As property prices continue to rise what can the real estate investor expect when it comes to renovating and looking to add value to a property?
Jon Tenbrinke of Black Jack Contracting provides his experiences for the Niagara Region and where the challenges are in terms of building permits and getting access to supplies.
Sarah: Next presenter is Jon Tenbrinke from Black Jack Contracting. He's also a master electrician. How he got started was it was through that and he has a great story as well about how Black Jack Contracting came about through a bet. He could tell you that over a drink or whatnot but aside from that, Jon is a great contractor that has worked with many people that I personally mentor and coach as well as many members of The REITE Club. He's also a national sponsor partner, and has been a partner for The REITE Club.
With the right club, I would say probably for at least four years that I know of. can't remember if you were there for the first year or not, but, and you've also started a really cool show REI contracting. Welcome Jon.
What should we know today about what's happening in the Niagara, Hamilton market?
Jon: On a contractor, renovation specific topic. It's been the wildest two years that on record, it's been record building permits, wrecking construction, and that's just not on the investor front. That's on a home front too. It's really stressed out the industry to the max.
Contractors have been overbooked, materials prices have skyrocketed, subcontractor rates have skyrocketed and the overall timelines and the supply chain issues have been an absolute gong show for the last couple of years. As we sit right now, it's not currently much better. Basically, it's really stretched the budgets of renovation costs.
We've seen renovation costs rise between 30% and 40% versus 2019 levels. That's due to a lot of factors. One is supply and demand. Two is supply chain issues, and three is just between record low interest rates driving up free money and, just government handouts people were taking their vacation money and putting into their homes.
The investor community has gone absolutely crazy over the last couple of years because of all the crazy factors that have gone into it. That's really driven up all this stuff. We haven't seen that scale off yet and with the way the buying is going, we're not seeing it scaled down yet.
I'm part of some pretty cool groups throughout North America. We've all been predicting this winter coming when it comes to the renovation industry, but it hasn't happened yet. We're still seeing a lot of fluctuation in material pricing. We're still seeing delays with permits and with the cities, but it's gotten bad.
Park's gotten a little bit better. When it comes to budgeting, accurately for projects right now is really you guessing at this as a really crap shoot. One of my biggest pieces of advice to everybody is really work with either some of your trust or you find some people that you can have great relationships with that you could do some virtual consultations or onsite consultations, obviously with the no home inspections and all that stuff.
It's been a little more difficult but virtual consultations and MLS listings at least getting ballpark figures because we're in the know of what's going on in the pricing. Even for us, it changes so rapidly. We've seen it. We've seen a 50% or 100% increase in lumber prices overnight last week because of supply chain issues with the trucking convoys and stuff like that.
It's something that you gotta keep a real close eye on and renovation quotes are only going to be guaranteed for short periods of time right now because of the craziness in fluctuations. When it comes to budgeting accurately, what I recommend is you really gotta put a contingency in your budgeting planning because things change so rapidly.
It's one of those things when you're working with your contractors, you really want to speak to them about whether their pricing is guaranteed or there could be increases because I got a lot of feedback on that last year, hearing about contractors, going after more money because pricing increases. That's something you want to be clear in the contract with your contractor ahead of time, and really would discuss, because obviously that could put a big stress on that budget that was already set.
Managing the renovations right now is something that is tough, but it's also about the planning stage. If you get into a renovation, if you're going to hire a general contractor or not, which is really the key step to make that decision, if you're going to manage these projects closely with the contractor network being so stressed out right now.
Contractors are taking on too much work. I'm just trying to help everybody or being greedy whatever the person is doing, but that's really making sure, whether they're getting to your project on time or getting your projects done, which even we had a hell of a time with last year, making sure that people were there where they were supposed to be when they said they did because of the major stress.
It's something that takes a ton of communication, a ton of follow up, a ton of checking and it's something that it's not easy. That's something, if you're going to try to manage your own projects, you gotta be able to dedicate a hell of a lot of time to and have the systems in play for yourself to do that.
If you're going to be hiring a general contractor, really setting those terms of the communication level, you desire and how they do it, whether it be through technology, which is a big thing that I've adopted, or if it's just constant communications. One of the bigger questions we get all the time is how do you find great contractors? That's a tough one too, but again, it starts with knowing what you want.
This is something that I talked about in almost every lesson I ever teach about this. It's okay, do you want someone to manage your whole project or are you looking for individual contractors and you gotta be a hundred percent clear about that upfront?
Let's say you're looking for a general contractor. That person is going to take the budget's going to take your ideas, take the plans and just going to get it done for you from start to finish. That means they're in charge of that project. Other than the fact they're working for you. You gotta be okay with that, because if you're one that wants to be really hands-on well, that's something that you got to really discuss with the GC ahead of time cause sometimes that can clash about styles of how to manage a project and that's what you hired them for.
If you're not going to do it, then you might as well manage yourself and you can save 25% to 40%, but by hiring a GC and that's something that you want to be really clear on when it comes to finding them you guys are spoiled. I am not smart just to be a part of a group like this, because you can find a ton of great contractors and a great context just by the people in this group alone, not to mention other investment con destined groups and Facebook pages and all that stuff.
That is where I'd start all day long, every day, twice on Sundays is to reach out to the people in this group, reach out to all your networking contacts, because they're going to have a huge roster of contractors, the good, the bad, and the ugly. If that all fails, then you're going to start them by Google searches. You're going to search. I'd avoid Kijiji whenever possible, unless you're looking for something more on the handyman front, which you just want to make sure you do a good job vetting.
Networking is everything and you want to get feedback, Google reviews. You want to make sure also those contractors are the right fit for this project because there's a million different types of products. I focus on the conversions and REI stuff but that doesn't mean I should be building new 2,500 square foot or 4,000 square builds. That's not my specialty.
When you're interviewing those contractors or you're reaching out, you're looking for the skill set that you're after in your project. I think if you focus on that, you're going to do quite well and be very successful with it. Just have your expectations set up front, highly communicate, and I think it will go well for you.
Remember, it's a nasty industry to begin with. You want to be a little bit picky on who you're working with. Do you want to really have good reviews and you want to communicate highly and remember that nine times out of 10. How you set the budget and what you're looking for in a contractor, if you're going for the cheapest bid, that's going to lead to potential problems. That's a whole another lesson, but feel free to ask later. Anything else you want me to touch on Sarah?
Sarah: I'm going to ask you a few questions if that's cool with you and then we're going to do like fast fire. What are you seeing in terms of timelines right now? Let's just go by city, like from permit application to getting the green light, to be able to go ahead.
Jon: Typically, once you get the drawings completed, you can expect permits between two and three weeks.
Sarah: What about Hamilton?
Jon: Hamilton is always tough and we're seeing between four and six weeks.
Sarah: What about Niagara?
Jon: Niagara falls is difficult on the building permit thing, we've seen three to eight weeks.
Sarah: What about St. Catharines?
Jon: St. Catherine's honestly 4 to 12 weeks, depending on what project you're doing.
Sarah: Basically, you get something under contract, remove conditions. Hopefully, one of the conditions is that you can work with the city, get the stuff going before you close on the property. In terms of ARV these days, are you seeing that may surprise somebody? Here's an example. I just had a student refi in Welland, a duplex that he bought in August for $436,000 on Helms and refi last week at $750,000
Jon: $750,000 is when we're expecting for duplexes, we've seen $850,000 for triplexes. I think that's going to drastically go up over the next year because there's a hell of a lot more comps than there's ever been before. That was the big problem with and we just didn't have the comps selling there's other people doing triplexes and stuff. I expect Welland ARVs to go up quite a bit, but that's what we're seeing right now.
Sarah: Bill 108, where is that already? Just to recap, that essentially allows you to add an additional dwelling unit on top of it to the unit.
Jon: It's city by city and it's a real pain in the butt right now. There's a great REITE club member that's working on one in Hamilton. I'm just gonna use an example and they got the Hamilton spectator added about it today cause we've got pissed off neighbors. It's an interesting process. All of the cities are seeing it so well, it's already said yes, but the problem is with and is that you have to put a $35,000 development charge before you can even start the process which is killing it off the hop.
Sarah: I have a question because I heard that if you have a single family and correct me, if I'm wrong, you do this much more every day, many times. If you do it as a duplex first, and then you go back afterwards, you're eliminating in Welland anyways, the development charge versus if you were to try to do the triplex all at once.
Jon: That's if it's built into one. I was referring to garden suites. Welland has a cheat code. You said you applied for the duplex permit. As soon as I get it, then you send another application, they add that accessory dwelling and it's awesome. We'll do that all the time.
Sarah: That's thousands of dollars that you save right there.
Jon: And time and it's just really cool. Like St. Catharines is like R1 you can't do it, R2, R3, you go through hoops and bounds and all that stuff, but I've seen it. We have another great REITE club person, Sarah, either we're doing one, we're starting one for her with Triplex. They had to go through a minor variance and a grading plan, and we still don't have the permits we're five months into the process, but we've got conditional approval minus something.
That was a different zoning. That was R3. That can happen. Hamilton, it's area by area. Pretty tough on that one, but there are areas that, coach housing so that additional unit, I was referring to the Niagara region, still has that development charge which hasn't gone away yet. That's really going to slow that down in my opinion, but it has the properties for it. Hamilton for his other example, they got some real freaking rules.
Like 27 foot setbacks from the house and a four foot from the property line. You're already taking out 90% of the properties without a bunch of stuff. I think they're going to have to do some work on that before really going. St. Catharines is not approved. I think you're in the same boat in the Niagara region because of all the development charges and for the average, you can't even do a duplex there unless it's owner is occupied, unless you've made that development charge. I think they're trying to avoid that right now.
Sarah: I do want to say, I got a glimpse into what Ford is proposing. I think like 55 different things, and I think the full report is coming out. I believe on Tuesday. It looks like removing some of those obstacles is a few of those points on his list. I'm assuming, because I realize that there is just a need for the only reason, the only real way to fix this issue is to add an inventory and to make it easier for people to be able to add inventory.
I'm actually really curious to see exactly what's on that list, but they had a few bullet points and just being a lot easier to work with when it comes to all of that. I think there were like five or six points, even just something about. Allowing even just a single, sometimes you can't do anything, you just have a single residential option, but just to be able to say, you can do up to four units again. It's still hearsay right now. It's not as set in stone, but something that he's proposing. I think it's quite interesting. Apply it. I think it'll help us.
Jon, thank you so much. We'll put your contact information there. If anybody is looking for an investor focused contractor and Jon, you've got many projects that you can do at once as well in the Niagara, Hamilton area. Thank you so much for being on as a speaker tonight.
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