Alfonso Salemi: Sarah Larbi probably heard of her. If you don't, you should get the internet. Lee Pollock and Aisha Govani. Obviously, you guys know Sarah, one of the co-founders here of The REITE Club, known as the BRRRR expert. Now they're gonna talk a little bit about how they're changing the ways in the five key ways that they're pivoting their real estate investments. Without further ado, guys, put your hands together for Sarah, Aisha and Lee. And Lee and I just found out we go to the same barber, awesome.
Sarah Larbi: Awesome. Thank you so much. I'm so excited to be here. So one of the things that we were thinking about when we said, Okay let's talk and let's present is, what are people interested in hearing about?
We came up with some of the ways that we've pivoted because the market's changing. We're gonna talk about some of the things that we are doing currently that maybe we weren't even doing six months ago because of where we're at. Can everybody hear me okay? All right. A little bit about me since the pandemic. I was a real estate investor before that, but in 2020 October, I left my full-time job and I didn't know what I was gonna do.
I just figured I was gonna leave and then, be aka retired and see what happens. And a little whit bit goes by. And then I started buying some land, and then I started buying some more land and I got into some development stuff and then I'm like, Okay, I'm gonna slow down. And then these guys came along and were like, Hey, let's do these really cool, like new businesses.
We bought, I think, 10 deals in the last six months. We'll tell you what we bought and how we bought it. But that's a little bit about me and what I've been doing, I guess in the last couple years since the pandemic. Aisha, do you wanna go first and just give us a little intro on who you are.
Aisha Govani: Sure. Sarah calls me Aisha, but it's Isha. I'm sorry. She'd call me whatever she wants, Sarah, so it's No worries. I joined Sarah about a year ago. I've been an investor for about five years before that, and I was managing my own properties and I realized, Especially once I had children, I thought, what's the best way to make an uncapped income?
How can I exponentially make money? And the harder I work, money will come. I had big dreams, big ideas, things I wanted to do, and I didn't wanna be capped by salary. I didn't want someone telling me what I could or could not make. I realized I had done some research and some thinking, and I realized the only way to do that was real estate.
I got a great opportunity to work with Sarah and her team. Since then we've just, we've been finding ways and a lot has been happening in the last few years. Covid took a big hit on some of us. Some of us benefited a lot from Covid, but we didn't let that stop us when we saw everyone running.
We were like, we ran the other way and we were like they're running, but what can we find as a positive outcome from the situations everyone's scared about? And that's the key. It's about not being fear mongered by the high interest rates or, maybe not qualifying, but how do you go around that?
Because we still want to grow our portfolios. We still want to make dreams for whatever reason you're investing in real estate, whether it's financial freedom or you just want more houses. Whatever your end goal is and why you're going to real estate, there's always ways around it. Every time we get together, we come up with a business idea.
There's a new business idea, and I'm very careful now because she never says no to me. And I thought every time I say something, it's more work on my plate. So I have to be very strategic as to what ideas I share. Now can I take them on? Yeah this talk is really about how to get past, any roadblocks.
The government may put, or the banks may put, we can't let those hinder the drive we have because as investors we all have a few things in common, which is grit and determination and creativity. Those are the three things that no matter what, you're gonna get past those high interest rates you're gonna get past, not qualifying as long as you just find different ways to fit yourselves in the real estate industry.
Sarah Larbi: Awesome. Thank you. Little bit about you, Lee.
Lee Pollock: My name's Lee. I've been an investor for about 10 years. During that time I started a construction company. Mostly when I started was kind of hiring people to work for myself and for my own projects. Also managing my own projects as well. From a property management standpoint. And just started with duplexes, triplexes, and fourplexes kept growing the construction company hiring more people partnering up with some people as well. And kept growing and things kept looking really good.
However, there was a point where what stopped was not being able to get more mortgages and we probably all in that room have come across that. I started looking at commercial and going from commercial and dealing with tenants and, doing unit turns. I got into doing commercial conversions, so I did my first co commercial conversion, probably about four years ago. Small project, but worked really well and then went on to a bigger project. And we've just kept growing with that. We'll get a little bit into that, but so that's what I've been doing over the last 10 years.
Sarah Larbi: Awesome. Thank you. And then Ken as well is part of some of the projects as well that we've been doing together. One of the things that I've realized myself and for probably many of us as well, is that we've had to pivot along the way, right when we first started in real estate. I started 10 years ago. You guys started 10 years ago each as well can, likely as well. What worked even a year ago.
It doesn't necessarily work today. Obviously the cost of real estate is still high. It's coming down quite a bit. And, for us to buy, it's great. We've actually found something in the four, it was 495 in Hamilton. It was like unheard of. Cause cost of real estate's still high.
Why pivot competition amongst other investors? Sometimes, when we look at certain deals, there's so many other investors that are looking at the same deal. So how do you pivot and look at something? Obviously with the increasing mortgage rates, we have less and less cash flow, so are there ways that we can, mitigate some of that?
Increasing expenses? Insurance. I don't know if you guys have, looked at your insurance versus even three years ago. It's doubled, tripled. It's adds to all the expenses. Taxes, all that stuff can reduce the ROI on things that used to make sense before.
When I first started, I was doing these BRRRRs on singles and then it was doubles. Now even those don't work that much inflation at an all time high, right? We're at what, seven, 7%, something like that. And RTA rules are not in our favor. LTB delays are still happening. The fact that we have rent-controlled capped at 2.5%, that's next year, right?
Even if inflation is eight, 10%, 7%, as a landlord who has a property that was built before November 15th, 2018, we're subject to only a 2.5% increase. Again, that's gonna cut into our cash flow along the way, especially because the market rent and many markets are going up 20, 30% year over year. So all of a sudden you've got somebody there for two years and you're so behind market rent. All right, the number one way that we have decided to pivot are you sure? Do you wanna talk about that?
Aisha Govani: The number one way we decided to pivot, so we really looked at what's the best decision for investors. So I think a lot of us started in long term. I know myself, we have a few long term properties, but we know that, as Sarah mentioned, we're in favor, the LTB is not in favor of us. So how do you move past that? How do you make extra money? Cause if we have multiple properties, you're also now dealing with the rising interest rates. Your mortgages are rising, your expenses are rising, inflation is happening. There's a lot of factors to consider.
We really sat back and said, Okay, so long term isn't working for us. In the grand scheme of things short term rentals are being attacked. There's a lot of bylaws coming in a lot of cities. For example, London was one of the more, more recent ones we've heard about that have shut down short term rentals completely.
As an investor, what are some of the ways we can still. Make money. We can still protect ourselves and we're not under the control of maybe a long term rental tenant. So we looked at midterm. And midterm is anything above 28 days. And that allows you to still, as search term rentals, add certain fees.
You can add pet fees, you can add extra stay fees. You can control your assets. You can control how much money you're making. You can fluctuate the pricing. You don't have a tenant in there that all of a sudden is Oh, I'm gonna be here for, exponential amount of years and you can't get rid of them even if they stop paying rent.
As investors, this is your hard earned cash. This is your, some of us, it's our life savings. Some of us, this is all or nothing. And you want ways to leverage your money, but you don't wanna be under the control of the ltb. You don't wanna be under control of your tenants. So we found the midterm rental industry something were the government or the industry is not cracking down on yet and we still have opportunities to leverage.
We looked at that and we're looking at that with a lot of our three and four unit conversions. The ones we're doing that Lee mentioned, commercial to residential. We're looking at some of those. We may do one or two long term, but a lot of it's midterm because like I said, long term, if your tenant doesn't wanna move, I think a lot of us have tried to get rid of tenants. Have been there for so many years that we are paying out of pocket for them to continue staying there. And that does not feasible.
That's not something that's gonna give us the cashflow that we want. And then again, the short term's being cracked down on, So we found the midterm is a great way, and one way we're looking at is to connect with executive rentals, right? When you're looking at corporations, there's more cash flow there.
They have more expenses, they have the ability to pay the higher rates we want because their companies are covering it. We thought that would be a good opportunity to not be under the long term rental rules, but also be in the short term type of atmosphere where we can control the prices and move along.
Plus it's less expenses so your cleaner's not going in, every three, four days after a short term rental. Your cleaner may be only going in after a month or two if it's a midterm a renter, and then we also created our midterm properties rental management. If you want to be in that space, but you don't have the capacity yourself because you have a full time job and a massive portfolio, but you like the cash flow of the midterm rental opportunity, we're already managing so many of our own.
We're now offering that service to others. If that is something you are considering, please check out our table and we'll give you more information how we can support you in creating that cash flow and not locking you down as a long term rental.
Sarah Larbi: The other thing I would just add to this is it is important to work with a good paralegal. Andrew Trube who's also a sponsor, has given us some key things to do in order to ensure that if something does happen, he's able to call the cops and come and actually remove the tenants. There are a few things, like even putting a plaque there that has an Airbnb sign or something like that on it.
Still using a platform to do it. So there's a few things that still need to happen. But he's he's been a great help. Getting this set up. And then the other thing to keep in mind as well is as we're doing these three and four unit convers, There are gonna be some non rent controlled units, and there's gonna be some rent controlled units, the rent controlled units.
That's what we're taking, and we're gonna go into furnishing them and putting them on the short term midterm market. And we'll remove them if there's bylaws for the short term, and we'll keep midterm, but you can connect with hospitals, you can connect with different, companies. To be able to house some of this you can connect with potentially adjusters for the insurance company when something happens and they have, a need for something.
A lot of these, again, it's not gonna work in every single property. You have to be in an area where there's a lot of homeowners. So what I get, for example, in my Burlington, when I get a lot of people that are like in middle of construction or they're waiting and they have a house that they sold, and it's like in between the house that they purchased in the house that they sold, there might be a few months in between.
There's been a company that has rented my place for, six months at a time. And they had, three, four of their staff from BC that they would essentially send off to Ontario. So there's different things that you could do to connect where you're not having to do, like Aisha said, as much turnaround, but you're still in that gray zone right now where, the, all the cities and municipalities right now, they're starting to crack down on the short term rentals. If you don't wanna go into long term and you don't wanna go, you can't go into short term. It could still be that in between. All right, number two.
Lee Pollock: A couple of ways that we're pivoting and I think, we're as investors one thing that, we're always looking at the numbers. This is a building that we just purchased. Not just purchase maybe a couple months. So it's 15,000 square feet. We bought it for just shy of just less than 2 million bucks, and it was zoned for residential.
We didn't have to bother going through any minor variance or committee of adjustments. We got a really good because it's vacant. The lenders really do like vacant especially if you can execute on them. So we were able to get an 85% loan to value on this property.
We got a hundred percent loan to value on the construction. And this was a first time for me. I've never got this before, so it was a gift. But we got a hundred percent on the interest reserve payments for up to two years. So really at the end of the day.
Sarah Larbi: That means that there's no monthly payments?
Lee Pollock: Yes like it was actually, it was less expensive for cash down to do this than it would be on a on a triplex or a fourplex. So the construction budget we're gonna top out, probably, it'll be less than 2 million bucks on the construction. I think all in will be about like four, four, and a half.
However, when we had callers come and do an arv. To prove well to work with the lenders that the numbers worked. We got right outta the gate almost a $6 million RV on it. So like the commercial to residential stuff, like we, we love doing that. They're not easy to do. They're a lot more work. But the reward is the reward and the payback on these are. I prefer stuff with no tenants. I don't want to bully tenants. I don't want to do, cash for keys. I don't think the cash for keys really works that great anymore. I've been involved in many purchases of buildings from a construction side, from a property management side, and from an owner side where, five years ago, $3,000, $2,000 would work.
I have some tenants now on some older buildings where I've offered 'em up to 30 grand and they're still sticking. I don't really think that works, and I don't even think the lending on those works anymore because there's no clear exit on how you're gonna get tenants out. You might get 'em out. You might not get 'em out. The lenders that we work with they love the vacant stuff because if you can execute and you have the contractor behind you and you have the designer behind you, and you have all the power team behind you, you can take these and you can create, this one's gonna be 22 units.
If you do your math, we are gonna exit this, at 4 million bucks. Divide that by 22. It's a really, it's a great return. We just locked up a property. We're going through the due diligence on.
Aisha Govani: It's the haunted hotel.
Lee Pollock: Yes.
Sarah Larbi: It's haunted. believe that.
Lee Pollock: Special hotel. Probably some certain things went on in there. We grabbed this place in I went up there, I looked at it. I walked in. I made the offer probably within side of. It's we're gonna put 16 units in there vacant again. So it needs everything. It's just a shell. We paid 935,000 for 16 units. We'll probably be another like, I don't know, one, 1.2 in construction.
But I just got the information back from the broker today. It looks like we're gonna be all out on that one plus a half million bucks. Again, like the commercial stuff, the vacant stuff, the converting to residential. It works. I also think, it's a great time to start pivoting to, the larger stuff given, that the interest rates are wonky right now.
There are some great buys on duplexes and triplexes. As Sarah was saying, we've, been involved in some really good purchases. And, I've looked at some properties with clients where they've bought duplexes, 600,000 high fives, low sixes, which is amazing. Consider January, February, I was with clients that were paying 8 50, 900 for these places. But still, like this stuff really does work. The good thing about this too is the exit strategies. There's multiple levels of exit strategies. I don't really want to talk too much about the finances on not a broker, but when we exit with these, we exit with CMHC.
There are different options with CMHC that you can exit with affordability you can exit with accessibility, you can exit with with environmental. It's, changes your amortization. You can go up to a 50 year amortization. You get reduced debt covered service, and you also get reduced interest rates.
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Sarah Larbi: This is a new program, like when did the ML select come out? March 7th. There you go. This is fairly new. So if you are doing something like this, it's very this is gonna be at least part of your exit in your discussion because you can do really well and all of a sudden your loan to value is, 80% or whatnot. You're at 40, 50. Your amortizations, like your cash flow is gonna be really good on stuff like this rather than a typical standard triplex
Lee Pollock: Like we've explored on this. We brought some high level people that work with CMHC to run through and do the energy audit with us. We've talked to the experts in this field that do more of the affordability and accessibility.
We believe in the energy audit. I think that's gonna be our best exit. It's a little bit, it's a little bit of work obviously, to go from private and you have to bridge and then, you stabilize and eventually go to CMHC. We're going through one now. On a property, and it's like we're probably a year after we've completed the property and have it had it fully occupied.
We're just, I'll probably have my CMHC wrapped up by the end of this month, hopefully. At least that's what they tell me. The other thing too is no rent control. There's also on like less competition, I find that there are a lot of people that do want this stuff. There are a lot of people that love this concept that want to jump on.
It's big. It's beautiful. It's not beautiful, but it's big. It will be beautiful. We'll make it beautiful. It's executing on these. Again, like we all want to do this stuff. I'm fortunate enough that I've got a construction company. But you have to have the people in place to be able to do this.
Otherwise, it is a big job. Not every contractor can do this type of it's falls under a different section with the building code as well, and it falls under a different section with fire code. Everything is heightened. There's a lot more work and stuff like this. The numbers obviously work way better.
The other thing too that we can obviously is working and our investor gv partner on, on this. There's a lot of grants and loans from cities to take these older buildings and convert them into residential properties. The grants work in different ways. It's not necessarily free money. A lot of it can be in abatements on property taxes. There's all different kinds of grants. I know. I think on this one we're probably looking at pretty close to before $400,000 to $500,000 in in grants. It's just another reason to, take like these old, disheveled properties that people are not looking at and convert them.
Sarah Larbi: Okay. Awesome. The third way we are pivoting, I'm looking at some of my real estate and I'm saying, can I create any businesses from any of the real estate? You guys probably know if you've, watched the podcast or listened the podcast. I bought a resort in 2021. It's actually going to be launching in October onwards.
We're gonna have three cottages. It's six and a half acres. We're adding some every single year, but we are gonna be starting with three. It's adults only. It's upscale, it's nice. We're gonna it's on the water, it's in Coba Con, the CORAs, but instead of just renting the cottages by night. There's events we can cater to weddings, we can cater to corporate parties and retreats and different things like that. Take a look at your properties, what you have. I know we're just looking at like even the Barton Street House and or the building that we were, we was just talking about and there's film industry companies that might be renting that space.
What can you do to create some additional income, especially while things are sitting vacant? And then something like this is, what else other businesses can you do? There is gonna be, Income stream from the nightly price for these cabins. Now there's events and we can charge an extra premium on events, right?
We can go up 20%, 30% on food. We can go up on the, all the other things that people for weddings and corporate parties will need. This is why I have to hire a lot of staff as well, because there's things to do and I have to delegate. You guys know that I love delegated gating and if I can find somebody to do it better and more efficiently but take a look at your current portfolio. What else can you do with it? It doesn't always have to be rent. Number four, this is back to you.
Lee Pollock: Other things that we've done obviously more, creating things in house to build up the team is after I guess accumulating and building up a decent size portfolio. I brought in property management. One of my background actually comes from managing Starlight. I worked with Starlight for a number of years managing their CapEx stuff, so my background's from that and and property management. So I brought that in-house again with a number of units that, that I personally have.
I didn't want to deal with tenants. Gets too personal when it's your own properties. So I wanted to take myself outta that. Plus I wanted to scale up and I just found it was better to have everything in house. I love control. So I love being able to have everything house. I love being able to sit down with my staff and know what they're doing.
We have like weekly meetings and we're updated all the time on what's going on. Maintenance too. It's another big thing. We fix things. We take care of the tenant issues. We want our tenants to be happy. We care about our tenants. We also, we're protecting our investments and we're protecting our clients' investments by making sure they're managed properly and dealing with things in a timely fashion.
The other thing too, it also, it it stops any complaints or potentially most things can usually get dealt with through communication. It doesn't necessarily have to go to the LTB. I think 10 years of doing this. I've been to the LTB twice. It's been pretty good. Trades I have brought all our trades except for hvac, but all of our other trades are basically in house.
Again, goes back to control and it goes back to cost. It was easier for me to hire our own trades, bring everyone in house and control that, and build up and scale up that way.
Sarah Larbi: The other thing I would just say is you have a big enough portfolio to be able to also do this. Maybe you guys don't, you can, bounce it off of someone else and at some point when you get big enough, you can definitely offset. By hiring your own people. It might not be for you today, but it's definitely, like you said, really good to be able to control it. Probably saving money over time just is with the economy of scale.
Lee Pollock: Absolutely. There's a couple clients that I do work for that do pretty large volume stuff. Like they, four to eight properties, 10 properties a year. And they've actually hired their own maintenance people and managed, They have enough work where they can have one or two full-time people. They're creating employment, they're creating houses. I think it's a great way to keep everything house in house.
Looking at ADUs as well we've just completed our first, so we've been asked quite a bit over the last probably two years year to two years for ADU quotes. We just completed our first one for a client. Our favorite client, I have to say that cause he's in the room . I think he it came out really good. We just did a video there the other day. So he's happy with it. Place looks amazing. And I think the numbers really worked out for him.
I guess if anybody's interested in ADU stuff Alex. probably happy to answer any questions about numbers. More so than we did the construction. He knows the numbers.
Sarah Larbi: Awesome. I'm just gonna finish this point cause I think we're done for time, right? We've just gonna wrap it up in one minute. Basically, what we used to work back in the day, we used to do these singles in duplexes. Now we have to go the three and four units.
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