$1,000,000 BRRRR with Multi-Family Real Estate Investing in Hamilton Ontario with Jose Jafferji
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- Опубліковано 19 сер 2020
- Jose Jafferji shares the details of his most recent Multi-Family Real Estate investment in Hamilton, ON. Jose shares some of the financing details, the downpayment required as well as other valuable tips for any beginner investor looking into Multi-family Investing. This Apartment Building has 14 Units and his plan is to do a BRRRR and pull out close to $1,000,000 in equity after 2-3 years.
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This week we have a treat, this is the first Multi-family investment we have shown on this channel. Jose Jafferji started his investment journey with Duplex Conversions (basically buying a home and adding a Legal Basement Apartment). He did a significant number of these in Hamilton and Oshawa until recently he took a big plunge and purchased this $2,300,000 14-Unit Apartment Building in Hamilton, ON.
Some valuable takeaways that Jose shares is that this building actually does NOThave positive cashflow with its current rents and the financing he has in place. Since these type of buildings are sold on a per unit basis, the Net Operating Income on the purchase was close to $80,000 annually which is about a 3.5% Capitalization Rate based on his purchase price. Since the NOI was so low relative to the purchase price he was forced to go with a B-Lender who required him to put up a 35% downpayment of $805,000 as well as charged him a higher interest rate around 5.5%.
In the first 2-3 years of owning this building his plan is to negotiate lease buyouts with each of the existing tenants who are currently paying close to 50% of the market rent and then invest close to $25,000 in Renovations to upgrade each Unit so that it resembles the quality of a Condo with in-suite laundry as well as New Flooring, Kitchen and Bathrooms.
As a result he highly recommends for most beginner investors NOT to try to pull this off unless you really have deep pockets, he will be in a negative cashflow position on this property for close to 3 years while investing close to $300,000 in renovations into the building as the units turnover.
The end goal however is similar to our typical Duplex Conversions where once he's done all the renovations he believes that he will be able to get the property reappraised at $3,300,000+ and secure CMHC Insured financing at a higher Loan to Value to be able to pull out his entire renovation budget, his carrying costs, and a significant portion of his downpayment. Also once the Apartment Building is stabilized with Market Rents and a very Low Interest Rate Mortgage due to the CMHC Insurance currently available at under 2% it will then have a significant positive monthly cashflow.
This is definitely not an investment most investors should start with however for those of you who have gone through purchasing a few duplex conversion projects and are looking to level up your investing this maybe the next step to consider. It will definitely require you to invest a significant amount of capital for the downpayment, closing costs, legal fees, appraisal fees, mortgage loan fees, and the renovation costs are now significantly on a larger scale.
When done right however one of these type of deals can alter your financial future dramatically by creating a significant amount of equity and cashflow once the building has been stabilized.
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GREAT STUFF! Congrats Looking forward to Seeing Part 2!!!!
I'm glad you enjoyed it! I'm planning on filming more videos like this with Jose on some of his future projects as well so stay tuned 👍
i love it, keep the videos coming!!
Good stuff! Interesting to see how a bigger property is run👍 great video 👌🔥
Amazing video, cant wait for part two
Thanks! Part 2 is coming out next week 🙂
Hello Koukun, I have a cottage north of Barrie. It's 2 stories, 3 bedrooms, 1300 sq.ft., built in the mid 90s. How much would it cost to winterize it?
As someone that is interested into getting into bigger buildings in the future, this was a great video. Keep em coming!
I'm glad you enjoyed it!
Great job on renovicting fixed income (mostly senior) tenants during a pandemic, forcing them to pay overblown rent elsewhere while you line your pockets further.
I'd like to think you'd honour their previous rent once these renovations are finished but I wouldn't hold my breath.
Thank you for sharing your perspective.
Renovictions are illegal, if a tenant is required to leave as a result of a renovation needed to maintain the habitability of the apartment they should be given the first right of refusal once the renovation is completed at the same rent they were paying previously.
As a landlord, we are required to put an enormous amount of money upfront as a downpayment, go through a ridiculous amount of hoops to get a loan which we then need to pay back with interest. If a tenant is paying close to 50% of the market rent theres close to 0% chance of the owner properly maintaining the building well simply because they don't have enough money after paying the fixed expenses.
Regarding getting tenants to move out this is done by mutual agreement and typically the landlord is giving anywhere from 1 months rent up to as high as $20,000 in order to get the tenants consent to leave. If a tenant chooses not to leave there is next to nothing a landlord can do short of moving in themselves, and the fine for lying about that can be as high as $100,000.
If you watch any of the other videos I've made you can see that the majority of my clients are creating legal basement apartments. This is probably the only significant addition of affordable rental units that we are seeing in Ontario.
If you are looking for someone to blame for rents going sky-high as tough as it is to consider... one of the major culprit is rent controls. Had we not had rent controls these past 30 years we would have seen alot more purpose built apartments being built instead of condos. The supply of rentals would have caused rents to increase at a much more reasonable level than what we have seen recently.
@@KoukunREI ultimately this apartment is being viewed as a financial asset for profit making. The fact that tenants are faced with these overwhelmingly stressful decisions during a pandemic is disheartening. It's a shame that profits completely take over human emotion. I genuinely hope this doesnt happen to one of your loved ones.... it's a heartwrenching situation to be in.
I'm guessing that you had someone close to you experience this, if so I'm sorry to hear that!
You are right about the timing being unfortunate given the pandemic, however when I was growing up my family experienced living in one of these buildings where likely most of the tenants were not paying the market rate and we watched everything in the building deteriorate with the landlord not being willing to reinvest into the building. Without investors being willing to do this kind of work more and more of these buildings will be neglected and continue to deteriorate. Look at some of the stories from Toronto Public Housing, they are government funded but even they can't maintain their properties well receiving only what their tenants can afford to pay, how can a private landlord with much fewer resources be expected to do better?
Its a tough situation all around, to expect a landlord to reinvest significant amounts into a property and continue to receive anywhere close to 50% of the market rent is a tough idea to convince anyone of.
This looks like 500 Mohawk on hamilton mountains
What's your plan for turning over tenets?
I believe he's going to do cash for keys, we will be following up with Jose in a couple months to get an update 👍
having a similar issue, offering first and last at their new location. But if they say no can a construction issue close the unit and lead to tenet removal with 3 months notice? Good luck great purchase..
@@neilh6178 yes you can evict a tenant based on a renovation thats required to keep the unit habitable (not cosmetic updates), however they have the right to move back in after the renovations at the same rent.
I would personally lean towards offering the cash for keys and increase the amount if they don't agree. It may become quite expensive but usually the value of the building goes up significantly when you increase the rents so you will make it back on your refinance or sale.
Thank you for that. Saved me a lot of trouble right there in research!
Why does Jose look so sad lol 😂