Real Estate Investing Specialist Realtor Specializing ONLY with Investors Member of Re/Max s 100% Club in 2016 Author of 3 Books Mat Piche - Real Estate Investment Authority/Author Ph: (519) 497-5230 Email: homes@kwpropertypro.com web:www.kwpropertypro.co Professional Carpenter and Contractor Self Employed since 2010 Investing in Real Estate since the age of 22
Who Am I? Investing in real estate is a great way to build wealth, but I ll be honest, it s not my passion. Living a life of freedom on my terms and eating juicy tropical fruits while travelling to some of the most beautiful places on earth is my real passion. Real estate investing simply allows me to truly LIVE that dream - and I am thankful! Coming from a long line of carpenters, I ve always had an interest in building and renovating homes. Combine this with my passion for freedom and an abundant life, and you have one very motivated investor! Nearing the end of my apprenticeship I began to question my future as a company-employed carpenter. While I loved the work, I found myself caught up in the never-ending rat-race they call life. I knew I had to take control of my life and that s when I became truly interested in real estate investing. I bought my first property on my 22nd birthday - the day I began taking control of my financial future. That same day, I also quit my job and started my own renovation company specializing with investors. While I enjoyed being self employed, I quickly realized that back breaking labour was not part of the ideal lifestyle I envisioned for myself. As I continued to meet investors at networking events, I noticed that their complaints were all the same - I can t find a realtor who KNOWS the business of investing and the analysis that is required. With this in mind, I began to wonder about a future selling real estate rather than swinging a hammer. After much thought, I obtained my real estate license and quickly began specializing with investors in Kitchener-Waterloo and Cambridge. What separates me from other agents is that I m able to achieve yearly awards like Re/Max s 100% Club award all while working strictly with investors. My background has given me a deep appreciation for and understanding of the real estate investing market. This knowledge has translated into helping my partners invest in real estate with my one-on-one Real Estate Investing Apprenticeship Program. This programs allows me to be a part of my partners lives as they achieve more and more freedom. The transformations that happen are amazing! My life is a testament to how investing in real estate can allow you to live the life you re truly passionate about.
Table Of Contents My Mission.. 4 Business Models: The 3 Ways We Make Money.. 5 My Flipping Strategy 6 My Single Family Buy and Hold Strategy 7 My Multi Family Buy And Hold Strategy 9 Past And Current Single Family Rentals..10 Past Flip Projects..23 What Do I Bring To The Partnership?..28 Conclusion...31
My Mission: To build a fruitful real estate business that gives my partners and I an abundant lifestyle - more than just finances. Freedom is what I crave! Real estate investing has completely transformed my life and has given me a lot of freedom. Thanks to my background in construction, I know how to create beautiful homes that can be flipped on the open market or rented out to quality tenants while they pay down the mortgage every month. I have proven that my strategy works over and over again with hundreds of clients and partners. If you re looking to generate wealth from real estate, my experience will guide you. Nothing is more important to me than making sure that we BOTH make money! 4
My Business Models: The 3 Ways We Make Money Together! 5
#1 Flips We will be purchasing properties at 80% (or less) of the After Repaired Value (ARV) minus renovation costs, property taxes and vacancy insurance expenses for six months - which is the timeline from start to sale. My partners will be required to buy the property and pay for all expenses/renovations with CASH - no mortgages. I will be responsible for managing the entire project. We will then sell the home to an end buyer on the open market. Because I am a registered realtor, I will NOT charge a commission to sell our flips. After all, we re partners! However, we will budget 2% + HST for the buyer realtor s commission plus lawyer fees and land transfer tax. Profits will be split 50/50 after you ve received your initial investment. Similar to the flipping strategy outlined above, we will purchase properties at 80-90% (or less) of the ARV minus renovation costs. For both strategies 1 and 2, these properties will typically be purchased OFF MARKET from private and motivated sellers generated from my marketing expertise. With that said, finding properties on the MLS for this valuation isn t impossible, just less common. Here is a basic but real life example of a flippable property in KWC: Max purchase price = $336,000 (ARV is $470,000 x.80 - Renos/holding costs) Land transfer tax = $3515 Lawyer fees = $1500 Renovations = $30,000 Property tax, insurance and utility costs = $10,000 2% realtor fees + HST = $10,622 Lawyer fees to sell = $1,000 Total All In Budget = $392,637 Selling Price (ARV) = $470,000 Total Net Profit = $77,363 - $38,681.50 Each 6
#2 Single Family Buy & Hold If a seller won t agree to sell us their home for 80% of the ARV or less, the flipping strategy above can be VERY tight! However, we don t want to completely walk away from a private and motivated seller, so this is where the buy and hold strategy comes into play. Because we will be holding the property for at least five years, we can afford to pay a little more than the typical flip deal. For this strategy, my partners are required to provide the funds and obtain financing. I will manage the project for the entire duration of the venture. Holding real estate as a rental property is where REAL wealth is created. Flipping is great for those looking for quick money but as you ll see in the numbers below, the real money is in being a strategic and sophisticated long term investor. Let s assume, for example, that we can only get the seller to agree to 90% of the ARV (minus renovation expenses) on a semi-detached home - a conservative but likely scenario. In this strategy, we will be holding the property for 5 years. Example: Max purchase price = $294,000 (ARV is $360,000 X 0.90 - Renos = $294,000) 20% down payment = $58,800 Lawyer fees = $1500 Land transfer tax = $2885 Renovations = $30,000 2 months holding costs while renovating = $2,542.88 (mortgage, property tax, insurance, and utilities) Sleep at night fund = $1650 (one months rent) All in Costs = $97,377.88 The property is now renovated and worth $360,000 (ARV). Subtract $38,577.88 in expenses above (not including the 20% down payment) from the ARV and purchase price, and that leaves us with = $27,422.12 in equity on DAY ONE! 7
Even though it s not really enough to flip, it s a good profit for two months of renovating! Let s take a look at the monthly breakdown and keep going: Monthly Breakdown Mortgage Payment: $966.44 (20% down, 2.8%, 30yrs) Property Taxes: $240 Insurance: $65 Property Manager: $82.50 5% Maintenance: $82.50 Total Expenses: $1,436.44 Monthly Rent: $1,650 Total Cash Flow: $213.56 (NOT including your 5% maintenance fund (82.50) which is still real cash flow. Total cash flow is actually $296.06 a month even WITH a property manager) Time To Sell 5 Years Later: Cash Flow over the 5 years: 296.06 x 12 months x 5 years = $17,763.60 Mortgage pay down in 5 years = $26,862.67 5 years of appreciation using a conservative 5% appreciation rate per year = $99,461.36 Property is now worth: $459,461.36 Total Gross Profit in 5 years = $144,087.67 2% realtor fees + HST = $10,396 Lawyer fees to sell = $1,000 Repair Costs Before Selling = $7,000 (paint, misc small repairs) Total Net Profit On Closing = $125,691.67 - $62,845.35 Each 8
#3 Multi Family (6 Units And Up) We will be buying multi family buildings between a 5% to 6%+ cap rate with the intention of raising the Net Operating Income as high as possible during our five year partnership. This will all be handled by me. I will be responsible for managing the property managers and the balance sheet ensuring that we have an efficient and profitable building. My partners are required to provide all of the funds while both of us go on title and the mortgage. We will be focusing on fixing up the units as tenants move out, raising the rents to market value while attracting quality tenants. We will also be looking at ways to minimize expenses, which in turn will also increase the Net Operating Income. Multi family investing generally requires more initial capital than single family but there is BIG money to be made when executed correctly. While this niche is generally more of an advanced investing strategy, the fundamentals I ll be using have been proven over and over again. Below is an example of a building we would be buying together and the strategy that will be used. 8-Plex for $1,000,000 Current gross operating income (rents and laundry) - $85,000 /yr Expenses - $35,000 /yr Current net operating income - $50,000 /yr Current Cap Rate - 5% (Current building value = $1,000,000) We will focus on increasing EACH unit by $150 a month in 5 years($14,400 per year) Projected gross operating income 5 years later - $99,400 Projected future expenses - $40,000 Projected building value AGAIN using the same 5% cap rate and NEW Noi = $1,288,000 Projected mortgage pay down in 5 years = $101,360 Total Projected Profit = $389,360 (NOT including cash flow for the 5 whole years, but let s be conservative and assume that ALL of the cash flow was used up for repairs and selling costs. 9
Current And Past Deals 10
#1 Single Family Rental: Monteagle Cr, Kitchener A partner and I bought this semi-detached in November 2014 for $185,000. It needed a TON of cosmetic work, but it s since been on of the best and easiest rental properties in my portfolio. Our tenant has been there since the very beginning and has been great! See the before and after renovation videos below - and take a look at the financials on the next page. We bought, renovated, re-financed and rented it out for top rent (in 2015)! http://www.kwpropertypro.com/kitchener-waterloo-flip-episode-1/ 11
#1 Financials Purchase Price: $185,000 Renovations: $35,000 2015 Appraised/Re-finance Value: $265,000 2017 Value: $400,000 2017 Mortgage Principle = $196,631 Total Equity So Far = $203,369 Monthly Financial Breakdown Mortgage Payment: $794.24 (2.1%, 30 yr/amortization based on $212,500) Taxes: $195.41 Insurance: $60 Property Manager: $70 5% Maintenance: $70 Total Monthly Expenses: $1189.65 Current Rent: $1400 (should be $1600 in 2017) Current Monthly Cash Flow: $210.35 including the 5% maintenance. Actual cash flow is $280.35 even WITH a property manager! 12
#2 Single Family Rental: Breckenridge Dr, Kitchener A partner and I bought this bank owned semi-detached in March 2015 for $166,000. It was one of the grossest and biggest jobs I ve done so far. It needed a TON of cosmetic work, but it s been worth it! See the before and after renovation videos below - and take a look at the financials on the next page. We bought, renovated, re-financed and rented it out for top rent (in 2015)! http://www.kwpropertypro.com/kitchener-waterloo-flip-episode-2/ 13
#2 Financials Purchase Price: $166,000 Renovations: $27,000 2015 Appraised/Re-finance Value: $240,000 2017 Value: $350,000 2017 Mortgage Principle = $184,567 Total Equity So Far = $165,433 Monthly Financial Breakdown Mortgage Payment: $719.31 (2.1%, 30 yr/amortization based on $192,000) Taxes: $178.91 Insurance: $60 Property Manager: $77.50 5% Maintenance: $77.50 Total Monthly Expenses: $1113.22 Current Rent: $1550 Current Monthly Cash Flow: $436.78 including the 5% maintenance. Actual cash flow is $514.28 even WITH a property manager! 14
#3 Single Family Rental: Parkview Cr, Cambridge A partner and I bought this townhouse in October 2015. It was VERY outdated, had electric baseboards and needed a total cosmetic facelift. My favourite! We bought, renovated, re-financed and rented it out for top rent! Episode 4 - https://www.youtube.com/watch? v=vdrneyimtb8&list=plansnxtwouyh8bn-hk84h6jyatehbjbxp 15
#3 Financials Purchase Price: $165,000 Renovations: $30,000 2015 Appraised/Re-finance Value: $208,000 2017 Value: $280,000 2017 Mortgage Principle = $162,267 Total Equity So Far = $113,600 Monthly Financial Breakdown Mortgage Payment: $652.09 (2.45%, 30 yr/amortization based on $164,400) Taxes: $163.08 Insurance: $60 Property Manager: $65.70 5% Maintenance: $65.70 Total Monthly Expenses: $1006.57 Current Rent: $1314 Current Monthly Cash Flow: $307.43 including the 5% maintenance. Actual cash flow is $373.13 even WITH a property manager! 16
#4 Single Family Rental: Green Valley Dr, Kitchener This was the FIRST rental property that I ever bought in November 2010 and I still have it today. It s been a super easy rental that s made me lots of money! Episode 3 - https://www.youtube.com/watch? v=vdrneyimtb8&list=plansnxtwouyh8bn-hk84h6jyatehbjbxp 17
#4 Financials Purchase Price: $135,900 Renovations: $17,000 (spread out over 6.5 years) 2017 Value: $210,000 2017 Mortgage Principle = $118,940 Total Equity So Far = $91,060 Monthly Financial Breakdown Mortgage Payment: $495.49 (2.69%, 25 yr/amortization based on $123,171) Taxes: $137.51 Insurance: $30 Condo Fees: $280 Property Manager: 62.50 5% Maintenance: $62.50 Total Monthly Expenses: $1068.04 Current Rent: $1250 Current Monthly Cash Flow: $181.96 including the 5% maintenance. Actual cash flow is $244.46 even WITH a property manager! 18
#5 Single Family Rental: Green Valley Dr, Kitchener This was the second property that I bought (6 months after I bought the Green Valley above) as our first primary residence. Rachel and I lived in this property for about 5 years before buying our next primary residence in 2016. It is now rented out to a great family providing us boring cash flow every month! 19
#5 Financials Purchase Price: $168,200 Renovations: $20,000 2017 Value: $250,000 2017 Mortgage Principle = $151,442 Total Equity So Far = $98,558 Monthly Financial Breakdown Mortgage Payment: $611.74 (2.6%, 30 yr/amortization based on $162,000) Taxes: $148.08 Insurance: $35 Condo Fees: 280 Property Manager: $70 5% Maintenance: $70 Total Monthly Expenses: $1214.82 Current Rent: $1400 Current Monthly Cash Flow: $185.18 including the 5% maintenance. Actual cash flow is $255.18 even WITH a property manager! 20
#6 Single Family Rental: Green Valley Dr, Kitchener I bought this property with a partner in March 2016 for $170,000. We bought this for under market value - a great deal! It was also rented to 5 students which we continued to rent to until Aug 31st (that was fun!). On September 1st we gutted the whole house and renovated top to bottom for only $20,000. It was the tightest budget I ve ever pulled off - and it was worth it! It s now rented to a great family! 21
#6 Financials Purchase Price: $170,000 Renovations: $20,000 2017 Value: $265,000 2017 Mortgage Principle = $127,448 Total Equity So Far = $137,552 Monthly Financial Breakdown Mortgage Payment: $561.23 (2.3%, 30 yr/amortization based on $136,000) Taxes: $149.05 Insurance: $35 Condo Fees: 280 Property Manager: $67.50 5% Maintenance: $67.50 Total Monthly Expenses: $1160.28 Current Rent: $1350 Current Monthly Cash Flow: $189.72 including the 5% maintenance. Actual cash flow is $257.22 even WITH a property manager! 22
#7 Single Family Rental: Langlaw Dr, Cambridge I bought this property with a partner in July 2017. We bought at the perfect time - just AFTER the boom ended and sellers were getting desperate to sell their properties that were sitting on the market. We go this one WAY under valued. It;s now the highest end rental property that I currently have! Episode 8 - https://www.youtube.com/watch?v=uedeaf3s0gm 23
#7 Financials Purchase Price: $319,900 Renovations: $35,000 2017 Value: $450,000 2017 Mortgage Principle = $251,000 Total Equity So Far = $199,000 Monthly Financial Breakdown Mortgage Payment: $988.56 Taxes: $203 Insurance: $108.67 Property Manager: $90 5% Maintenance: $90 Total Monthly Expenses: $1480.23 Current Rent: $1800 Current Monthly Cash Flow: $319.77 including the 5% maintenance. Actual cash flow is $409.77 even WITH a property manager! 24
#8 Single Family Rental: Elgin St N, Cambridge I bought this property with a partner in August of 2017. It was a total re-do, which is my favourite type of property! I do these semi detached properties over and over with partners because they re easy and they work! Check out the before and after walk through below Episode 9 - https://www.youtube.com/watch?v=k6hob53o1xy 25
#8 Financials Purchase Price: $185,000 Renovations: $30,000 2017 Value: $340,000 2017 Mortgage Principle = $142,000 Total Equity So Far = $198,000 Monthly Financial Breakdown Mortgage Payment: $885.55 Taxes: $183 Insurance: $65 Property Manager: $82.50 5% Maintenance: $82.50 Total Monthly Expenses: $1298.55 Current Rent: $1650 Current Monthly Cash Flow: $351.45 including the 5% maintenance. Actual cash flow is $433.95 even WITH a property manager! 26
#9 Single Family Rental: Ninth Ave, Kitchener I bought this property in June of 2017 and it was a MASSIVE renovation. The biggest I ve done yet! We took a single family home in need of attention and converted it into a legal Duplex. You definitely want to check out the before and after on this one! Episode 7 - https://www.youtube.com/watch?v=_7- DBD0Yl1Q&feature=youtu.be 27
#9 Financials Purchase Price: $322,000 Renovations: $110,000 2017 Value: $519,900 2017 Mortgage Principle = $400,000 on refinance Total Equity So Far = $120,000 Monthly Financial Breakdown Mortgage Payment: $1,686.39 Taxes: $185 Insurance: $120 Utilities: $150 (Gas and Water) Property Manager: $120 5% Maintenance: $120 Total Monthly Expenses: $2,381.39 Current Rent: $2,600 Current Monthly Cash Flow: $218.61 including the 5% maintenance. Actual cash flow is $338.61 even WITH a property manager! 28
Past Flips 29
#1 Flip: East Ave, Kitchener I bought this one with a partner in April 2016 for $222,000 from a private and motivated seller. The house was COMPLETELY trashed and left vacant for 3 years - so you can imagine the amount of weather damage from the cold winters! This one was a total gut, but was VERY profitable for us! See the amazing before and after videos here - http://www.kwpropertypro.com/kitchener-waterlooflip-episode-5/ 30
#1 Financials Purchase Price: $222,000 Land Transfer: $1945 Buying Lawyer Fees: $1200 Renovations And Holding Costs: $90,000 Realtor Commissions: $9492 (Only 2% + HST - I List For FREE!) Selling Lawyers Fees: $1,000 Total Expenses: $103,637 + Purchase Price ($222,000) = $325,637 Sale Price: $420,000 Total Net Profit: $94,363 This property ended up selling and closing in early October, 2016. That s a 6 month TOTAL project from start to close - which is right on the desired timeline! 31
My Primary Residence/Flip Rachel and I bought our current primary residence in late August 2016. We had no intention of renovating for profit but this property has ended up making us the MOST money of any deal I ve done so far. We simply wanted to renovate our home from top to bottom for our own enjoyment. We ve worked so hard on our real estate business and making our partners wealthy, it was time for us to have a nice home too! But thanks to the boom of 2016/2017 plus somehow buying this property undervalued on MLS, we have a mighty profit. But we have no intention of selling. This home is beautiful and is all ours! 32
Primary Residence Financials Purchase Price: $329,900 Land Transfer: $3423 Buying Lawyer Fees: $1200 Down Payment: $16,495 Renovations And Holding Costs: $35,000 All In For: $364,900 2017 Market Value: $550,000 Total Equity: $185,100 (NOT Including Principle Pay Down) Not a bad profit for 1 month worth of renovations and letting the real estate market do it s thing, right? Yes, we got a little lucky with the KWC boom, but when you buy real estate in key areas and let the fundamentals work, you often get lucky don t you? I will point out that the reason the renovation budget was so low is because we did ALL of the renovations myself. That s the benefit of being a carpenter but that month was hell! I was working 12 hours days every single day for the month of September. But now it s done and we love it! 33
What Do I Bring To The Partnership? What Are Our Roles? What I Require Of My Partners (YOU): - Put up 100% of the funds to buy and renovate the property on day one - On title to the property - Qualifies for 100% of the mortgage (Except for Multi Family, we both do) - Has a 50% interest in the property and profits - Has a 100% interest in the expenses (repairs and maintenance - but unlikely since we renovate top to bottom right at the beginning and put all cash flow back into the properties account throughout) - Be a part of EVERYTHING that I do and become a coaching client for as long as we're partners. Bring ALL of your real estate questions to me, not just about our specific property! As you can see, my partners role is very self explanatory by the list above. I am the active partner and the real estate expert in our venture. 34
My Responsibilities - Put up 0% of the funds to buy the property - NOT on title to the property (Unless Multi Family or Flip) - NOT on the mortgage (Unless Multi Family or Flip) - Have 50% interest in the property and profits - Set up mutual bank account for income and expenses - Access and tap into my real estate team of professionals - Local and neighbourhood expert - Up to date local market information and data - Screen and filter potential investment properties with my expert knowledge (because I m already a registered realtor specializing in investment properties) - Calculate for cash flow properly and conservatively leaving no room for novice errors - Write offers - Negotiate with sellers to get the best deal on both price and terms - Help my partner secure financing with my investment savvy mortgage brokers - Perform home inspection - Ensure that all proper forms are completed and steps are taken for our protection I.e. Mortgage broker, lawyer, etc. - Finalize the offer with lawyers - Pick up keys from lawyer upon closing - Work closely and instruct my contractors using my expert renovation knowledge to attract the best tenants - Hire my property managers to take over the day to day functions 35
My Responsibilities - Use my marketing expertise to attract QUALITY tenants - Choosing the right tenant(s) once applications have been submitted - Constantly managing the property managers to stay in the loop and on top of things - Manage tenant issues or complaints - In charge of dealing with and hiring contractors when maintenance is required - Overseeing the bank account to make sure rent is deposited monthly - Sending my partner financial updates every quarter - Communicate with my partner every 3 months (minimum) - Keep the books in order - Work with my expert accountant to protect both of us during tax time - Negotiate with buyers to maximize profits at point of sale - I DO NOT CHARGE COMMISSIONS WHEN WE SELL OUR PROPERTY!! (MORE profit for us!) - And MUCH more.. The Real Estate Investing Apprenticeship Program is designed to teach you HOW to invest in real estate with an expert guiding you oneon-one. To ensure your success, I will NOT receive a profit until after we sell, once you receive your initial investment back in full and ONLY if there is a profit left over to be had. So I m putting my money where my mouth is! If the venture wasn t successful, I don t get a penny! How many mutual funds, stocks or other investments have a policy like this? 36
Conclusion This partnership is a learning opportunity that will save you time and money while getting you closer to your dream life efficiently. The biggest mistake people make is thinking that they can do it all on their own. Learning as you go can be very costly and unnecessary. I will be there every step of the way to hold your hand and teach you the proven strategies that I use EVERY single day for myself, my partners and my clients. I live and breath real estate, so let me do the heavy lifting! 37