Hello Investors,
This is a fun post but I will mention what I learned about multi-family investing near the end so here goes!
This past weekend, I took some time off to visit my friend Mark’s new house and new home gym in Toronto where I trained with some serious athletes. Clint benches a measley 685lbs and the petite lady in the below video is Trish. She is my friend and national powerlifting record holder in both the benchpress and squat. As the saying goes, you can’t fly with the eagles if you hang with the turkies and luckily, I was the closest to being a turkey so no where to go but up 🙂
Here’s the video of us working out and what is an awesome home gym. If you want to see my poor excuse for what is working out go to: 1:50, 2:18, and 4:36.
httpv://www.youtube.com/watch?v=sN8c8RFaKT8
After pushing the prowler I thought the lactic acid build up in my legs would never go away and I just sat and drank water for the next hour.
So what about real estate investing? OK, OK – Clint who I mentioned earlier, we got chatting and the topic of real estate came up so I asked him what he does. Turns out, Clint is a commercial real estate agent working for a major outfit that represents a few of the major players such as the Ontario Teacher’s Pension Fund who buy only large multi-families. Clint goes on to tell me that several clients are looking to divest their properties because they are aging, 40-70 year range and the capital improvement costs are throwing off their cap rates (net operating income / price of the property). Such is life in Ontario where we have rent controls.
Well my clients don’t buy large multis, they like the smaller ones so I asked about that. Clint goes on to tell me they have moved properties under 18 units that are being bought by “mom and pop” or people willing to put in sweat equity in order to make the financials work. That might go to explain why so often market price for multis do not justify the cap rates when you include the cost of a property manager….
What’s my takeaway? Other than make every conversation about real estate, as an investor I will only make purchases that make financial sense so when writing offers on multis, one consideration should be to use your cap rate to determine the price of the property. If the deal can’t be done at your price then it isn’t a deal and it won’t move you closer to your goals.
Till next time, Happy Investing Everyone!!
Erwin
