Multi-Family Deal Lab Episode 012
The Multi-Family Deal Lab “Travels” North this week as we learn about Canadian Investors and the Hazards and Pitfalls to avoid when investing across the Border!
Speaker 1: Stay tuned for a special edition of the multifamily deal and podcast. Welcome to the multifamily deal lab podcast, where we dissect a deal before your eyes and ears. So you can discover the strategies and tactics that got each deal to the finish line strategies and tactics that you can put in your own toolbox to get you to the closing table from sourcing the deal, raising due diligence to the property takeover, multifamily deal lab shows how you too can get the deal done. And now here’s your host. David Lindahl, everybody welcome to multi-family deal lab. I’m your host. Dave Lindahl
Speaker 2: With me is Dario Lorenzo, and he has been a student for last couple of years, and he is from Vancouver, British Columbia, and he is not only investing in his own backyard and making a bunch of money, but he’s also investing in the United States as well and making a bunch of money. So I thought I’d bring him on the line, especially for my Canadian students. So he could take us step by step to the process of what he did to get started. What obstacles you overcame, both investigator’s own backyard and also investing in markets in the United States and emerging markets, and then the obstacles that he saw and the obstacles that he overcame as well. Dario welcome. How’s it going I’m doing great. Thanks for having me. My pleasure. we were just talking before we started and it turns out that we’re both triathletes, whereas Darrio completed his first triathlon.
Speaker 2: when did you complete that first Right offline. The first one that I didn’t finish in 2007, 2007. And then you finished one and what year was out 2008, 2008. Yeah. And I remember when we were, when we were at that Phoenix bootcamp last year, and you were telling me that you run long distances on a regular basis and you were telling me your times as well. And, which was pretty impressive because, you know, I am not a fast runner of the three disciplines. The running is my, my weakest. So that’s pretty good. So kudos to you. So anyway, so we have you on today to talk about number one, tell everybody who you are, where you’re from, I’m from Vancouver, British Columbia, and, I’m currently in Phoenix. And I spent my time in Vancouver, Phoenix in Cabo, San Lucas, Mexico. Cause that’s your favorite place to just hang out and have some fun
Speaker 2: Yeah, it is. Oh, that’s pretty cool. What do you do down there Do you like to serve fish girl Hang out by the beach and work on my band. All right. So I’ll tell everybody how you get started. First of all, how you got started in Canada and then your thoughts and going to the U S market and how you actually did that as well, years ago. I, well actually it’s been awhile since, started studying and, and I, I kind of got caught up in the same props that everybody does it. I, I started learning about investing in real estate and I went to bootcamp after boot camp and I was, you know, always wanting to learn more and learn more and learn more connect with some magic pill
Speaker 3: That if I keep learning, learning, learning, eventually I will somehow magically buy real estate. So after dealing
Speaker 2: With drop on your lap. Yeah.
Speaker 3: So after taking a bunch of bootcamps, I realized that I already had the knowledge. I just had to put it into action. And then what I started looking at is I started taking small actions, small steps every day, and eventually I bought my first property. And then I bought my second property. I remember having a mentor and mentor was instrumental in getting me to start buying apartment building is I think a lot of single family homes. And he asked me a simple question. So what’s preventing you from buying an apartment building. And I kind of shrugged at him and I was a little confused by the question. I said, well, I guess money. I said, well, what if money’s not an issue And then I said, well, I guess nothing. And then from that conversation within about three to four months, I bought my first apartment building. And then when I looked at trying to buy real estate in the us,
Speaker 2: I want to hold you up there. I want to reign you in a little bit on you talk about some of those small steps. You took those small victories that you got, so that you can progressively get to your first deal. So what were those small things that you were doing to get there
Speaker 3: Good words. I started going out and I started looking at real estate. I basically set a ball and it’s what I said to myself was that I was going to float and I was going to look at a lot of real estate and I was going to write a lot of offers, whether they were accepted or where they were rejected, it didn’t matter. And what I found was that within a very short period of time, I was in tune with what was going on in the real estate market, in my local market. I knew where things were selling for. So I knew I could put it without delay what the deal was, what the deal wasn’t. I, was looking at a lot of convos and, by writing offers, some of them got accepted and I would read the strata minutes, which here’s the HOA minutes.
Speaker 3: I got to learn a lot about what was going on in different buildings. So when a good property came up, I quickly analyze it to see if it was a good price. And then, because I was familiar with a lot of the properties, I was able to buy buildings, buying those buildings and stay away from the bad ones. And that probably took me probably three months of constantly going out, talking to dozens of real estate agents. I can tell you company has both, when I first got started, I didn’t have a lot of money and the no money down strategy was out there. So, you know, my first conversation with the realtor went like, Hey, I want to buy a property. I don’t have any money and show them stuff. And so my conversation ended right there. And then as I, the more I spoke to real estate agents, the more I became familiar with a conversational flow that allowed me to manage and get to the point where eventually I did buy real estate with no money down with the help of a couple of different real estate agents, but it took some massaging, the relationship and sort of getting chill.
Speaker 3: I understand that I knew what I was doing.
Speaker 2: Oh, you getting into these conversations with these brokers, where were you finding
Speaker 3: Local newspapers I would go to, I’d be driving by see a for sale sign or an open house. And I’d go in there. You know, one of the first houses that I bought with no money down, was actually, I met the real estate agent or the broker. I met him at the open house at an open house. And from that open house, it was probably three months down the road, but he actually pulled me up when so it took some time to develop the relationship. Most of my success today is, based on building really good relationships with the pro for a lot of the deals that I get paid, are off the market field. and they come from broker relationship. Would you agree,
Speaker 2: We though that probably not a good idea to tell a broker that you’re looking for no money down deals,
Speaker 3: Not a good idea until you have a really good relationship with them. That was my mistake by mistake at the beginning was that I would just walk into the office or walk up to the broker and say, Hey, my name is Dario. I got no money and I want to buy no money down. and what, what bought me my success was that, I developed a relationship with the agent, and eventually he got to know who I am and what I’m looking for and what my needs are. You know, when I pose the conversation about, you know, as you think you might be able to do a seller financing, like I didn’t call it no money down and came up, you know, seller finance, or I called you pick, it might be able to get terms kind of be very vague with them and then sort of bring up the conversation about what I meant by terms. And that’s how I was able to be able to get.
Speaker 2: Did you deal with hard money lenders at the same time as well, or any private money at that time Or were you just basically looking for seller financing and creative ways to get into
Speaker 3: Yeah. And Hoover or Canada is a little different in Canada. There aren’t that many hard money lenders. so, so for me, it was kind of tough getting started. It was tough, getting them, you know, getting financing from the bank to Canada is fairly difficult, start off with, so, you know, my first deal was CMHC financing, 90% financing, which is the equivalent of pod, Fannie Mae, Freddie Mac financing. 90% was the highest it would go at the time. And then I got the seller to agree, to do the type of percent seller financing. And the way I got around that was I was able to convince the real estate agent for us to sit down, eatable ended the deal, at the seller’s house for coffee and have sort of have a conversation about this. And at the coffee people we brought, I brought up the issue of at seller financing.
Speaker 3: I asked them, I brought it up. I asked him, what are you going to do with a down payment And he said, well, I really don’t need it right now, but I have to sell. Cause I need to get financing to buy a house that I’m building. So you find bought a lot and then get financing covered, free ship was out of whack. So he needed to sell and grant, to get that bed off is, X ratio. So, so when you said that, I said, well, you know, we’d be interested in making, you know, an 8% return on your money. I jumped the gun, I threw 80% out of my, I basically said that to, they kind of looked at me, he thought about it. And he said, well, let me think about it. And then two days later he said, you know, if you could prove to me that you bought the money to close, I’ll lend you the money for the down payment. But now my challenge was okay. I have to, I think at the time it was $19,000 a month and I didn’t have it. So I had to prove to them, I had $19,000 by the property. I mean, to sell a finance, whatever it was. I went running around and, I got my brother to provide the, with a bank account where he had $19,000 in the account and, gave that to the seller seller saw and he said, okay, we’ll do the seller financing. And I didn’t feel okay.
Speaker 2: Pretty sweet. That’s pretty creative. Hey, did you do any, direct mail campaigns out, for your single families up in Canada
Speaker 3: Not when I first got started, when I first got started, I kinda, kind of run into, I hadn’t done any campaign. Getting lists, in Canada is, is difficult. So you have creative. it wasn’t until I took a different route and they gave me some ideas on how to come up with a list. And then I was able to come up with lists and then I did out and, and I was able to do a couple of lease options, seller financing. And I was able to get a couple of options on a couple of houses where I got an option and then I flipped it and ate my money that way.
Speaker 2: Okay, good. So you, so you do a bunch of single families and then you decide that to all, you had a mentor that said, what about apartments You didn’t really have a reason why you weren’t doing apartments in any first apartment deal. What size was that
Speaker 3: That was my first deal was a 16 or department.
Speaker 2: Did you say 16 or 60 60 Oh 60. Okay. And where was it
Speaker 3: It was in a, it was an account called us minister and a city us minister, probably about 15 minutes outside of Vancouver. Okay. And, it was a eight, I believe it was eight $65,000 a unit. And within a pub
Speaker 2: That’s pretty steep. 65 a unit. Is that an a property you know,
Speaker 3: It was a property. If I remember it was built in trying to remember who I think it was 89 was a condo, it was a condo property. I then fester out of Ontario. He bought it out of foreclosure. It’s again was one of those deals where I actually never owned this property yet. What I do is I flip it after what seems like years of negotiating the seller, because he was very sophisticated. He kind of knew what I was doing finally agreed. So I gave him a hundred thousand dollars and he gave me 120 days. And in those hundred 20 days I sold all the units. And I think if I average price was $98,000.
Speaker 2: Hold on for a second. Just so you gave him a hundred thousand, is that what you said
Speaker 3: Yeah, I gave him a hundred takes a little, like when we signed the contract. Yeah. and after my due diligence, my deposit became non-refundable and it was released to them.
Speaker 2: Okay. Where did you get the a hundred I had it. Okay. So you had it from your single filming day, so things were going pretty good. You had some money in the bank, you decided to invest this apartment building. And then in 120 days, you sold all the units for almost a $30,000 profit each unit. Yeah. That’s pretty sweet. How did you know to get into that deal and that you could do that
Speaker 3: Mentor, mentor the same mentor that said, Ariel, why don’t you do apartment bill Eve If he posts me through getting it under contract to coach me through how to structure the deal. And then once we, I went down and refundable, which I was like, you know, being my fan, that I had a hundred thousand dollars with the actual amount of money at that time. And I was like freaked out. And on top of that, like if I blew that patients shot basically, and it was funny, you know, I got involved with it because from the time my mentor said, why don’t you look up, the next thing I’m walking out of his office, I’m owning the real estate agent today. I used to buy single family homes. If I’m like, Hey, listen, I’m buying apartment buildings. It just so happens that he knew a guy in his office to do this apartment building off the market that the seller would consider.
Speaker 3: So it’s kind of weird how I got it. And that’s how, you know, through relationships, I was able to get the building on the contract and sort of get a little more leeway when I maybe shouldn’t have, because I, I really, I was so green. I didn’t know what I was doing. Right. It worked well for me because we were, it was, again, I didn’t know, a whole lot of what emerging markets, the market was emerging at the same time. So, yeah, so, so all these things lined up for me in order for me to be able to do this, if it would have been a year earlier, I would’ve blown up. if it would have been a year later, I would’ve done much better. I would, I would guess the venture 50 units say if they spark Uber, they’re probably worth somewhere around $300,000.
Speaker 2: Wow. Did you get into, on an upswing in the market So that’s good.
Speaker 3: It a, it was a big run-up and that’s why I was able to sell it at 128,000 at the price that we were selling. They were slightly below market and people were buying.
Speaker 2: Yeah, that’s a, that’s a good strategy. you got a lot to sell, so let’s go below market and, and let the public scoop them up. All right. So from there, did you buy more apartments in Canada Did you, did you go across the border or what was your next step from there
Speaker 3: I kind of went a little crazy and I started buying, apartment buildings in a MPC, bought some in Alberta. We bought some Ontario and, and for awhile, the strategy was that I’m under contract with very little money and then some, so I was looking for condos. And if there weren’t condos, I would try to get a really long closing so I can do the condo conversion and then, you know, bought a couple old and then eventually sold out of them. Again. These were all through, off the market listings relationships that I had developed with real peers. I got a tie, a townhome complex. if I remember correctly, there were 25 pound homes, scoop those up really cheap and sold them. those ones I actually bought and I bought those with the combination. this was a few years after the first apartment building. So I, then I had found, you know, hard money. I had developed sources for art money. I was able to bring in some partners, so bought the property. I think it was for $1.6 million, no money out of my pocket, brought in a partner, an equity partner with the money together through art and money source. And I think we sold that for about 2.4, 2.5 million and the profit.
Speaker 2: How long did you hold that and sell it
Speaker 3: Oh, that was 90 days for individually titled 60 condos. no, sorry, 20. I think it was 25 condos. they were townhomes townhomes, so pretty sweet. They were brand new, never lived there.
Speaker 2: Awesome. Hi, now let’s talk about, you going across the border and investing in the U S how’d that come about
Speaker 3: So, during that time where I, you know, doing all these deals, I want to learn more about real estate. I want to learn more strategies. So I continue learning. And, I started looking at style, right. But what I saw as, in Canada, apartment buildings that are condo maps are large. There’s very few and far in, in. So I started looking down South down through there there’s four opportunities. It was 2004, 2005. The market was starting to go crazy. So I, I, I saw certain markets like Las Vegas, Arizona as the market I’m into. I jumped keepers, the single family home. And I did a bunch of single family home. I was a little to get into the apartment side because it was a little more complicated. I didn’t, you know, I didn’t know what I didn’t know. And what I got hung up with, which is what a lot of pain is good is aren’t they get hung up over the perfect structure.
Speaker 3: It’s going to be minimized the amount of taxes that they pay. Okay. So they spent a lot of time and a lot of energy trying to figure that out. And a lot of money talking to CPAs, lawyers, accountants, figure out what is the best structure. So I get, I got caught up in that a little bit. And then I got to the point where I said, you know what, forget all that. I’m just going to go by. And then, you know what practices it is, what it is, and I’ll have to pay whatever it is. And, and, you know, I’ll learn as I go right, make money, then worry about taxes, kind of what I, but what I found out with that process, it’s very, very careful to make sure that I, I follow the rules very, very carefully. Immigration has a bigger consequence to foreigners and invest in the us than taxes structure.
Speaker 3: And, you know, there’s, there’s horror stories of penny BN, buying a house in Blaine, which is, you know, on the other side of the border, if buy a fourplex. And, they say, you know, we’re going to keep one first off before, down there for the weekend. And then we’ll rent the other three hours. And with the rental income, hopefully we pay all this stuff off and it won’t cost us in it. Right. And so they’re going down to Blaine on the weekend and they put grass and they collected from friends and dependent as a problem. So they go and they fix it. And all of those things are a violation of my patient. They’re not as, as foreigners, we can’t work with the us and we can’t do anything that would take away the job of an American. So, you know, you’re collecting rent, that’s a property management company.
Speaker 3: You’re, you’re, cutting the grass. It’s a landscape job. It’s not. So as a, as a foreigner owning investments, we can, we own them. We can’t touch them anything inside of. Right. So, this is story that I was going down is one of the neighbors called immigration. Immigration came over to jail and days, and then they poured it and then they lost their assets perceived by immigration. They lost four or five. They lost everything. And now the worst thing about it is he can’t come back to the U S for 10 years. And at the end of the 10 years, they have to ask for permission to be able to come in for something as simple as that. That’s crazy. Now, if you own, if it’s a single family home and it’s your second home and you live in it, then you can do all those things.
Speaker 3: You can cut your own grass, do those things as it’s, it’s your residence. it fits like a fix and flip. I can tell you, there was a woman in Vancouver that I met. She was, she was fixing and flipping. When she got five, she had 12 houses lost off and come back. She was, but she would do a shoot with some down here and her and her husband would actually do the renovations and they would hire a bunch of workers and then they would fix something and flip them. And that’s how they thought that one of the, one of the workers, I guess they got in some kind of disagreement, I dunno, with, at work or a subtrade. I never really asked if all the immigration on her and they came down and they put her and her husband at the port, and she would talk to me if she wanted to be doing that. And she wanted kind of part of her up with feed into that. And I’m like, no, I don’t want to, I don’t want to be anywhere near you. You got problem with immigration with me. So when I come down here, I’m very careful not to do anything,
Speaker 2: Which is a good thing, because you know, what I teach is that you, you hire people to do those things and, and your, your job is to go out there and get more properties that will cash flow for you. So you’re constantly creating relationships and that’s how you grow a business anyways. So I guess you’re forced to do that, when you’re crossing the border. So those are the two pretty big issues. Another issue has to be funding the deals in the U S how, how do you go about doing that Because not everybody, how many units do you own now in the U S
Speaker 3: What I can tell you is a last year in 2011, I bought it, around 450. I’d probably have to say closed to maybe six or 700. I was hoping to be able to buy more this year, but I’ve kind of cooled my fields this year. I’ve only been able to buy seven. I’m looking at a couple other deals right now that culturally I can close. And it’s like both, and they’re going to be in the 200 unit range, but I’m sorry, what was the question Oh, the other issue, finding funding, funding, funding for Canadians, we don’t qualify. So there’s a couple options in both. So if an Eaton can hire an attorney, us $50,000, if you can get an investor visa, with an investor visa, you get a social security number, it’s five years, and now you will be able to qualify for HUD financing and, you know, any Fannie Mae, Freddie Mac, all that kind of stuff.
Speaker 3: So you’ll be able to get a low interest rate, high ratio mortgages. if you don’t go that option, you can still get financing. There’s two vendors available that I’ve been able to find. I’ve been able to use. The rates will range from a five to 7%, loan values to arrange between 50 and 70%, 75%. And, and what they’re looking for, obviously they’re on big phone. they want to use a corporation. And what they’re looking for is they’re looking for you to have experience. If you don’t have experience, they want you to have a partner that had experience. I haven’t had any problem angles to find, financing. Okay.
Speaker 2: So that’s, so that’s good. So financing is available. I know you get private money to fund the down payments and the closing costs of your deal. So how do you go about doing that Yes.
Speaker 3: So what I have is I, I set up a simple structure. I set up a us corporation and have a simple structure work. I, it’s for accredited investors, only in the us, sorry, in Canada and in the U S and I raise money, through that simple structure. And, just recently, I finished putting together a private placement. I’m gonna be applying all, and it’s going to be for sophisticated investors and a competitive investor. And it’ll be, I’ll be able to use that in Canada and in the U S it’ll make it easier for you to raise more money, because now I’ll be able to go around or outside of accredited investors. But the only way I’ve been able to raise money is through building relationships. I think that the business real estate and raising money, it all comes from relationships. So I put myself out there to help people that are looking to raise money. I’m looking to raise money for apartment buildings, and specifically in the Midwest, I provide them on a regular basis. Once I get their email address, I asked them if it’s okay for me to send them information and I send them articles about what’s going on in the economy, the us.
Speaker 2: So there’s a primarily Canadian investors.
Speaker 3: Yeah. Mainly Canadian and best with the app. Okay.
Speaker 2: We’re interested in investing in the United States right now, whether it be through a syndicator like yourself or, or with themselves into their own apartment deals here, there’s a lot of people in
Speaker 3: There is a huge, the number one, Google, a word, and we’re freezing Canada right now, us real estate. And here in Phoenix, I think it’s 38% of all their bills. It’s all the things told me.
Speaker 2: Yeah,
Speaker 3: Well, mainly because, Alberta and British Columbia, there’s a lot of money there and a lot of wealth. So California, Las Vegas and Arizona are a big target for those profits.
Speaker 2: Sweet. Let me ask you a question, a couple more questions. what would you do differently knowing what you know now as a starting out real estate investor and then a Canadian investor investing in the United state
Speaker 3: Well, like, I think I said it, the one thing I would do is not get hung up on the structure. So something simple, go out, buy something, make some money, and then have any worry about the structure. I would, I actually did it. I read up a lot on the Gracian, every day I, I teach her back and forth whether I want to get my investment visa, or I don’t want to get my investor visa coming up an investor visa yet. I don’t have the investor visa on. I’m still,
Speaker 2: You’re still able to get the funding from the banks.
Speaker 3: I’m still able to get the funding. Yes. Good. Yeah. But, but I definitely would, would jump in sooner rather than later, I wasted a lot of time trying to figure things out, but the only real way to put it is getting up there and
Speaker 2: Get into about taking the swings. Yeah. All right. well, first of all, I wanted to introduce you to all of my Canadian students, because for the first time we now have a Canadian coach, which, D’Addario has, accepted our invitation, become one of our coaches. So if you’re somebody in Canada, that’s looking to invest in the U S and you’re looking for some way to coach you through the process. Dario is on our coaching staff now, which is a great thing. another thing too, is, we’ve written a special report, the five more costly mistakes that Canadian investors make when investing in the United States. but Dario in conclusion, what advice would you give anybody who’s just starting out, investing either in the United States or Canada, in order to become successful. What are the, what are the first few things they need to do
Speaker 3: You know, I, I would have to say coaching, getting a coach, a mentor is going to be something that’s going to make you, it’s a world of difference. I know that when I first got started, it was a few years before I actually got any coaching, any mentoring, simply because I, I didn’t know any better if I would’ve known sooner, I would’ve, I would’ve done it. You know, who knows where I would’ve been. If my coach, my metaphor, didn’t say to me, there are, what’s preventing buy an apartment building. I mean, maybe I’d still be buying single family homes. And I think stuff with that, who knows that I relate to that one question is a defining moment in my life that really made a huge impact and a different from a person that was, you know, outside the box. You know, one of the questions, one of the things that he could do is he said, you know, I want you to take down.
Speaker 3: I want you to write down what is it you do every day and then apply what it would cost. So what if, what would somebody get paid if you hired them to do all that Right. And what I got out of that is that, you know, I was spending my day doing a bunch of things that, you know, $50 an hour, $5 an hour, $30 an hour stuff. And then when we got down and we talked to more, he’s like, okay, so how much money do you want to make this year And, and I’m like, well, you know, half a million guys. And he goes, okay, well, if you work as many hours as you work right now, and you wanted to make half a million dollars, how much money would you have to make per hour And it definitely was not 15 point $25 an hour.
Speaker 3: I had to make, I think like $500 an hour or $700 an hour and simple. What are the things that you can do that are going to make you earn that much money and forget about everything else, hire other people, or you figure out a way to get other people to come forward. You can focus on making big dollars because that’s, what’s going to make a real difference in your life. So that, that was also another thing that, you know, the coach helped me cause, you know, I was the guy that had the pleasure and the pools and the back of my car. And I get calls in the middle of the night and I like run out there and I was doing everything like checks, leasing units, doing all the repairs. I basically had a maintenance man job. Sure. I owned a bunch of real estate, but I was doing the maintenance if you meet the standard wages at times, too. Exactly. Exactly. Because, yeah. Yeah. and again, fortunately for
Speaker 2: Me, the market was moving in the right direction, the wrong direction, who knows what would have happened. But I think that one of the best parts about our program is the fact that we teach emerging markets. I wrote the number one best selling books for emerging real estate markets. And it’d be point blank shows you what to look for to make sure that you’re in a market that you like, you get it when you first started out. But referenced one point that you made when you’re talking about a mentor and a coach is, you know, it was your mentor that said, what is it you know, what’s stopping you from apartment buildings. And then after you made the decision to go into it, and he’s the one that helped you with that 60 unit building where you made over 30, 30, 30, $5,000 per unit, which is like $1.8 million on the sale of those condos in 120 days.
Speaker 2: That’s pretty sweet. That’s the importance of mentors and coaches. I think the learning curve that he helped me through a pleasant credible, because like I said, without him at that moment, the, my advisor was it single family home bill stated, and that’s all he ever saw. So if I got hung up on something and I would talk to him, he would have done out the answer because you know, that’s not his business. I had the mentor go and say, Hey, this is the problem I have and what should I do But he knew the answers because he was buying apartment though. Right He has experienced that. I wanted to have that’s good stuff. Well, obviously you joined our team because while you joined our family a long time ago, when you actually came to your first bootcamp with us and anybody that comes to any of our events immediately becomes a part of our family. And now you’re even closer because you want to have our coaches. So Dario, I want to thank you. And any parting words of wisdom that you’d like to share before I sign off, get out there and do something. That’s going to get you closer to buying your first property, pay gas, even, even, even if it’s just a small step, like picking up the phone and calling a real estate agent and asking them to show you a house. Absolutely.
Speaker 1: You’ve been listening to the multifamily deal lab podcast, where the deals get done. If you’d like to learn more visit Dave’s free book.com and don’t forget to leave a five-star rating and review and hit that subscribe button. So you don’t miss an episode. Thanks for listening.