Investing In Multi-family Properties with Calvin Hexter & Alfonso Cuadra
Calvin: I am here with the one and only Alfonso the Godfather Quadra. Good to have you.
Alfonso:Hey, I’m excited.
Calvin:I think it took more than one call. Let’s just be honest with everybody that’s watching right now. It wasn’t just one call. And so for everybody that’s out there and you’ve seen like the meme of the little miner that’s like going to the mine and then there’s like the brick of gold right next to it. Well, Alfonso’s the brick of gold, just so you guys are following my reference, and I’m the miner. And I know my first phone call was just one chip in the mountain. My second phone call a little bit further. And I think the third one, I saw a little bit of light come through. And I was like, hey, I gave you the idea of what we were doing. And you were on board, it seemed like right away, which is awesome.
Alfonso: It’s a great, it’s Edmonton. I mean, I love Edmonton. And, you know, and I happen to believe that Alberta is a booming market. And a lot of Canadians are going to be investing in Alberta, and specifically Edmonton. I think there’s massive opportunity there.
Calvin: Big spotlight. Exactly. And so what better place than Edmonton? Alfonso, we get this question all the time. We work with a lot of clients. And I want to ask you, as an investor, when do you know that it’s the right time to invest in multifamily?
Alfonso: Well, if you ask me personally, I would say the right time was yesterday. But, you know, I think some of the numbers and the value of the assets scare off some people. But if you ask me, you know, like if I’m on the street, and someone came up and asked me, I would say it’s usually when your banker says no more mortgages, right? That’s kind of the sweet spot. It tells me number one, you maxed out the amount of mortgages that you can have under your name. As you know, for residential mortgages, they go to the debt to income ratio. And at some point, you know, your lender is going to say, you know, no more mortgages, right? So usually, that’s two or three. And so there’s many things that you could do at that point, you could find other people that can help you qualify to strengthen the file. Or you can make that jump to multifamily. When I talk about multifamily, I’m talking more about commercial, residential, real estate, commercial mortgages, where it’s not based on the debt to income ratio, but it’s more on the asset itself, they look at the DCR, the debt coverage ratio, can this asset support itself. And so it just makes it a lot easier to qualify for a lot of these assets, easier to, for things to cash flow. And, you know, just things really makes, you know, make more sense when you start entering the multifamily realm. For me, it was my second deal. So my first deal was a duplex that I converted, we’re talking about over 25 years ago. So that’s how long we’re talking about here. But it was a duplex that I converted into a triplex, two units into three added value. And my second deal was a seven unit apartment building. And what I discovered was, actually, you know, looking at the duplex that I converted into a triplex, and that sevenplex, and going through the financing, I was like, oh, this is a lot easier than I thought, right?
Even though the price tag was more, but the management was a lot easier. So easier to manage, easier to finance. And I never looked back since, that was 25 years ago. Since then, we’ve accumulated roughly about 1000 doors across Canada and the US, about 200 million. And I’ve never looked back. And, you know, I happen to believe is the best asset class that you can find.
Calvin: I love it. I love it. I love the stories. And I know that we’re gonna, we’re gonna be graced with a lot more stories. And I hope even some like horror stories, sometimes the horror stories and the challenging stories are the most…
Alfonso: Oh, I got lots of those. I have no hair, right? You know, I used to look like yours is nice and flowy. And, you know, and then, you know, then that’s what happens. So be prepared for that as well.
Calvin: Absolutely. Absolutely. So, Alphonso, I almost feel like multifamily in the eyes of many investors is like the deep end of the pool. And a lot of people, it’s easier to, you know, it’s more palatable to get into the baby end, right? Where it’s, you know, covering just right about your knees. But then once you start getting it around your waist and then your shoulders, and then you started, you know, you kind of got to start swimming. That’s how I know that some people kind of feel like multifamily is to them. What’s the best tip you can give somebody to help them better digest or make it feel like it’s an easier transition if they have more experience in residential or maybe going in their very first deal is multifamily?
Alfonso: Well, you know, the first thing that people need to understand is when you become a real estate investor, you are in business, you’re operating a business, you know, most people don’t grasp that at the very beginning, they look at it as a sideline, or a hobby, or this is, you know, I’m just like, I’m just, you know, I’m just gonna try this out or whatnot, you know, but even if you try it out, you still, you’re in business, right? You’ve gotten a mortgage, you got financing, you know, you’re operating, maybe it’s a two unit building, but you have clients, these are your tenants, maybe you have only one, right? Now, if we look at it from that perspective, if we look at real estate as a business, right, so this is a business that you’re starting, the smaller properties violate all rules of business, meaning you don’t tap into the economy of scale, right? You don’t tap into that, you know, multiple clients, multiple customers.
So if you are indeed in a business, then the objective of having a business is to have multiple clients, right? And imagine you started a restaurant with only one customer, well, you better hope he eats a lot, or else you’re going to be under. And so the idea of having multifamily just means that you are in a business with more customers, you can tap into the economy of scales. And to me, that’s, you know, that’s how businesses operates. I’m thinking to myself, how can I get as many customers as possible? When people get into the ones and twosies, and I’m sure that’s where a lot of people are going to start, because it just seems feasible. But the very, the very, the very second you get into the ones and twosies, you should be looking to level up.
If you ask me, in hindsight, you know, what would be the things that I would change, I would have leveled up faster, earlier, right? So I talked about seven plex being my, my, my second deal. And then from there, I went to a 10 plex. But then I kind of hovered there for a little while, because I felt uncomfortable, I didn’t want to make that jump to the 15th and the 20th. What I discovered is, there’s power in numbers, it’s a business, right? And so you have more customers paying down some of those same expenses, you tap into the economy of scale, and then things start to make sense, they start to cash flow. And especially where interest rates are today.
I mean, they are, they’ve come down, thank God. But ultimately, it’s hard to find, you know, some of these singles that are going to cash flow if you’re not going to put a lot of equity towards it. And so, you know, it’s hard for people to understand that at first. But when you put the numbers, when you show them the numbers, numbers speak for themselves. And if you look at it like a business, you know, if you had a restaurant or a store, the idea would be to have multiple customers. And that’s what multifamily is just how you just have more customers to help you pay more of those expenses, reducing the load that someone has, because they only have one customer paying that water bill, you know, the electrical, the gas and all these things versus having multiple tenants helping you pay down the same expenses.
Calvin: Absolutely. And to bridge off of that example, that analogy of the restaurant, you know, do you want to just be serving a main course or do you want to offer appetizers and desserts and reflecting to multifamily? Do you want to have coin laundry? Do you want to have storage space? Is there any other amenities that you can have your customer base, you know, invest in that might have them use, you know, use more of the services in that building, which would then help support run that business even more, you know, more successful.
I don’t know much how that works, but you can have a network (internet) and then people plug into your network and you can offer that service. Actually, I know a guy, I know a guy that was doing that. And every time his tenant was late on the rent, he would slow down the internet. Instantly people will pay the rent. You know, I know someone that has a Turo account, right? So they, they took, you know, a vehicle and parked it right in front of the building with a Turo account and gave all the tenants the, you know, the ability to rent that car on Turo. And, you know, at the very beginning, people were like, well, that’s not going to work. And then this car is always gone. Right. And it comes back to that same place. All the tenants have access to this car, you know, storage lockers, laundry, parking. There’s so many ways of making money. Once you have an audience, right. Once you have people, it’s very difficult to just do it off one person, one or two people, but you got 20 people. This is like, you know, you’re talking about a little community that now you’re servicing. Right.
Calvin: Yeah. I mean, that’s fantastic.
