Buying first piece RE, 6plex, details of transaction, what you guys think?

Martin1968

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That's a good writing! I take it you were sipping cappuccino on a French terrace overlooking the Mediterranean while doing it? :)

You are one of the very few that I was describing starting with 16+ units and it has worked out very well for you. Congrats!

In the above case however, taking everything into consideration such as property, market, fixed cost to expected revenue, purchase price and DP/LTV, it would be better to spend your resources in a better market, (not saying that a 6 PLEX is to big) the best advice is indeed to start a bit smaller, preferably in a better market and learn as much as you can and build your portfolio from there.

Buying larger MF doesn't necessarily have to be more difficult. If you would want too, you can buy 24 suiter for 600K or a 12 suiter for 250K in northern Ab.
For me personally it wouldn't be the size of the object, but the quality that would be leading.

The other thing I would like you (and others) to comment on is the 85% LTV CMHC insured. I just ran this by my broker yesterday due to interest in a 12 suiter complex, but it seems that in todays market it's hard to achieve since CMHC qualification criteria affects the value they give the property compared to purchase price.

Looking forward to your answers.
Au revoir from sunny and warm Alberta
 

TangoWhiskey

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That's a good writing! I take it you were sipping cappuccino on a French terrace overlooking the Mediterranean while doing it? :)

Actually I was sitting on my terrace looking out over the peach fields sipping a glass of red wine from a local winery. We're about 15 clicks from the Med, but there is a pool and we're right at the foot of the Pyrenees, in the phenomenal and very small little pocket of the Roussillon plain on the border with Spain - the plain is surrounded by mountains on 3 sides and the Med on the 4th. I can see a 9000 foot high peak from the terrace even though our house is just over sea level; it really is sea sun sand and snow here, with winters at sea level averaging 10-15 C in the day and usually sunny. The geographic diversity of France is exceptional :)
Hopefully what I can communicate here is being super selective and focused because its all about starting with the end in mind. We wanted freedom and that means cashflow and scale to create a manager position. We were very selective on the regional market where to invest in Canada and we tried 5 different strategies targeting 10 % cash on cash returns - CMHC MF; rent to own; student housing; gut and renovates; and development - ideally looking to make deals in the 150K-200K size cash invested using investors. CMHC MF turned out to happened to be hands down the best performer on a number of counts - though the others were mostly good too, just harder to scale. The plan is next year we sell the remaining single families and buy or develop more MF, if you have 3-4-5 MF complexes that are all performers, you have mega income and none of the hassle that comes with single family management. I HATE hearing about issues and I don't hear about them in the MF.
We're equally selective now in the region we chose to take that passive income to - this is the last pocket of reasonable value on the Med in France, at the eastern end of the Pyrenees north of Barcelona - we're investigating buying to live 10 months here for the school year and rent out the house by the week for 2 months in the high season to north Europeans to make the house a net revenue generator while we go back to Canada for summers at the cottage. If you can believe it, you can get a mortgage as a foreigner here for 25 years fixed, 2.25 currently.
Its just like CMHC mortgages - the real asset today isn't the property, its the mortgage. You do have to go down 25 %, but the limited remaining Mediteranean seafront should mean over a long time frame a real winner ... not sure about how to hedge the currency risk though.
But in answer to your questions - you're putting the cart before the horse. You are taking open market listings (publicly open market, even worse) and asking why it doesn't fit the formula CMHC uses. Instead, find out where CMHC is insuring mortgages at 85 % of purchase price (there's a few ways to do that) and then concentrate there building a list of all the owners of buildings and market direct to them. I spent last summer overseeing a student who's main job was to create that list (and others of oceanfront development lots, commercial zoned lots, and trailer parks) in my regional market - for MF there are 700 buildings; 250-300 owners; about 30 of them are the top prospects, especially the ones with a small family sized portfolio of buildings - my ideal target is a long time owner in their 70's with 2-3 assets. Its expensive to get that level of detail and mail all those folks to then further narrow it and further narrow it - but its an investment. It should be just a question of time before one bites, or someone dies and the heirs just want to sell and hey presto there's this letter in the deceased's office ... After that, its being sure to use the CMHC expense numbers in your spreadsheet to make sure you meet the ratios and sooner or later than should get you the 85 %. Nothing rocket science but it took me 5 years of very focused effort on how you build wealth in RE to get that system sorted out.
Message me your email and I'll add you to my list of prospective investors for when I get a deal under contract. Our investors have so far been pretty happy. International investing with the twist that its us how are overseas, not the properties.
 

Martin1968

Frequent Forum Member
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Having your own terrace.......even better.

My hat off to you.......you have done very well.

Interesting thought on finding out where CMHC is insuring 85% mortgages. Hadn't looked at it that way, although I do understand what you are saying about open market listings. I'm going to send you a few questions on how to find out about where those markets are.

As for France, I lived in Western Europe for 29 years. By the sounds of it, you are close to Perpignan? I did the reverse of what you did and came to Canada, and instead enjoying the beautiful (snow covered) plains of Alberta. :)
 

Myron Bas

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Registered
That is probably true but I think is a mis-understanding of what I see as the true risks in real estate investing. We started with a 24 unit building as our first investment and by buying big you benefit from the bank and CMHC, if they get involved, acting as your out-sourced due diligence. Buying bigger multifamily means you aren't the real loan guarantee anymore, its the building, and they look closely to be sure its worth mortgaging and insuring. I understand in the large markets you won't get CMHC accepting purchase price as market price - but they do in small rural markets, and if you're looking at Wabasca of all places I guarantee you can find much better places to buy that CMHC will accept the purchase price as market price. Essentially you are arbitraging federal policies when you use CMHC insurance on MF in small towns, you are allowing the big city REITS who use it for the reasons outlined below, to create or subsidize value the small investor can take advantage of.
The leverage and removal of refinance risk against a lower value- which IS your real #1 risk in real estate, despite it getting so little airtime or awareness in REIN and real estate investing media and education generally - is why CMHC is great. Go find the places they have insured 85 % mortgages ie accepted purchase price as market price - buy one or two being sure they generate 10 % cash on cash, which they probably do to get that acceptance by CMHC, make sure the market you are buying in has government institutions to manage your risk - and Voila! as the French would say, Freedom. And I mean freedom. Manager in place, no refinance risk, ample cashflow to attract investors. Then go find another non-correlated market somewhere else to buy another one to manage/diversify your risk and that's it, done for life if you want. Go live in Tahiti, or the south of France, or a condo in the heart of UBC :)
Its the same amount of time to find a duplex as a 20 plex, all the same professionals, a little more expensive of course, but its the same principles, its just the economics and scale are so much more efficient. The main hurdle is fear, which is most people's major problem in life - I was a paramedic, after going into 00's of people's lives and houses on the most intimate level possible, you learn a few things about how we think and the thinking that produces 95 % of outcomes. The real magic is finding those small markets that have a great risk profile and still meet the CMHC 85 % underwriting for purchase price in todays much higher value world. I'm developing an on-line training course on how to do it accompanied by an analysis of the places in Canada you still see 85 % CMHC financings, this information is so valuable. This is hedge fund level info.
MF is an awesome conservative investing niche - its why Grant Cardone is in it - linked with great leverage. Find the spots the leverage goes furthest in a risk managed way. Then look for the buildings in those areas and approach all the owners. Tell the people in your circles what you're doing and why, and ask who's interested in participating. Sooner or later, and probably sooner, you'll set yourself free.... and then everyone will tell you you were lucky :)
So insured 85% mortgages, does that mean you put 15% down or how does that work? What are the impacts of CMHC accepting purchase price as market, why does it matter? How do you search for deals and how many deals does it take to find the right one? 10% cash on cash is good!
 

Thomas Beyer

Senior Forum Member
REIN Member
We got lucky and made out like bandits

Ok for local operator with local knowledge, access to local trades and ability to hold 10+ years or forever


Sent from my iPhone using myREINspace
 

jay1214u

New Forum Member
Registered
We got lucky and made out like bandits

Ok for local operator with local knowledge, access to local trades and ability to hold 10+ years or forever


Sent from my iPhone using myREINspace
Thanks for the insight. Is there a thread for lessons learned or failures. Do you have a .pdf version of your book which a person can download for a price instead of buying from Amazon.
 

Thomas Beyer

Senior Forum Member
REIN Member
Thanks for the insight. Is there a thread for lessons learned or failures. Do you have a .pdf version of your book which a person can download for a price instead of buying from Amazon.

Yes it’s also on iTunes as 3 e-books ( search on Beyer 80 lessons ) .. and kobo


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com
 

TangoWhiskey

Frequent Forum Member
Registered
You've been very good at your market timing that's for sure. How long did the sale take? That's quite a long process I would think to find someone willing to buy in Fox Creek. Was the Ontario investor experienced? Did you learn much about them?
 

Martin1968

Frequent Forum Member
Registered
You've been very good at your market timing that's for sure. How long did the sale take? That's quite a long process I would think to find someone willing to buy in Fox Creek. Was the Ontario investor experienced? Did you learn much about them?

For sure he learned the Ontario investor had Big Hairy Balls.
 
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