Ming Lim and Gary Hibbert
Daniel: Good evening, Ming and good evening, Gary.
Ming Lim has a dual role at Volition Properties, as both head of advisory and construction. He mentors and guides new and experienced investors who are interested in purchasing and developing in the Toronto market Ming has a background in computer science from the University of Waterloo and construction experience, giving him a unique analytical lens on investing and a practical approach to implementing investing strategies.
At Smart Home Choice, Gary Hibbert purchased his first investment property in 2008 and six years later, left the corporate world to become a full-time real estate investor. Gary is a licensed real estate agent and Gary has achieved various realtor awards and is also an author, mentor, coach, and he has his own podcast channel..
Ming in at one of our live events, you were one of the presenters on that Saturday at a special event and you showed people there who really did not believe that you could cash flow in Toronto, but you had a really good presentation where you showed everybody that was a fable that actually you can cash flow in Toronto. Is it still doable?
Ming: So, the short answer is yes. But and I'm sure this is not just the Toronto market but everywhere, every investor right now, it's getting harder. And our solutions and our business plans have become more and more sophisticated. I had a conversation with my business partner before, and he was like, oh, I hate having to rebuild the business model every time the market changes.
But that's unfortunately the reality of being an investor, we keep having to be in front of the market changes.
Daniel: Now, do you handle a lot of condos yourself?
Ming: We do, but they're not our, I'd say our gold standard investment. There's a lot of reasons that condos can make sense for somebody, but in general, I find condo investing to be a little speculative, right? If, especially talking about pre-construction condos. Our bread and butter is around, triplex, fourplex and the creation of those buying up a single-family home, turning it into three units building a laneway suite, things that are a little more sophisticated, little more difficult to execute on, but allows you to have cash flow in an expensive city.
Daniel: I'm looking here at an excerpt from an article from the Canadian Real Estate Wealth magazine, where it says the value of condos nearly doubled in four years. So, they were showing the prices between April, 2017 and June, 2021 condo prices went up 44%. But the rent did not go up 44%.
Ming: No. And that's the thing, right? If you buy a pre-construction condo, it is speculative, Because you're buying it at a per square foot price. You're assuming that in the future that per square foot price is going to be improved. And you're not doing any active business around it.
You're just buying and hoping. So, it's not a business model we like. We know there's a time and place for it. And we still do pre-construction, but very select pre-construction. So only one or two max projects make sense every year, but in general, we're trying to get people to a place where they're buying land, right?
Instead of fractional land ownership in a condo, you have full land ownership. When you're talking about true bricks and mortar and in neighborhoods that are going through massive gentrification 20 years ago, you were buying a duplex there for $400,000.
Now that same duplex is worth 2.2 million. That's the kind of lift we're trying to get over a long period of time, but you need to be able to cash flow that whole time.
Daniel: You just said something there that I never thought of that way. If I spend $800,000 on a condo on the 30th floor, I'm buying a box in the sky and I'm buying something that tomorrow or next year they can build another one will be here and next year they can build another one over here.
There's nothing unique about it, but if I buy a house on a 60 by 80 a lot. I'm buying land. They can't make any more. They don't do any more. This is so brilliant to think of the difference. Where would I invest? 800 or a million dollars condo box in the sky or a house on land.
Thank you. That is a brilliant observation.
Ming: The hard parts to make it. To make it legal. There's a lot of a duplex and making a basement suite is relatively simple. But it's not enough, not for Toronto, right? A duplex won't have you cash flow. You need to actually take it one step further and get to triplex.
And that jump from duplex to triple is actually quite arduous because the requirements change. For example, when I'm talking about a legal triplex, I have to show fire separation between three levels of units. I need three separate HVAC systems, three separate HVAC drawings, becomes a lot more complicated, but the difficulty nets in an investment, so harder to execute investment has greater after repair value. So, if you're willing to put in the sweat equity, you've got the capital to execute on these strategies. They can really work out well.
Daniel: Okay, so it's doable, but you need to know what you're doing, or if you don't, you need to talk to the people like you and your team will know what I've experienced.
You've pretty much worked all of your life in the real estate investing in the Toronto market, right?
Ming: Yeah. I've done Toronto and I was in Waterloo for many years. I've done both at Waterloo was great to me. But I didn't live there. It was a pain in the butt to drive back and forth.
Especially at that time I was in my twenties and I was more interested in partying with my friends and I was managing a real estate portfolio. There were some practicalities around it, but Toronto has worked out very well for us. We have fantastic tenant profiles, which is one of the things that I love about Toronto investing.
Young professionals earning good money. It's so rare that I have to go to the LTB to deal with any tenants because somebody is working at PWC earning $85,000 a year. They're paying their rent like they're university educated and responsible people. So, it's a great tenant profile.
It's one of the big reasons that we invest in Toronto.
Daniel: Now, let me ask you a question here, and that's going to be our segue to go to Gary, that as a realtor with somebody sold a house in Toronto, and then the seller was actually moving to say, Ajax or Peterborough.
Ming: Yeah, absolutely. So, one of the things that I think we pride ourselves on at Volition is we look very deep at the data. One of the things we were looking at was rental price per square foot per postal code. So we took all the rental data. We mapped it out per postal code, and we said, where are people actually moving?
Because rental prices will indicate it's not a great indicator of migration, but it is an indicator. And what we were seeing when we looked at that data was the headlines were right. Because there was a huge impact in the downtown core, like very downtown core financial district. They were seeing like 40% drops in rent.
But when we went to one postal code, rents were almost the same, about a 5% drop. So, it was telling us that there was a mass Exodus from the city, but it was like one postal code over it. wasn't like a mass exit is way out of the city where people are moving to the country or something like that.
They just wanted more space. If you're stuck in 500 square feet 24 hours a day, you want like 600 square feet or 700 square feet. You're willing to move a little bit more for that extra space.
Daniel: All right. Having said that since I live in Niagara on the Lake, we just rented one of our house here from somebody who was living downtown Toronto, and now they have a 1700 square foot house with a big yard.
They were growing vegetables. They live in a beautiful area near the wineries and the orchards, and they're paying a thousand dollars less a month than they were paying in downtown Toronto. So, they're really happy.
It's definitely folks like that, where it works out for them. They can work remotely and they can get the space they want because everybody's stuck at home.
And Gary, there's also people, who sell their $1.2 million house in Toronto, and then go buy a really nice house for what 700,000 in Peterborough, and then put the rest in the bank or invested or do something with it.
When are you going to restart your events? Even small little groups, are you thinking?
Ming: It's been interesting. I'm sure that you guys have experienced the same thing, but in some ways being virtual has been great for us.
We've almost tripled the number of attendees since COVID, and I think it's just easier to attend a meetup virtually because we used to host them downtown, Toronto. And if you're coming from outside it is really difficult. Infrastructure is not great in the city, so it's a bit.
Being virtual means that, Hey, if you're in Ajax, you want to come join and find out what's happening downtown. It's just a click of a button now. So, we'll probably end up doing both in person as well as virtual.
Daniel: Yeah, that's our plan as well, because I can tell you probably get the same thing too.
I can't tell you how many comments would get almost weekly of people saying, oh, this is good. This is fun. I don't have to get dressed and go and drive down and drive from Guelph to where we were in Burlington. But man, I missed the contact. I missed the handshake, so they can't wait for us to go back to doing some live ones.
But probably you will do both because we have more now. I don't, you may not know that, but we do. We do regional for Ottawa. We do regional for Eastern Canada, and then we do regional for Western Canada. These people are not going to attend our live events. So,we are going to definitely be continuing with these virtual events.
Ming: I just saw the note that said I think Gary's internet has died. I have one or two slides that people are interested to see the data that I was talking about. I can share them. Like we've got a couple of minutes if you actually like the data that we're. Yeah, sure. So, give me one second. Let me just share my screen here.
Daniel: It's not good that its internet has died, but it could be worse.
Ming: Yeah. I like some of the headlines that we've seen are like sales volumes dropping and if you look here March, April, May, yes. Sales volumes are dropping and average resale home prices remain stagnant. Like these are some of the headlines that are coming out, and this is real data.
This is Toronto real estate tread board and new listings, or, there's a tightening of inventory. So, all these things are happening. And then because of that, people are saying, oh, maybe there's going to be a price collapse in Toronto. Like I said, one of the things we really love is actually to dive into data.
And one of the things we do is look at. The home price index, which chose us the value of a property carried month to month. So instead of saying average, if there's a lot of condo sales, obviously average price is going to go down. Condos are cheaper than homes. So, the average doesn't tell us very much.
It doesn't tell me like, hey, what is actually happening with my three-bedroom detached home? So, the home price index tracks a type of asset over time. So, for example, a three bedroom detached home, how is that performing over a month? So, it's a much better metric. So, we take that, we map it by all the Trev neighborhoods, which you see here, and then we put it, we plot it out to see what's actually happening.
And so, while you see a decrease in sales volume, which people can infer like a decrease in sales volume means, okay, mark, it must be slowing down. When you actually look at the prices, it tells a much different story, especially the tail end of the year. I'm so sorry. The tail end, the last couple of months on this graph here, you can see like this huge increase actually in for like properties to the point where, when we looked at May data, we actually got ahold of the people like a national bank corporate and they have this internet to see Hey, is this correct? Because there's been a big jump in prices and adaptively, we're feeling it as investors and people, both the buy and sell side, it's a huge lift here. Condos, as you mentioned there has been a decrease in condo prices that happened through 2020, but in the beginning of this year, took a huge turnaround.
It was so fast. I was working with a client in Liberty village and literally we were watching the condos go up 10 to $15,000 a week. When we were trying to get into that market. And when we map it out, to look at the outside of the GTA, we're seeing something very similar.
Now the recovery from the crash in 2017 took much, much longer outside of Toronto. But we have seen it, especially in the last couple of months, really spiked up. I just want to show that because I think it shows the difference between what's the quote, like lies, damn lies and statistics.
Like you can basically stat your way out of anything, right? I think Gary's back.
Daniel: The conclusion to your domain is that there's all kinds of possibilities in Toronto, but people who want to invest in Toronto should get connected with a group like yourself. People, the market and maybe of all the markets in Ontario, the Toronto market is one where you can just go willy nilly and just play by ear.
You've got to work with somebody who knows what you should be doing.
Ming: Yeah.
Daniel: Thank you so much for your time. And thank you so much, that was really educational. Gary, how are you doing?
Gary: I am good. Sorry about that there. My internet went down. I'm actually tethering off my cell phone so hopefully it's stable.
Daniel: Yeah, it's a little choppy, but you know what? Hopefully it will come out. Okay. See, I live in Niagara on the Lake, so we know that we get a lot of people who come here and buy houses in this area because of the price difference. And I'm sure it's the same thing on the other side of the lake where you are.
Do you ever encounter some people buying houses in Peterborough who are moving from Toronto?
Gary: You know what, not so much people that are moving from Toronto that are buying properties, but we are definitely helping and working with a lot of investors that are looking outside of say Toronto or Durham region and trying to find properties that can cash flow.
And so just to give you a little bit of a history on Peterborough as well, too, and why we even went to Peterborough, which was back in 2017 and please don't take this the wrong way, but there was a lot of Toronto agents that were coming into the Durham region back in, if you remember 2017. And at that time, one of my agents, I actually had pushed him to quit his full-time job, Christopher Hummel.
And Gary, I can't buy any properties for any of my clients. What am I going to do? And that allowed us to say, let's take a look at Oshawa. Let's take a look at Bellville. Let's take a look at Peterborough. And when we looked at those three areas, Peterborough to us made the most sense.
And so that's where we really set up shop in 2017.
Daniel: Okay. So, what's the market like in Peterborough these days? What's happening?
Gary: Oh man, the market is hot. It's been something that a lot of investors have been really reaping the rewards from when they moved in there in 2017.
What we're seeing is obviously when the 407 came across the top and I'm always big on looking at infrastructure and that's like saying something already for your heart. So, that was very huge to allow people to get in and out of the city. We always say, follow your eds and meds.
And when you take a look at another location to invest in, what are the jobs? And you've got Fleming, which is a college, we got Trent university. And you've also got the hospital out there as well. I could see, also in regards to income you're seeing household incomes so rents are great out there.
Detached homes and one of the big things, especially when you're trying to find properties that will cashflow for you. You're looking for detached homes. So when you compare Durham region, which, when you look at all the homes about 50% of the homes are detached. However, when you go into Peterborough, 80 to 85% of these homes are detached.
So you've got a lot more inventory in that particular market that you can now potentially convert into a legal two unit, right? And the rents are great. There isn't much of a difference from say, Durham region to Peterborough. We're seeing anywhere from 18 to 22 upstairs and 14 to I'm seeing even 17, 18 downstairs.
So the numbers are incredible and we're picking up most of these homes anywhere from that 475 to 575 to the top. End of six. So, the numbers make sense. The other thing that I really like about Peterborough and the other thing that I really like about Peterborough is that it's also the gateway into the cold war region, which is cottage country.
But also, you've got these little small bedroom communities in there. Our feeder towns into Peterborough. And so, you've got the bridge north, you've got Lakefield, you've got Buckhorn, you've got Bobcaygeon. And so right now in Peterborough, there are vacancy issues. There it's less than 1%, but that's right across the GTA.
But you're also having those issues in the little. Communities as well too. And so, people may be a little nervous and I don't know if I want to invest in Bobcaygeon. I get that. However, there are families that can't live in Peterborough that are willing to move on to those areas. And those rents are similar to what we're seeing in Peterborough.
And so some of our more, we'll say sophisticated investors are comfortable investing in those types of communities. And I think there's a lot more runway for those areas.
Daniel: So, you are planning to do business there in Peterborough for quite a while.
Gary: I am, I would say so much so that I've actually, and I think you guys know this as well, but I purchased a cottage up there.
Next year I think it's a really good place to be. I think the core says, and again, if you're into maybe potentially getting into the cottages that are going to be, I think the new Muskoka it's happening right now. And the beautiful thing about it, there's a million different ways to get into those areas.
So whether you want to take 401 into the 115, or you want to take the 407 or if you like the scenic route there's a million different ways. And so traffic is an issue. And I think a lot of families like that outside of the congested areas of the city,
Daniel: Okay. What do you think, you probably have the figures, but say year over year from May last year to May this year what might the average prices of houses in Peterborough gone up?
Gary: No, I almost don't even want to say this number, Daniel, but it's this close to 40%. It really is.
Daniel: Gary, it's not scaring me because we just found out here that the Niagara on the Lake went up 64%.
Gary: Are you guys up that much? That's incredible.
Yeah, those numbers are incredible. But yeah, we're up 40% of the homes that we were typically buying last year around this time for say 400,000 or even the high threes are now going for in that, mid five range high five. So, it's just been an incredible growth. But the numbers still work which is good. And what we find is that when an investor comes out into that area and they actually see the thriving community, they actually end up enjoying going out there. Then, obviously outside of COVID, but there's lots of restaurants. There’re festivals that are going on.
The river runs right through Peterborough. But now I will say this, for an investor or realtor coming into this market, they do have to be careful, especially if they're buying a single-family home and they want to convert it to a two because it is the river that runs right through it.
And so, when you want to convert a single-family home into a two unit, you gotta be very careful of floodplains. And because of that, there are homes that just cannot be converted. And I've seen some investors come in not knowing the implications of that. And then now they've got this property that they can't convert.
So you definitely want to be working with a realtor that's familiar with the Peterborough area. And the kind of another thing that's great too, as a city and very helpful up there. So, I know sometimes when you hear about the city and the permits, listen, these guys are there to help us because it is a legitimate housing crisis in Peterborough.
There's just not enough rental properties.
Daniel: All right. So, of all the things you said, and you said a lot of it, what I remember and what people should remember is if you're going to go and buy in Peterborough, the numbers can work, but you can't just go there willy nilly. Like you can't go downtown Toronto willy-nilly you need to work with the team who knows what they're doing. So that means you get a hold of Gary and his team. Cause you've got, how many of what you and three or four of your agents are all working to Peterborough?
Gary: That's correct. Yeah. I would say probably 85 to 95% of what we're doing is in the Peterborough location. And then on the outskirts, we still do a bit in Durham.
Again, when you see the numbers and they're very similar in regards to Durham and Peterborough when we're talking about rent but you can buy that same type of property or homes, square footage for 150, sometimes 200,000 less. It just makes it.
Daniel: All right. Thank you very much for your time, Gary, and also for finding your way back to us.
And thank you very much. So, there you go, do you want to do something in downtown Toronto or Toronto in general? You get a hold of Ming. You want to do something in Peterborough? You get a hold of Gary; they add the people and the team to help you do well in both of these places.
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