Preconstruction Opportunities

Natasha Phipps
 
Francois: I met Natasha in almost a little bit over a year. February 2nd at the Ottawa Real Estate Investor Conference. Anyway, it was really nice chatting with Natasha and she had an amazing product. And then I'm like, oh, you should come to Ottawa and talk about something. Now, it's the opposite. I'm going to Calgary right now and meeting with Natasha and we're going to be able to share Natasha's story. And Natasha started investing at 20. I thought you were still 20 Natasha, 21 or 20.

Natasha: 21.

Francois: That's good. And then. The family business is in new construction. We've had some talks about it, and I'm really excited to share this with the REITE club community. And there's some great opportunities and new construction you were telling me waiting times are fairly short in Alberta here in Ottawa minimum one year. And that's quick, like one to two years to get anything's. Very excited and then tonight you're going to be focusing on construction for investors. I'm looking forward to hearing more about this.

Natasha: Absolutely. I'm excited to be here.

Francois: Thank you, first question for you. What should you look for when buying directly from a builder? Are there things to look out for?

Natasha: The first thing about Calgary that you're going to find, if you start looking for new construction is there's a lot of different incentives being offered. There's a lot of different promotions and products. And so, you do want to look for a builder though that at least has some investor special going on or some sort of targeting marketing towards an investor.

That's usually the one thing that I look for and there's not a lot of that here in Calgary, to be honest with you. Okay. And then the main point to get across, at least for Calgary, is to really dig into some of these points. Our market is very much divided. Our downtown market and our suburban market are like going in different directions.

Prices are going one way in the suburbs and going the other way downtown and you can see some of these pre construction opportunities in the downtown market, particularly which they've been trying to sell for many years. And now these developers are trying to spend them as investment opportunities.

Dig into those numbers and where they're getting this kind of data from because it is a little bit misleading. If the only thing you get out of me tonight is just to look at those incentives they're offering. Do your research on the builder and ensure that the investor kind of incentive that they're offering is legitimate and make sense for them.

Francois: Awesome, because that's what we were talking about. When we met in Ottawa, you had some amazing turnkey condos, but now I think the market's kind of shifted and there's other opportunities.

Natasha: There are still some wonderful condo projects. But the ones that I'm excited about are in the suburbs where people are moving to, and for Calgary even pre COVID, there was really that push out to the suburbs. Living downtown was becoming less and less important to homeowners and tenants like, as investors we want to focus, like where do people want to live is really the main thing. And our downtown core has unfortunately still got a ways to go in terms of recovery.

We do have like new builds condos in the suburbs that have excellent investor incentives that I've built with the developers that are like three years of free property management, like we try to make it as easy as possible, but the location is the most important factor, so definitely available, but in the suburbs.

Francois: The classic still holds location.

Natasha: Absolutely. And then, like some strategies work everywhere buying where there's transportation or commercial, improvements coming like a train line extension or a hospital or any of those things apply very well. They're what's drawing people to a community and there's several suburbs in Calgary that worked really well for that.

Francois: Excellent. Thank you very much. Pitfalls to avoid, I guess, like you said, making sure that the investor offers are legitimate. I guess there's been some builders that offered things and didn't follow through.

Natasha: Yeah. When, and again, for Calgary, the main pitfall, I would just avoid the downtown altogether, unless you just want to buy low opportunity and, you're okay with a little bit more vacancy. And the one pitfall that I hear. That I don't hear enough that I would want to communicate to people when it comes to pre-construction. Because I had this happen to clients of mine here, and this applies anywhere again. If you feel the market has a possibility of going down, which you know, and Niagara falls like that's something we're not worried about, but here that's a possibility particularly for downtown.

A pitfall of pre-construction can be, if you pay this price and in two years, the price actually comes down and it appraises for less. You're now in a situation where you have to actually come up with the additional capital or you're going to lose the deal or potentially be sued, lose your deposit. Being aware of that and making sure that the market's going in the correct direction and the sort of time that you're looking at is just the number one thing to be aware of is that just because it's pre-construction does not necessarily mean it's going to be worth more when you actually close on it.

Francois: Okay. Wow. That's really interesting. Especially for us living in Ontario. It's nice, as soon as you buy, you almost earn a hundred thousand in equity and it stays there. Yeah, price drops. We don't hear that often.

Natasha: Exactly, And that, that certainly unfortunately has happened here during our previous recession with some of these pre-construction projects.

Francois: Something major to look out for, and that's why you need an expert like Natasha. Yeah, your background. We have a question. What's your background? You're a realtor. We forgot to mention since we got too excited all year from 20 to 21, you're a realtor.

Natasha: I've been a realtor now. Almost 14 years. I got out of university and was working in oil and gas while I was going through university, and got my marketing degree. I ended up, I was actually making more money, just living and moving in real estate at the time. No idea what I was doing. Like I got lucky. But I was making more money to see over a year just on my real estate deals. And I got my license and have been focused on the investment space ever since. And now I'm in Calgary, I've got a team. There's five of us here now in Calgary who were all focused agents. And we're with CIR Realty here in Alberta, which is Alberta's largest brokerage.

Francois: Why would you recommend new construction to investors from out of province? That's another discussion we've had in person, and you had some great points on that, because I'd be tempted, like coming from Ottawa, let's buy this place. It's cheap. It's underperforming. Let's fix it, but there are complications.

Natasha: And this was a topic that I was very passionate about finding a solution for going back about five years. I started going to a lot of the conferences outside of my area and realized that there were these awesome, like turnkey opportunities that we just didn't really have here. That made sense. I started really figuring out what that would look like and here in Calgary, what makes the most sense for most investors looking at Calgary or looking for cash flow? We don't have rapid appreciation, but you can find excellent cashflow numbers here. Trying to combine that with a new construction opportunity was really the goal.

We've developed a product. With legally sueded semi detached for the people in Ontario or half a duplex for those in Alberta that have legal, secondary suites in them, which is something we're in shortage of here in Calgary. And then something that maximizes those is those cash flow numbers for our clients. It's been a real win and we're still really the only group really like waving this flag and are really passionate about it.

Francois: That's crazy like new build and cash flow. Normally that's a hard sell. Like you have to be very creative to buy at the right price point. And again, the location like you mentioned is as crucial and you recommended investing in new construction because everything is low maintenance. Yeah, I've mentioned that as well.

Natasha: The last few years we have seen a ton of investors, particularly from outside of our market that are looking for affordability. They can't maybe afford something in their backyard or to get two doors for under 500,000 in Toronto, like that's not happening. People are taking their equity and putting it to work somewhere else. And so these new construction opportunities are awesome because they're easy to own. Like he said that this isn't a project or renovation.

We have the whole team here on the ground, like we've got Ryan and Kristin here in between the three of us. We really take you by the hand and walk you through the whole process and make sure that things are running smoothly. It's a wonderful way to get that.

Francois: Very nice. I see we have some questions from the chat here. What kind of impact will Biden's Keystone XL pipeline cancellation have on Calgary market? It might be some buying opportunities, I would say.

Natasha: Obviously it would have been amazing for that not to have occurred. But we didn't have it last year. We didn't have it the year before. We have been through it here. There's no denying that. And we were reaching a point of stabilization and now we are, like right now, currently we're either in a seller's market in some parts of the city or a buyer's market in others.

I think we're going to have to continue to diversify, which is what we need to do prior to this. The whole sector is always going to be obviously something that we're heavily dependent on. I personally feel we are likely going to see one more big push in that sector in my time here. But it is really encouraging to see this diversification happening.

We're seeing a lot more employers popping up and opportunities popping up in other sectors like tech agriculture, transportation, shipping and logistics. A whole bunch of other things are occurring, but it's going to take time. It's not going to happen overnight. But one good resource. If you're looking for something Calgary economic development is a Calgary focused website that does a good job of highlighting all sorts of differences. Indicators for the Calgary market and is just a good resource for tracking that. But definitely that's what we need to do. We need to diversify more.

Francois: Amazing, for sure like even Southern Ontario Alfonso was mentioning Hamilton. I remember Hamilton and St. Catherine's. Those were hot markets, but they used to be called the Rust Belt. It was a very depressed market. I remember when I was 19 and 20 that's a while ago, but again, some other questions we had let's see about the yeah, or higher up actually. Do the units sell for a premium, the new builds? That was from Johnny Borello.

Natasha: You can certainly buy something cheaper on the MLS. That will require 99% of them to require some sort of renovation because most likely that secondary suite won't be legal. You need to spend some money on it. When you start comparing dollar for dollar will, you'll end up, you tend to come out around the same spot, but obviously the upside of renovating is that you've added that value yourself and have the possibility to take out that capital there. It depends if you're available and you can do the work. You can absolutely make these properties with something that's existing out on the market.

Francois: Excellent. We have a comment actually from Jeff Walter. So, about oil and gas, it shouldn't impact us much. We are really trying hard to diversify, what you're saying, and we're not as reliant on oil and gas. Keystone was only one of three pipelines. I think Alberta has got a bright future and the infrastructure you have as well, the train in Calgary, Ottawa's finally getting a train and it took a year and it's not built for winter. Anyway, Calgary it's been around since how long the train has been around for 30, 40 years almost.

Natasha: That's a good question. I didn't even know the answer to that when I first came, but I think you have to look at calories. Yes, we are very dependent on one sector, but we're also a very large city and people live here for a lot of reasons and we are still the highest paid per household in the country and very well educated. We have a very resilient people and workforce and our location is really Really attractive because of the mountains. We have a very nice lifestyle here. I don't want the image that there's just blocks of people leaving Calgary.

I don't think that's going to happen. Do we have some tough times ahead of us and how did we had some in the past? Absolutely. If you look at Calgary's history, it's like this, but what's great about that is as long as you're employing the right strategy at the right point in that cycle. Then you're okay. If you're flipping houses at the wrong time, we're buying and holding at the top, then that's when you run into trouble. We've learned how to read that market very well. And there's not one strategy I've stuck to for more than a few years at a time, at least in my time.

Francois: Daniel St. Jean mentioned as well, you have to pivot. And with COVID, all of Canada is affected. We're not dependent on oil and gas, but there are things affecting each market. And that's why these events are important to meet with professionals like yourself and are the guests that will follow. This is great. I think we have time for one more quick question. Where do you invest yourself? What's your favorite area?

Natasha: In Calgary right now, my favorite strategy at the moment is taking a side-by-side full duplex that has suites in them that are not legal and legalizing them, bringing them up to a fire code. That'll be my kind of top strategy for those that want to get their hands dirty on the ground here in Calgary, there is a deadline of when we can do this at the end of this year, those requirements are going to change a whole lot. That's what I'm focused on. We tend to focus just on residential real estate with secondary.

We have done a lot of pre-construction we've owned, a half a dozen condos in Toronto over the years. And we've built infills when that made sense and we own property out in Langley right now as well. Again, it varies and we've done a lot of different things to what makes the most sense, but for me right now, that's where I'll be focusing.

Francois: Very cool. Yeah, because there is a, like a major opportunity. You were staying in Calgary past the bylaw and you have to be legal. It's not like some other cities where you can get grandfathered in. It's not cutting yet. I see Alfonso, I think he's kicking me out. Thank you so much. It's been a pleasure chatting with you, Natasha, please stay on and answer some questions in the chat and near the end for the live networking.

Alfonso: Definitely not kicking on it. If you guys haven't seen it, Natasha's contact information is up there as well too. Make sure to reach out to her for more questions and more insight. I know it's a short period of time, but thank you for squeezing all that info. I'm wondering if there is one little last tidbit that you wanted to leave with the community, Natasha. You just put your phone number in there too. Awesome. Is there one little golden nugget or one little piece of info that whether it's investing, a prospective life, all those kinds of things that you would like to share with the community?

Natasha: I think the main thing, and I'm joined here tonight by Ryan Bond. Ryan and I work really closely together in creating a financial plan that goes along with your mortgage plan. I love these types of events that really give you access to these types of professionals. And you don't have to go calling around looking for these people.

These groups make it so easy to have these kinds of experts at your fingertips. Absolutely use Ryan's expertise in helping you build your plan to get to whatever your goal is, do that and figure out what that is, and then combine that with your mortgage plan as well. We can hit those milestones that you're wanting to achieve.