Jon: A lot of times it's illegal things and I'm just not interested. So you get a basement that's, 5'11 and they wanna put an apartment in the basement. I'm just not gonna do it. It's not legal. It's never gonna be right. And so I'm not interested. Again, one of the bigger ones, again, is the stuff behind the walls because it's not pretty and it's the most expensive part, we'll leave the, we'll leave the bad wiring, that's, the bad plumbing or HVAC and then just put you know put a paint job and do this stuff. So we avoid that. And in, in the end, it's gonna cause you a lot of problems.
Laurel: Hi everyone. I'm Laurel Simmons, your co-host for The REITE Club podcast today of real estate investing in Canada.
I am joined here by Daniel St-Jean. So Daniel we've had a really interesting guest here today, Jon Tenbrinke of Black Jack Contracting. He's got really cool tips for people. He does a lot of education and he's obviously really passionate about helping real estate investors renovate their bungalows, their real estate investment properties.
What was your takeaway from this?
Daniel: My takeaway, and it pains me to say this because I'm a licensed realtor, but my takeaway was when you're looking at buying a property and your realtor says, this is possible, that's possible. And roughly this is what it's gonna. Don't pay any attention, get a person like Jon to come in and ask him to, or her, if she's a contractor Is it possible and how much is it gonna cost before I make an offer , and sign my name on that offer because afterwards , you could be really disappointed. So that was my biggest takeaway, as much as it pains me to say that.
Laurel: Well, and it's true. , Jon made some really good points about how you could lose a lot of money. And that's just one thing that you mentioned there, so please listen to the interview. Jon has lots of great suggestions and recommendations. There's lots and lots of great stuff. So before we go to the interview, I just want to ask you to rate us on any of the platforms that you're using to listen to our podcast, whether it's apple or Spotify or anything else, the more we get rated the better it is that we can reach other real estate investors and help educate them.
And also don't forget to go to thereiteclub.com where we have lots of great free content for you. So with that, let's go to the interview.
Daniel: Let's do it.
Laurel: Hey, welcome Jon to The REITE Club podcast. So interesting times, huh? In the the contracting business and start, please fill us in what's going on.
Jon: We just come off the two most interesting years of our lives and it, I tell the truth. It's still just as interesting now. I'm part of some networks across the states and it's mostly contractor, networking groups and stuff like that.
And they predicted a couple of these things that are happening, for a while now. So we dealt with all the shortages we dealt with the labor supply issue. That stuff is slowly starting to correct. Now have costs come down. Nope. Not at all. Why would they, why when gas are two bucks a liter, right?
So they're gonna keep it up as high as possible. Things like. Two by fours which has been a great example over the last couple years has been basically like a sign wave, an electricity sign wave up, down, up, down, up down. So we've seen that and it's still sitting at three times the cost of one before the pandemic. And it's just little things like that, but what's really interesting is now that the market, there's a lot of fear in the market as you guys probably well know, especially in the real estate space, and it's not much different in the contracting space, especially the ones that serve real estate investors.
Investors are starting to tighten up and, so basically what's happening is there were all that labor that was going gangbusters for the last couple years is now running of things to do. So the what's happening is it's driving down contracting prices, which I know sometimes is a good thing, but unfortunately it's the desperate ones that are getting out there.
So what we're seeing is there's a lot of people are worried about the rising interest rates, which is affecting how they're doing the renovations, how they're going about their renovations and and strategic renos are starting to become, very more important. So it's one of the more interesting things I could ever imagine happening, but I think what you're gonna see over the next year is it just start to figure itself out and level, and then the fear stops. And then we should get back to hopefully a pre-pandemic normal.
Laurel: So does that mean then that I just wanna go back to what you were talking about, like people not having as much work, because, I wanna make sure that I understand this. So as some investors are wary of rising interest rates and what kind of return they're gonna get on their investment and the construction costs, that they have to put into it. So then they're pulling back a little bit. And then that means that the that if they pull back, there's not as much work. So therefore the trades, there's not as much requirement for the trades. So the good trades like will always be busy, they'll always,
Jon: Yeah, always. You never agree about that.
Laurel: So it's the it's what for the lower hanging fruit, is that a good way to put it there?
Jon: Yeah, so in a polite way is that it's one of the worst industries, as I've said for a long time, because it's got such a low barrier to entry. So there's a lot of guys that really have no business being in business that are in business that are gonna cause a lot of problems for the industry and themselves.
But basically in a nutshell to explain it is that we've seen the biggest renovation, boom, in history happen over the last couple years because people weren't traveling. There was cheap money. The government were doing handouts. So everybody was, instead of traveling, was working on their homes.
And, with the investors went gangbusters because the interest rates were so low, it was basically free money. So that drove up material shortages that drove up labor that drove up trades. And that is starting to contract. And when that contracts now, as you said before, the good ones are always gonna keep busy, but it's the ones that you need to be wary of that are going to cause a lot of problems because it is very tempting to go with cheaper price.
Now, there's a difference between paying the right price and paying over price. And that's completely fair. But if you're getting three bids and they're all over the map and you go with the lowest bid you're inviting yourself into the problems because it's, nothing drives me more nuts and it happens every day, especially if you're on Facebook or Instagram.
And, oh, I got screwed by this contractor. This guy didn't show up a little, but they went with the guy Kijiji that was, the lowest. So that's what I'm trying to be warning about here. It's not about overpaying. It's it's about being careful of that tempting really low bid, because those are the guys that are going to run off your money, cuz they didn't charge enough to cover their expenses.
As I said before, it's going to be a really interesting thing that happens here, but just be wary about that because things are changing quite a bit, very fast.
Daniel: This is really good advice coming from somebody who's been doing this for quite a while. So tell us a little bit about that. What's your story?
At some point you were in high school and now you're sitting here as a, one of the top contractors in the GTA. What happened in between?
Jon: So I'm actually an electrician. Basically outta high school. I knew immediately that I had no interest in like a university education. I just I'm was a hands on type of person.
My father was not a mechanic. And I learned at a very young age. I had no interest in working on cars after watching the sub blow himself up for years. And during one of those career days of school, I went into electric, they talked about electrical. I thought that was interesting. And I actually started with a Ontario Youth Apprenticeship Program, which is basically while you're in high school, you're doing the co-ops with other companies and I enjoyed it.
And so I was 17 at the time. I was a licensed electrician by the time I was 22 and I was the youngest master electrician in Ontario's history at 25, started a business at 25, cuz that's usually the requirements had no business being in business because again, I might be really good with the electrical had zero financial training.
So after getting your butt kicked for a few years and not making any money, I finally decided to get myself educated that there's a lot of great, not a lot of great, but there's some really great contractor education and I've been investing heavily in it. The last five years, I spent over 200 grand on personal education and that's how I got to where I'm being.
And then, so basically I was doing electrical for another general contractor who did basement suites like we did. And he was a terrible contractor, nice guy, terrible contractor. We became friends and I made a bet with him one day that said, I bet you, I can do this better than you. And he he took the bet and we started another company within a week and we started doing jobs for him and we won the bet.
He's no longer doing it. We are, we've done 236 basement suites or something like that since 2017. And so we and accidentally fell into the investor space and just stuck with it. And it's been great. I got a education at REI well, for real estate investing as we go along. So it's been a wild ride.
Laurel: So I have a question for you. About that. So often , we talk about as real estate investors that we go out, we get bids and we choose our contractors. However, there's the other side to it. And I bet I'm betting that you also look at your customers and clients, because I'm sure there's some you don't want to work with , you, I'm sure you have a set of criteria about the kind of clients you wanna work with. So can you talk a little bit about that? What are you looking for?
Jon: It's, when you just start out in business, you don't have that set of criteria.
You just want the work to do anything. And then the problems happen or challenges happen and you quickly realize, okay, maybe we're better not served for a certain type of person. And so what we've evolved into over the years is more of an educational contracting company. So because we've been serving investors, we find that it's the young ones, the newbies, not so much young and age, new into the real estate investing game and they need a lot of coaching and help throughout the process. And that end up being our ideal customer for some random reason. Like I really enjoy the piece of consulting basically is what we call it consulting.
And so so when you're going through the process, it's amazing how much. unsales, if that's the word for it that you try to do because the people come in and they watch HGTV and they want this and this. But what you have to teach them is you're not gonna live here. Your two goals with this property is rent and After repair value refi, right? That is one of the bigger challenges with dealing with a more newbie investor is trying to explain to 'em that, your furnace needs replacing and you want quartz countertops. You say you can't afford to replace the furnace, but you wanna put the quartz in. It's going to be, important to do that. And not so much the other one, when you can do that later. So that type of thing what we've learned is that a, you're a really seasoned investor. Doesn't need us. And that's something once it's a little more of a maturity, because usually they'll be, we're not, they don't need our consult.
They know what they're doing. And so they don't need us. They, so that's why they're better off to work with. Maybe a little lower end, but , they know how to manage them well, and then, within the investor space, joint ventures is very very prominent and it's a great way, but , what I've learned personally, Is how important it is to be involved with both sets of joint ventures.
Because what happens is if we don't get to communicate all the things we see about a job site or the cost on a job site, it doesn't get communicated from one partner to another, from some reason or another. That's where most of the problems I've ever seen have come up. So now that's where I have to be a little more strict as a customer saying, if I'm going to be doing your project, I need to be, I need to communicate the project and the financials to both sets of parties and because the trust factor and the and the openness of, costs and problems that could occur and how you're gonna solve them needs to be communicated with both partners.
So that's where I've also found that if they're not willing to do that, , we're not the right fit for you. Cause that's where again, any problems I've ever had has been through that situation. So , it's been a learning curve, but now we've got it figured out where we best serve people.
Daniel: Okay. You've done 270 something or whatever jobs since 2017. Give me an I an example of maybe the smallest job you've done and the biggest one, I'm trying to see a range here between oh sure. The smallest thing you do and the biggest thing you do.
Jon: So usually one of the smaller jus we'll do is like what we call a retrofit.
And basically we have a finished basement that just needs to be brought up to code in order to legalize it for a customer. And typically, the lowest end one we've ever done was about 40,000 bucks and it got the place legalized into two units. And now I think the biggest project we've ever done was closer to half a million and it was a sixplex conversion.
So that we do that too, where our best skill is by far doing legal second suites and duplex conversions just, , we've done so many of 'em. We got that down to a science. So yeah, pretty much from 40 to 500 and everything in between the average job size is, 150, 180. And it's usually what happens is you take a mom, a grandma special. That's a beautiful bungalow home, but it's just very dated, renovate the main floor to its maximum potential and then convert the basement. The funny story about that is the first one we ever did from scratch was $77,000. And now my costs are higher than that. So usually the average is, 150 or something like that.
So how much things have changed in five years, but if you look at cost across the board construction, subcontractor's permits the whole deal. It's just gone up so much in a short period of time, but, as a strategy for investors, it still seems to make the most sense, because you're not gonna cash flow single family much these days, unless especially in the area we're serving because we're, we're in Hamilton and everywhere in between.
And houses that would buying for, 475, 2 years ago, we're selling for 1.1 million this year. It's, it's changed quite a bit, but. Yeah, those are the projects. We do everything REI right now. We'll take single family homes, convert them, or we'll take existing duplexes and renovate them to get the max refi and rent and every little thing in between we're we don't typically do like just going in and do flooring.
It's that's not really what we're here for. Because you, at that point, you hire a subcontractor for much less money and to be faster where we're more of the. Project management arrangement type thing.
Laurel: So if you, and I'm sure you've heard this question before, but when you go in to look at it say a reno, like it's okay, so say it's your typical small bungalow it's a bit outdated and you've got somebody who's not that maybe experienced in real estate investing, but is looking for some advice, some consulting, what are the top three things that you recommend that investor do to increase the refi value?
Jon: You have to go in there and look at a house on a case by case cases, but the number one return on investment always is painting right? For cost versus reward. Good flooring is extremely important and durability. So that's, I guess I should prefix with that is when you're dealing with, when you're creating a home for a rental, the idea is to have it as low maintenance as possible.
So when you're looking at what you're going to do, you wanna make sure that it's gonna last more than one year, cuz tenants are generally gonna be rough on things. So the materials you pick and how you go about things is really important to make sure it's durability. Number one, obviously it's gonna look good.
So because I'm an electrician, I'm always gonna prioritize what's behind the walls before what's in front of the walls. It's not sexy. But, it's gonna cost you the most money later, if you don't do up front and it's gonna cause you the most issue. So when I, as I said before if you have to make a choice between a furnace or some electrical updates versus your quartz countertops, I'm gonna fight new tooth and nail to make sure you do that.
And again, it doesn't affect my life any after I leave this job, but I know that it's going to, it's gonna cause you issues. So a lot of the coaching stuff that we a lot of the consulting stuff we do it's making sure they know the risk versus reward of doing this now or later, cuz sometimes the people just don't have the budget or the, to do everything they wanna do.
So how you prioritize, that's extremely important. So for rentals, generally bathrooms are big. That's gonna be a big one. You wanna make sure it's in good shape or if not redo it, kitchens are always subjective, but it's always gonna give you the best. It's gonna give you a wow factor and a good refinance.
But again, if you're in a decent cabinets where you can fix it up and you're gonna do that, flooring is extremely important. Everybody loves hardwood, but hardwoods gonna get ruined every single tenant life cycle. And if you look at 375 to refinished the floors or $5 to put in brand new vinyl, you never have to do it again.
That's how we're gonna, that's how we're gonna lead you. Bright space is good lighting, good safety. And so basically the top three are flooring, painting and bathrooms other than the fact of the major things that like behind the wall stuff. But so it's just planning the strategic planning of renos, unless you're going to redo the place is challenging.
So you take the budget. By the way, no, one's budget's ever the right budget for a project. Everybody. I think everybody knows that. So that's one of the bigger tips I'll say is, do not take advice on renovation costs from a realtor, unless they're a really experienced realtor, who's done a lot of things.
So I work with some great duplex realtors that know cost. So what's really heartbreaking is when you get someone who buys a deal on bad advice and all of a sudden they're in shambles because they didn't realize how much things were gonna cost. And then all of a sudden this deal doesn't make sense.
And I see it all too often. So it's who you take your advice from. There should be very few people you take like renovation costs, budget advice from, but that's one of the bigger tips I'll ever put out there.
Daniel: What you're saying is that before I buy that duplex and my realtor is telling me 50 grand will get it all fixed up and whatever , before I put an offer or do anything with that listing, I should go to somebody like you and get an at least a rough estimate to see if this guy is anywhere near the real or if the 50 is gonna turn into 175 later on.
Jon: A hundred, hundred percent. And that's the best thing about the last two years has taught us is that technology can be utilized so many ways. You can hop on a FaceTime. I gotta FaceTime call scheduled tomorrow cause I couldn't be there. So he is gonna call me from the site to least.
So I could take a quick look, zoom, pictures, videos. At least get a ballpark reno so that that you're in the ballpark. Because I said, I've seen people that have been told 40 grand that the project was 200 grand. You know what I mean? And then all of a sudden that deal doesn't make sense anymore.
I've seen people like I'm dealing with one right now that took advice from a realtor and now they're probably gonna lose a hundred thousand dollars on a house because they were told something could be three units when it can't. The deal does not make sense anymore. And by the time they get out of this deal, they're probably gonna lose a hundred grand.
And it's just because they took advice from the wrong person.
Daniel: So when you go into a project and somebody has hired you, called you or invited you, some people must have some preconceived ideas of what they want. So we're gonna call Jon, and we're gonna ask him to do this and that or whatever.
What are the two, the say top three stupidest things that people will ask you to do over and over. And once you're finished with them, they realize that it was not a great idea, but people think that if we do. And it's gonna be absolutely wonderful. What are some of these silly things that people asked you to do when you first walk in there?
Jon: A lot of times it's illegal things and I'm just not interested. So you get a basement that's, 5'11 and they wanna put an apartment in the basement. I'm just not gonna do it. It's not legal. It's never gonna be right. And so I'm not interested. Again, one of the bigger ones, again, is the stuff behind the walls because it's not pretty and it's the most expensive part, we'll leave the, we'll leave the bad wiring, that's, the bad plumbing or HVAC and then just put you know put a paint job and do this stuff. So we avoid that. And in, in the end, it's gonna cause you a lot of problems. What's the other ones?
I guess so to your first point is what they want us to do. The problem that we find a lot of times is they have no idea. The ones that have the ideas where, you can just reuse as much as possible or, the stuff that's just never gonna pass and ask us to, to work with it.
I'm just not interested. I don't like it. I gotta overall, I think I got a relatively high standard of how things are gonna be done. And just because someone doesn't have the budget to work with you or the project in general doesn't mean that I'm interested in cutting any sort of safety or dangerous corners. Cause I gotta put my name on it so that I would say something like that.
Laurel: How do you manage expectations? Because I think you've alluded to it a little bit, but and people do come in with all these grandiose ideas and they see all these television shows and, in an hour, oh my goodness, it goes from an absolute, oh, I wanna pull it down to this mansion that you, with the big windows and the wow factor and we all know that yeah, really. And who knows what they actually did. It could all just be smoke and mirrors for all we know cause we don't see everything that goes on.
But how do you manage those expectations? Do you actually lay out a budget and show people exactly what, because they say, I want a new kitchen. Like I need, this is a horrible kitchen. I want a new kitchen. Do you actually say, okay, this will be a hundred grand.
Jon: Yeah. So hundred percent.
I'm pretty blunt. And I think that helps. So I have the personality to do it, and I think that's one of the things is I'm pretty strong headed, but , I think, , we get along with the customers pretty well. So if someone tells me, oh, let's just underpin this and we can add a basement.
I'm okay. Okay. That's gonna cost. $80,000 to start. And then you'll put another a hundred into the basement. That ends that conversation really fast. Your kitchen, , as long as you have some experience to give them relatively accurate ballpark numbers customer up the hill that not this idea to put a barn door where it doesn't belong. And so right now we're supposed to put it just a regular door. Okay. Okay. We can do that. That's gonna cost four times what this door costs. Do you wanna spend that money? Oh, I didn't realize it was gonna cost that much and it usually solves the issue, but again, educating from the start.
And that's, and I think that's, if you're looking for a contractor out there. They have to be educating you from the start. From the very beginning, there's no point in going through this big grandiose meeting and listening to your wishlist. Knowing very well that this is gonna take a hundred thousand dollars project to a $300,000 project without having the conversation right then and there, because you're scared to talk about money and that takes experience.
Be honest with you. When we start out in business, we're all scared to talk about money, cuz you're just gonna sound like you're too expensive, but if you don't have the money conversation, I'll put honestly up front. Then this kind of stuff happens and everybody wastes their time. And then, you say this idea and all of a sudden you go back with a price a few days later and they don't even talk to you again.
Cause they just think you're trying to rip off instead of so that's a big part of it. And expectations is one of those things that's it's a really important part to have a conversation of what the goal is. For the project. This is especially with the REI space. And homeowner space would be a lot different, but in an REI space, it's really important to see what the goals for the project.
Is it a BRRR, is it a flip? Is it a buy and hold? Are do you have partners? Are you gonna refi? And you have to, and with a lot of contractors, that's a scary conversation to have. And budget is another one. People are so scared to tell the contractors their budget because they think that, he could do the job for less and he was just gonna ask, take all that extra money.
I guarantee you, your budget is under that guy's budget. So just discuss the budget and that way you can design a renovation around your budget. And that's why for, as you asked before, managing expectations, if you have all these conversations up front, this shouldn't be an issue.
Nowadays I've learned my lesson so much that we actually have all these discussions before I even go see the house. And then from there, and then from there, it should be pretty easy.
Daniel: And you're talking a lot about budget and money, but I want to bring something up to your attention very quickly before Laurel gets into the next round of question.
We have a beautiful house here in Niagara on the lake on a corner. And we were thinking at some point to do a basement conversion. So we brought one of the experts, another sponsor of The REITE Club and he came in and you know what, before we, even, first of all the, the ceiling big enough and every everything's fine, but we didn't do it.
Why? Because it's on a corner. So from this space to that space, there's no parking, then there's a fire hydrant. And then there's the Canada post boxes there. So he said, you know what, we can do this, but then the city is not going to give you the permit because
You need one more parking space. And from what I can see here from half a block this way, and half a block, that way it's not gonna happen. They're not gonna give you a permit. That's, you need experience to give that advice. And that was, we thought that was amazing that somebody would be from a contractor point of view that you would say don't do it because you're not gonna get the permits.
Jon: Yeah. A hundred percent. And that's, you have to be able to do that. You have to say this job does not make sense. And that's what happens when you're working more experienced contractors and they better, and not trying to find a better word, but not desperate contractors. Because if you are a guy that just needs jobs, you're gonna lie your way into a job.
I can go and lie in myself with a hundred jobs. Cause the thing that you have to be wary of is a thing called, we call it a bait switch and I got a quick example to tell you is so when we go in there because of experience. My price is generally gonna be higher because I've gone through everything I could possibly think of where a lot of times they'll only include what the customer says.
And then as the job goes on, they're gonna go after you for change orders. And we saw a recent situation where we've bid against somebody had lost the job by $40,000. I don't make 40,000 extra dollars to, to lose against. So it's always a question. And then we talked to 'em and said, okay make sure that this is included after already signing the contract.
And we found out afterwards, after they asked the question, they end up change, ordering them for $45,000 and end up being more expensive because it's called the bait and switch. And this is why this industry's not trusted. And it's. It's a tough one, but that's you know what the contractor owes you is what's in that contract between you two.
So if there's any more on there, even though you may have not been educated, he can legally not do it because you didn't sign a contract for that work. So that's it's one of those things.
Laurel: Yeah. I think you learn, like both as a contractor, there's the one side and the other side as the buyer. The services. Yeah, you gotta educate yourself. That's the message that's coming through loud and clear.
We're gonna move on to the lightning round now, and I'm gonna start four questions and whatever comes to mind. No. So Jon, the Jon of today, what's the first thing that you would say to the Jon of 17 years old.
Jon: Get educated.
Yeah, quick, quick and simple answer is that I think in my latter half of my twenties, I was lazy on that point on the mental thing I was working and all that stuff, but I stopped learning and that's where all my problems came from. And the moment I started learning, things started changing.
So get educated.
Daniel: And in terms of education, along that line, what is the best business advice that you have ever received from any source?
Jon: I get a lot, but you're better off not doing a project than doing it at a loss or not doing a job at doing it at a loss. So that's where that desperation thing comes in. When you're young, again you just think you have to do everything, you have to please everybody. But if the business isn't. Making a profit and the business isn't, you can never grow. You can never think, and you're gonna live a miserable life. So one of the things I learned is just you have to treat the business first and then your customers are gonna be similarly satisfied from there.
Laurel: Okay. So question number three, what will keep you awake at night? And I'm not talking about personal stuff, but what will keep you awake at night?
Jon: Basically processes and systems. So it's a never ending battle, but if you wanna be the best at what you do, you have to it's, there's a book called the E-myth and most people know about it's a business book and it's one of the best ones out there. So they even have a contractor's version of it.
And, you could sit here and run a business and have a job for the rest of your life or you can build a business that serves you and your family and will, happy customers and all that stuff. And it's all about systemization. So a lot of times a process or a system will keep you up at night.
Daniel: All right. Question number four. So anybody who knows you from The REITE Club knows you as being a successful entrepreneur, what in your view is the key attribute that has made you successful?
Jon: The drive to get better. I'm I have a severe hampering thing that I'm never happy. And I like not as in for where I'm sitting, I could always do better.
We could always do better. And I think my natural drive is what's given me that success.
Laurel: There you go. It's, I think it sounds to me like, perhaps you have a bit of the and I know where you're coming from. It's like, it's not good enough yet. It's gotta be perfect. Cause I know exactly where you're coming from.
Jon: Yeah, that's me.
Laurel: Thank you so much, Jon. This was great information. I think people I don't know. I learned a lot. It's always nice to talk to someone who's passionate about what they do and who really enjoys what they do and is really good at what they do and you're continually educating yourself.
That's great. And it's great news for those of us who are real estate investors and who want to improve their the properties, whatever they are. Thank you very much.
Jon: Thank you for having me.
Daniel: Have a good day!
Laurel: So there you have it. So many tips and tricks and recommendations from Jon. Wow. It's just, it amazes me how much he knows and how much he's willing to share. What do you think Daniel?
Daniel: What I think is after you listen to this podcast, you understand why John is one of the most likable and liked people that we see at The REITE Club. Cuz he used to be one of our sponsors at live events and people say all the time, what a nice guy he's so friendly and et cetera, et cetera.
Jon is a likable character, but he is also very knowledgeable character. Yeah. Hope you paid attention.
Laurel: Yeah, likable, knowledgeable and to me, his integrity comes through loud and clear. So anyway hope you enjoy the episode and we'll see you the next time. And don't forget at The REITE Club, we want you to customize your life. Bye for now.
Daniel: Bye for now.
- Log in or register to post comments
- ARNEL-LLEMIT-1637316866's Blog