Jonathan Matheson
Jennifer: We're going to introduce Jonathan Matheson, born and raised in Prince Edward Island, not quite 30 years ago. Jonathan started his real estate journey in 2018 with a purchase of a house in Summerside for only $67,000. He and his partners currently own seven properties and 11 doors in total, including a storage facility of 2000 square feet with office space at the front.
Having been an electrician, he and his partners have started a home improvement business, a property management business. Plus, he's a realtor.
Francois: Wow. And You're not even 30. Yeah.
Jonathan: We'll see how it all goes, but it's just a start.
Francois: Really good start. I wish I did that when I was under thirty.
Jonathan: Hopefully, we figure we're young enough now that if we flop in five years, because some time to recover a little bit, right?
Francois: Yeah, you just recycle, go back to being an electrician.
Jonathan: That's just it, right? That's it. Hopefully not. I'd really like to avoid that.
Francois: Yes. Thank you so much for joining us. Let's have the REITE club discover you.
Jonathan: I'm happy to be here. I was really excited when you asked me to do this, I was pumped, really excited.
Francois: So, our first question, what are the differences, are you aware of when investing in PEI, as opposed to other provinces?
Jonathan: First the tenant landlord act in PEI we’re actually stuck back in the eighties with our act. It's been a long time coming. They just announced last year, they wanted to update the act.
And now, the new act is actually going to be a lot more tenant friendly than it is landlord friendly. So, now there's an actual landlord association who was trying to try to even that out. So, it won't be as tenant friendly as it is now. Some of the things that are a little different than other provinces, like we do get the first month rent and damage deposit, we're allowed to get up to a hundred percent of the rent for damage.
You have a thousand dollar rent, we get a thousand-dollar damage deposit and hold onto that. In terms of month to month leases or month to month rental, sorry. Once you get going, if you want to evict somebody, non-payment or whatever, it may be 30-day notices all you need.
They also though, if you don't have a month to month agreement or you don't renew your lease, it automatically goes to a month to month agreement. Another problem, so, if you had a one-year lease and it expires, it automatically switches month to month and you basically start following those guidelines, those rules.
So, right now the big thing on the island is people, the prices have been going so fast with the rents haven't gone with them. So, what people are doing is their investors coming from Ontario, They're buying these properties that are run down from the sixties and seventies and they're fixing them up and then they want to get the rents up to recoup the money they put into it.
They'll refinance or whatever, but if you spend say you find a spot for 150, $200,000, you save 50 and you want to refinance that, you're going to have to get your rents up to at least a thousand 1500 from the 500 that they were before. What makes it really hard is you have to deal with the island regulatory and appeals commission, and they can be a nightmare, especially if you still have a tenant in the unit when you're trying to raise the rent. If they're gone, it's a little bit easier, but they basically have the say on whether or not you to raise the rent,
Even when they can, that's the big problem. So, it was like if you had a tenant's been there for five or 20 years and they've been paying $400.
They move out, the new owner buys it and they want to rent it again. You still need to go and ask for permission to raise that rent to even to 500, because you're only allowed to raise it one to 2% per year, depending on what they deem appropriate. So, that's been the big thing happening on PEI lately is people.
People are being evicted so that the rent renovations can be done to bring places up to code. And then they're going to ask for permission to raise the rents, to get them to where they need to be. So, probably the biggest obstacle is getting the rents to where they need to be, because a lot of people have been renting for so long and they've had the same owner for 20, 25 years.
And these mom and pop shops, or they're selling their rental properties, cashing out with some of the younger investors like myself or somebody else. And then we're stuck with the issues of getting the reds to the market value of which, should bare minimum nowadays to be 800 to a thousand dollars for a two-bedroom apartment. Yeah. So, it's a little bit of a rigmarole, but it's still doable.
Francois: And on Facebook, some tenants are sending letters to new tenants. Hey, this was my rent.
Jonathan: Yeah. That was a whole other thing when that happened. That was a bad day. We still want to be frightened. Like we went on, we started checking our list to see if I got your rental properties on there.
Like we haven't any place where we've inherited tenants. We haven't raised the rent. We've kept it the way it is because it just made sense. And as they leave, we do renovate. I don't like doing the whole rent eviction process. But the issue that's coming on with that is there's no way to really guarantee what those people are posting.
What they're paying five years ago is even true. There's no way to prove. So, people are taking that word. And then they're going back saying, listen, I'm paying three or $400 more without any approval. And then, the landlords on the hook, it comes down to meetings and not court hearings but appeals, meetings or hearings.
And, if you find that you're at fault, then you owe however much they'd been paying. Five years, that's $300 more a month than what the last person was paying. Then you've got to pay back that $300 a month over 12 years or five years. So, it can get expensive. So, you definitely want to make sure you're doing everything by the book, which it's always the right way to do it anyway.
I's great for the tenants and not so much for the landlords, but I haven't had any issues and I haven't heard any of my investor friends having issues yet. So, we've been pretty good. Hopefully it stays that way.
Francois: If you do the right tenant screening in any market, like I was complaining about Ontario, but we do have good tenants. So, wherever you are, if you do your screening, It can be good.
Jonathan: It can be good. Yeah. With our property management, we're not going too big, too fast. We're just taking on a few or we want to grow organically. We don't want to try to get too big because it's a side hustle for us now. We did have one issue with a tenant from the previous landlord who we took over the property and the last property manager didn't do their screening. And now we're stuck with dealing with the issue, right?
So, that’s a little bit of a headache, but we'll get through it.
Francois: And total shift in gears, you own self storage. So, those are very different.
Jonathan: Oh yeah, huge. And actually, sorry, I guess I typed something wrong in my bio. It's actually an 8,000 square feet facility.
Francois: I was going to say, that sounds small.
Jonathan: And then there's 2000 square feet of office space. Yeah, that's a totally different thing so far. Like when we purchased the place, all the years the place was almost empty. So, we're actually stuck trying to fill them back up again. So, we've been doing advertising, trying to build a little bit of a brand around that to get us going.
But so far the tenants that we do have, we've only owned it a month and a half, but rents come in. So, no debt, no maintenance. I got my first electric bill last month for 30 units cost $120
Francois: Oh my, for a few light bulbs?
Jonathan: For a few light bulbs to be running. And then there's no water. So,no bills, which is great.
Not yet. Once we get the office, we'll have a bill there, but, no heating bills and, property taxes, $3000 or $3,500 a year, I think what it was. So, it's pretty good. And even without the 30 units, the seven that we do have rented, we're still making $700, but we're still coming out ahead. So, once we get those other units filled, hopefully it'll be a lot more profitable for us.
Francois: And your location is amazing. Like very close to the Confederation Bridge
Jonathan: Exactly. Yeah. You come off the bridge. It's one of the first things I'm going to get a nice big sign on my roof so people can see it. And I put my face next to it with my realtor logo, just because we advertise.
Francois: It's all about location.
Jonathan: That's it.. And it's a very centrally located 35 minute drive to Charlottetown, our big city. We're about 35 minutes from Allentown, which has a big population of 40,000 people. That's our big city and then 15 minutes to Summerside where there's 20,000 people. So it's perfect for PEI as a whole.
Francois: So, that's also probably why Jennifer earlier was saying the pace of things in all of Eastern Canada is very different for us because 45,000 people here, we're in Ottawa where a million people are rushing and pushing and things right now.
Jonathan: As you have actually said, like we can have contracts and conditions that are due in a week and a half time. Its people like to see, the conditional and the offers are still happening, but, I've submitted a few offers where we have two weeks for financing and it's a month closing. People aren't really rushing to get those deals and make sure you close them as quickly as possible, because we're just not quite there yet.
It's still busy. It is a good thing for us, for sure. It gives, especially me as a new realtor. It gives me more time to learn the ropes a little bit more.
Francois: Yes. Where are good areas to invest on PEI, on the island?
Jonathan: To get the rents and the returns that you want? I personally like Summerside But there's the hidden gems like Kensington, which again is centrally located. It's not a big population, but there's a lot of employment. There's a lot of job opportunities for Borden.. As soon as you come off, the bridge and another great spot.
The rents are still up there a little bit, but there's a lot of jobs in the area and not a huge population. Once you get down to Charlottetown way, it gets harder to cash flow finding those properties that you can still get your return. The rents are higher. You can get $1,600, $1,700 a month of rent in Charlottetown, but you're paying for it.
So, I liked central PEI personally, the Kensington. There's a place called Kincora, which has a population of maybe a thousand, but it's still small. The rents are still up there. I know some investors, they do go more east towards Surrey. I'm not as familiar with it personally, I think that's not a big spot, but I still know my areas a little bit and I'm not as familiar, but I know the rents down there, six to $700, but the prices haven't reached the other limits of on Summerside.
Jennifer: So, are you finding that there's any trends that have shifted in this pandemic?
Jonathan: I've found since the pandemic hit, I'm noticing a lot more people doing new builds a lot, like duplexes. Those have been the big thing. It's been a big thing for the last two or three years. But during the pandemic, I've seen it a lot more where people are building these, semi-detached their duplex homes side by side.
And if they're keeping them, they're renting them out for $1,600 aside or they're selling them for 300,000 aside, they're splitting in the middle and selling them off to people retiring here from Ontario, Alberta, stuff like that. So, that's been the big thing in the last year.
So, it seems like everybody I come across on Facebook, they're building a duplex. It's everyone. that would be the biggest thing. We still, personally, we try to still stick to more towards the BRRR method and by finding single family homes that need repair. A little bit of love and touch him up and then refinance at the end of it.
But the biggest trend would be people coming from Ontario that are buying these duplex homes are half a duplex that people are just selling because you're still getting a little bit of a lot. It's not a lot of privacy, but compared to what they're used to in Toronto, you're almost like you're living in a castle almost.
Francois: Any tips and tricks for investors thinking about investing in PEI?
Jonathan: The big thing for PEI is studying the market and kind of picking an area like it's, you can drive from tip to tip on PEI and about two and a half hours. So, you can cover the whole island pretty quick, but you want to know where you're at and you want to know the location, then you know if you're getting a good deal. Finding those those homes that need some love in there and disrepair and need a lot of work. Those are what I've been looking for and that's what I'd recommend. So, once you understand the market, you study the market a little bit more. That house it's undervalued and you can put a little bit of cosmetic work into it or something and then turn around and refinance it.
Then you're, find that two-bedroom home that he turned into a three bedroom and add 30 or $40,000 of value right away. Relatively easy work within reason. That's what I look for the most if you're looking to invest in PEI, start studying the market, like I said, I'd go more towards the Summerside area or Kensington, those smaller markets where it's not as booming and not as hot because you can still find those places that are undervalued. The diamond in the rough, it's something that has, nobody's taking the time to really fix up and get going.
Francois: Excellent. Thank you so much.
Jonathan: Oh, it's my pleasure.
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