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: Good day, everybody. Welcome back. Thanks for joining us again. And as usual, Quentin d' Souza is here with me. Bright eyed, bushy tailed, ready to go share.
[00:00:40] Speaker C: Where'd you get, where'd you get bushy tailed from? What's going on?
[00:00:43] Speaker B: I want to know. I saw those photos.
[00:00:45] Speaker D: What the.
[00:00:47] Speaker C: Okay.
The only photos I have is like I just finished the Three Peaks last weekend with.
[00:00:54] Speaker B: There you go.
[00:00:54] Speaker C: With my sons. Right.
[00:00:55] Speaker B: They're wearing furry coats.
[00:00:58] Speaker C: Yeah, it was, it was rainy. Like we did Ben Nevis in Scotland, Scaffold pike in England and Snowden in Wales. And my, I got all three done. So we did one a day. One a day. My oldest son got two completed and my younger son got one completed. And it was great. It was a good experience together. We had, we had a lot of fun.
[00:01:21] Speaker B: And Are they close together?
[00:01:24] Speaker C: About five, six hours apart. So we had to do like a cannonball run from Ben Nevis after we've finished it, over to England and then over to Wales after. So it was quite a, quite a bit of a drive and, and challenge every day. But it was, it was really good. And you know, the old man power kind of came through here because I was able to get all three done. And you know, I think my son's kind of underestimated the challenge, so. But they did well in any case. So it was, it was good. And I'm just working on some refinances right now and we have a great speaker who's going to be coming on and talking a little bit about that. And I, I just got a successful cash for keys done on one of my units in a building. So we, we've been able to actually bring up the wrench just in the last three months.
Another $2,000 on gross rents, where we started at about 14,000. So I think we're going to be just above 21,000 now on that, which will be quite good. I'm really happy about that. And, but that refinance isn't going to happen for, I got to take a look at the, the numbers I believe in other three years anyways. But we're, we're in a really Good position on that refinance when, when we do come due. But yeah, just working on regular stuff, everyday stuff.
[00:02:54] Speaker B: Yeah, I don't, I don't consider doing the cash for keys thing all that often but maybe I should reassess where some of the rents are right now because I'm, you know, I usually take it pretty easy because I want good tenants but I think that sometimes I, I'm a little too, like my rents are a little too low in a lot of, in a lot of cases. So I should probably re examine that myself too and see if there's anything we could do there.
[00:03:17] Speaker C: I mean in the apartment building space. Like I've got 25 buildings and, and we, one of our metrics is you know, being able to get those rents up and we, we need to do that beyond rent increases in order to be able to reposition the building for refinance.
And you know, our goal is to try and refinance out our capital within three to five years and we've been pretty successful about doing it. Really requires us to work on getting our expenses down and our income up. And the only way to do that in a rent controlled environment like Ontario is, you know, turning over units and without doing anything illegal like, or immoral. We like to offer cash for keys and give people the option. And you know, that seems to have worked quite well in the past. A little bit harder last year because rents were up quite a bit but rents have been coming down and actually we've been finding it a little bit more successful on the, the cash for key side. So if you haven't been doing that and because rents have been coming down psychologically, it actually is a good position for the renters to go and you know, look for another unit and have some cash in pocket. So it's worked out quite well in the last few months. Who knows what that will look like, you know, three months or six months from now. But it's what's working right now, so that's cool.
[00:04:56] Speaker B: Everyone listening, go over to breakthrough reipodcast ca listen to all of the 230 some odd shows that we've done over the past years and there you'll be able to get in touch with the guests as well and you know, you can reach out to them and, and some of them have very specific expertise and, and you know, have left their contact information in the show notes and they are looking for people to reach out and contact them. So go over to the website again, it's Breakthrough reipodcast ca then go over to itunes and leave us a rating or review. Please really appreciate that for everyone that's done it so far and if you haven't, please just take five minutes and go over and do it. It helps us out a lot.
And Quinton, I have, if anyone's looking for this kind of investment, I currently depending on when this comes out, have a licensed 10 bedroom student rental property in Peterborough that we just put on the market the other day. So if anyone's interested in that kind of investment and wants to hear more, then just reach out to me. Robisterbreakthrough CA Awesome.
[00:06:06] Speaker C: Sounds good. You know what we should do one time is underwrite one of these deals. Yesterday I on my Q A call with Durham REI members, I was underwriting a 10 unit building and people really like that process. So we should maybe do that one time trying and go through some underwriting.
[00:06:26] Speaker B: And yeah, they like the mock process, probably not the real one.
[00:06:30] Speaker C: Well, I mean even if it's something that's like a live deal that.
[00:06:34] Speaker B: Yeah.
[00:06:34] Speaker C: You know, anybody can see on the MLS and you know, and there's no NDA that needs to be signed in order.
[00:06:40] Speaker B: Well, I'd have to leave that up to you for sure because I certainly wouldn't be able to navigate something like that.
[00:06:46] Speaker C: Yeah, no problem. I can get, we can do that on a call. That'd be great.
[00:06:50] Speaker B: Yeah, we should do that. Just me and you.
[00:06:52] Speaker C: We'll, we'll, we'll.
[00:06:53] Speaker B: The next time we record. Yeah.
[00:06:55] Speaker C: Yeah. Okay, sounds good. So I, I'm pretty excited about this next speaker that we have. Our guest is Mike Peters. He has a master master's degree from the University of Waterloo in economic development. He's worked for several, several municipalities as an economic developer.
Specialty being assisting all business types diversify and expand. He was an entrepreneur in 1999 and you know, he formed a business finance division.
He's evolved into managing the commercial mortgage division with Scott Dillingham. I think he's met him through the his finance experience and he's a member of the Dominion Lending center expert financial brokerage. And he's one of the 100 focused on commercial agents of the agents that are in that, that brokerage. So I'm really excited and interested to talk to Mike Peters today.
He has a wealth of knowledge and I'm looking to that. So thanks for coming on the call with us, Mike.
[00:08:08] Speaker D: Yes, thanks for the invite, Robin. Quinton. I look forward to this conversation and.
[00:08:13] Speaker B: Yeah, I really appreciate it. Except for Quinton, you got one thing wrong. It says he's the only 100% commercial focused mortgage agent out of the 75 agents.
[00:08:24] Speaker C: Excellent.
[00:08:25] Speaker B: Yeah, that's cool. Yeah. So yeah, just tell us a little bit about yourself.
[00:08:32] Speaker D: Well, I, I'm an avid golfer. Let's start with that. I, I love golf. That's my, my past time.
I, I really, you know, my, my focus has always been throughout my career assisting small business grow and expand. And you know, I became an entrepreneur, sold several companies, mainly in the high tech area.
You know, when I did cash out, I decided to, you know, get into business finance. Find money for, you know, small growing businesses that might need, you know, to double their fleet. They may be an H Vac or new desks and computers, you know, that kind of thing, that kind of business finance or new backhoe.
But one of the, the products that I proprietarily developed, a client asked for financing software as a service.
Because when you bundle hardware with a software and you have a monthly software fee, the client wanted to have that as one monthly fee, not just finance the custom built hardware. And this was for water wells. There's something like 800,000 water wells in Ontario that are not being monitored and they're the source of water for. Primary source of water for people.
So you know, we developed a system for that and you know, the company wanted financing. So I scoured the market to see who would do financing of software as a service. You know, I'm dating myself because that's pretty common now.
And I was able to align myself with an entity. I then joined the local business incubator down in Windsor, Ontario to assist the small business in there as a consultant. And they opened up their books to me and I told them that they needed to consolidate their debt and get a new mortgage.
That is how I was introduced to Scott Dillingham. Scott was able to get him a mortgage and then Covid hit and the mortgage was conditional on a site visit and that site visit didn't happen. And as you can imagine, after Covid, their numbers were down. The number of, you know, tenants renting space.
So anyways, Scott, Scott and I hit it off.
He asked, you know, Lend City. The name itself lends itself towards more than just mortgages. So we set up a finance division and then Scott's got a pretty strong marketing engine and he was receiving a number of commercial mortgage applications. And given my broad background in business, every commercial mortgage is a business mortgage, a business loan, it's, it's business focused.
So I, I took over the commercial division and handled all of that.
Initially given his focus as a residential agent. Most of them were multi unit residential properties.
Either the client had hit the ceiling that one of the big banks might have you know like six properties and they want to buy a seventh and so you got to go commercial instead of personal and others had corpse and and we did a lot of business, a lot of refinances of, of multi use and largely down in, in the southwestern Ontario market.
More recently I'm seeing a lot more business type commercial mortgages whether that be somebody interested in buying a retail plaza.
I've got campgrounds so I'm working on a, on a number of things truly have evolved into all things commercial and, and in enjoying it. It. It. What it. Each situation is unique and that's what I like about it. Each situation is unique.
First and foremost I, I stress it's my bible that I get to know the client first.
What are their goals and objectives and, and I, I work with them, you know to help define that, help define the strategy.
Always encourage them to speak with their lawyer or accountant as to what the best framework should be for moving forward to achieve that strategy.
And I truly enjoy it. Truly get, I enjoy getting up like I just got off call right now Airbnbs and Mont Trembla.
You know, exciting five you know a brand new development with a hotel.
I've got you know mixed use commercial large mortgages. They're getting larger. What I'm finding is that the lenders are preferring larger mortgages just given the volume that we're seeing right now in the commercial space especially as well in the multi use residential.
[00:13:36] Speaker C: Yeah, I'm kind of, I have a kind of offshoot question about that because what, what I've, what I've seen is that the off of mortgages that are less than a million dollars we're seeing like, especially if you're going to do something along the lines of cmhc, we're seeing like a, an additional premium added to the CMB Canadian mortgage bond rate of closer to like 2% as opposed to like larger mortgages.
Is that just because the risk is higher for the lender under a million? Why, why do people, why do lenders typically have such a high additional interest rate as compared to let's say anything above a million or what's, what are those kind of like points as, as when they kind of go up?
[00:14:32] Speaker D: Yeah. So some of the markets that, that you can still buy a 6 Plex for half a million dollars.
Windsor St. Catharines, Thunder Bay. Yeah, yeah, yeah.
You know they're, they're they're the same amount of work as a, for the lender as they are for 2 million. And all lender frontline people have, you know, quotas.
And so a $500,000 sixplex and Windsor goes to the bottom of the queue, really does.
If the client is prepared to sign that premium 2% and you hit the nail on the head, it is 2 to 3%, then the bank is getting paid for, for, you know, they're making, making money off of that mortgage. I'm finding that clients are just going conventional because on the CMHC side, if, if you're retrofitting a building so that you can get the higher loan to value, you know, then it may make sense, but that's a pretty significant investment to redo, you know, baseboards and, and put railings and showers and skylights on the roof or you know what I mean?
Not Skyline.
[00:15:53] Speaker B: That's something you would also have to do once you've purchased it too. So that would be on like a refinance side, not on the initial mortgage side either.
So you've got to either pay the premium or.
[00:16:06] Speaker D: Right. So those, those clients, I, I, I encourage them to, to make the purchase at approximately 75% loan to value is, is what we could get for a six plex. That's, that's running fairly well.
You know, make the purchase and then, then we go through, do the retrofitting.
But you know, on a new build, CMHCMLI select is, is the way to.
[00:16:33] Speaker B: Go, you know, I have a question for you then. Yeah, Quinton, but, well, both of you can probably answer this. Let's say there's a building worth, I don't know, 950,000.
Wouldn't it, you know, wouldn't it almost make sense to say I'll give you a million?
[00:16:52] Speaker D: Yeah, it would, but there's fewer and fewer.
[00:16:54] Speaker B: No, you don't think so? Quinton said. No, but yeah, it's the lenders.
[00:16:59] Speaker C: Right. And who you're gonna get. So, you know, like as Mike was saying, it makes more sense to do a conventional mortgage and just get it done rather than try to do CMHC on something like that and get the value up and then go maybe to CMHC afterwards, if at all possible.
Right.
[00:17:21] Speaker D: Well, I also found that a number of properties, you know, are overpriced and the clients are going in with a CMHC condition. And, you know, that's three, four months.
And not too many sellers are interested in, you know, an offer that conditional on CMHC financing in three or four months.
So in that, in that instance we try to, you know, find them a bridge, get them that initial mortgage, get them some additional finance for the retrofit and then go through the CMHC process.
But again, 5 Plex is, there's just not a lot of underwriters either that will do.
Cmhc.
I've got two that I like to go to and, and they're, they're up now to 2 million bucks.
[00:18:18] Speaker C: Yeah.
[00:18:18] Speaker B: Okay, so, so quick question, let's roll back and let's talk about somebody maybe just trying to break into this multi residential purchase and let's, I don't know, Quentin, let's make up a scenario under a million, you know, and then like Michael, teach us how to walk, like to prepare yourself for that purchase.
[00:18:41] Speaker C: Okay, well let's do, let's do a purchase price of like 1.5 million. And we, we that way at least we'll be above a million. So there'll be more lenders that will look at it. Right. And let's say that it's like, you know, you're looking to put, you know, 25% down, so you're just a little over a million on that. You could go conventional with 25% or maybe you could from a debt coverage ratio maybe at, at 80% loan to value. We're still at a 1.3 DCR on this property.
That way there's more options, let's say, as opposed to, if it were a lower debt coverage ratio.
[00:19:28] Speaker B: And you know, I guess you're not the one that would handle that in that circumstance either. So yeah, let's talk about Quentin scenario there.
[00:19:36] Speaker D: Well, yeah, if, if you're prepared to keep, I believe it's around 30% of the rents under fair market rent you can get to 80% with CMHC, but you've, you've got to commit to 10 years of part of your building staying at the current rent.
[00:19:57] Speaker C: MLI Select. You're talking about MLI select, right?
[00:20:00] Speaker D: Yeah, yeah, exactly. And they, if, if the person was to leave that is paying under market rent, they still have to lease that place at that rent.
And, and so that, that makes it kind of tough, but that's the way to get to 80%. So that's really one of those buy and hold situations to just increase value of the building over time and take some money out, maybe buy something else.
That's, that's what I recommend.
[00:20:31] Speaker C: In that instance, I think like we've, on a sixplex, I just did this. I did a standard CMHC mortgage with a 40 year amortization.
But my, my debt coverage ratio was 1.3 on the sixplex. So I was able to get a higher mortgage like an 85 loan to value 40 year AM on a standard CMHC just because my DCR was so, yeah, so I, so I think that maybe one of the things that our listeners may want to be able to, to, to know what to do is what is a dcr? And then maybe we'll roll back and then go to Rob's question because if you understand DCR then it makes it easier to understand the underwriting part. Rob, so does that sound right?
[00:21:27] Speaker D: Yeah, yeah, yeah. So all commercial mortgages for the most part are, well all of them are DCR. That's debt coverage ratio you've just mentioned 1.3. That means for every dollar of expense that, that building which is a business, for every dollar of expense it's generating $1.30 in revenue. So it's making 30 cents on the buck.
I find that the big banks, you know, they, they, they, they add a, a bit to, they're around $1.35 whereas the local credit unions I tend to use.
I just did a 20 unit apartment building at 75% loan to value at 1.2.
So 20 cents on the dollar.
So it all depends on the scenario. I, but debt coverage, that's how it works. It's, it's. If the building is self supporting, first and foremost, if it's generating a $30, you're going to get a mortgage. It's hard finding those with like you say, the rent ceilings. In Ontario I find so many opportunities where half of the sixplex is paying fair market rent, eighteen hundred dollars and then the other half of the tenants are paying 900, 950 makes it extremely difficult to, to get to that 1.2 DCR, therefore a much larger down payment.
[00:23:02] Speaker B: So Quinton, can I, can I, so if you run into, because I saw you nodding your head at that, so you've seen that quite often and is that something then you would just, you would just say okay, I guess there's no deal here or in that circumstance what would you do?
[00:23:17] Speaker C: So I, in the, so I, I'll use an example of something that I did as an example. So I, I, on this sixplex that I got the mortgage, I got a 1.4 million dollar 1.3 million dollar mortgage on this six plex.
But I had turned over all six units over the period of ownership. I started off with a conventional mortgage with BMO and I worked on turning over those Units and getting the building up to a certain level. So, and I remember I bought the building for something like 700k and now I have refinanced the building conventionally in the past, but I Recently moved to CMHC, got a 40 year amortization because the DCR was 1.3. I was able to get an 85 LTV loan to value. And then so my new mortgage is 1.3. I pulled out that capital and I was able to hold on to the property because I turned over all the units in the building. It took a while, but once I did that, you know, then you have the ability to be able to pull out more capital and gives you more options.
[00:24:36] Speaker D: And how, how did you do that? Like that? That is a trick. Cash for keys is, is one avenue. Correct? You've deployed in the past.
[00:24:45] Speaker C: Yeah, I have lots of strategy. I mean this is my business, right? This is what I do. I eat and sleep this.
So like when we take over a building, we do something that we call kind of like turning the screws, which is basically where we are making sure that people are following the rules of the Residential Tenancies Act. Day, shape day, late dollars short we're issuing. And fours, they're not following. They're keeping improper units doing, you know, bad stuff. We want to improve the building so we start issuing N5s. We, we want to turn over units just based on what they should be doing because oftentimes we're buying from mom and pop owners who are too, too flexible and not, you know, doing what they should be doing managing a building.
What we find is 10 to 20% of the units will just naturally turn over. Based on that, then we, we might move to focusing for keys on some units, work on turning over some of those units that way those are the, you know, the traditional way. And then often over time we'll find that other units will turn over, people will.
[00:25:57] Speaker B: Natural course.
[00:25:58] Speaker C: Yeah, like it takes a while, but it, it happens. And, and it just depends on, you know, over the course of doing this. I've done this for so long.
It, it's not only about turning over units, it's also about reducing expenses. So in this 6 Plex, we actually implemented wise meter and put the water meters or the water of each of the units onto the units themselves. And so as we turned over, we reduced our expenses on the building as well. So we don't have hydro and we don't have water, we just pay for gas. Again, all of that reduces my expenses, increases the debt coverage ratio and Allowed us to take a higher, higher mortgage. So that's just the example on, on that particular building this year I've got like a, I've got a 23 unit, a nine unit and a couple of other buildings. I can't remember off the top of my head that we're refinancing. So again, all of the same things, right?
[00:27:03] Speaker D: Yeah, yeah. Those strategies are sound. You're within the law and that's.
[00:27:09] Speaker B: You got to get it done somehow. Now here's a question then. You would never refinance with the MLI select program. That would be for.
[00:27:18] Speaker C: Yeah, never.
[00:27:20] Speaker B: Never. Right.
[00:27:21] Speaker D: Yeah.
[00:27:21] Speaker B: It doesn't work.
[00:27:22] Speaker C: No, not because it doesn't work. It does work the.
[00:27:25] Speaker B: Well, it doesn't work once you've raised the rents though.
[00:27:28] Speaker C: But the problem is, is that in a rent controlled environment, you don't want to have rents that the people who do that are short in my, this is just my opinion. Okay. And, and Mark, I might can chime in here. I think that that's a really not a good move unless all you're doing is planning on to hold to that building for Infinium and not planning on refinancing it again. Because what you've done is you've capped your upside on the building for, you know, five years or 10 years, however long you're locking in that MLI select for. And it's not the purpose, it's a business. The business is to run and make profit just like any other businesses.
[00:28:09] Speaker D: Yeah.
[00:28:10] Speaker C: And if you're capping it by affordability, doesn't make sense. The government may want that. The, you know, the tenant may want that. But as a business owner, that's a real stupid move if you ask me. I think that's not, not a good move. As somebody who runs a business now, if all I'm thinking of it long term asset that I don't want to touch and I just want it to be there. It's a great move. Like, you know, like, because it's good cheap financing I can get long term, but I can get 40 year amortization as long as I bring my rents up on, on a regular standard CMHC too. Right.
[00:28:49] Speaker B: So as MLI select, it's always 40 year amortization.
[00:28:52] Speaker C: It's a bit. The benefit of that is not just that it, it brings down it actually. You can get your debt coverage ratio down to like 1.1 if you use an MLI Select. So you're releasing more capital, you're getting a higher loan to value.
That's the benefit of that MLI select. So you're pulling out more capital. But, but then you're locked in, right? You, because of the rents, you have to reduce the total rents that you can ask for.
If you're using the affordability component. There are other components that you can use, but for affordability is usually the easiest and they're changing all the time. The problem that I find with CMHC is like you, you start to work in one direction and then they make a change and you spent all this time doing this stuff and all of a sudden they make a change and you're in trouble because now you can't qualify because they, the, they've given you two weeks to be able to apply or, and, and lately it's been like right away. Mike, have you, have you seen that?
[00:29:58] Speaker D: Yeah. Yes. It's very frustrating. We've had a couple of deals right at the finish line that we just, just did not move forward because of changes in policy. It's. With cmhc, it, I prefer to stay away with it, away from it, unless it's a new build.
[00:30:17] Speaker B: And that's the only, let's see, that's the only entity that actually changes policies quickly.
[00:30:28] Speaker C: Well, it seems to.
[00:30:30] Speaker D: Well, no, I mean even my lenders, I would say that half of my role is lender relations, right? Keeping current with all of, all of the lenders. And you know, when they have a board meeting, they can switch policy on a dime. For example, land banking, right? For commercial development, you've got a, you've got an entrepreneur that has a strategically placed parcel of land that he paid a million bucks for.
He's got an appraisal at 2. It's still raw land. You're still only going to get 50% loan to value on the raw land. But he thinks that he's going to get 50% of the 2 million just because appraisal says it's 2 million.
That's not the case. And, and then all of a sudden, you know, the guy's got it zoned for a hotel.
The final stage is just getting the servicing. So he needs another quarter million or half a million bucks. And the, the banks just changed their policy on, on land banking because there's so much of that right now in the marketplace.
Sit and hold until the property value goes up and then, and then wrap up the servicing and the zoning and, and sell to a developer. But in a lot of instances, these people, these types of clients have inherited the land and you know, they have no experience and experience is critical. A bio is critical in the commercial space, whether you're running a printing business or whatever kind of business you're running. And when you grab your first six Plex is going to be easy enough, you know, especially if you have a maintenance company, if you know that, that, that's easy. But when you start talking apartment buildings, you're not going to jump from a 6 plex to a 20 unit apartment building without the right team behind you. You definitely have to have the bio of experience with the lenders.
[00:32:34] Speaker B: But that, that could be in the team as well. Or.
[00:32:37] Speaker D: Oh yeah, it's in the, it can be in the team. Like yeah, definitely. Like if I own a tool and die shop and I want to buy a new piece of equipment, a million dollar piece of equipment to start punching out Barbie dolls or whatever the plastic product is that I want to diversify into.
It's a business plan and it's a team that the bank will evaluate it against not only the financial performance of the company but also the team that's going to manage it. And that's the same as you scale up in terms of your high density residential. The team is critical.
[00:33:16] Speaker B: So for example, you were talking about land banking and someone coming in and putting in the services.
But you like in your example where the person inherited the prod the property, they could just hire a project manager, you know. Right. And so does that change things?
[00:33:32] Speaker D: That changes things big time. But they're even more than a property manager.
He needs a, you know, the, the contractor to oversee everything. I haven't had a gentleman who inherited four motels and he wanted to knock one down and put up a condo.
He inherited all this. He had no experience. I introduced him to prop, not a property manager but a consultant. Somebody who knows how to do the permitting, how to do all of the, the work with the municipalities, etc. Right.
Very extensive background, but they don't come cheap. But he needed that because he had no expertise whatsoever. He was running, you know, with the family single floor motels and you know, he just had no experience whatsoever. So it's, it's important to have a project manager and then a property manager on your team if, if you're growing to that kind of scale.
The budgets, Budget's critical because on construction you're going to be making draws and you're going to want to make sure that each, each draw gets the job done. There's been a lot of, I've seen a lot of properties that are two thirds finished because the bank didn't do a very good Job on inspecting before issuing the next draw. By the time all the money's exhausted, the building isn't even done yet. So that's why.
Yep.
[00:35:12] Speaker B: You've seen that.
[00:35:14] Speaker D: Oh yeah, yeah. The bank banks were not inspecting at each, each stage. Like steel studs for example.
[00:35:23] Speaker B: I do not feel sorry for the developer in that circumstance though.
[00:35:26] Speaker D: No, yeah, I don't either.
[00:35:29] Speaker B: Yeah.
[00:35:30] Speaker D: But that's against somebody with no experience that like one of them, that one of them is an old age home that I think it was 200 units and if you drive by it's still sitting there. Steel stud.
[00:35:42] Speaker B: Oh wow.
[00:35:43] Speaker D: Yeah. Yeah. Good opportunity for someone to grab and wrap it up. I think we're going to see a lot, a lot of foreclosure opportunities on the horizon with, with the amount of mortgages, commercial mortgages that are coming due in the, the next couple of years, you know, the rates are a lot higher than what the folks are paying now that own these businesses.
Another thing that I find is that you know, as they're shopping for, for business businesses that tend to be cash related, whether that be a, I mean there's all kinds but a mechanic's garage or you know, the couple, whether it be a, a restaurant, they tend to as they know they're exiting, they tend to run more cash through the business. You can see the, the cycle of, you know, profitability, profitability. Everything's good, everything's good. And then covet hit and their business went down. So that's, that's a legitimate reason for the revenues to, to decrease was Covid. But they're saying, you know what, I don't want to go through another Covid. I'm going to sell. So they're doing more cash business and so their books even after Covid don't look as good as they did before COVID And in a lot of instances the bank want. If you're going to buy a restaurant or you're going to buy a mechanic's garage, they want to see that entity's books and they don't look good.
In a lot of instances it's making it difficult to add a mechanic's garage and, and you know, the individual refused to share the books.
You know, even car lots refuse to share the books. So you've got to be very careful. You've got to have a very receptive seller. They have to provide information, good information and hopefully, you know, they've been running it correctly where you know, trying to avoid tax with Revenue Canada and, and other things that they do to put More cash in their pocket for their retirement.
That's. I'm seeing a lot of that on in the commercial space for what I call boutique retail.
[00:38:00] Speaker B: Huh.
So it's not doing them any good, that's for sure, in the long run.
[00:38:05] Speaker D: Yeah. It's just making it difficult to.
[00:38:08] Speaker B: Now, what would be the reason for someone to not share the books? Would it be because that's what they're doing?
[00:38:14] Speaker D: Yeah, yeah, pretty much. Yeah. That's what they're doing.
They're.
Yeah, they're just taking cash out of the business. And I mean, they have the right to do that, obviously. It's just, it, you know, they've got the business ridiculously priced at say, Chinese restaurant. A million bucks.
And, and the books are, you know, generated 50,000 profit last year.
How are you gonna sell, how are you gonna sell that for a million bucks?
[00:38:43] Speaker C: There's no, Nobody's gonna buy that for a minute.
[00:38:45] Speaker D: I know, I see, I'm seeing a lot of that.
Yeah.
[00:38:49] Speaker C: So the EBITDA is not, not there. Right. And you know, everybody's gonna pay like that type of multiple.
[00:38:55] Speaker D: So.
[00:38:56] Speaker C: And I think like businesses buying businesses and buying buildings are very similar. It's just one uses ebitda. One, one's, you know, cap rate. Right. But it's, it's very, very similar. And I'm just curious, like, do you prefer to go with credit unions or the big banks when it comes to financing, you know, real estate? Let's come back to real estate here.
[00:39:21] Speaker D: Okay.
I may have done one deal in my entire tenor with a big bank.
I love local credit unions. They again, I'm an economic developer by profession. I love local economies. You sitting here in the fishing capital, freshwater fishing capital of Canada, Wheatley. And I'm just thinking of businesses that should be coming into this town and, and it's just, you know, it's business oriented for me. It just, you know, that's, that's my focus.
Not sure I answered your question, but no.
[00:40:02] Speaker C: So. So it sounds like most of the time you're going to credit unions because of the flexibility that you're getting.
[00:40:08] Speaker D: Yes, yes. I, I just had other policy was 70% loan to value.
And I have great relationship with this credit union. I said, you know, it's not, it's a $3 million refinance on a $4 million building. And she, she gave me 75% loan to value and a 1.2 DCR just because of the relationship. And she knows building, she knows the neighborhood, she knows it's up and coming and that it's a, it's a yuppie don't, I don't even know if these exist anymore. But it's a, you know, a haven for, for young professionals, artists etc and she knows that. And whereas a decision maker in Toronto with CIBC has no clue.
[00:40:56] Speaker B: Well, and their hands are also tied.
[00:40:58] Speaker D: Yeah. With policy for sure. Internal policy. Yeah, yeah, yeah. With credit units they can go up the ladder to the boss. I mean I've had that happen numerous times and say hey can we make an exception? Like I really feel good about this deal and, and it happens, it happens. I'm getting DCR loans at 1.15.
[00:41:21] Speaker C: Right.
[00:41:22] Speaker D: In some instances.
[00:41:24] Speaker C: With credit unions.
[00:41:25] Speaker D: With credit unions, yeah.
[00:41:27] Speaker C: Wow, that's interesting.
What about like I know a lot of listeners in the show are also interested in US lending.
Like are you able to get any like commercial lending opportunities for US products?
[00:41:47] Speaker D: Yes, yes.
Scott Dillingham, Len City has set up our US division. I presently have $7 million hotel in Texas that we're working on. He needs a, they've let it run down. It's a foreclosure. He needs another 2 and a half mil million to get it back up to speed and we're working on that. I have a 10 bedroom rich and famous kind of home. Going into a gated community where you know a celebrity or will rent the place for a week and invite all his friends which is what happened at the neighbor's house the other day. So that's a three million dollar construction loan.
Currently one of the businesses that you know has always been hot lately is Self Storage. Working on Self Storage in Michigan.
I've got a Toronto client that is divesting in Ontario and he's looking for a medical plaza in the US Either Michigan or Ohio.
So seeing a ton of that, it started mainly with residential properties.
[00:43:08] Speaker C: Right.
[00:43:09] Speaker D: We, We've got almost 30,000 lenders. We're part of the biggest brokerage in the US and our lender database, when we, we get our clients information and they type it into the application, the top five lenders given that scenario pop up with rates and yeah, so we're, we're very active.
[00:43:28] Speaker B: What about smaller deals in the US Is that, is that is like those ones that you talked about were pretty big.
[00:43:34] Speaker D: Yep. No I've, I've done a condo in Lauderdale, a per a refi condo in Lauderdale, a recent purchase in, in Memphis.
Doing a refi in Memphis.
And these are single family income properties.
As long as they are break even like not even one to one one to one is good, but break even.
You know, we're seeing 30% down.
And so they, lenders prefer something over a mortgage over 100 grand, but that's, that's kind of the, the low end. So somebody sitting on $30,000 and wants to buy an income property in Cleveland.
[00:44:23] Speaker B: You mean $45,000 though, to our audience.
[00:44:26] Speaker D: To our audience, yes, exactly.
[00:44:28] Speaker B: Don't forget that.
[00:44:30] Speaker D: Exactly, exactly. I, I do have clients that are divesting their interests in, in Ontario and moving it into the US has that.
[00:44:40] Speaker C: Scaled up over the last few years? What, what's your feeling about what's happening with. Because I've, I've noticed that as well with different investors that I have interacted with. They, they're frustrated by the landlord, tenant board, frustrated by mortgage rules changes. They're frustrated by additional taxes. They feel like they are being attacked as investors in Canada and that they, if they're being vilified so they're taking their money and going where they're treated best.
[00:45:14] Speaker D: And that's exact, that's exactly it. I mean, it's like going to a restaurant in the U. S Where the waitress is bubbly and she wants to be your friend versus somebody who's just throwing your plate down. There's so much more receptive in the U. S. Lenders and they will bend the rules a little bit. If not, I mean, not outside the law, but their own internal rules to get the job done.
I'm seeing a lot of that. And it, it's, I mean, our U S. Program now maybe is a year and a bit old and it's, it's currently evolving and, and has become a major part of our business. But the divide divesting part for me is a recent trend, maybe the last six to eight months.
[00:46:00] Speaker B: Do you think the reason for that is that you mentioned that there's 30 over 30 lenders. That's probably got to be a good, like, that's probably the reason for, you know, there being.
[00:46:12] Speaker D: We're talking 30,000 lenders.
[00:46:16] Speaker B: Sorry, 30,000 lenders.
That opens it up a little bit more even than I was thinking.
But I mean like that the, like there's not that many lenders, you know, in Canada.
Right. There's very few in comparison. So do you think that has something to do with it?
[00:46:33] Speaker D: Oh yeah. Yes.
Yeah. The options in Canada are not like, I've got some stuff up north, you know, I love going up north. But if the banker can't get to the property within an hour for a site inspection, you can have A hard time getting them a mortgage, you know, so that's, that's part of the problem. So there's, in the U.S.
you know, you get a bank on every corner, different bank on every corner.
So anyways, I, I hope this has been helpful. I, I look forward to assisting anybody who has interest in any type of commercial mortgage, whether that be multi family. I mean we do condos, Condos are a little tricky because of the condo fee, you know, the DCR and some of the other issues with condos. But we do condos at 65, you know, apartment buildings at 75, stretch it to 80.
Owner occupied dentists. We can, we've got lenders that will do 100% financing for professional services like that, engineering firms that. Sure. Oh yeah.
So you know, so it all depends on, on the type of business you're in.
[00:47:48] Speaker B: There's a lot of opportunity and if we haven't covered it, reach out to Mike and, and there might be an avenue for you to create an opportunity here. So Mike, how can people get in touch with you?
[00:48:01] Speaker D: People can get in touch with me via several sort ways. Mike at LendCity CA is my email address.
Lend City is Lend City all one word.
And my direct phone line is 226-345-7047.
[00:48:21] Speaker B: And we'll put all that in the show notes there so people don't have to memorize it or go back and listen to the recording again. Even though you probably should listen to the recording again. It's been a fun show.
[00:48:31] Speaker C: Thanks Mike. This has been great. How can people get in touch with you, Rob?
[00:48:37] Speaker B: Well, they can reach me at Robustru Ca if you want to talk about Costa Rica. So I am, you know, as always your Canadian realtor here in Costa Ric. So give me a call and I'm going to find you that dream property that you're looking for. Whether you know, you want to move here like we did. I don't see too many people doing that though Quentin.
Most of the time it's an investment and for use a certain portion of the year. So if anyone just wants to learn more about how that works here, give me a call or give me, sorry, give me an email. Rob@ Mr. Breakthrough CA Quinton, how can people get in touch with you?
[00:49:15] Speaker C: I'm, I'm actually, I'm heading out to Peru next week. I'm doing a trek with my, my youngest son. We'll be gone for 10 days but if you want to catch up with me afterwards, you can go to quintessouza.com and book a 15 minute call. Or you can check me out at Duramarii Ca, where I do speaking and, you know, do sessions, Q A sessions around any real estate questions that you have and investing questions. I'm not a realtor or a mortgage broker.
I'm, I've been a full time investor since 2013 and just focus on enjoying life right now. I, I'm not a golfer, but I would be with Mike if on a golf course, I'm sure. But I, I, I'm a hiker, so I like to go out and do tracks. Yeah.
[00:50:04] Speaker B: So very cool. Or if you're in Peru next week, try, you can track Quentin down that way.
[00:50:10] Speaker C: Yeah. We'll see you in cost. If you're in Cusco, check me out. All right.
[00:50:16] Speaker B: Have a great day, everybody. Thank you for listening.
[00:50:18] Speaker D: I enjoyed it. Bye for now.
[00:50:20] Speaker C: Bye. Bye.
