Hear from profesionals in financing, insurance, contracting and property management. Brian Hogben, Alex Bell, Jon Tenbrinke & Susan Corcoran.
Laurel: I have the privilege of introducing the professional services panel. Brian Hogben was inspired to begin the Mission 35 Mortgages after accomplishing his mission of paying off his mortgage by the age of 35. So, great name Brian, that's wonderful. He has a massive real estate portfolio. And he's the author of "How to get mortgage free really...". I can't say the word because anyway.
Alex Bell is a real estate investor himself for over 25 years. Commercial real estate or insurance broker whose entire practice is focused exclusively on working with real estate investors and developers. So, that's really cool. He likes finding grand solutions for his clients.
Jon Tenbrinke began his career in high school, playing football and taking his first steps to becoming an electrician. And at 24 years old became the youngest master electrician in Ontario's history. He is the co-owner of Blackjack Contracting and follows him on facebook for everything he has done.
Susan Corcoran, who has a portfolio of residential and commercial real estate. And she brings a fresh and innovative perspective to the investment property industry. Susan specializes in property management, leasing and property maintenance and exceptional experiences for owners and tenants. Welcome all.
Sarah: Welcome everybody. We're excited to have you here. And so, how are we going to do it? We're going to ask each of you questions in blocks and then we'll move on to the other person. Just that way, it's a lot easier. Why don't we start first and foremost with Brian. All right. Are you ready to be on the hot seat?
Guys it's important that you work with a mortgage broker. That is an investor works with investors, because if you're looking to scale, these people are going to be key to your team. First question for you Brian. We switched them up and were a little bit surprised. The number one question is, what are the trends that you are seeing today that you can share with us? Anything new since the last month that has changed, that investors in the REITE club nation should be aware of?
Brian: Yeah, you know what? I think we all know that real estate values are going up and we've seen the value's gone up quite a bit. One of the trends I've seen, which I'm really pleasantly surprised to report is it seems almost like the pendulum is swung back in the other direction.
Going back to March and October, we were in an Uber compliant environment. Seeing what we're seeing right now, we're seeing lenders have a little bit more grace with exceptions. Now, we're seeing that sort of total debt service required. Lift up a little bit. We're actually even seeing lenders in the alternative space, which is specifically great for investors right now.
If you're self-employed less than a year, we're seeing those access to funds be a lot cheaper and easier than what it was before too. I know everybody's got their sort of speculation on whether the market's going to go up, go down, go sideways. But money seems to be flowing really well in the broker space right now for our real estate ambassadors, which is nice to see.
Sarah: Very cool. And I also heard, but just correct me if I'm wrong, that Scotia now has made some changes in the down payment for the better for us.
Brian: Hallelujah. I know.
Sarah: Can you share what it is now?
Brian: Yeah, totally. You know what? I think a lot of mortgage brokers were swearing and cursing because they took away the borrowed down payment. As a lot of you may or may not know. Scotia has a phenomenal product for leverage. They have a product called the total equity plan where you can borrow the down payment from up to three different lines of credit or mortgages. Separating it for counting purposes, they took away the ability to borrow for down payment.
What they said was, this was back in March April, they said, we will not take borrowed funds for real estate investment. We were like holy ... You know what I'm going to say, Laurel. So, anyways, but I won't say it.
Sarah: The same thing you had it in your bio that we couldn't say.
Brian: That might be a theme. But the good news is yeah. The beginning of October, they put out an internal memo and they said, and this is what I was talking about with that sort of pendulum swinging back. That was another telltale sign where Scotia said, we're good, you can use borrowed funds from a secured line of credit now to invest. So, that's what Scotia banks, we are saying.
And there is a huge asset for any mortgage broker that's leveraging up to invest. They're good with it. Again, they have good rental offsets, they have good programs. So, that was really cool to see. So, the floodgates are open for them again, which is phenomenal, really nice to see.
Sarah: Absolutely. Next question, because we've got to think of the future. We've got to plan for the good and for the bad, but what should investors be doing today or this month or the next month to be able to have a successful 2021 and on.
Brian: Oh, great question. You know what? I think what we're telling a lot of people now, and if this is your first time on the right club here, first time seeing this it is the best time to leverage up right now. And because I think the national average last time I saw her up almost 17% in certain market areas. I know our office in Niagara falls, St. Catherine's I think they're up almost 30% this year. If you're sitting on the sidelines and you're just not sure what to do yet. You own a home, refinance, take out a home equity line of credit because chances are your house is worth a lot more now than it was before, which means you have unused capital available.
I always like to say, we joke in the office. You don't have working capital. If you're not using it, you have worked capital. It's not working. Do you know what I mean? So, take that money out right now. If you're still unsure as to what's going to happen in the next two, three months, leverage up now.
You have the ability for the down payment later, because chances are your appraisal is going to come in. We've seen that usually in our market, the refinance, usually people say their house is worth a million and it comes in at 600,000. This is the only marketplace where we've seen people's houses come in higher than what they thought they would on a refinance. It's a great opportunity to leverage up for you guys right now.
Sarah: Yeah, absolutely. Before I even left my job, it wasn't even as good as it is today, but I definitely refinanced what I could. And it's always easy to have the money there before you actually need it, before you actually need to find the deal and fund the deal.
Okay, so, here's another question and I'm going to ask you in terms of your business and you work with a lot of investors, but a lot of the investors think, oh, I'm going to be capped. I'm capped at three, I'm capped at five. Can you share like, roughly, like where you've been able to extend investors in terms of borrowing ability in number of transactions, is it 50 deals? Do you have anybody with 50 deals, 20 deals? What does that look like? And I know it's complex, but maybe share a little bit about that.
Brian: Thanks, Sarah. That's a great question. I'm going to take the next two hours and explain it. Okay. No, I'm just kidding. Okay. But the reality is we really like to specialize and get people up to four, I think. And we break it down between bank money, B money, private money. We like to leverage up and say, you get four to five units that are attainable with bank money. That's your 2%, under 2% money to get that four to five units, you will start to capital. Sarah says, depending on where you're at around that four to five unit mark, as soon as we go to our investor portfolio with people that want to go 5 to 10, then we start going to B and don't be scared of B. It's what brokers say. It's B an alternative.
But as I said before, like the B money right now, our alternative money is at 3%. That's ridiculous, it's so cheap, right? So, you can still leverage up for property 5, 6, 7, 8, 9 there now for those really savvy investors that are going from 10 to 20 to 30 to 50, a lot of times we'll do a combination of B money and private.
As long as your fundamentals, your cash flow, your entrance and exit strategy,all make sense. I don't want to say the sky's the limit, but what the hell will I do? The sky's the limit, right? There are multiple ways to grow that portfolio. You just need to be working like Sarah said, with a mortgage broker who understands how to access those funds for you.
Sarah: Perfect. Thank you so much, Brian. Guys, by the way, if you have questions, send them over into the chat. Brian will answer them by chat, but we're going to move on to the next person. Thank you so much, Brian.
Brian: Thanks.
Laurel: I am having trouble with my new book. I got too many new buttons tonight. I got a mute button here, a mute button there. Anyway, I'm not mute. Okay, Alex, we've got some insurance questions for you. So, explain what a hard cycle is in the insurance marketplace? And what does that mean in our current situation?
Alex: Yeah, absolutely. Thank you for having me before we get into this. I just wanted to give a quick shout out to Sarah Larbi. That's fantastic news about you retiring. I haven't seen you. Everyone's stuck from working from home, but had been following that email thread. And that's absolutely fantastic news, Sarah, so, good on you.
With respect to this evening, there's really three items that I'd like to convey or actually get across to everyone. The first one is exactly like you said, Laurel. Where the insurance industry is cyclical. It's no different than the stock market, the real estate market, whatever, a big capital equity market you would like to talk about.
And right now the insurance market is in what's called a hard market. Now I'd like to preface that by saying insurance companies are always complaining and moaning that they're not making money. And I'm a broker and I'll be the first to say, there is no difference than big pharma, big banks, oil, and gas.
The reality is, in today's marketplace, they are not making as much money as they've actually projected. So, right across the Canadian marketplace and I'm sure a lot of investors have found. In the property and casualty business, which is the segment data that an investor would include for their portfolio.
They are paying losses particularly out in Western Canada. They've had some large losses with the Fort Mac fire. There was a big hail storm in Calgary that hit the industry heart. So, we're in a hard market. That being said, I'm getting calls and emails from clients all the time, particularly out in Western Canada with respect to, they can't get insurance. They're having a hard time.
First of all, getting insurance on new deals or properties that they're closing. And secondly the current carriers that they are working. I want to raise rates, right? And it's the same old story with insurance companies. The good news is, there are solutions out there for investors that have remained stable. The coverage, the wording is very broad and comprehensive and the rates are stable. Don't be discouraged.
There are choices or options out there for people. That being said a common question I get from a lot of investors is that they've reached their maximum, they've just like what Brian was touching on with some insurance companies. When you get to your fourth or fifth property a year, you've exceeded capacity for that particular. And they actually want to cancel your entire portfolio. Again, good news is, by working with an insurance broker, they will have access to insurance companies where there's no limit.
I work with clients who have 150 somehow to one that's 250 properties in their portfolio. Don't get discouraged. Back to your original question, Laurel, we're in a heart, what's called the heart. It's actually at the point where a lot of insurance companies are just simply getting off risks.
They don't want to be in this space because they're not making as much money as they projected. And they're just canceling. They're just getting out and that's happening in New Brunswick. I see that a lot and certainly the rates seem to be stable and Ontario rates. But that's the first thing. Laurel, does anyone have any questions with respect to that?
Laurel: I think it makes sense. Just like you said, insurance is a big business and there are cycles and just like we see mortgage rates go up and down. We're going to see more insurance rates go up and down. It's not the end of the world. It's not like insurance companies are going to disappear and they're going to come. It's like anything else, a few of them will go away and then the marketplace will even out and then people will come back and then rates will go down and then we'll start all over. Because apparently we can't learn the 1st time or at the 12th or the 25th time. We're doomed to repeat.
Alex: It is Laurel. It is frustrating, because at the end of the day, the insurance premium does affect cash flow. It does affect a positive cash flow. And I have a lot of people reaching out that they're getting double, they're getting 50% rate increases and it cuts into the positive cash flow. So, it is discouraging, but exactly like you said, there are options or solutions out there.
Laurel: Yeah, exactly. What are some of the increased exposures to save my own portfolio or anyone's portfolio?
Alex: That's a great question. This is really twofold. First of all, we'll talk about COVID-19 and I had the good fortune of speaking to a lot of clients and investors back in March, April, when this kicked off. Looks like we're heading into maybe a second wave. They certainly are down, certainly are in the US. We're trying our best here in Canada, but with respect to how COVID, if there is a second wave, this would also obviously pertain to the first wave as well.
But for anyone who has questions coming in. Here are the key issues that you should be concerned about with your current insurance policy writing, and you'll want to scrub that policy and reach out to whoever you're working with. The first item or coverage is you want to make sure that you have at least a 30 day vacancy period, hopefully more, longer than the majority of clients or investors. They were not impacted greatly by people not paying their rent.
Subsequently, I had a lot of calls and inquiries about what will happen or if my tenant has to, if I again, there was a moratorium on evictions, but if my tenant moves out, how long is my coverage in place while it's vacant? All right. So, you want to make sure that ideally, you should have a policy that has a 120 days vacancy allowance, period. All right. Now, the majority of them are 30, but hopefully you have a policy that will include 120. All right. That's the first exposure risk due to COVID.
The second is vandalism caused by tenants. All right. Not all carriers will include this coverage, but I have. Unfortunately, a few clients that were their tenants, they were in disputes. And when the moratorium was lifted, they were in dispute with their tenant and they went through the eviction process and subsequently the tenant trashed the place before they had to leave.
Not all policies contain that coverage, vandalism caused by tenants. Make sure your policy has that. And another big one as well is what's called, you want to make sure. And I spoke about this last time when I was online with the REITE club if you want to make sure, and I can't stress enough.
This is a great risk management tool. You want to make sure that your tenants have their own renter's insurance policy. And the reason is really as the landlord or the owner of the building, you are not responsible for your tenants belongings, that's not really the exposure here, but by having, so, if they have their own renter's insurance, the reason is twofold.
If there is a loss, okay, a liability loss, you're getting a free or additional layer protection through your tenants' renter's insurance policy. All right. In layman's terms, if someone slips or falls on the property in that unit, the tenant's insurance policy will be the first payer. All right. So, the liability portion of that policy will be the first pair.
If the liability limits are exceeded on that renter's insurance, your policy will then kick in and cover any additional core costs or defense costs., So that's a great tool. When I first started working with investors, not a lot of them were aware of that. So, I can't reiterate strongly enough how important that is.
To dovetail down on that, I get a common question is, yeah, that's great, Alex, they show me that they have a renter's insurance policy, but how do I know that it's kept in force and the solution there is you add. You must make sure that you're included as an additional insured on that renter's insurance policy.
By being added as additional insured, you're not increasing the premium for that policy, but you have rights and privileges with respect to the payment of that policy. That is the solution to make sure that those policies are still in place. That's it with respect to, hopefully, everyone we're going to get through the second wave better than we did the first. And your insurance products are not impacted.
Laurel: That's great. Thanks Alex. And I just want to remember or remind everyone before I hand it over to Sarah for the next step, panelist is that, stick around to the end because we're having networking. All our panels, most of our panelists will be there and you can ask some questions directly. We will have a chance. We can't get them handled in the chat. We'll do our best to get that handled in the networking session. Thank you, Alex. And over to you, Sarah.
Sarah: Thank you. All right. And guys, if you have any insurance questions, this is a great time to ask them to chat. Next up is Jon. Jon is a contractor. So, first question for you Jon, you are in Southern Ontario in some sections, but how can somebody find a great contractor to add to their team? What are some of those criteria to look for somebody that is the right contractor?
Jon: It's a great question and excuse me, the first answer would be this group. There's obviously hundreds of members here and they all work with different contractors at different renovations. What to avoid, what to look for? And I would first use your network to get recommendations for contractors that work with. As I'm famous for saying, this is the world's worst business for prepared entries. So, you're going to find a lot of bad ones before you find the good ones.
That's why referrals are very important. You want to see how they handled themselves. You want to see their paperwork. If someone hands you a price on the back of a business card, I'd be concerned. And after this morning, you want to see that they have their minimum $2 million liability insurance coverage.
They don't have WFSB, which is public records online. By the way, anybody can check our statuses. When you see that they're not valid for clearance certificates, that's a bad sign. That means that they haven't been paying their premiums and they're not actually insured or somebody get injured on your property.
You could be responsible for online, what do you want to call it? Review your peer reviews, check their website, their information, and check first status, what they do. One thing you want to focus on is that if you're looking to have a basement suite, which is the market I'm done. If you're looking for a kitchen contract and you want to learn, they focus on kitchen contractors, there's too many jack of all trade contractors and not specialists.
If you're looking for a handyman, that's great. Some of that could fix up little things, but if you're looking for a specialist and that guy can do anything like that, I would recommend working with people that do it for a living instead of the Jack of all trades. And after that, just gotta do your research and call referrals.
Sarah: Awesome. And how many quotes do you think that somebody should get for each deal?
Jon: Depending on your comfort level with the premium gifts, you've never worked with the person before then multi that they say is three is the best. And you gotta be clear on these quotes too, to make sure that you're comparing apples to apples because they have to have clear scopes of work in that. And that really is the responsibility of you guys to make sure that they're comparing. So, that you get a fair, accurate bid.
Now, you gotta be careful too, is that some contractors like to play the game of omitting things from their estimates. And then try to go back on you afterwards. One question I was always asked, is this the set price? And if they start stumbling where they say it couldn't be this, it could be this, could be this, that's where you gotta be real concerned because your base price was what's great. Could all of a sudden jump 30%, 40% real fast.
That's something I've been wary of. If you're comfortable with that, there's such things as planning, material contracts and more 75% of construction lawsuits last year were based on material or cost plus contracts. I don't really recommend them unless you're getting into some investigative work. I really focused on getting a fixed price and making sure that it's following.
Sarah: Thanks for sharing it. I'm going to grab a question from the audience to ask us that your last question. If there's a smaller job rather than a whole basement conversion, but maybe it's a smaller job. Like they just need flooring done in some painting in maybe a kitchen resurfacing or something like that. What is in their best interest or what is in our best interest? Is it to hire a contractor? Find a handyman? What is your advice on that?
Jon: If you're comfortable managing the small job yourself. You're hiring him. You're making sure that we show him up. You're paying the bill for, as a real estate investor, especially on a cost front. That's the best way to save money to do it yourself. When you hire general contractors, they're there to manage projects. They're basically managers, right?
You don't really want to pay a markup on everything that you do. If you are comfortable with the situation, then, hire the small jobs at handyman or a small local contractor to focus on that floor that you want done. If you're getting into the bigger things, you have two choices, you can manage the project yourself, if you're comfortable, and that can save you 20% to 40% of the project cost.
If you are doing a big project, and you just never done this before, you don't have the time. That's why you pay a general contractor to make sure we get the job done. And so, that's why I say it's if you're looking to save costs and you can handle it and you got the time, then it's good to manage yourself.
Sarah: Awesome. Thank you so much, Jon. And I see there's some other questions for you. So, Jon will respond to the chat as we are moving on to our next speaker. But just make sure that you guys put all attendees and all panelists in there, so that everybody can see the questions and Jon will answer and type them into the chats. All right, Laurel, over to you. Thanks Jon.
Laurel: Okay, Susan, you're up. What trends are you seeing in project management? I've worked on projects too much from a property management standpoint these days, like what's happening out there?
Susan: Sure. There's a couple of things that we're seeing in general, we do post our market stats on the REITE club forum. So, they're there for anybody who's by the REITE club online forum. So, really there's been a real soft market for Toronto. We're seeing a 10% to 11% to 12% decrease in rental vacancies in the Toronto market, but we're seeing that come out to Hamilton, Niagara, Kitchener. So, what you're seeing is basically a displacement of the way people are renting right now, as more jobs are also staying online.
There just isn't as much demand to stay in the city and there's no amenities to be there. So, if you have an investment property in any of those regions. It's so awesome right now to be able to get higher rents and also attract the 416 tenants, which are all new to some areas of Hamilton and the Niagara region.
One other interesting trend though, just because if you're looking at any of those markets is that one bedroom in St. Catherine's goes for as much as a one bedroom does in Hamilton now, which I've heard of it's unprecedented.
Laurel: In other words, we're seeing the effect of the spillover effect from the GTA and the exit. It's not just the exits from the GTA. It's simply the pressure of people moving into the GTA because there's still lots of people moving in there, right? The city is growing by leaps and bounds. So, you combine all that and you've got the pressure on everything around it.
Now, rents are going up. And to say that St Catherine's, the rent for one bedroom is the same as Hamilton, that's pretty amazing because wow. That's really stunning. And for those people who know the area, that didn't happen even two years ago, three years ago. No way. Not a chance.
Susan: If you Live in Niagara. Niagara is a great place to live. A great place to buy, ask Brian, he's seeing the prices out there and a great place to rent as well. While you can get for the 416 tenants, or people that are moving out, you can just get so much more. And so, it's really great for investors because it's still a deal. Like Hamilton's a great place to invest. Niagara, St. Catherine's, Welland, Fort Erie,great places to invest.
Laurel: Yeah, you're right. If you're getting better rents, but you're not spending nearly as much of your capital and your credit on properties that you can buy here. That's the secret, we don't want to tell people because those of us who are alive, we don't want you to know that. Okay. Now that the cold weather is upon us, how are you prepping for the winter? What are you doing with your properties and what should we be doing?
Susan: We all spend a lot of money on our investment properties. And a little announcement, a prevention is worth a pound of cure. So, making sure that taps are off, you're going in and using this as an opportunity to do an inspection of the property. So, changing the furnace, filter, changing the batteries on the smoke detectors gives you an opportunity to go and see exactly what your tenants are doing in the properties, so that you can get ahead of any sort of maintenance issues before they become a real problem.
We suggest spring and fall. Everything closes down. Everything opens up. You want to do a good property. Look for water, as we all know, water is very bad for all types of properties. Spend a little bit of time and just really take some time in and look at your properties, make sure that they're ready for freezing butter, all your big stuff, furnace, roof, windows, plumbing, all the good stuff.
Laurel: In other words, You do the same thing that you do for your own, the place you live in yourself, your own home, right? Check the furnace, cover up the air conditioning unit. You check the windows, you check the roof. You just make sure that everything's looking good.And the last thing you want is a surprise in the middle of January. Because then, it's gonna cost you more money and that's going to be harder to get somebody. And you're just going to be really unhappy because it's the middle of June.
Susan: Yes, absolutely. Maintenance is one of those little irksome things that gets under the skin of the tenant. So, the more you can do to prevent it just saves you aggravation and eroding your relationship with your tenants. When it becomes a major problem.
Laurel: Yeah, exactly. Okay. I'm going to wrap it up here. Thank you, Susan, that was great.
- Log in or register to post comments
- ARNEL-LLEMIT-1637316866's Blog