden suite. Yet because of our density was too low, yet we haven’t gone to enough properties. So what clients are doing is finding properties that have potential for garden suite for future use. This could be added down the line and or rent the entire single family home in the meantime and then put the garden suite in the back as the next step. So this particular property client’s going to do the basement first, but there is more than enough room in the back to put a garden suite down the line. That’ll be two bedrooms and, you know, another 800, 900 square feet. Easy.
Erwin Szeto [00:37:28] I love real estate with options, but I know you’re really not a fan of condos for folks who don’t use the. You’ve been on the podcast before. Back in April, Steve went to hear about his rant about it condos. It’s all there if you want Steve’s full story as well. It’s all items on the April episode, but for now we’re just go focus on deals. Yeah, I love real estate with options because if the property has options, we’ve seen it before. If a house can have a basement suite, doesn’t have to happen. Just the fact if it has a ceiling high in the zoning for basement suite, those houses sell more than the equivalent house that does not have those things right. So again, I want a house with options because I know it’s worth more even if I don’t do the work, even if I never build a garden suite. I know my property’s worth more because it can it can support one.
Stephen Phillips [00:38:15] I also think in piggybacking on to that that statement, it’s also it’s very true. I also think that your listeners and our clients, I mean, not to be too presumptuous, they’re quite advanced compared to the regular, regular market. Right. It’s not everybody looking at real estate is even thinking about future use of garden suite. So when you’re using that knowledge and you’re buying with that, you kind of also have to hold on to that, that you’re way ahead of the curve. So you may not see or realize that potential value until X amount of years down the line. That’s okay. You were in early, right? So like if you buy the property today and you turn around, go, yeah, but I could put a garden suite on it and nobody else cares. Don’t worry, it’s good that you know it because you’re ahead of the curve. They’re all going to catch up to you. It’s just a matter of time before they realize why that was important. That you did that.
Erwin Szeto [00:39:10] Mm hmm. Fantastic. And then what do you think? What’s the property can be done once the duplex can be? When it’s done? Three bedroom, a.
Stephen Phillips [00:39:17] Three bedroom up, two bedrooms down. There’s a requirement of Belleville that only do two bedrooms in the basement. So that’s fine. We’ve put in pretty conservative rents; I think for what I’ve seen a lot of new build duplexes like this getting but upstairs we’ve got it in at 2200 2250 plus utilities and then downstairs looking at again about 800 plus utilities. It’ll be separate everything because it’s new build. Again, property management in the area is about $200 for the duplex. I’ve got 100 grand in there. I’ll put I’ll send you the spreadsheets when we’re done. But basically when I run through everything through our calculator, it’s just over $1,000 a month.
Erwin Szeto [00:40:01] Wow. Yeah. Worker Endowment Month. I get four grand rent a month past 12 months. 48,000 a year. Oh, my Lord. Felicitas benefit. This is special, says the investors doing better renovation themselves.
Stephen Phillips [00:40:16] It’s an anomaly. Yeah, but even then it takes out of the outflow of capital. So it’s taking the original capital expense down, but it doesn’t affect the original by too much. So. So. Yeah, I think it’s a good one. There’s a couple other little anomalies in here that are that are interesting, but we’ll save that for Saturday.
Erwin Szeto [00:40:35] But still, numbers like that’s the rent is 9% of purchase place plus renos like that’s phenomenal. And the tenant pays all utilities situa you split them.
Stephen Phillips [00:40:47] Yeah. And I think if you’re looking for like social proof, there are we have a mutual person that we know out here in Bellville doing some deals and it’s all over Instagram. What they’re getting on the rent. I’m not making them up. They’re kind of kind of being advertised here.
Erwin Szeto [00:41:04] Mm hmm. So before I move on to prop number three, how important is it to have team? How important is it to have contractor and property management contacts?
Stephen Phillips [00:41:11] Okay.
Erwin Szeto [00:41:12] So in relationships, this.
Stephen Phillips [00:41:13] Is it’s very, very important. The contractor aspect of here is it’s complicated. It’s very complicated to get like in the sense that there is a waiting period for a lot of our good contractors here. They’re not just ready tomorrow to start the renovation. They’re not ready to start anybody’s innovation. Right. But as far as property management is concerned, we have that locked in there, ready to go tomorrow. Sign them up the center of the contract. Everything’s good to go. As far as general assistance with drafting and documents and paperwork and city dealing with all of that’s under control. You just. But, look, when I’m dealing with my clients, I’m trying to prepare them for what strategy we can use to kind of wait until the contractors are available. So this is based on the individual investors kind of background understanding thresholds where they are with financial, can they hold the property and pay the bills and float it while we wait? If not, then we may be looking at turnkey. Yeah, we’re looking at turnkey or we’re looking at a property. So what is a single family renting for right now? For the most part, you cannot find anything renting under 20 $400 a month plus utilities. Pretty much any house. So, you know, that’s a pretty good start if we’ve got. Now I have another property that I was just looking at with a client who is entertaining this property because it’s very interesting. It’s a 60 by 220 foot lot inside the city, like inside the raid on the transit lines and everything, which is a big lot there and the property.
Erwin Szeto [00:42:57] A lot anywhere. Steve Sorry about.
Stephen Phillips [00:43:00] How I live out here. There’s a lot of big lots. I’m talking about like two in a three and four acre lots everywhere. But. So anyhow, this property has just recently been flipped. The inside of the home is immaculate. It’s been done. Amazing. But the flipper is flipped into the wrong part of the market and it needs to get rid of this property. It will sell in the high force. It has future use of a massive garden suite in the back. No problem. This property is one of those type of deals where you can rent that. Right now it is in the same quality as new construction. You’re probably going to get closer to 2800 plus utilities for a property like this. Three bedroom, one bath upstairs, full house. So that property, although not cash flowing, a significant amount of money right off the bat, does put you in a position where you’ve got a very well finished house turnkey ready to go while you set up for your garden suite in the back. So things like that are options for people that they’re starting to entertain, right?
Erwin Szeto [00:43:55] Well, they have they have rental income commitment right away. There’s something to be said for that.
Stephen Phillips [00:43:59] It’s not costing them three grand or two grand a month in carrying costs while they wait for contractors. So give them a bit of options.
Erwin Szeto [00:44:08] So again, to each their own, I don’t really think there’s bad investments, but again, for some people that might help them sleep at night knowing that the properties aren’t tenanted right away, it doesn’t even.
Stephen Phillips [00:44:19] Go to like it doesn’t need anything and it’s done very well. And then go to like the first part of our conversation where you are buying a 60 by 220 foot lot in the four hundreds with a house on like those type of things are also could be valued like it’s hard to find something like that you know six months ago in February or whatever it was, we were we were killing for deals like this. So they’re all still good deals. They just the interest rates are higher, that’s all.
Erwin Szeto [00:44:49] Isn’t the flipper going? Take a bath on this. They start in the four hundreds.
Stephen Phillips [00:44:52] Yeah. This goes back to dangerous times to be a flipper.
Erwin Szeto [00:44:56] Steve, I’m sure people gonna be looking for this. Where can they find. Where can they reach out to you if they’re interested in looking at property in Bellville and surrounding area? So we should just clarify that folks like we’re talking about Bellville now, but Steve goes from West Kingston to Oshawa.
Stephen Phillips [00:45:11] So the deals are yeah, the deals are going into different markets. Like we have people starting to look at different markets like Coburg, which is a nice growing market and values are going to jump much higher there. So there’s different markets along that corridor as well. One corridor, but particularly right now we’re talking about Bellville deals. But yeah, Instagram I guess is the most conventional way people reach out to me.
Erwin Szeto [00:45:35] Funny how the world has changed.
Stephen Phillips [00:45:37] Yeah. Email but you don’t I don’t know you sometimes block given out emails on this.
Erwin Szeto [00:45:42] So I just worry because again the internet’s forever at least Instagram you can say bye to it email it’s hard to say bye to.
Stephen Phillips [00:45:51] You know what? If you reach out to our team at Islwyn, they’ll put you in touch with me pretty quickly. I think everybody on our team connects to me pretty, pretty fast so we can help either with.
Erwin Szeto [00:46:01] Stephen Phillips on Instagram or the handle is island underscore on underscore the underscore east side of the link on showing us folks all right now it’s property through that we’re talking about the flipped product. How is the workmanship on this flip product on those photos?
Stephen Phillips [00:46:19] Man, it was good. It was good. It was actually a very good, finished product. Like, I’m harsh, just like the rest of our team is. I’m pretty harsh on the contractors.
Erwin Szeto [00:46:29] Expensive home renovation background. So you know what workmanship supposed to look like and that’s reengaged as well. How I want my rentals rated is different than how I want my home renovated. So it’s different standards, right?
Stephen Phillips [00:46:44] And it’s a, you know, to a certain degree and I not. Yeah, I just I know I have a gauge of what is what is in line with what it should be. And it was it was good. It was a good quality product. I was happy with it. So I think that that’s definitely an interesting phenomenon is there seems to be a few of them out there. These flip properties, more and more are coming online and they’re in a position on the price point where they’re kind of a little out of reach still for the first time homebuyer. And they’re a little you know, they’re in a weird zone. They kind of hit this weird place. And so they’re just something to be taken advantage of from the investor point of view. If they have what they need, it doesn’t work for everyone, but if they have the right or they have something, it could be very appealing.
Erwin Szeto [00:47:27] Actually asking.
Stephen Phillips [00:47:28] I’m going to hold that to myself, let them contact me to find out because it may give too many hints and I’ll lose my lead.
Erwin Szeto [00:47:34] Man of mystery I like. Or be there be a third eye when meeting the video.
Stephen Phillips [00:47:41] The purchase price is definitely that I’m proposing is definitely lower than the list price.
Erwin Szeto [00:47:46] Feel sorry for the flipper, but you know, you can feel sorry for the flipper. But you know, I signed to a flipper yesterday. A pretty big one. I think you’re sharing that. They’re gonna take, like, a 30 grand hit on the current deal. But they made tons of money. Couple years. The professionals. The professionals. So, you know, it sucks to lose money on a deal, but you can’t just look at one deal, get to look at it, to look at the whole picture.
Stephen Phillips [00:48:10] I think that’s the biggest mistake I see young investors or newbie investors look at is they get obsessed on the one in front of them. And the guys that I’ve meet that are very long term minded, they know that it’s a long game. You’re going to win some; you’re going to lose some. You try to win more than you lose. And for the most part, you don’t you don’t take massive, massive risks. But if things don’t always work out the way you plan it, don’t let it ruin your life and your business. Just keep moving on. You just and you move on to the next thing, right? It’s about that. And so the pros tend to like to look at those scenarios like these type of choppy waters part of the game, like it’s just part of the game. And they’re going to get a lot of good buying opportunities right now that hopefully they’ll make up for any loss that they’re taking right now next year when the buyers kind of cycle back out and they make some money. So it’s hard to yeah.
Erwin Szeto [00:49:03] I think people understand that the consistency of success in real estate is very high, unlike general entrepreneurship, small businesses. So lastly with that. All right, awesome. Steve, thanks for sharing. No problem. Is there another property to talk about? We’re good.
Stephen Phillips [00:49:20] Let’s put it this way. We’ll leave a teaser. I have another property that I’ll be talking about at the I-when meeting. If you’re interested, you can. Come on, we’ve got a couple more to go through and some of the deals that we’re looking at right now we’re going to be covering on Saturday on the Iowa meetings as well. So come and have a look because there are a couple of properties that we’re targeting and watching and keeping our eye on.
Erwin Szeto [00:49:41] Or just reach out to. Steve, if you’re open minded and nice.
Stephen Phillips [00:49:48] Please, nice people. My wife has a sign at our one at our building and it says, Be nicer, go home. We tend to follow that rule being a single word, cool, be nice. But yeah, generally that’s the way it goes.
Erwin Szeto [00:50:01] Amazing Steve this year but like flip property talking about I don’t know how much you spend for and wanting to get that kind of rent it’d be over 700,000, maybe over 800,000 to get that kind of not right. Kind of rent dollar, but amazing. All right, Steve, thanks for sharing. And again, the whole point of this was so folks could get a taste of what investors are buying today and the deals we’re looking at, because if you’re not in the business like we are, I don’t know how you know, what’s in context is everything decrease?
Stephen Phillips [00:50:31] They said, yes, context is everything. Get the whole story about the market. Don’t just follow the main narrative because the main narrative is guiding you a certain way. And when you start to go into the trenches and look and see and find details, you’ll figure out that the main narrative may not be what you believe.
Erwin Szeto [00:50:53] It’s very good point. And we’re not saying that our deals are the best you can absolutely do. I’m sure some people can do better, which are going to work harder, a lot harder to find them. Amazing. All right. Thanks, Steve. Any final words?
Stephen Phillips [00:51:07] Thank you. People get out there and do something. I mean, take action. It’s a lot easier when this moment passes. Whenever this moment passes, people will look back at this opportunity and they will surely call us and they should about that. And that moment is the moment where my empathy for the shit about that is gone. Because we were here, we were working with other people, helping them. So let’s take action, get out there, see property, and then figure it out.
Erwin Szeto [00:51:39] Amazing. All right. Thank you, Steve.
Stephen Phillips [00:51:41] Thanks.
Erwin Szeto [00:51:50] 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, then sign up for my newsletter and you’ll learn of the next free demonstration webinar and 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 the 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. There are forget the cash flow reduces your risk. The more you have, the more lambs 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 about Store for free from my newsletter at WWW. Truth about Real Estate Investing dot CA into your name and email address on the right side will include in the newsletter when we announce our next Free Stock Anchor 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.