Accessing CMHC - MLI Select - an Innovative New Multi-Unit Option with James Knull

Accessing CMHC - MLI Select - an Innovative New Multi-Unit Option with James Knull

Creative Investing Strategies to Grow Your Real Estate Business

 As a real estate investor who wants to scale and grow their business one of the obstacles can be finding the right make-up of strategy and financing. 

Fortunately, there are a number of different solutions and we have invited guests to share a number of creative strategies to help you that you may not have heard of or considered before; 

CMHC - MLI Select - An innovative new multi-unit mortgage loan insurance product focused on affordability, accessibility, and climate compatibility.
Access reduced premiums and longer amortization periods based on your level of commitment to affordability, accessibility, and climate compatibility.
 

Daniel: Mr. Knull, how are you doing?

James: I am fantastic.

Daniel: That's good. A little introduction here. James presence in the real estate industry is truly multifaceted as an investor himself. James has acquired almost 300 rental units in his portfolio and architected several large joint ventures, bringing partners together to acquire great properties as a realtor and leader with the mobile team.

James is one of Western Canada's top producing agents and you've grown and expanded into multiple cities. James, one of the strategies you use is CMHC. Analyze, select that's pretty innovative. Can you tell us about that?

James: I'm very excited to talk about the MLS program. A little introduction to myself. Thank you for the kind words Daniel. Come and learn about how to make a better financial future for yourself utilizing real estate. That's a big deal. One of the things I'd recommend you all do at some point is get your phones out and make a little social media posts about how you're spending your time.

I'll tell you, you never know where the next real estate opportunity or joint venture partner, business connection. You name it. Where's it going to come from? The more interconnections you have in your network, the better and in this day and age, this happens online. That's my first piece of encouragement and owns the fact that you're a real estate investor.

A little bit about me. I own a company called the Mogul Realty group which is one of the biggest investment oriented real estate firms in Canada. I think it's the biggest in Western Canada. We've got an office in Edmonton for our headquarters in Alberta. We've got an office in Vancouver for our headquarters in BC, and we do business for investors all across Western Canada.

To give you an idea of a little bit more fun of who we are. There's me and my humble roots when I was selling houses with Remax, EXP now. Here's the team out for a fun team, pizza lunch. One of the things that we do every single year for our team is a team ski trip. These are the people that managed to sneak into the picture.

We do a lot of networking in real life, which is exciting post COVID. We're an incredibly active team. We were the number one team before we left Remax. That was the number one team at EXP for a couple of years running. We sell a lot of income properties to a lot of very happy investors. I love to sponsor community stuff, so a lot of our charitable dollars go to community sports organizations.

Here's the Mogul logo on the work wall and an American ninja warrior facility for the kids. You can see just how tall it is. I sure as heck didn't make it up to the top, but some of the top athletes were able to run up there. I spent a lot of my time trying to keep my body as healthy as possible. Here's a good friend of mine, Sean. Sean did a full iron man triathlon, if you believe it, that guy's a little crazy. I did a half ironman triathlon. I feel like I still get a little bit of credit. That's holy smokes, full iron men.

Here's me with a group of my buddies. The guy in white is getting married and these are a bunch of my university friends just having it up. I love skiing. I was talking about that at the beginning of the presentation. That's why we named our company Mogul Realty Group because we are aspiring to help as many people as possible become real estate moguls.

Then I love seeing the moguls. Here I am on a cat skiing trip. For those of you that don't know what cat skiing is, it's like the stepping stone in the heli ski but you fit more people in that tank thing to get them up the mountain. It's better for a large group and to cross train for skiing in the summer season. There's meet up on the North shore in Vancouver amounts from just jumping off a drop-off there.

One of the features built into the forest for mountain biking. That's a little bit about me as a person. That's a little bit of a real estate business, but I'll tell you a little bit more about why I feel I'm qualified to talk about what I'm actually here to talk about, which is the MLS Select program.

Just a brief history of my portfolio development. Look at the top-left. That's a house with a secondary suite on a corner lot. I spent my early investing career on those. I have a bunch of houses with secondary sleep on corner lots. Knowing that those quarter losses would be helpful in the future for the type of development. I'm going to talk about today and guess what? The future is now.

I moved into the multifamily space. This is the first apartment building I ever bought, a 12 suite, a good mix of one and two bedrooms and a really nice neighborhood. And then where the LRT is going, good stuff from there. I moved into the development space. You can see, this is a picture of a house electric home that we built for the shell and then to the bottom.

These are two houses side by side that we built to keep. That's where the story is landing right now is we are going to be talking about building. That you can utilize CMHC funding. Let's get into the good stuff. I'm assuming you guys can see my screen here. Yes, I'm on the CMHC website.
I'm going to keep it simple. This is where you guys can go. What we're going to be talking about today is CMHC and what it does from a financing perspective. A CMHC is a Canadian Mortgage Housing Corporation and they lend money at very favorable terms to people, organizations, corporations that are doing things for the community to provide housing for various reasons.

Let me give you a couple of examples. These are all funding opportunities. You can see here first nations development, funding, national housing co-investment funding, on reserve non-profit housing program. A lot of first nations had enough shelter and had the program for people's things, domestic violence, shelter initiative for indigenous women and children.

Federal community housing initiative for low-income tenants, cOVID 19 loan payment, deferral for indigenous clients, seniors at that adaptive housing for seniors preservation of funding for community health, rental construction. This is where it starts to get interesting. You have to get to the bottom here. This is where investors like ourselves really take advantage of some very cool programs.

Rental construction, housing initiatives, low cost loans incurring the construction of sustainable rental apartment projects across Canada. I don't know about you, but I'm feeling pretty green these days, especially if I can borrow low calls from CMHC seed funding, interest free. I'm going to say that again, interest free loans and or non-repairable contributions to develop and preserve affordable housing. You've got my attention. What if we blend those two elements together? What if I have an idea to build sustainable housing? It's green friendly in conjunction with affordable help.

This is what we're here to talk about. Seed funding, that's where you're going to want to go. This is an overview. What I'm trying to do really here inspires you to do a deep dive into these programs. I really want to just give you an excitement and a taste for what's possible utilizing CMHC funding. I'll answer some questions in the presentation, but ultimately, if this is something that is getting you excited, reach out to me, we can talk about it full disclaimer.

I'm giving this presentation from the perspective of a borrower using the program. I'm not a mortgage broker, I'm a realtor. I don't know as much as a mortgage broker, but as someone who's gone through this program, I know a heck of a lot more than your average Joe, and I've got money coming in hot from CMHC. I think my success is something that is worth emulating for yourself.

If you have a project that you want to do. For example, interest-free loans, the non repayable contributions to help you preserve affordable housing. You can get interest free loans for a three-year period, non repayable contribution for up to two year period. This is a pretty big deal if you click the product highlights. You get a there's no restrictions on the type of building farm or future residents of the project must have a minimum of five affordable units.

We build apartment buildings with this stuff, if you want to go portable. That's why for those of you guys, like in the Edmonton market, Vancouver market to the markets, I know the best. You see a lot of community housing going up like crazy. Why? Because you could see him. He sees me, he's very easy to get money to build this stuff. It's worth getting into maximum loads. We're at $50,000 with security requiring up to a maximum of 150 flips. Depending on how big your building, $350,000 isn't a ton of cash.

If you're building something smaller, the idea of this funding is to help bridge the space between your construction financing kicking in and the project getting started. We call that kind of like the soft costs, architectures, zoning, carrying costs and consultation costs, et cetera. Anybody that's ever built anything, that you can burn a hundred, $200,000 real quick waiting to actually break ground, start construction and get the money flowing on your construction. That's part one of this program.

MLI select, this program is you talking hot off the presses. We made our application in the first round of applications in March. I'm just going to show you guys a little bit of how this works. If this is exciting to you and you want to do a deep dive, give me a holler. This is not something I can cover in 20 minutes. This is fairly complex, but I'm here to excite and inspire you guys to do something great for your community. Affordable housing and build something that's sustainable.

Let's have a look here. You have to get a total of 100 points in order to qualify for the program. For example, 40%, 50 points if 80% of your units are at 30% of median rental income. That's providing affordable health. You get a hundred points. If you can show that 40% reduction in energy efficiency, again, I'm not going to go to them. I'm not getting caught in the weeds here. I'm just telling you guys, these are some of the requirements now. I can tell you that affordability is easier to hit than a 40% reduction in energy efficiency.

It's easy to blend these two together to hit your numbers. Accessibility are things like, just for a super simple example, like wheelchair ramps and handrails in the hallway, stuff like that. What does it mean that we can do? This is where I want you guys to get paying attention. If you've got a hundred points, you can have 95% loan to value and a 50 year amortization. I don't need a mortgage broker to explain to you guys if that is pretty darn weak.

To be able to get a 95% loan to value personalization, here's the one, two punch. Number one, get this seed interest, free financing to bridge you into this sort of construction. If you do this right, you're going to build equity in your projects, through the development, and then you refinance 95% loan to value. And guess what? A lot of the money that you invested into the project, you get to pull back out upon refinance because you've increased the value of the land when you add construction plus building costs that adds up to the number.

The final appraisal value should be a rate higher than that number, that Delta in essence becomes your down payment and you can start building affordable housing with little to no money in using this program. Your cash flow comes back because you got a 50 year amortization and you're renting at 30% of median rental income. The longer amortization helps offset the slight visible red that you're collecting and now your cash flow.
I don't want to go down too far down a rabbit hole, but if there's a way for this as well, and your 50 year amortization gets short right back up and you're really laughing. That's a diversion. I don't wanna go down that rabbit hole, but hey, just to brainstorm at the moment. This is my show and tell for the MLI Select program. I hope you're liking it cause it's really great. Look at the websites here. Just go to CMHC website, there'll be a front row center, click around, not hard to find just Google CMHC MLI Select, it'll come up.

First thing that will come up, it's not hard to find. Let's get into a little show and tell. First things first, I want to show you what I'm building. What am I spending my money on? Step one, find a good corner line. This is Paragon for any of you that have worked with a realtor anywhere in the Western Canadian market. This is what we use to find properties. You are now in the back office, seeing what only realtors can see. This is like under the hood from the realtor perspective of realtor.ca.

I found a corner lot here for 249,000 bucks in Edmonton. There's an aerial view, looks like Edmonton in the spring. What are we going to build? Let's go to the abstracts, but it's a little search. Look at this beauty. You got 1, 2, 3 slots and then in the basement we have 1, 2, 3 suites. We got a six Plex on our heads. Look nice. Again, this is show and tell. I don't want to get into the weeds here. I love talking about this stuff. You can see where it's located. The new LRT is coming in, like right over here.

This one's a really nice location for that. You can see, this is what I would call builder grade luxury. We've got stone countertops, laminate flooring, backsplash stainless steel appliances. You can still read something. That's nice to someone who falls into that affordable housing event. That's okay. Build it durable. This is what I'm building. My final piece, this is what we're building.

We're buying a piece of land throughout, give or take 300,000 bucks. We're going to have something they're selling these things at $1,625,000. The place that I'm building isn't a better location. This is probably going to be worth about $1,800,000. When it's done. But our piece of wine was also more expensive than 250. The numbers still work. It's a good Delta there as they say, let me just walk through the process.

Please don't take any screenshots because these are somewhat confidential documents because they're my documents. Let's just go through the steps of what this looks like. We have a house, on a corner lot, and I'm thinking to myself, okay, with this MLI Select program. Our problem was with our particular lot, so it was RF1. We needed to build RF3 because we want to build three. We got to go through a rezoning here and this is Alberta and it's in everything. It's fast track stuff, which is pretty darn.

We had to resolve, so this whole rezoning process, if you can see it signed by the mayor and you like me now, is pretty neat. The mayor has to find results. That's why it takes a bit of time. From the time we applied for the rezoning to the time that we achieved our rezoning is about a six month process. We just had this thing rented up in the meantime, knowing that we're going to tear it down.

We had to get fire services to approve that we've got three fire protection features. Are we fire code compliant? We got that issued on April 26. We have our development permits, so you can see. East middle West unit, secondary suite. That's all approved. That came through on March 24th and then the funds back. We had to get an appraisal done for the after repair value so this is an appraisal. After repair value, they think of a shortage or something appraisal at $1,575,000.

We actually got it reappraised and it came out closer to this $1,700,000. We have a second appraisal in play now. We also got an appraisal, like in the dead of winter before the empties market jumped a little bit. You can see, they use comparables from January, February, March 20th, appraisal. The market went up by 10% from March 3 to May. That also helps which is great.

We did a budget, so you can see this is a builder's budget. Again, this isn't a presentation about how to read a builder's budget, but it's the kind of thing you'd expect. It's going to cost us about $1,100,000. The $300,000 piece of labs, plus carrying cost, run it for about $1,400,000, $1,500,000. We're going to be in it from $1,700,000 so the Delta between that $1,700,000, $1,500,000. That's our 5% we're going to leave in the property.
When this thing's all said and done, we're gonna have a cash flow in properties financed by CMHC in the MLI Select program for affordable housing, energy efficient features. That would be great for the community, with none of our own money. Want to hear more? Give me a call because I love talking about this project. I'm pretty proud of it. This is a spec sheet, project specifications. This is a level of detail you want from your building.

We know how much to the penny, every single part, every single component of this darn building is really professional stuff. We'd love our building. They just give us a few specs. We know what our cabinets are going to look like. We got white cabinets with pretty straight forward handles, countertop. We've got our blueprints. We got a triple garage, one slot per building. Then we've got our building blueprint. I've been on nights. This looks familiar. It should, because it still looks very similar to this still pink.

Why does it look similar? Because it just so happens to be the same builder, same building blueprints, which saves us a little bit of money. We said, build that. I happen to know that person who owns this company is a colleague of mine. I got a great testimonial for real estate. We'll see what real estate will look at previous bills of a builder or a contractor you want to hire. I think it is a better business card than their previous work.

That's what we did. We liked it so much for getting to build them one for ourselves. Blueprinting stuff or planning. You want to get into the minutiae here, but it's pretty self-explanatory, there's something you need. Finally, we have our contracts for service with the builder, so we have this signed off. This is signed, sealed, delivered. There's a deposit in place. A bulldozer has knocked over the building. We've already got our seed funding in the bank that has taped for the deposit with the builder, as well as the cost of demolition, as well as some of our other soft costs, as we're getting into this.

Here we are in May. Remember we applied for rezoning at the end of last summer, we got done, et cetera. We just demo the building. We should be foundation pouring within the next three weeks. That'll be done probably by February, March, just in time to have her thing on the market for rent. Let's go back to this guy on the market ready for spring season 2023. The whole Chabay is about a two year turnaround and it would have been more like an 18 month turnaround if we didn't have to wait around for rezoning. And that includes ever rethinking.

This is a project that I did with a joint venture partner. I need all this stuff to happen. They were just cash partners. It's going to be a terrific project. I was going to do a cash flow analysis, but at an interesting time, I won't go into those weeds, but the thing I can tell you is that this thing is going to cashflow a terrific amount. If you're interested in talking to me, getting to know me, go to www.mogulrg.com. This is our awesome website or go to Facebook. This is my preferred social media platform for business purposes.

If you go to Mogul Realty Group right here, follow us you'll see all kinds of great content and you'll be able to DM me. I use my middle name on Facebook because my dad named me in the afternoon. His name's James so I put Joseph in there to distinguish between the two of us mogulrg.com and Mogul RG on Facebook.

I need you to get ahold. I love talking about real estate and I love building six plexes that have cash flow and Edmonton with CMHC is money and none of my own. With that, I thank you for your time. I thank you for your attention. I commend you on investing your evening into learning about real estate, and I hand the floor back over to Daniel.

Daniel: Thank you so much. Just out of curiosity, right now, when you're talking to us, where are you?

James: Currently in Vancouver.

Daniel: Okay, but normally you're dealing in Vancouver, you live in Calgary or what?

James: I split my time between Edmonton and Vancouver. Depending on the month, depending on the quarter, depending on the season. Especially, depending on winter spending more time, that's the vast majority of my portfolio is in Edmonton. And then I've got some properties in Vancouver. We're getting some properties out on some of the Gulf islands. I'm stepping into this development project.

Daniel: Thank you very much, James.