Join our panel of experts as they discuss what has changed and what might be happening in the world of real estate investing in 2022 in Canada. Topics discussed include real estate markets and best types of properties, financing and refinancing, tax implications, landlord and tenants and short-term rentals. Watch our experts Brian Hogben, Dylan Suitor, Andrew Choubeta and host Alfonso Salemi in this lively discussion.
Alfonso: We have a star-studded line up tonight and I'm not saying this lightly. Guys, these are some titans of the industry that are actually crushing it every single day. They are out there, they have amazing teams. They are investors all themselves. We have Brian Hogben from Mission 35 Mortgages, Dylan Suitor from Elevation Realty and Andrew Choubeta from Legal Services.
If you haven't heard of these guys, welcome to real estate investing. But for those that haven't, I'm going to do a quick intro on these gentlemen here. So, Brian Hogben, owner of Mission 35 Mortgages and an avid real estate investor with a 10 million plus portfolio ranging from apartment buildings to single family homes.
He's got an amazing book and it's really recommended. I've read it is, How to Get Mortgage Free Really F*$%ing Fast.. So, if you haven't checked out that book, definitely find that book with Brian Hogben and knowing Brian a little bit, he's got a need for speed. He loves racing. He's been on different tracks with different cars and he loves the need for speed.
Dylan suitor, the man behind Elevation Realty, experts in real estate investing and their investors too. Again, I've worked with these guys. I've worked with this team and they are all amazing. They walk the talk. One of the secrets to success is being super proactive in an ever-changing world of real estate investing and knowing the market's really excited to chat with him on what's going on.
I think we have 14 seconds of inventory on the market these days and how we can be productive and still get deals done and a quick insight tip. Dylan is an avid mountain biker. I think I saw something this week on social media. He's actually mountain bike out in the snow, but I think he's a little bit of an adrenaline junkie as well, too. Him and Brian I think would really have fun strap on the seatbelts for sure with those two. And last, but definitely not least Andrew Legal Services, specialized in small claims, landlord and tenant law and employment law. He too is an investor with an impressive portfolio and why it's so important you really want to work with those on your power team to really understand real estate investing from all perspectives.
Guys, if you guys have people on your power team that are not actually investors, rethink about that, okay. They might be great. They might be your friends. They might have helped your cousin, your aunt, your sister, do something. But you want investors on your team. So, gentlemen, welcome to the round table. There are no corners on this table tonight, so we are super excited to get excited and chat. Welcome.
Brian: Thanks Alfonso. I love that introduction as well too. You always do such a good job at making everybody feel like a million bucks.
Andrew: He called us a Titan, right? That's amazing.
Alfonso: Man, you guys are studs. Every single one of you, really, super excited for you guys to be here. Like I said, this is going to be a round table expression. We've got a whole bunch of questions that we've prepared that we've gotten from The REITE Club community. But so feel free to chime in, a little bit of cross talk. We want to make sure that we're getting the most value out of tonight, but I'm going to start with Dylan and like I alluded in the intro.
I think I remember conversations about what a balanced market is, how much inventory is. And like I said, I think we have 14 seconds of inventory on the market and definitely in Southwestern, Ontario and most of Ontario, but here's a loaded question. Okay. Where is the market headed? Are we continuing to go up? Is there no end in sight? Yeah. Or what's going on? Where's the market heading?
Dylan: I appreciate you asking me first and putting me on the spot. I do a lot of personal development, a lot of training. I'm a Tony Robbins advocate. The truth is no one knows. This is probably the most unknown market that England's ever been in 2021.
The stock market, for instance, usually goes up 10%, 15% didn't even time, 14% was the number I was told by Peter Baluk. And at some point in time there was a drop in 2021 that didn't happen. There was no drop. There was no correction. It was just trucking along this thing. Is that sustainable? No, not forever.
At what point in time is it going to change? So economists are saying that, you know what we don't know and they've given up trying to predict it. So my opinion would be, and my thought process and where I'm at. If you were brand new to real estate investing, get in because it's always been beneficial over a hundred year period, take any a hundred years you're going to win.
If you are a real estate investor that has a smaller portfolio looking to grow it. If you can't refinance and grow it, or you can't purchase something else without doing a refinancing. So, there is a chance that something happens in March or April, where they do a change when they do the budget and they may change the capital gains.
Now may be the time to make a sale on a smaller purchase to upgrade your houses to a hotel in a monopoly game type thing. So, I'm a huge advocate for apartment buildings. I have been for a few years. I have totally gone that way. So, I might call, it would be to play the game of monopoly and upgrade.
If you are a bigger investor, continue to add, and you have an opportunity where you can sell underperforming assets in your personal perspectives for more higher performing assets that may not necessarily be available to every investor. So, I would say that there are people that will find every asset class valuable, whether that's single family, duplex, triplex, 10 Plex, a hundred plus units. There's someone for everything and it may not be you right now. So, there is opportunity in this market. You have to look for it and find out what your strategy is.
Alfonso: Love it. Love it. Great advice, Dylan. And I want to come to Brian just on a quick, up on just how quickly the purchase prices have been going, like a Mission 35 rocket, that kind of just gotta keep escalating. How have you seen, maybe appraisals coming in or actually financing because it's one thing to say, hey, there's multiple offers. It's going 100, 150, 200 over.
How has that been all working out on the financing side? When an investor's lining up and say, okay, I want that property. I'm willing to pay for it. The number's still work. How does that work on the financing side with a continuous boom, an increase in purchase price?
Brian: Yeah, that's a great question. You know what, and in 2021, we saw just massive increases in property, but surprisingly enough, the comparables were keeping pace. So, we actually didn't see too many issues where the appraisals were coming in light. It's only now I would say in the past two, three weeks that we've seen some appraisals come in up to a hundred thousand dollars short. I think this is probably like when you said supply, is that one second or two seconds?
I think the supply is at a definite low right now. And we're just starting to see appraisals come in a little bit late. Now that being said. Most people, investors are up a hundred percent from pre-pandemic, right? So, investors usually have an out. So, we just had one scenario where the appraisal came in at a hundred thousand dollars late. It was in the Hamilton area, but they had a backup plan, typically people that are going in cash and going over lists by X amount of dollars.
You've got a blanket mortgage backup plan. You've got private mortgage options. You've got, it may not work out as desired, but because it's a long-term play for people. And I have to agree with what Dylan said, there is that if you're buying for the fundamentals, if you're buying for the fundamentals and you're buying for the long-term, I don't know what's going to happen in my crystal ball. I think I know, but I don't know for sure. But the fundamentals are key.
If you pay an extra 50, 7,500 grand, nobody wants to pay that. But if you're holding it for 5 years, 10 years, you get a long term play. You're going to come out ahead. You're going to be fine. So, I think as long as you've got a backup plan for going over ask and the supply shortage in case appraisals come in low, you'll be fine.
Alfonso: Nice. Yeah. Great tips. And I'm going to come to you next to Andrew and ask you as real estate is headline news. Like I mentioned, we're in talks with CMHC. The government is aware, everybody knows that there's no supply. It's the front page, it's the front page on whatever you're scrolling. It's all about the housing supply. We, alluded to, Dylan talked about, maybe there's going to be increased taxes on equity and guess the American version, Uncle Sam is going to be in our pocket and yeah, the liberal government or whatever whoever's in power is going to have to make some of that money back that they've put out.
Have you heard of any rules coming into effect for whether it's investors or, what do we need to be aware of? Or how do we set ourselves up to make sure that we're not getting it's all about keeping the money that we're investing.
Andrew: Yeah, there's been quite a few changes in the past couple of months, years, right? Mainly, you know what I'm believing in on a municipal level. That's really where everyone's looking at these days right now, flavor changes on how much money are you going to be paying out in taxation per city. Hamilton's a lot different from Welland and Munden and Toronto now. And you're seeing that the bills are being changed. It's funny because everyone looks at the federal government. And that is incredibly important for your taxation, but nowadays you're looking at your large expenses coming out from a lot of municipal bylaw changes, and those things are eating up a significant amount of portfolios, just getting more and more important to know your ward, counselor, and how they're voting on certain matters.
I know here in Hamilton has been a massive change on how people consider and how they move forward on taxation and then right control. That's a big thing these days, right? So, certain cities will have it and the other ones don't. Toronto being the main one, having a really significant push and Hamilton now going slowly over into the same thing.
You're seeing a huge change in how investors are having to act and repurchases change. And depending on how big the investor community inside certain areas are, you can see the influence moving one direction or the other, people gain more and more organized. And you started to see that eating significantly into profits these days.
It's in regards to where the best sort of shift is, it's hard to tell as of right now because risk is where you know, where the reward is. Hamilton is still looking good. And with all those prices, Dylan's changed me completely on the apartment and building the aspects on that, like I initially was a lot more duplexes and triplexes then, I felt like Grant Cardone after seeing him making his purchases. And now I'm looking at something in Africa. I'm going to shut up, move something out there and get my 150 units to be fantastic.
Alfonso: Yeah, that's awesome. A quick comment from Dylan or Brian or both on the investors that you guys work with. What are they doing or what are you recommending? And Dylan, great point. You're not an accountant, you're not lawyers. We have those even here tonight.
Dylan: I speak with my accountant and lawyer on telephony but I'm not going to claim to be one of those.
Alfonso: Absolutely. And that's why luckily, we have some amazing sponsors and REITE partners that are in those professions, but from your perspective, you're working with real estate investors. What advice do you give them to be ready for some of the changes you'll age, you're mentioned as taxation, how do you find more cash flow? Can you put a granny suite in, can you have a basement apartment in the granny suite now? Like I know you're always about adding and it's finding more revenue in those deals. So, I'll go to Dylan first and then Brian, for some comments after that.
Dylan: Highest and best use is one of my favorite terms. I'm all about it. And I guess those who don't know me please reach out. I'm more than happy to build out a customized plan. It's something I offer to all potential clients, it's just especially REITE club members. This is somewhere I've been since day one, day two. Actually, we always joke about that. And I do, I get a smile from you Alfonso.
Day two, I came around and I've been here all the time since, but yes, reach out, set up a strategic plan. I had someone about a week ago to go and she had a five-year plan to hit a certain $7,000 a month. I looked at her portfolio, I'm not going to tell you to buy or sell anything. You can actually refinance and move some of the numbers around and you can actually recreate over $8,000 a month in passive income right now with what you currently own. And it was like a tiering moment and it was one of the best opportunities that I've ever had to provide that for someone.
Please reach out. That's what I want to do. I want to look at your portfolio. See we can do it, I look at it from a holistic perspective. I'm not trying to force a purchase or a sale down your throat. My focus is how can we take your goal where you want to dig deep into why you have that goal and then build a plan to get there.
If your goal is I want $10,000 a month in passive income why do you want $10,000 a month passive income? If your goal is to replace your active income with passive income so you can quit. And as Claire always says, tell your boss where to put it. Then you can do that as well, or if you absolutely love what you do, but you want to replace your active income with passive income, so you can double up and have both.
So, if anything does happen to you or your family, you can still provide, we build that plan out for you. Now, I'm going back to your question. You asked at the beginning, which was, what do you recommend? Exactly what I mentioned, we kicked this thing off, which really depends on your strategy and your plan and where you want to go.
My focus for all of my clients is to upgrade. It is to take a no portfolio and make it a portfolio. Take a current portfolio that's underperforming and make it something more that you could get performance out of if you bought into the market, because all you could afford was a condo, but now the condo fees are chewing apart your cash flow.
Maybe it's time to sell the condo and increase it to a duplex or triplex. If you have three or four, duplex, triplex, they may make a little bit, but you're like I could take those and utilize some of the CMHC rules coming out in March that might be able to get me 95% loan to value on an apartment building.
Maybe that's the plan we want to run with. Those are the things that I would recommend, is that it really comes down to what you're looking to do. And I'm more than happy to sit down with each and every one of you for half an hour and determine exactly what your plan would be. And then build that plan for you.
Alfonso: Brian, anything to add after Andrew and Dylan?
Brian: You know what I think where I would have to piggyback off what Dylan said in the sense that I think it's up to your plan and your goals and making sure that you're leveraging and scaling at your pace. Because I think Dylan's pace might be a little quick for some people and it might be different for other people.
I think it's just coming back to the fundamentals and making sure. When you're investing in real estate, you make sure that you get the cash flow if you can. And you're comfortable because what I have seen lately, the only concern that I have sometimes is with people scaling up too quickly, doing too much private money with unforeseen government intervention. Later we've actually seen as someone that got stuck with logistical nightmares and contracting doing BRRRRs. Do you know what I mean?
It's just if you do too much. Make sure, cause I think that there's something to be said about stacking your knowledge. You get a condo, then maybe get a duplex, then maybe get a triplex. I do love the apartment buildings. I've got some too, but if I went into a 12 unit apartment building fresh out with no experience, I might've fallen on my face.
I think that climbing up the ladder. Do you know what I mean? I think in this day and age, sometimes we're trying to get too far too quick. It's still okay to build on that ladder. Do you know what I mean? And the other thing that we're telling a lot of people too is, readjust their portfolio. I've seen this as well too, where people, tenants especially, are staying in properties right now with really low rents.
Sometimes it's good to trade up that condo or single family home into a new property so that you can take all that equity because it doesn't make sense to refinance some of these properties to be negative cash flow, just to take the equity out. So, we are looking for a lot of our investors to transition that portfolio as well too.
Alfonso: Yeah, some great insights. And definitely we're going to come back to Andrew talking about the Landlord Tenant Board. I just learned something new this week about the Landlord Tenant Board. So, we're going to come back to Andrew, but let's stick with you for one second, Brian, and the interest rates.
Of course, how can we have a mortgage professional, not talking about the interest rates? Oh, they're going to go up. They're going to go up. They're going to stay the same. They're going to go up nine times and are going to go six times. It's like the same, like where's the market going, but what are some of the changes or what they anticipate again, you have a finger to the pulse you're working with some of the biggest lenders in the industry. Can they stay the same? Can they increase? What can we anticipate? What are some things that we can prepare ourselves for?
Obviously, you don't have the crystal ball. You're not here to give us the ultimate, I do. It's right here. It's right here. Wait, let me call it. Perfect. There you go. Okay. Yeah, there we go. Can you Airbnb that crystal ball?
Brian: Yeah.
Andrew: I can make it legal, man. I can get you to, at least for that.
Alfonso: It's going to be okay. But again just on the rates overall, what to do lock in now, what do we do?
Brian: I think too and when everybody talks about interest rates going up, it's important to first distinguish between fixed and variable, right? Fixed rates have been going up for the past three months. We were seeing fixed rates for five-year fixed money below 1%. They've slowly crept up. And now there are anywhere between 2.5%, 3%, a little bit over three, depending on your down payment, rental, depending on the property you're getting.
They've already gone up the fixed rates. What everybody's talking about is variable rates. Now, something important right now is that variable rate mortgages are up 80% year over year. So, that means that more than 80% of people are now taking a variable. The reason being is because right now, currently, depending on your situation, there's about 150 points spread. Okay. A hundred that's one and a half percentage points.
To put this all in perspective, our rates are going to go up in my mind, for sure. I think all the indications are that we're going to see rising rates. When I don't know, I think we could see a quarter point jump as quick as the end of this month or in March. And then we could see up to 1.5% increase by the end of 12 months, 18 months time. How much is it going to go? Hard to say in my opinion, I think we're going to be up this time next year, at least 1%, if not marginally more based on all the inflation that's happening right now. But with that being said too I wouldn't be concerned for 2022 about rising rates.
It's important to note a couple of things. One, when a variable rate goes. There is no payment shock for anybody. The average Joe homeowner for 6 to 12 months. And the reason being is because you're still going to make your mortgage payment, but you're still going to make the same expense. You're still going to take Uber eats. You're still going to go buy ship stuff from Amazon. You're going to go traveling and then you may not pay off your credit as much and household debt right now. I always look at this number because before the mortgage default. People will default on credit cards.
Credit card default is at an all time low bankruptcies, insolvencies are at an all time low. So, when it comes down to interest rates going up, for sure, in my mind, they're going to go up. Is there going to be a negative effect in 2022? Not because of interest rates, in my opinion, if there's something in addition to government intervention and interest rates, maybe, but I think the interest rate, we won't see any negative effect for our real estate investors in 2023.
Alfonso: Yeah, great insight. And you touched on it a little bit there about inflation, right? To counter that inflation and like everything is more expensive, man. When I was playing tennis, I could go to Canadian Tire and buy a can of tennis balls for 399 or 499.
Now, they're like 12 bucks. I'm like, man, I'm going to get a couple more hits out of those balls. Because that's tough. But so just really quickly touch on, how do you combat the interest rate on a HELOC or a refi, how can that combat the inflation or the effects that it's going to have?
Brian: By having interest rates go up. Basically, the whole idea is that by having interest rates go up, it costs more money to borrow. So, it's going to slow down spending, right? The whole idea is to slow down spending and interest rates go up. The idea is that you're going to think twice before spending, you're going to think twice about putting money on your credit card. But will that be the case?
I don't know, but that's the whole idea about raising rates to slow things down to slow down. If rates are higher than theoretically, we can't buy more real estate. But with 25% of people buying real estate right now being real estate investors they can build in that buffer. They can build in that buffer. So will that, how much does a rate increase need to go up in order to slow things down? That's a leavers that are above my pay grade. I don't really know, but we'll actually see how that turns out.
Alfonso: Yeah, absolutely. And we talk about raising rates. One thing, investors are always raising the rents. That's, we want to make sure that we are the bare minimum after this rent increase. What was it like 1.1, 1.2 are those increases another way, the cash for keys, but where did these, where did these tenants go? Right to go at these rates. What did that lead us to Andrew, the Landlord Tenant Board?
Again, I saw firsthand some, I think maybe an improvement that it wasn't these old school, like Excel type documents that the Landlord Tenant Boards worked with. It was all online and submitted through the online process. But have there been any improvements with the length of time folks are getting in front of adjudicators? How long is the process taking to get those hearings and like a letter on a postal code or an address or something like that. Like really think guns, like we'll start back again.
Andrew: Giving me stress already. Yeah. Yeah, no, that's exactly how it is. You miss a postal code is wrong. The big thing with me is unfortunately, and it does happen to a lot of professionals. It's a DocuSign. I see that all the time where they put the date at the bottom and it says day, month, year, but it's, DocuSign's American's, this is month, day, year out the door.
You can do your application and say, January, you wait until March, April, May to do a non-payment of rent and you haven't had rent for the entire period, get to the hearing date, outdoor it goes, it doesn't matter. And there's no recourse. There's nothing to be done. You just have to refile it, redo it. So, it's sobering, right? It very much is. Depending on the one thing I tell investors the highest traffic areas are the ones that you're going to see. Where you have to be careful, right?
Every landlord should know how to do an L1 application or a nonpayment of rent. It's your standard when you're in for the right. That's the one you should know, if you've never done it before the first time you do it, hire practitioner knows what they're doing, and then they'll help you and walk you through it.
Everyone should know that after that view, those end fives and some things get a little more serious or if things get a little more convoluted, those are the things that you should be hiring for a paralegal practice. If you just don't feel comfortable or you have a significant amount of arrears, I would definitely contact a paralegal, contact a law firm, and have someone deal with it.
There's not that many people that specialize in the Landlord Tenant Board, simply because of how specific the notices need to be in the type of work that needs to be done. So, there's a few practitioners that do, but not often that many. Now I'm grossed out by the wait times, the realistic, honest answer is nobody. It's up in the air, that you might as well just throw it up and see where we land on the table.
But we are seeing things move faster in certain areas. I've seen Hamilton's now moving a lot quicker, London well, in that type of thing, they're more rural. It gets easier, but if you're downtown Toronto, Liberty Village, Scarborough, that kind of thing, those application times can be very lengthy.
I don't mean two or three months. The court process, nine months, 10 months, 13 months, that kind of it can happen. I'm telling you. Remain diligent on your applications. Remain diligent if you are moving on something, don't wait for anything. If there's something to be applied with the Landlord Tenant Board, do so immediately, you can always end an application. It costs you $186, right? Or $200,000. It's not a significant expense.
The property's worth 1.1 million, and you'll have to explain to Dylan and Brian, why you didn't do something. And now you're really big for 200 bucks. And it's funny cause it happens and it always drives me insane because people don't know what to save money on and what knocks investors that sometimes could be the worst at it.
Your application is not the thing you want to be waiting on right. As soon as you have something that needs to be dealt with, and it's a serious matter, handle it immediately, right? Hire a practitioner, if you don't know how to do it, but handle it immediately and people, March, April, May from a non-payment red situation in December, June, July.
It's by the time I get to it, it takes me a week to get started. It takes me another week, 14 days to get to the application process. So, it can get you quite a bit of time. Do be diligent, don't hug your paralegal or lawyer.
Alfonso: Absolutely. And you know what great advice there, in a property, in my personal portfolio, a duplex in Hamilton had to go through that in the last year. And I think it was from August, December that it was all resolved. And yeah, that's not a fun way to go through that process. Definitely not. And yeah, for all those that, to put their hands up, those paralegals that are their job to go to the landlord and tenant board.
I remember when they were in person. I used to call that place hell on earth, because it was just crazy. And now that they've moved online, it's even crazier. It's like herding cats. You have some people that are now like they're zoom is right up their nose and their cameras and it's all wild.
Andrew: Alfonso, I just came into a hearing room yesterday and it was 97 files on a docket. 97. It starts at night like this is another thing. If you have an application, the time that comes on the hearing date, or that the notice of hearing, it's not the time you're going in. It says 9:00 AM I get 8:30? Okay. Then you've brought some blood. Cause I'm mad about this, but it's 8:30. I got to get it. Okay. And I don't get heard until 4:00 PM. I'm not kidding. And I've been in hearings at 7:00 PM. And I'm 57th on the docket or 80th, and then imagine waiting for that length and your witnesses disappear because they've got to go to work.
Your client has to go to work, the kids, et cetera. And then the matter doesn't get. It gets pushed for the next day. Yeah. That happens a lot. It happens all the time. And you're having these huge mega hearings with multiple adjudicators and then that kind of thing, and yeah. And yeah, it is what it is and you have 60 or 70 matters per day. And I could be there for 11 matters, 10 matters five. And you try to get through all of these, but yeah, it's if you've never been there and said when I was in-person, similar, but it wasn't like this zoom has helped a lot of things, but inside the practice. It's interesting to say the least.
Alfonso: Yeah. Yeah. Maybe somewhere down the line, the metaverse we'll solve all these issues or something like that. You go through the supergroup, but anyway, all right. We're almost wrapping up, but I do want to ask. Dylan, one more question before we wrap up and, obviously, don't give away all the secrets, but two things, types of properties that are the best opportunities for investors and areas that you see up and coming markets everywhere in Ontario, maybe across the country has been up, but maybe what are some pockets and types of properties that you can help guide some of some of our REITE club community.
Dylan: Again, I go back to highest and best use. There's been some changes recently and I speak to an architect or an engineer. Someone who really knows about those changes in a specific city. Although there are opportunities to add more units. There are opportunities to build for those of you who are looking to build and do new development.
There's some opportunity there. And also I know this whole coach house concept has been running across Ontario, especially with the last couple of years where they're adding another unit. I had a client of mine who was buying a building for the first time. He had just finished up four duplex conversions or legal suite conversions in Hamilton. We called them and the coach house option wasn't available.
He bought them, and he turned them into units. He then sold them. He was all in, at 900,000 in costs. Then he sold them for 950,000 or a million bucks. So, there was some profit there, there was a little bit of profit, but not a ton, but I said, okay what happens if you held them another year?
And you can add a third unit to that for 100, 150, 200 grand. And it was worth 300. We've had another hundred thousand in value and he purchased a 12 unit apartment building. And that lot on that 12 unit apartment building actually was big enough that he could add another apartment building. We haven't finalized how many units that apartment building can be. But the concept of it was by this 12 unit, turn those units over, refinance it.
You're not going to make a ton on the BRRRR strategy on that initial 12 unit by doing the buy, renovate, refinance. But you're not gonna have this parcel of land that when you get site plan approval, you can build up an apartment building of whatever amount of units they have and make the upside in that.
I think that is a bit of a high level idea or concept that we're working on, but it also applies to someone doing a two unit conversion or a three unit conversion where you can take a larger lot or a corner lot. You can serve it. You can add a third unit. It's being a little bit more creative and looking outside of the box from what you'd normally do because it's very easy to look at a bungalow. That's a thousand square feet on the Hamilton mountain or in St. Catharines or in Welland or Cambridge, any of these cities and add a second unit in the basement. But you need to look a little further than that now.
I think that's why you need to work with the power team that knows what they're talking about, that has done it, has experienced it and that someone can pick and advise you on it. The other thing I look at is some people have single family homes and they're being advised to sell them, but their goal is $3,000, $4,000 a month passive income. You could do those as a short-term rental, not necessarily an Airbnb.
There are ways to do 3, 4, 5, 6 month rentals executively to insurance companies that can avoid some of the HST implications you may run into if you do three-day rent or whatever three-day units. I've done that in the past as well, where we've done executive rentals for six months, or they do three months at a time and they've stayed for two years, but they paid $3,500 from my basement in Burlington that's happening right now.
I took a house in Burlington that would normally get $5,500 up and down and all of a sudden they would have $8,000, $9,000 a month in rental income that drives an extra $3,000 of passive income. Because we look at insurance issues or people that markets such as Burlington, that there just isn't any rental available. And if someone has a flood or a fire, unfortunately knock on wood.
It's not for each of you. Then they need a home and those homes can actually yield a really high return. And their strategies and ways to get into those insurance companies and be on that top of that call list as well. Then I'm happy to discuss with anyone as well. So, a couple of different ideas and strategies outside of a typical, just buy a bungalow, turn into units or buy a house, renovate it and flip it be a little more creative, think outside the box and and see how we can add more value for yourself and the people that are gonna rent of you.
Alfonso: Yeah, fantastic advice. Gentlemen, Dylan, Brian, Andrew. Thank you guys so much for your time. There's their contact info in the chat box. Reach out to these guys. I really meant what I said. Andrew, you guys are the Titans in the industry. You guys are doing it out there every single day. Continuing to help more and more.
And that's what really wrote about The REITE club community. So, Brian, Dylan, Andrew, thank you so much. And I also want to thank others that are on the call here tonight to make part of your power team. If these guys aren't part of your power team, definitely have a call with them and definitely consider it.
Some of our partners and sponsors are on the call. The Windrose group, Claire Drage and Amiel, John are here Senate financial. We just recorded a podcast with them last night, Sarah and I have really some good information coming down the pipe from them. And our original sponsors, Derek McEwen in Storm Realty.
Sarah: You know what, maybe I will start Andrew, if you're still here. I'll make it the first question, go to you based on something that Dylan said about mid term rentals and how you can avoid the HST, obviously talk to your accountants, but you can maybe a little bit avoid the RTA. Can you just share a quick 30,000 foot view on midterm rentals and put those on Airbnb and VRBO or whatnot.
Andrew: Yeah. So, you don't believe it or not. I've been doing a lot of this in the past couple of months. They've exploded in the past couple of months. People sort of investors have figured it out now. And they've got the gist of the VRBO and Airbnb being king at this point. Because now, Airbnb is now considered a commercial lease. It's not covered on the RTA.
Sarah: Guys. This is really important. Can you repeat that so everybody can really understand what that means?
Andrew: So, it is not covered, like a VRVO or short-term rental and Airbnb are not covered under the Residential Tenancies Act, is completely and utterly exempt from it. This is the thing, there's a case law that came out, but on September 10th, 11th of this year, or last year, essentially speaking, if you have an issue with a tenant, it doesn't, with Airbnb, you don't call a Sheriff's office of enforcement. If you do an eviction, et cetera, what happens is it goes to a bailiff cause it's a commercial tenancy because the property itself is considered to sit under the act.
If you're removing an individual, if you have a problem, et cetera, you would call a bailiff and have that individual removed. And the thing is the reason why there's a lot of issue with people that are doing this is because a lot of police constables. Because it's brand new. So, what ends up happening is you look at Hamilton, Toronto, Grimsby, et cetera, they all have mandates where they will not re remove an individual from a dwelling without a sheriff.
What happens is you've got a lot of people with Airbnbs that don't know how to communicate with the police, and don't know how to explain to them that this is not covered in the RTA. So, they go to the Landlord Tenant Board, finish that entire process. And you say, oh, sorry. Ken's back, this is nothing to do with us.
You have to get involved with your paralegal or your power team, and then have that matter. And if anyone needs it, I can provide the case law to you. And hopefully you are never in that situation, but short term rentals. Yes, very much are doable there. We, our office, do have some templates you can use for our lease agreement that are sort of attached to the Airbnb and VRBO current schedules in terms of et cetera, and that there is a way of actually doing it.
If you look at some of the older podcasts that I did, I was very against it. I do not do it. It's not a good decision, but now it's possible. It's good and a lot more companies have just started sprouting up doing this.
Sarah: That's just because of the case law that came about in December of 2020, that was precedent for everything else. And there is also a myth that it's 28 days or less, right? That's a myth, like you could do it for three months, as long as I think, as long as you have the case law in hand and you from our discussions, but correct me if things have changed you likely just book it through VRBO or Airbnb. So, you can show that along with the case law. Is that still the case?
Andrew: Still the case, as long as it's coming through that platform, it is not covered on the Residential Tenancies Act, you are completely on the opposite end. I've seen a lot of co-hosting companies just pop up overnight and go from 20 doors to 200 inside Hamilton, Toronto, overnight. Like it was so shocking. And because I would write one contract for one company and it would just start popping up on so many other investors' portfolios like this. I just wrote this a week ago. How did this happen? It's because everyone's not realizing the game and they're trying to jump on that playing field really quickly, there's a lot of money to be made there. Now, that's opened up. It's fantastic.
Sarah: Awesome. Thank you for that, Dylan. This question is probably for you, Caledonia thoughts on that market.
Dylan: Caledonia for detached houses. Again, when it comes to detached houses, they are likely to appreciate in an appreciating market more than a duplex or triplex would. Now, the reason why I say that is that a single family home, a detached house is something that's almost a family buying it.
There will always be a larger market for families as well. I shouldn't say always, I guess things can always change, but there will likely be in the foreseeable future, a larger market for single family homes, where a family can move into versus a duplex or triplex for an investor to go into. I do think that at some point in time in the future that may tilt where investors will be buying properties.
They may live in one unit and rent the other, or it just may be out of reach. I'm currently in Vermont and I'm down here to do some research on the investment market. We're looking at six plexes for $300,000. So, it's a little bit different from single family homes. You get like 3000 square feet for 200 grand. It's a totally different market down here.
I think that based on the way the prices are going and the cost of a home versus your average income, there may be a tilt, a tipping point where it just, you have to have a second unit even by but I think that for this, for the short term, at least buying a house, an individual home in any market in Ontario. We'll continue to go up just based on the fact that we're going to have a demand for single family and families moving in.
Sarah: Awesome. Great answer there. Andrew, I think there's a question for you regarding getting a tenant out if they want to sell the property, but there's still time left on the lease. Any comments?
Andrew: Yeah. So, I deal with this quite often. So, if there is a lease agreement that's still in place, the contract still fortunately has to be held, right? There's no way of actually getting out these days. I don't really know why people put long arch lease agreements. There's just no need. The vacancy rate is so minimal. And as soon as your lease ends it now just goes a month.
It's never necessary to have a three, four or five year lease. It's just, and then ends there. It was harming you, because the real estate market just increased so fast. So, one year lease is bare minimum. That's where you should be. You shouldn't be doing like two or three. Now, if you have a lease agreement, that's still set and you need to remove the tenant for whatever specific purpose you need.
If your portfolio is changing because generally speaking, and this is again, investors, worst status sometimes in regards to looking at it at a high level. Don't just ask someone to leave. It's never going to work. It's like trying to sell a car with someone who already owns five of them. It just never makes any sense.
What you need to do is first start your application process and move along the line because people need to understand that you're actually doing this for whatever that you're doing it for. Once you move through the legal process, then you can actually start having a negotiated talk. That's only then will I ever do it?
I will never actually tell someone, just go in and try to negotiate and do a cash for key deal. Because who would say yes, I certainly wouldn't. You're not gonna send me something I don't need. So, what you do is you end up starting a legal process, move forward with an eviction, if you are planning to do then you have that conversation through mediation or through your paralegal, through your lawyer only during that time, because otherwise what incentive you have does not, there's not going to be any reason I'm going to listen to you because if I wasn't said that position, wouldn't have to, why should I care? If it's not serious enough for you to start the application process, why would it be serious for me?
Sarah: Yeah, for sure. And what I think I get from that is, sign month to month leases. If you can, 12 months are really only trapping you, the landlord and the tenant can really technically come and go as they please regardless.
Andrew: Yeah. there's no reason to have even in my opinion, if I, for most of my portfolio, I don't have a year lease. I do five months, four months and just do month to month. Yeah. Maybe if you want to keep for even if you are a small landlord, turnover is not that expensive anymore these days, but you can get, you can do a lot of turnover very quickly. So, why it's just no.
Sarah: Rents go up so quickly year over year. So, you're happy when they leave. Somehow they would leave tomorrow. I can get another thousand bucks, it's insane. And they've only really been there for four years. So, month to month, is the way to go. Brian, last question for you. And then we're going to do it, open it up to networking. You see a lot of investor deals. What are the top four cities that you see the best coming in and out best numbers, whatever the strategy is.
Brian: That's numbers for people investing out of our office right now, I would say, we're still seeing a lot in St. Catharines, Niagara, Welland area. We're seeing it in Chatham as well, too. We've got a ton of stuff in Chatham and then also in Sarnia as well, too. So, I would end up saying like Chatham, Sarnia, and then that's still Niagara as well too. We're seeing some people getting a lot of lift. And I'm a biased Hamiltonian, so I'm still invested in Hamilton. I think it's just absolutely amazing. The lift it's here. It's a great city.
Sarah: Awesome.
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