All Forum Posts by: Dan Illes

Thought I’d share a deal with you guys that I completed a bit ago as I rarely see people talk about projects like this.

I purchased a house that was repossessed by the bank. I bought it sight unseen as I viewed it as a small development project, did my due diligence up front and didn’t really care about the state of the house.

There were 5 offers on the property to which I ended up knowing a few of the other bidders. I was asked “how could you pay so much for the property, did you make money”? Where they were all looking at it as “$250,000 to fix it up”, I was looking at “how much to tear it down and subdivide”. We viewed it completely differently.

I ended up demolishing the house, went to city council got approval to subdivide the vacant land into two building lots, then flipped both building lots off to a builder. There were some costs involved for demolition, making an application and a survey coming in around $30,000.

One of the best parts of this deal was the “return on time”. This was almost exclusively done from my desktop, although I went to site a few times, I could have probably gotten away with never having went.

My biggest regret with this project ….. Selling it.

Shortly after some zoning changes came into affect that would have permitted triplexes to be built on both lots. This property is also 15 minutes from my house. I’ve got projects located 50 minutes to 2 hours away from me. Would have been so nice to have one in my own back yard.

Feel free to reach out of you're doing similar project or have interest in this strategy.

 Hi River, I'm planning on going full steam ahead with build-to-rent. I have a 2 unit build coming up and a 6 unit build as well in the pipeline.

Thought I'd take a minute and share a video on a 4-unit new build I recently completed and successfully implemented the BRRRR strategy on. We got the land to build this by subdividing it off other rental properties we own. Each unit has its own electric panel, gas meter, furnace, water meter. The tenants pay for all their own utilities. This is a great example of the build-to-rent strategy. I'm confident you will find value in this. Check it out and let me know what you think! Cheers

Yeah Alberta (especially Calgary) is on its way to becoming the same craziness that Ontario and BC are as well.

That area is a beaut. Although prices have went insane in recent years (despite the recent come-down), the dollar is in the toilet again so you'd get a pretty hefty discount. 

Thanks for the reply, Jay. The home value decreases are not as bad as I wrote country-wide, however BC and Ontario have taken a heavy hit as discussed and they represent over 50% of the population. The mortgage problems I discussed, would be felt country-wide.

I wanted to share something that has been going on up here as I believe there are lessons for everyone, and I don’t think this gets coverage at all in the US.

Up here in Canada we have had interest rates increase at the same crazy pace that the US experienced but are seeing some very negative consequences from it that are unique up here.

In Canada we do not have 30 year fixed mortgages. We have fixed mortgages that can be amortized for 30 years, but typically can only lock them in for 5 years maximum. Once that term is up you have to renew at the current rate. As this happens people’s mortgage payments have gone up somewhere around 60% in the worst scenarios. Our housing prices are insanely high to begin with.

We take adjustable rate mortgages at levels you would never see in the US. This happens because there are stiff penalties for breaking a fixed mortgage where you end up owing all the missed interest to the bank. I do not believe the US has these penalties at least not in the same way. Going adjustable gets you out of these penalties should you break an adjustable mortgage. Somewhere around a third of mortgages are adjustable. People on these mortgages had their payments go up automatically with every interest rate increase and saw cashflow completely wiped out. I personally had one go from $771/mo to $1250/mo. Luckily, I still cashflow a little bit. Some of the adjustable products, the payment stays the same, but the principal to interest allocation changes to the point where people are only paying interest and are now in a negative amortization where the amount they owe is actually going up. Not good!

Prices have fallen 25-30% since the peak. The majority of this happened in 2022. People flipping homes instantly got crushed and many people doing BRRRRs ended up under water both in equity and monthly payments as rates went up. Places would no longer appraise.

People cannot sell their homes easily either as there has been a flood of inventory, seller expectations are still yesterday’s prices and days on market are through the roof.

I personally know a number of people that have went bankrupt, lost properties and a ton of people that have lost money in the six or seven figures.

People that purchased new construction years ago are not able to close on their purchase as they are now worth much less and can’t afford the payments. This has been one of the biggest disasters. People are walking away from six-figure deposits they’ve made over time. Almost every few weeks there is a news story of new-construction homes burning down sometimes whole subdivisions. We don’t fully know the back story on this, but it wouldn’t be surprising if it was people trying to bide time as homes have to be rebuilt.

I decided to share this story as I’m sure anyone in the real estate world would find it interesting and there are some takeaways from this. On the flip side, this has presented some opportunities for the creative real estate investor as well.

Some news story links and a snapshot of what has happened to prices in my city.

https://www.cp24.com/news/video-shows-massive-fire-that-destroyed-under-construction-homes-in-burlington-1.6671785

https://www.thestar.com/real-estate/toronto-area-buyers-are-walking-away-from-deposits-on-new-homes-some-losing-as-much/article_db451c58-5c4b-5269-8510-17095d5496e1.html

 Appreciate the insight. Thanks, Arn

 Thanks Bradley. I will look into those suggestions.

Hello, I'm wondering if anyone would be able to share some insights on growing a social media presence. I don't seem to get the same engagement I used to on FB and IG. Some of this could be my own doing, but I've also heard the algorithms may also be responsible.

With the timing of posts being very important, does anyone have any insights on best times of day and which days work best? This is particularly for someone looking to grow a real estate business not just general posts. I've Googled this at length, but I find the information I come across very suspect and doubt that it's best suited for the REI community.

I've done a decent job growing a SM following. I've been on a few notable podcasts which helps, but seems to be less so than even a few years ago. I offer a lot of development consulting since I have a background in Civil Engineering and Urban Planning. I also own and operate a business that provides water submetering for multi-family properties of all sizes. Social Media is and should continue to be, my main driver of leads for these businesses.

Any insights are highly appreciated! Thank you in advance