Episode Transcript
[00:00:01] Speaker A: If you're looking for the skills and tools to succeed in real estate investing, you've come to the right place. This show is about breaking through barriers, breaking through limiting beliefs, and breaking through to the life that you want to live through the power of real estate investing. You're listening to the Breakthrough Real Estate Investing Podcast. And now here are your hosts, Rob brake and Quinton D'Souza.
[00:00:29] Speaker B: Hello and welcome back, everybody. Appreciate you joining us again today. We've got another great show. My name is Rob Break, and with me again is Quentin D'Souza. Quentin, been here for a year now.
How you feeling?
[00:00:42] Speaker C: Awesome. Feeling good. I'm in Jamaica right now.
[00:00:46] Speaker B: Yeah, as usual. Not at home.
No, as usual. Just like out gallivanting around, climbing mountains, scuba diving, you know, enjoying what you've built with real estate. Really? That's what it is.
[00:01:00] Speaker C: Yeah, absolutely. Yeah. I'm getting my Patty certification today, so I should have that. My. That way I can scuba anywhere. I can actually say scuba. I can scuba.
[00:01:14] Speaker B: Well, that's cool.
[00:01:15] Speaker C: Yeah, that's fun.
[00:01:16] Speaker B: And, and, and just because we've got a special guest today, I'm gonna bring him in right now. You know, today we have Sandy McKay returning to the show. And Sandy was a co host of this show until.
And so we're excited to have him back here and share what he's been doing with himself and the lessons he's learned over the last 10 years, real estate investing. So thanks for coming again. Wanted to bring in on the intro.
[00:01:42] Speaker D: It's awesome. I, I kind of biting my tongue because I was almost getting back into the flow of, of how we used to do these, and I was like, oh, I usually say something here.
[00:01:50] Speaker B: Yeah, so, yeah, so we'll bring you in. So then you're more than welcome to jump in on any time. So I, I think Quentin's got a couple little pieces of news or whatever that he wants to talk about.
[00:02:02] Speaker C: I wanted to. Maybe we can just add that to the conversation, but I wanted to say Sandy McKay is a seasoned real estate investor, entrepreneur and visionary leader dedicated to helping others achieve financial freedom through real estate. Originally from Greater Toronto area, Sandy launched his real estate career in 2011, buying his first investment property in Oshawa. 2012 rec. Recognizing Hamilton's potential, he put down roots there and became a Realtor with Keller Williams 2014. He quickly made a name for himself in the investment space, co hosting this very podcast, Canada's number one real estate podcast with over 2 million downloads until 2024. Along the way, he built multi million dollar Business in real estate, including Found Spaces Realty Group, Found Spaces Property Management and an investment company. In 2021, he expanded his impact by launching Keller Williams Legacy Realty in Vaughan, growing it to 100 agents in its first year. His passion lies in building high performing teams, creating generational wealth and helping others design epic lives through real estate.
[00:03:17] Speaker B: Wow, that's a lot, a lot of stuff going on there. And do you still have the Vaughn investors club?
[00:03:23] Speaker D: We do have the Vaughn investors club, yeah, we are, yeah, of course, yeah. And doing that. It's been a couple years.
It's going pretty well. You know, it's been a, the interesting couple years. So many interesting investment stuff happening and yeah, it's, it's been a lot. I'm super pumped to be here. Guys like this is even doing this short part so far. I'm like, oh, this is, it feels like right back into the swing. It's like we've never left.
[00:03:49] Speaker B: Do you have something in the news that you, that you're interested in talking about in the news.
[00:03:55] Speaker D: In my news or are you talking.
[00:03:56] Speaker B: About in the news? In the news.
[00:03:59] Speaker C: Interest rates.
[00:04:00] Speaker B: Interest rates. Anything to say about that?
[00:04:03] Speaker C: Tariffs.
[00:04:04] Speaker B: Yeah.
[00:04:04] Speaker C: What do you, what's your prediction? Where do you think interest rates are going to go before the end of the year? Like, let's say what, what's the bank of Canada right now?
[00:04:14] Speaker D: Is it two and three quarters?
[00:04:16] Speaker C: I think, yeah, 2.75. So you think that we'll get two before the end of the year?
[00:04:23] Speaker B: Below two?
[00:04:26] Speaker D: I would, I would say, I would say two, two and a quarter. Probably, probably down a little more.
Probably not, not a ton. I, I, I, I think we're trending down a little more.
[00:04:37] Speaker C: I think if we do get into this trade war and it gets, you know, heated and these, a lot of these tariffs stick, we'll probably below 2 before the summer.
[00:04:47] Speaker D: I would, if I, if that, if that's a, for sure a big F. I didn't, I just think it depends how long it's going to last. But I know Trump is what is, he's a negotiator and a businessman. Right. So I know, I don't know what's behind all this, but there's a, there's a, it's not just for the sake of tariffs.
[00:05:06] Speaker B: The issue is on our side. That's my opinion. You know, like when, when they're imposed for a reason and all we've got to do is fix the problem, then, you know, I think it's pretty easy to do. That's, that's what I think. I don't know. And then I wanted to ask you guys your opinion on this. Like, I don't think it's a bad thing, obviously, to buy Canadian. Of course, that's a great thing. But what a lot of people don't understand is that these companies, you know, all these Canadian companies, a lot of them are doing business on the other side of the border and it's really, this is really hurting them. So, you know, where I think it's, it's sort of naive that a lot of people think that, you know, oh, this is going to help Canadian companies and it's just simply not going to do that.
What do you think?
[00:05:57] Speaker C: I don't know. I, I, I, I do think that, you know, it is as a Canadian, and I'm a proud Canadian, I, I, I really do want to make sure that Canadian businesses do well. I, I think that the whole tariff thing is kind of like totally right out of the second half of the art of the deal by Trump, which is mostly misdirection and he wants something else and he's using tariffs to misdirect everybody to, I mean, if you look at the actual number of migrants going south and the actual amount of fentanyl coming into the, into the US that's been caught anyways, it's, it's not as significant as perhaps it is in Mexico. But also, I think that's not what he wants. He wants something else. And, you know, we, we can speculate what it is, but we don't quite know what it is yet. And this is just, you know, a bit of a ruse, in my opinion. And, but I do think that, you know, I, I'm part of the Toronto Business, Toronto Business Society, and you know, I'm involved in the entrepreneur organization still. So I, I know that there are businesses that because of this have opened offices and open facilities in the US So is it working? Yes. And have I been seeing it happen? Yes. When, when are we going to see this reflected in our economy? I don't know. In the short term, could be a couple months, but over 12 to 18 months for sure, we're going to start to see this, unfortunately.
[00:07:36] Speaker D: Well, I think, Quentin, you're right on with the, with the misdirection because, I mean, Trump's a master of the media and a master negotiator and he's using, I don't, we don't even, I don't know in what way, but somehow he's misdirecting from something else. And we'll probably see that play it over time. At some point we'll look and go, now I get, now I get it what he was doing. But anyone's guess is as good as, as good as the others for that. I don't know.
[00:08:00] Speaker B: The bottom line is, the bottom line is that at that time, whenever, whenever it's revealed because I think you guys are on to something there. It's going to be him that's the savior and able to help us out. You know, that's, that's the whole point. So yeah, it'll be, it'll be supposed.
[00:08:19] Speaker C: To be the 51st state and his, and his, his way to save us is to become that. I don't think people are going to appreciate that. Right. But it may be the solution that he proposes and we may not want that.
[00:08:34] Speaker B: I, I, I, I think you're probably right. I mean it's already been said.
[00:08:39] Speaker C: He, he's already started a bunch, you.
[00:08:41] Speaker D: Know what the, you know, one, one, one opportunity in all this is, is to, because there's so much uncertainty right now. There was, there was some uncertainty prior to all this even coming into his, his inauguration and everything and now there's even, just seems to be more uncertainty. And especially with the way the last couple years has been, people are already a bit on edge financially in general. Lots of people struggling and now even more uncertainty here with our election, or no election or whoever's running the country, all that sort of uncertainty as well. There's so much uncertainty and when there's so much uncertainty, it creates a lot of fear and then that creates a lot of opportunity. If you can put that aside and just look at what it is. And the real estate market is ripe for opportunity right now, which is a great thing for savvy investors who can block out the noise and just look at this and go, wow, money's actually getting to be pretty cheap again. There's a lot of motivated sellers and there's a lot like at all levels too, like, like small newbie stuff all the way up to the big development projects. All sorts of opportunities across southern Ontario for sure. I'm seeing, I've never, I've never seen this much opportunity in my 12 or so, 12, 13 years of really being in this pretty full on.
I don't know when the last time would have been this, this ripe for opportunity. I would imagine the 90s probably was the last time that it was this, this awesome of an opportunity for investors.
[00:10:08] Speaker C: Yeah, like sales have gone down the tubes right now. It's probably the lowest level in the GTA for probably, I'm going to say since 2008, 2009, probably.
So that means that if you're, if you have cash and you're ready to buy and you're, you can qualify, you know, you're good to go for sure.
[00:10:32] Speaker D: Yeah.
[00:10:33] Speaker B: And one of the things that we're going to talk to Sandy about is maybe if you can't even qualify, you, you look at bringing on partners and we're going to talk a little bit about sand with San Diego partnerships and how to make them work. But like Quentin said, we do want to go back and for the listeners that, you know, maybe you're new, tell us how you got started.
[00:10:54] Speaker D: Yeah, I mean, especially even thinking back to when I got started because I got started really in wholesaling real estate and what a great time to be doing that again right now, you know, finding off market deals and finding motivated sellers. I think, I wish there was this many motivated sellers back then because I.
[00:11:12] Speaker B: Think there's, that would have been so much fun. Yeah, it really is.
[00:11:17] Speaker D: That would have been a great time to be starting in wholesaling. Um, but that was kind of how I got started. You know, I actually the, the real thing that triggered my interest in real estate investing was rich dad, poor dad. Reading that book changed my whole outlook on, on, on life and on money and kind of gave me an excuse, an excuse to go be an entrepreneur, the excuse I needed to go be entrepreneurial because prior to that I was trying to find my way in this, in this world and not really fitting in in a lot of ways, a lot of the boxes that society likes to fit you in. And so that book gave me a great excuse to go be an entrepreneur and look at real estate, primarily because they talk a lot about real estate in that book. And, and so that really got my mindset in the right place, probably for starters. And then I, I came across an event that, that those guys were hosting locally, went to the event, learned about wholesaling and said, oh, you can get into this with no money. Well, that's perfect. I don't have too much money, so maybe we should look at this wholesaling thing. And that of course got us, you know, starting to talk with investors. We started building two, two lists, like motivated seller list and then investor list. I didn't know how useful that investor list would be. Big picture. But it was, it was at the time, it was the, the list of people that had money that might want to buy these properties that we were Search. Searching for. And. And of course, Rob and I met through that. We met actually a Durham real estate investment club Quentin, of course, founded and hosted by you. So, you know, great connections there, built over time. Yeah.
Eventually that led to us doing a few. A few wholesale deals. One of the wholesale deals, which we got paid out 25 grand on, which at the time was like just amazing, amazing payday. We put that right into our first investment property, which was in. In Oshawa.
What street was that on? Apple Street. Apple street in Oshawa.
[00:13:05] Speaker B: I remember. I remember going over there and you were trying to do renovations yourself, try to do drywall work. And I know because my dad has a drywall company, so I have done drywall my entire life. And I just went in and I was like, oh, my God, what are you doing? So I had to basically destroy everything you had done and start over again, help you out a little bit. I remember that. Fun times.
[00:13:30] Speaker D: I mean, trying to do drywall is a good description. That would be what I was doing. I was trying to. I actually think I heard maybe Quentin had a similar story or so I think it was you or I heard. I use this line a lot. I said. I usually say that was the one and only time I really picked up the hammer and did any work. Because after that, that was. And I just. I was just watching YouTube, trying to figure out how to do.
And then hanging a door. That's what. That's what actually killed it for me. I was like, I think I stumbled around for a day or so trying to figure that out. And I realized, not an engineer, I'm not a carpenter or a drywaller or any of these things. I'm like, I just should not try to be. I've never been handy. Why the heck would I be handy now? I might as well try and outsource this the next time.
But, you know, for the first. First project there, we learned a lot. It kind of stumbled into a bit of a burr style project on that one, which I didn't really understand the whole concept at the time, but we, you know, through that, we bought that house for 267,000.
We had one vacancy. We ended up filling, repairing, and renovating that upper unit and then adding a tenant there. And then we. We slowly moved the one tenant out of the main floor as well, and then up those rents. And then, you know, we turned that around in a couple less than two years. We sold it for 410,000, if I remember right. And we took those profits and moved it into Hamilton, which we had started to transition over into, where I ended up working most of my career now as a realtor and starting to help more investors. And we were really looking at Hamilton more primarily. And so we shifted that money over here, bought one of our, actually we used that money to buy our first personal property in Hamilton that we lived in. And, and then we just kind of went nuts in Hamilton for the, for the last decade and we just kept buying stuff here, started raising some money. We really used that first project though, as an example of what a brrrr project can look like and what the money could look like, especially for a partner to come in with us and show them how we could force the equity in a, in a, in a project and then, and then pull out some of that equity after a refinance. We just didn't refinance it, we sold it. But very similar concept.
[00:15:37] Speaker C: What kind of, what profile did you use for the type of properties that you were purchasing in Hamilton? Because usually there's some sort of profile that allows you to systematize the process, right?
[00:15:50] Speaker D: Yeah. And we, for the first, probably first, like six, seven years, we really focused a lot on the small multifamily triplex fourplex. That's why we like Hamilton. There was a lot of those, there was a lot of that 3, 4 unit property in inner city kind of house that that was either illegally or illegally chopped up into three or four units.
There's a lot of that product. And so we could rinse and repeat that over and over again. And we really built our model around that. It was, in hindsight, I would have gotten bigger faster because all those properties, right?
[00:16:25] Speaker B: Well, I mean, you only know what you know at the time, right? But you know, to say getting bigger too, that just means only not necessarily being more profitable. You know, I, I, you, you, you know, I think you did it right. You did a pretty good job, man.
[00:16:47] Speaker D: Yeah, we, we use, we use a lot of partners, a lot of joint venture partners that came in and you know, the, one of the issues is they're always going on title and that was fine, but I mean just that was another sort of thing that came up over time as people learned more about their finances and stuff. Like we'd do four or five with, with a partner and then there you go, I, I maxed out. What do we do next?
And so like that's fine. I mean, we did, we would always recycle their money, right? Do one deal, then try and recycle into the next one and the next one. And the next one.
And eventually you kind of realize, well, that's great. And we rinsed and repeated that like crazy. We did, I think the one year, we did 25 or almost 25 in the one year with that model. And it was great. Eventually we started to go into a few, like not necessarily a lot bigger, but at least commercial financing because that way we could actually just becomes more of a numbers play rather than what did the house down the street sell for? And it's just a lot more numbers based, as you guys know. And so you could really reverse engineer those numbers back a little, little easier to what the, the purchase price should be or price per door.
And you know, it becomes a little more of a math equation and a little more business like I would say overall. So we've done a lot of those now since we're still, we've still done the odd smaller Burr project here and there, especially with some of the partners that we've, we've worked with over the past and wanted to do another one. And we've here and there as we've come across some really good deals, we've made some of those work. But it also became a tough on management because we started our own management company in 2017 and we realized pretty quick how, how the management of all those properties looked versus managing maybe one building in one place and some efficiencies with that versus, you know, five fourplexes or 120 unit generally that 20 units can be a little easier to manage, maybe one boiler or furnace system and just a little more efficient in that case. Not always, but we found that, you know, having the management company and starting to work with some other investors that were buying bigger projects, we started to learn a lot more through that and, and started to tweak our model a little bit.
[00:19:01] Speaker C: So you, you, how many partners did you end up working with and what are some of the, you know, the benefits of working with the partners I.
[00:19:10] Speaker D: Think we would have had over, you know, in the last 10 years, then we would have had JV partners probably 25 or so, probably around that number and you know, a really good core, five of them. And then, you know, one thing I would, if I were to redo it, we would have, I would do it with a lot less partners.
[00:19:35] Speaker C: But partners that did, did more. Right.
Like those five partners. Those five core partners probably did more than the other 20 combined. Right.
[00:19:46] Speaker D: For sure. I, I, over time, you know, you really get to learn what type of partner you actually really want to work with and, and and that's going to be a little different for everyone. But you know, we're probably a lot, a lot of people would end up thinking like I did, which was we, we wanted people that were pretty silent. You know, we didn't want them getting in our way because we have our model and we know what works and what doesn't. And if, unless they're already an expert in the Hamilton area or wherever we're buying as well, or they were a contractor or you know, but in a lot of those cases then, then they're kind of, they're bringing maybe too much value to the table and maybe that throws off our, you know, that makes it not worth it for us to go into the deal at a certain percentage. Right. So you know, we always wanted the people that are very, very silent have other stuff in life that are, that's really important, family or work or whatever those things look like and, and just want to do that and focus on that. But they love real estate because they see other people making money in real estate and they want to get a piece of that and, and ideally do that in a very passive way. And, and then they've come across this model where they've maybe never heard of it or never been involved in something like that, where it's like pretty unique where they could, you know, put some money in and actually get a good chunk of it back out and really increase that, that ROI in the big picture.
[00:21:03] Speaker C: And are you using joint ventures or, or are you doing like GPLP structures?
[00:21:11] Speaker D: We're mostly joint ventures. We're mostly joint ventures. We, yeah, we've, we've, we've started and we, we were starting a. Right before 2020, end of 2022, we were actually getting into a more formalized GP LP structure on some bigger deals and we pulled the plug last minute because we had some issues with our partnership and that was like my, I've had a few partnerships that I've looked at in hindsight now and gone well.
Should have done some more upfront due diligence with, with the people involved and just, or just been more patient and let that, you know, as you get to work with people, everything's in. Real estate's a, you know, some version of a people business and really important to be partnered with the right people. Especially if you're going to be doing, you know, a one off deal is, is, is, you know, okay, maybe with someone that's not the right fit, but it's much better to go focus on like I, I wish I just focused on just those score five people and did more and more and more with them because I know what it's like working with them, you know, is, is exactly the right fit for everyone. And even I would often do deals with people that was more kind of, maybe I knew was kind of a one off for various reasons.
But you know, one of those is fine. But if you do like 10 of those or 15 of those, now you got 10 or 15 kind of, kind of not the right fit. And yeah, and then, and then those, and now you're spending time with those people and it's actually hurting the five that you really, really want to work with and they want to work with you. And so I, you know, I learned some great lessons in that and the amount of servicing of that relationship with the wrong person can really, really be a tough thing over time. And, and real estate's, you know, we're buying these for a longer term play. So it's not like we're doing, you know, most, for the most part we weren't doing a lot of flips or anything, you know, in and out. So you know, there's a long term conflict.
[00:23:04] Speaker C: Sounds like you had a bit of a big challenge then a couple years ago. Like was there a lot of assets that had to be sold off because of a partner or. And I mean that's obviously a con with different partnerships. But I mean this would be, this.
[00:23:20] Speaker B: Would get us to like what you've been doing for the last year. Really.
[00:23:24] Speaker D: Yeah, well, yeah, we've had. So I had a, I had a pretty big portfolio with one group of partners that ended up in, in some challenging times. The, the market kind of dipping really helped bring this to light. And I think it was one of those things where we had, we had built up a lot of assets and stuff together and, and from a financial perspective everything was going fine and from, you know, as we grew together, just started to want different things. And this was not just a, not just a real estate assets partnership. We were involved in some ways at least in operational businesses as well. And, and so now as we were building up and we had other JV partners working with us. So in some cases like three of us a deal or, or even four of us in some deals together. So it started to get a little complex. You know, nothing, nothing we, nothing f. Like nothing.
No major financial issues in it. Just a lot of complexity and a lot of, a lot of little things to work through and kinks. As the market started to dip, it brought, you know, a lot of Our partners got a little worried and all of a sudden we're looking at our, our properties and going, well, maybe we want to exit on some of these underperforming ones. And it wasn't that easy to exit on some of them because the market had dipped quite a bit.
[00:24:42] Speaker C: Yeah.
[00:24:43] Speaker D: Yeah. And you know, honestly, and thankfully we started, you know, buying so many 10, 12 years ago that, you know, some of these little hiccups in the last five years weren't, weren't horrible. But I know, I feel for a lot of people who started in just the last five years because they were definitely having challenges. And it's, it's. Some of it is like, you know, it happened all so fast. As we all know, just the market going, going backwards. Like in Hamilton area was mostly 30, probably dip in, in a lot of cases, so pretty substantial. You know, when you're, when you're refinancing these two in a BRRRR model and you're going at 80% loan of value. So if your place is worth a million bucks and you refinance at 800 and now your property is worth 700, you know, you're underwater. So we didn't have too many of those, but we had, we had a few of those that we needed to try and exit on. And, and you know, ultimately I've learned a lot. I've learned a lot about the legal ramifications of some of that. I've learned a lot about dealing with lawyers and what the costs are there. Not just financial costs, but time and energy costs and emotional costs. Enough to know that our system. Oh yeah. Enough to know that our system's pretty broken for that too. Just as it is with the tenants and landlords side of things, it's also broken. The legal system is broken in a lot of ways.
Not a fun, not a fun place to end up in. So, you know, at the end of the day, you know, just who you're in business with is so important. And it. Doing some more due diligence up front or just, you know, what it was for me, probably more so was we were winning financially and I kind of early on in my career that was, that was important. But as we started to have more financial success and then I started to look at other areas of life and our values just really didn't align in a lot of ways. And then I started to say, well, this is not like doing that decision doesn't make sense to me. If it's just for money. That's not a, that's not A and maybe they would think differently in those scenarios. So just started to be misaligned. And in hindsight, I would have exited a little sooner having to see those little warning signs. But it's hard when you're actually succeeding and you're, and you're winning in a lot of ways. It's, it's hard to really pull the.
[00:26:55] Speaker C: Plug on something financially. You know, I, I think that that's, that's always a challenge, especially when you're, you know, that's the first time that you've experienced that type of financial success, right? Or you're kind of growing into that success. You're like, this is the train I want to be on this train. And then you're like, you know, you kind of can reflect back and go, oh, wow. I mean, the finances were good, but there were so many other things that I wish I, I knew. And now that you know that, in hindsight, you can kind of reflect back on that. But if someone was listening to this podcast and they were about to get into a partnership, what advice would you give them about, you know, having those successful partnerships other than, you know, just.
[00:27:45] Speaker B: You said vet them.
How do you necessarily vet a partner, you know, deeply enough, I guess, that you, that you know for sure you want to be with, want to be in a business with them?
[00:27:58] Speaker D: Well, whether you, whether you know you want to be with them or not, if you're doing something with them, regardless how long it takes or how quick, you definitely need to have something well written by lawyers about the partnership and a very detailed exit strategy. That's one of my challenges was the exit strategy wasn't clearly defined enough and it took a lot of time and effort to clear that up.
So having a proper, depending what it is, a shareholders agreement or of course joint venture agreement and some sort, depending on what type of partnership you're going into. Something that really clearly outlines the exit strategy or strategies, depending on the scenarios.
Always have that in writing and have the lawyer review it both sides and really make sure that that's clear because that'll help you out of most challenges. If it's, you can always resort back to what's defined in that agreement. We didn't have a tidy enough agreement or agreements in a lot of those cases.
So that will always help. Definitely don't skip that step. I see a lot of people, I still see a lot of people doing this, and I did a little bit too, is you find at least an early looking synergy that makes sense. Know someone's a contractor. I'M a, I have some money or I'm a real estate agent or I'm a mortgage broker. We can put the deals together somewhere in there. It's like, seems like a nice fit early on and you draft up a, let's draft up a quick one pager and just let's, let's go do this stuff together. Well that's, that's probably not a smart way to do it. As quick, as awesome as the opportunity is or as great as that deal is that's sitting on your plate, that needs to close in a month or needs to be signed on in a week for you know, often the best deals are not there forever. Right.
[00:29:35] Speaker B: But I've done too many times, I have to admit that most of my JV agreements were not in place before the property closed.
So I mean it's, you'll get away and it has gotten me into trouble. It's gotten me into a position where you know, for lack of wanting to, to have the, you know, hey ride that you've been having for the last year, just sort of saying okay, we'll do it your way, you know. And I know that it's not that easy a lot of times but you know, I found myself in that situation more than once and, and that's not good either.
[00:30:13] Speaker C: Right.
[00:30:13] Speaker B: Just because I was the same thing. We didn't have a very clear agreement on, on exit strategy so.
[00:30:22] Speaker D: Well, you'll get away with most of those is in my experience most of them are fine because you're in most cases you can figure that but small percentage, 1% or less even that, that don't go that well and have a tough breakup, it might be a really tough one and it might, might, might be really, really not worth and all the other ones combined.
But yeah, I think, I think you know the agreements are huge and then just really being patience, you know there's as good of a deal as a deal is in the moment. You know, I've, as you get as you spend more time in this industry, you realize that there's, there's always going to be a next deal. I mean the real grand slam home run deals, they don't come around every, every week or every month. But you know, having, having the best deal ever is if it's, if, if you lose peace, peace of mind, you know, inner peace, it's not worth it in the long run in my, my experience. So doing a lot of great deals, a lot of good deals. I would prefer that all day long over with good people or great people rather than a couple grand slam deals. But I gotta sacrifice my whole, like, version of the life that I lifestyle that I want to live. It's not really worth it might be worth it for some people. It might, might. You know, depending on where you're at in your career, too early on, those, those are a little more attractive. As you start to, you know, mature a bit, I think those become a lot less attractive because it's not just about making money anymore, Right? It's about the life that you want to live, designing that perfect life.
[00:31:52] Speaker B: It's interesting because you said you would have grown quicker, you know, if you, if you went back, you would have tried to grow a little quicker. So how.
[00:32:00] Speaker C: Bigger? You said bigger. Right? So.
[00:32:03] Speaker B: Oh, is that what you meant? You meant like, you meant like, move up to multifamily sooner? Is that what you meant? Okay, I gotcha. I gotcha. All right.
[00:32:12] Speaker C: Why is that? Why, why would you say that that's something that would be more important to you? And believe me, I agree. So.
[00:32:21] Speaker D: Well, so in my experience, even from a capital raising, if you're raising money for those types of deals, it's almost the exact same amount of work or sometimes even easier to raise a million dollars than it is to raise like 2 or 300 grand. And you're also starting to deal with a little bit of a different type of person. So when you're dealing with the people that have a few hundred grand, or let's say 500 or less, generally, you know, they're a little more novice. They're probably, maybe they're getting that from a home equity line of credit or, you know, wherever they're getting those funds from, especially if it's money that's not cash, it's something they're paying interest on, they're going to be a lot more paranoid about that money. And, and so it creates a little more anxiety through that, that partnership. In a lot of cases, if they're investing a million or more, you know, a lot of times you start to get into more sophisticated profile or, or someone who just has a lot higher net worth and can be a little more comfortable loaning out that type of money and, and it becomes a little more business, like a little more formal. And I think those more formal arrangements tend to go. Not always, but they tend to go a little more, a little more smoothly, and they're just a little more formal. And I think those are, for me, those are, those are better deals in a lot of cases. And, and like I said before, too, the, the Commercial financing plays a big part in there where you can really work the numbers a little more directly and be confident in the math and the efficiencies. A lot of the operational efficiencies. There's also a lot of different mortgage products now in that, in that space with the whole MLA select program through cmhc. You know, there's some kinks and issues with that too, but it's, it's a great program that came out a couple of years back now, a few years ago now I think that you can utilize for those bigger projects and, and this is not available in the typical residential financing world.
[00:34:13] Speaker C: There's different points. A point system where it allows you to get a higher amortization and a lower debt coverage ratio in order to pull out more capital and reduce your overall cost. And the, the dollars that are associated with that are like how it's backed, right? Like because you're, it's an insurance product so they have like bonds or they'll have you know, a backing to them. Canadian mortgage bonds that, that are associated with particular product. But it's a mandate as well by the government in order to. A federal government in order to encourage specific types of housing as well like energy efficiency, affordability, accessibility, whatever mandates that they have. But Sandy, are you, are you comfortable talking about some of those like how you use that in your multi family.
[00:35:13] Speaker D: Yeah, we've only done a couple of them actually from start to start to finish at this point. But you're right, there's a point system and a lot of the.
So there's three main areas, right? There's your affordability, there's affordability. What are the three? There's affordability, accessibility, accessibility and efficiencies. Energy efficiencies. So like the affordability and the efficient efficiencies are probably the easiest one. Accessibility we've never really touched much on just always be, you know, it's doable but it's was always a little too much of a, of a undertaking for us.
You know, I think for a lot of you know the, it's evolved as we've been doing it. They've changed up the system too a little bit which is one of the challenges because you get involved in the project and you're really looking at a one to two year, three year play in a lot of cases depending on the size of the, of the project.
And CMHC doesn't work fast so it's, it takes a while. It's very, very cumbersome and getting all your paperwork ready and, and all that we've needed some, some lots of help along the way with a good mortgage, mortgage broker. And if you do it right, you can get up to 95% loan to value and 50% amortization. If you, if you gain, I think it's 100 points, 50 years amortization, 50 years.
[00:36:38] Speaker B: Oh, well, okay.
[00:36:39] Speaker D: And 95% loan to value. When you do the math on that at the end, like, you can really, you can really make the numbers work really well. You're, you, you're getting into some high, you know, potentially depending on how you look at it, some high, you know, high ratio there in terms of the value of the property. But you can, you can really, really make those numbers work well. And most people miss the efficiency part of it most. That's in any project. I think most people miss that. Even if you're not doing a MLI product, most people look at, okay, I'm going to go and increase the rents. That usually involves potentially working arrangements with tenants to increase their rents or to have them move on, which is one way to increase the value of the building. A lot of people miss the efficiencies. Whether it's energy efficiencies for the CMHC products or just general efficiencies in the building, really working those expenses down can be a great way to increase the value of a building and increase that net operating income. A lot of people miss those. And most buildings that I look at, older buildings especially, have a lot of opportunity to increase those efficiencies.
Could be through different heating systems, water, what are those called? Like the low flow systems, things like that, that can really create a pretty big impact and for the cost up front, you know, that's why we love those, those products for the cost of fixing those, you know, or the cost of increasing or having a tenant, you know, move out, which is a, you know, hot item, always is how much that costs to get someone out. But when you increase the NOI by.
Let me do the math on this properly. If you increase that NOI by 10 grand, you're increasing the value of that building substantially more than ten grand.
And depending those investments up front can really create a huge uptick in the value, which also creates your ability to decrease the equity. Sorry, I'm shooting a podcast. No, I can't.
[00:38:47] Speaker B: It's okay.
[00:38:49] Speaker D: Sorry, my dogs are about to jump on me.
[00:38:54] Speaker B: That's cool. Don't worry about it, man.
Stuff happens, right?
I saw. Did you ever see that clip where the guys, do you ever see the clip where the Guy's doing like a news report or something and his kid comes into the room and he's like going like this and trying to like, like. And someone else comes running in, ducking down and grabs the kid. And I'm just like, man, wouldn't it be better to just grab your kid and give them a little hug and then pass them off to somebody? You know what I mean?
It looks a little better than, than, than freaking out. So I've had my kids walk in and my cats make noise and all kinds of stuff. It just happens.
[00:39:39] Speaker D: Did I finish my point there? Where did I leave off there? I was talking about the numbers on the.
[00:39:43] Speaker C: Yeah. On the energy efficiency that there's, there's just not, you know, not enough attention paid to those other things that you could do to increase the noi.
[00:39:54] Speaker B: But, but do you have to have a certain, like, you have to have a certain all over efficiency level, which could be very difficult, some of those old buildings. Right.
It's not just a certain, like, it has to be all or nothing, doesn't it? You can't just do one or two things.
[00:40:14] Speaker C: It depends on the number of points that you need and, and where you're. You're doing them. Right. Sometimes you can be caulking windows or changing bulbs from, you know, incandescent to LEDs. And those, those all add up. Or changing the thermostats, the smart thermostats. Like, it doesn't always have to be super expensive too.
[00:40:35] Speaker B: I, I see what you're saying, but, but I'm talking about as far as the, as far as the CMHC program goes.
[00:40:45] Speaker C: It'S just the number of points that you get. Right. Like it depends on what you do in order to get the, to like the, let's say your goal is to get to 50 points, you'd hire an energy assessment company to come in and give you the things that you need to do in order to get that point. And then they would add that report along with your application to cmhc, and that's how the points get established. And then you have a certain amount of time to get it all done.
Right. It's an interesting process, for sure. Yeah. I mean, that's a challenge in itself. Like CMHC changing the rules all the time you're about to do something and then they change the rules again. Right. Like the whole private. Moving from private funding to cmhc, they made a rule that you couldn't do that. Well, all of a sudden there were people who went bankrupt because of that, because they were all in private and they couldn't go directly to cmhc, which was what their plan was. So they had to get bridge financing which much more expensive. Right. And it can really mess people up. So I mean that's a challenge. But you must have had different challenges in real estate investing. What are some of them and how did you overcome them?
[00:42:04] Speaker D: I mean that's, that's of course, I mean ultimately one of the things that I learned now at this point is because I there's always this constant debate about, you know, how, how important cash flow is or, or not or how important appreciation is versus cash flow. And you know, all different markets offer different, different variables for that. Right. And we've now, now looking back on our, our model we, we used to do a lot of the Burr strategy, right? And usually for a BRRRR model you're refinancing about as high as you could go and really trying to maximize that so you can potentially as you go seeing, pull out as much money as you can.
Sometimes good in short order, but sometimes dangerous if you're, if you're, We've all seen that with the interest rates in the last few years. As those interest rates change, all of a sudden that positive maybe $500 cash flow becomes negative 500, negative 1500.
That puts a big strain on, on that. You know, one of those is maybe not so bad but, but 20 of those all of a sudden you're in the hole pretty big every month. And, and you know, thankfully we started long enough ago that we didn't get too caught up in that. We did have a bunch of properties that went from being somewhat positive cash flow into, into negative and into know, a thousand plus negative dollars every month. And, and really, really learned about the importance of having the, that foundational chunk of your portfolio being very cash flow positive.
I mean most, in most cases I look for basically everything to be cash flow positive. But, but I've looked at you know, a lot of the Canadian southern Ontario markets lately and it's, it's right now there's some opportunity to find some cash flowing properties. But for a while there it was extremely difficult to find anything that was cash flow positive and buying those properties at running your numbers at 2% interest rate or something, it was just very silly and a lot of people did that and we did that in some cases too.
Some of those challenges over the last few years have been around that and really making sure that we're buying something that can cash flow regardless of the interest rate, regardless of you know, market fluctuations. And really having more of a foundation of that. And then because I, I still really believe in, you know, cash flow is amazing. Big, big wealth is generally not built on cash flow. It's generally built on the appreciation and equity growth over time. So I, I still believe strongly in having that and having a lot of your portfolio be, you know, I think 70% should be pretty heavily cash flow positive and focused. And then if you start to add on afterwards a lot of the, you know, you can start to dabble and maybe take some risk into some bigger appreciation projects or development plays or, or just buying a great asset that's maybe not heavily cash flow positive but it's a great asset in a great location and long term is going to really serve your portfolio well. But you can't, you shouldn't start with doing those as I started with doing too many of those and not enough of the just good solid cash flowing properties. But I've also learned too that's you know, great cash flowing property in a bad area is also not that sustainable. And we've bought a whole bunch of properties in Hamilton that were in I would say probably seed quality neighborhoods and, and they did cash flow pretty well on paper.
But.
[00:45:23] Speaker B: Right.
[00:45:24] Speaker D: You know, watch that, watch that over three, four or five years and start to see the challenges that come up with the tenants, tenant issues, tenants not paying even. We've done some really nice houses and not so great areas and usually for the first tenant cycle it's, it's pretty good. And then you know, usually people start to realize shortly after they move in maybe or, or through the process there that maybe this isn't the neighborhood they want to be in. Although the house is great, you know, they tend to leave pretty, pretty early or sooner than we want them to. And so you know, look at a 5 to 8, 10 year outlook on a property like that and it's not as great as it is in that, that, that performer that you saw online or that, that initial analyzer math that you ran. And so we've had a lot of challenges around that that we've had to look at and address and change up our strategies because we've early on bought so many of those types of properties that we now in hindsight probably wouldn't buy. And that's what we've been doing a lot the last couple years kind of right sizing things and sure that we weed out some of those, those, those ones that are, you know, sometimes it's great. We have still a lot of properties in some, I would say Pretty mediocre areas. We're not buying all in, in fantastic areas. But I would, I would continue to look for more in the middle of that and start probably do a lot less in the challenging neighborhoods and, and stick to that B quality neighborhood which is where most of our portfolio has been. But most of those properties have been, have been great to own. Most of the challenges have been in the tougher neighborhoods where the numbers might look better, but they're, they only look better for a short period and then they start to look worse over, over the years.
[00:47:06] Speaker B: But it's interesting because what I'm gathering is like a big, well, like the big picture lesson here is that there's going to be obstacles. You're gonna, you're gonna think that you're making a good investment here, you're going to think you have a good partner here. You're going to think that I should renovate the house to this level in this neighborhood. And that's not the best idea. So the bottom line really is like they've got you through all of this, is that whenever you face the challenge, you, you said, okay, well we've got to get through it somehow and we're able to reposition it somehow, maybe sell it maybe, maybe, I don't know, lower your rents or whatever you've had to do. Like, but there's always a way around it. And that's what I'm gathering from like everything that you've said, repositioning of some kind to get yourself through. It's not going to be easy.
[00:47:55] Speaker D: I mean we've had, and no, and we could go through tons of stories like I've had murders in our properties, we've had suicides, we've had gang related crap going on. We've had weird, funky sexual stuff happening. We've had so many interesting sort of unique things, seemingly unique, but I think it's happens all over the place. But, and then when it first happens, you're like, whoa, that's interesting.
So we've had lots of funny, it's not funny, sad sometimes funny stories that have gone on and you know, those sort of things. You either, you can take two points of view. You can look at it and say, oh, that is, that's terrible, I'm out of this thing. Or you can look at it and go, okay, what's the lessons I can take away from this so that I can maybe avoid this or do something better next time. And if you, if you continually, you know, it's not always easy in the first, first moment. But you know, give it five minutes, let it, let it blow over, and then take that approach of, okay, this is, this is just a challenge. I'm going to learn something from this and I'm gonna work through it and learn and do something. Do it better next time or more smarter next time.
[00:48:58] Speaker C: Great mindset. That's, that's, that's part of the mindset of a real estate investor. Right. You need to be able to.
[00:49:05] Speaker B: Yeah, that's the bottom line. Yeah.
[00:49:08] Speaker C: You win or you learn. Right? That's it.
[00:49:10] Speaker D: Win or learn. And now, well, you're gonna, you're gonna, you're gonna always like. And you're gonna always. Sorry, just one more thing on that. You're gonna always, you're gonna always come across these things and you have to take action regardless. Because if you don't take action, like, that's one of the things with taking a lot of action is you're gonna have these challenges. And it's a great thing because the more action you take, the more of these challenges you encounter, the more you learn, the more you grow faster. And I would way rather that than sitting around waiting for the perfect scenario, making sure everything goes perfect and then I buy one deal in my life, you know?
[00:49:45] Speaker B: Right, so you're saying you gotta invest to be an investor.
[00:49:50] Speaker C: Yeah, I would take actions for sure.
[00:49:53] Speaker B: Yeah, exactly. No, it makes sense. And I wanted to ask you the last question because you'll meet you. Everyone's got to go here. But what, what are your big plans for the future?
[00:50:08] Speaker D: You know, we're continually building our portfolio. We are, we're sort of buying some properties in Cleveland. Actually tomorrow, as of the recording here tomorrow, we're closing on our first two properties in Cleveland.
So we're, we're doing some. Yeah, we're starting to build up a portfolio there, which I like Cleveland. I'm not, I'm not going to sit here and say Cleveland's the greatest place to invest your money. I like the market for cash flow play. And as we, as we develop there, hopefully we'll. I like Ohio. As a general rule, it's a, it's a lot more landlord friendly and, and I think there's some good opportunities there. But that's kind of a starting point for us and we'll see, maybe look at some other markets as we start to go deeper on the US Starting in Cleveland seems to be, it's a comfort, comfortable place. It looks a lot like Hamilton.
It's, it's drivable. It's, it's a place we can start with and then build our credit up in the US as well and then start to get some better financing options and go from there. So we're doing that and then we're really actually growing our property management company quite a bit. It's something we, I see some opportunity in across Canada for sure and maybe even into into the US at some point. But you know I really, I really look for and you know, I hear, I always hear Warren Buffett and Munger talk a lot about finding businesses where the competition's pretty bad, pretty weak because you don't have to be that great as a business person in those market, in those industries or those markets to succeed.
It's perfect for me, you know, a company to compare property management to like Realtor industry for example. The realtor industry is loaded with really smart people, smart marketers, really savvy salespeople and it's extremely high competition and we've done well in that space for a while. We'll continually build on that. But it's hard to always being, you know, being really great in order to succeed. If you're average or below average in the realtor world, it's pretty darn tough to make a living.
Property management space I see a little differently. I see it being generally not as much competition and, and I just see it, you know, some great opportunities for innovation and growth across Canada in that space. So we're diving pretty deep on that and, and hopefully over the next few years we can grow that into some different markets and, and maybe create some, even some maybe disruption in that, in that space a bit.
[00:52:30] Speaker C: Very cool.
Well how, how can people get in touch with you?
[00:52:36] Speaker D: They can find me pretty easily on social media. That's usually the, the safest and easiest way at its Sandy McKay across any social media platform.
That would be the easiest best way Reach out to me on there you can people welcome to DM me or message me and, and happy to take a combo from there to however else we want to chat offline or on the phone or whatnot. I'm always open to helping and helping the other investors grow and I'd love people to reach out and, and however I can help I'm definitely willing and.
[00:53:09] Speaker B: And we'll have all your other links as far as like the investor club and, and your brokerage and all that other stuff in the show notes so but the easiest way you can remember it @ it's Sandy McKay on social media. Quinton, how do people get in touch with you?
[00:53:27] Speaker C: Yeah you can visit Quintessous.com and book a 15 minute call. We can chat or you can come out to Durham Rei duramarei.com and come out to a monthly meeting.
[00:53:39] Speaker B: Quinn's there in person.
[00:53:41] Speaker C: Yeah. And Rob, how can people get in touch with you?
[00:53:46] Speaker B: Well, it's. It's just my email, Rob. Mr. Breakthrough.
[00:53:48] Speaker C: Ca.
[00:53:49] Speaker B: It's the same. And I encourage people to come down. Please come down and visit us at Manta Ray Lodge. And, and you deserve a vacation. You know, all of you listening deserve a vacation. I think that you should come down, spend the week, have some fun on the beach, have a few drinks, enjoy the sunshine and get out of the like 18 degrees, that's great. Or 15 or whatever you said it was. But you know, it's still March or April or May whenever you hear this. And it's darn cold where you are and you know it. You need. You need to, you know, you need to get away.
So, you know. There's my commercial.
Awesome. Yeah, that's it. So appreciate all of you for listening and we'll see you next time.
[00:54:36] Speaker D: Thanks, guys. That was fun.
[00:54:38] Speaker C: Gotta head out, huh?
[00:54:39] Speaker D: Good, good. Good catching up. Yeah.
[00:54:42] Speaker B: Okay.
[00:54:43] Speaker C: Awesome.
[00:54:43] Speaker D: I might be coming down to there in November, actually to Costa Rica. I don't even know where yet, but I have a wedding there, it seems. So maybe, maybe we'll chat more on that as it gets closer.
[00:54:52] Speaker B: I just had a few beers with Brandon not too long ago.
[00:54:56] Speaker D: Oh, I just saw him like yesterday at the gym. Actually, I didn't, I didn't. I didn't get a chance to talk to him, but I saw.
[00:55:01] Speaker B: I have to follow up with him because he went. He was gonna buy something, but not with me. He was. He was talking to the. The other realtor, who was a listing agent. So. Anyway, all right, have a good time, guys.
[00:55:14] Speaker D: Thanks.
[00:55:15] Speaker C: Yeah, have a good one.
