Multi-Family Professionals Update

Mel and Dave Dupuis
 
Mel: Hi, everyone.

Dave: Hi REITE club, thanks for having us. Multi-family is our bread and butter. I want to say, I agree and disagree with some of the things that were said. I agree with private money. I pride myself on not using banks until I absolutely have to. And it's usually on the refinance section, when I've gotten my lift and I'm bringing it to a bank to get my refinance, to pay all my credit financing.

I want to say that yes, a hundred percent financing is doable. Mel and I, modeling six properties in the last two months, over a hundred units and all a hundred percent financed. It's just finding the appropriate lenders and investors that will allow you to do so.

Mel: And that is key. Finding the right people who do that, do you ever hit the lender unit? No. But if that's your strategy, finding the people who do because yes, it is doable. Absolutely.

Dave: For an example, I'll break down two kinds of deals out of the six. $2.2 million deal. We had met a mortgage investment company or corporation. I forget exactly what it stands for. I just know I used them, but they gave us the first mortgage of somewhere around 55% to 60%. And then we had the owner hold the second mortgage of 35% loan to value, and we bridge the gap with promissory notes, contractual agreements. A hundred percent financing.

Another example, we bought a cottage. A personally-used cottage. We got a first mortgage for a mortgage broker and utilized someone's RRSPs as our entire down payment. It is doable. Again, we walk the walk and talk the talk. Just wanting to get that out there. Now, what we have noticed is the loan to value has gone down even on awesome cash flowing properties that have great ratios that we used to get 80%, 75% loan to value.
Like I mentioned earlier, one of those mix, are different mortgage brokers and things like that. They got me 55%, 60% loan to value the first mortgage, but they were okay with creative financing in the backend. You're just having to come up with a little bit more creative financing. They have dropped their loan.

Mel: That's exactly where the creative financing comes in. Knowing that, yes, no lender will lend a hundred percent. Nowadays, even less we find compared to how it used to be. This is where the creative financing really comes in and finding these private lenders and dealing with people and RRSPs, or promissory notes because you can do a combination of all of the above to help fund the deals. Just because he can't get as high as before, doesn't mean that he can't buy properties using OPM.

Dave: And one of the reasons they're arguing that lower loan to value, I'm noticing the vacancy rates that they're using are so much higher. Like the last deal I was thinking, why aren't you giving me such a low loan to value. And there were two or three commercial spaces, fully occupied businesses that are not COVID proof, but that will probably stay open. And they were underwriting the deal with at least 10% vacancy on the almost commercial. So, a lot higher than they used to.

And that's why they're giving me the lower loan to values for multi-family properties that were anchored by apartments. But because they had a commercial aspect, just the loan to value because of the vacancy has shot down. Now, I have noticed, ironically, industrial space. Industrial seems to be a hot market right now.

I know why am I saying that in multifamily? I know some people, I've looked at it a few times as buying an industrial space and then maybe making a cool loss if you get the rezoning and all that. I know businesses that have people that are looking at doing that. Industrial businesses are now buying the buildings that they used to just rent because real estate, that market went down. But the other thing, Ronald, a hundred percent with you in the multifamily.

That's something that we're looking so much at when we're buying those underperforming assets to get them hired, to lift them and then refinance them and pay. It's always been important, but it's so much more important now for a multifamily investor to really do their due diligence on the renovation costs and their materials.

The contractors are all crazy busy, so they're going to be very expensive, right? You're not going to find someone, cheap goods and fast if you only have two of those. pick which one. But that's something that we've really noticed as well. And for the trend to hit the last one was the trend going into 2021. I forgot to set up, but there probably will be a slump. as a real estate investor, especially in multifamily, get your financing, get your refinances in, get your money ready and be ready to pull the trigger on some hopefully good deals.

Mel: And there's also opportunities as well that I know some deals are going so quickly nowadays. And this is where finding as many deals as possible is so important. having an investor focused agent, having an investor focused wholesaler who understands real estate, having a professional who helps you find off market deals as well. All of that, because the more deals you're going to look at in this kind of market, the better.

It certainly helped us with our own personal growth to get to that next level. But we have found for sure. There continue to be more than enough deals up there. A lot of people who have had their properties for a long time, throughout this past couple months, it's enough for them, so they want to sell, they want to get rid of it.

And with OPM, Other People's Money, it's a win-win. They benefit because all of a sudden you're providing them a solution that otherwise they wouldn't have, because they may not have an exit strategy. And all of a sudden they're hit with all these taxes. And if you're able to make it a win-win, where they win and perhaps the whole part of the seller finance, the VTB you win because you get a property using their own money.
They get to defer their taxes and it can really be beneficial for all parties.

Sarah: Absolutely thinking outside the box is really important. And it's so inspiring because it's not like you just have a handful of property. I was like, you guys have a lot, like you've built a really good portfolio systems, processes and not doing any JVs, I think. It's just strictly both of you are very cool. Awesome.

You've got a book as well. the book we can add into the chat, if anyone is interested with a link and any questions guys for Mel and Dave, you guys are our coaches, you're experts in what you do. And if you're looking to scale your portfolio using multi-family with thinking strategically out of the box, these are your go-to folks. Mel and Dave, thank you so much.