How We Made $200,000 This Month Thanks to My Understanding of Bond Yields, Macroeconomics, Geopolitics, and Poker

Once upon a time, on January 14, 2025, Canadian bond yields were at 3.28%. This translated to real interest rates in the multifamily sector of around 4.35% to 4.50%.

When we submitted financing and refinancing applications for five properties in September 2024, bond yields were hovering around 2.72%, meaning real interest rates were between 3.75% and 3.95%.

Then, Trudeau announced his resignation.
Slightly more inflationary economic data emerged.
Trump hinted at new tariffs.

All of this forced a real estate investor like me to decide, as the notary signing date approached, whether to lock in my rate or not. This also involved a “rate buy-down” if rates had risen since the file was submitted.

By January 14, locking in our rate meant we had to pay about $200,000 in rate buy-down costs.

There was significant upside risk. The consensus was that Trump’s tariff announcement would be inflationary and push rates higher.

Should we stop the bleeding at $200,000? Or take the risk of reducing the rate buy-down cost by waiting for rates to drop, knowing that things could go south if rates actually increased?

This is when you realize that as an investor, the further you advance in your career and the larger your portfolio grows, the more advanced financial engineering concepts become essential:

• Risk management, probabilities, and statistics;
• The bond market;
• Macroeconomics;
• Geopolitics.

Look, I don’t consider myself an expert, I’m a practitioner with skin in the game. But I have a responsibility to my family, my friends, and the people who have invested in the Fierbrooke Collective. I have to do everything in my power to understand these issues as best as I can. It’s a quest for mastery, but also a continuous exercise in humility.

Against external pressure and the advice of many, I trusted myself, relied on my processes and systems, and waited. It became a race against time because the longer I waited, the more I risked exceeding the deadlines for my CMHC certificates.

And I held firm. I put my fears aside, my emotions aside. I adopted a cold, mathematical approach. Easy to say, extremely difficult to do — this is what separates the great investors I admire, like Warren Buffett, Howard Marks, and Ray Dalio.

Howard Marks, in his book The Most Important Thing, emphasizes the importance of understanding probabilities and risks in investing. He explains that the best investors don’t try to be right every time but rather maximize their long-term gains by understanding the odds (probabilities).

Similarly, Annie Duke, in Thinking in Bets, uses her experience as a professional poker player to illustrate how to make decisions under uncertainty. She explains that, like poker, investing is a game of probabilities where even the best decisions can sometimes lead to unfavorable outcomes.

Of course, I also had a hedging strategy in place in case rates spiked quickly.

For the past month, I must have checked MarketWatch (which tracks bond yield movements) at least a thousand times.

Trump’s tariffs were announced on Saturday. Worse still, Trudeau’s counter-tariffs.

This morning, Canadian bond yields are oscillating at around 2.53% to 2.73%.

Bet won.

Real estate — when you’re building a company that will be worth hundreds of millions, maybe even billions, and will positively impact the lives of thousands of tenants, neighboring citizens, and partners who have placed their trust in you — is a constant war. You have to set aside your ego and understand that you don’t have to win every battle, just the overall campaign.

This experience reminded me of an essential lesson: in investing, as in life, the duty to learn never stops!

Every decision, every market movement, every geopolitical event is an opportunity to improve, to ground yourself in solid principles, and to avoid being swept away by emotions.

Running a real estate company, a business, or an investment fund is like captaining a ship. You bear immense responsibility: for your investors, your partners, your team, and above all, for those who indirectly benefit from your work — tenants, communities, and future generations. This is not a task to be taken lightly.

To navigate often turbulent waters, you need a unique blend of passion and composure. Passion drives you to wake up every morning with the desire to build something greater than yourself. Composure allows you to stay calm in the face of storms, to make rational decisions even when everything seems to be falling apart around you.

But most importantly, you must cultivate what the Japanese call shoshin (初心), or the beginner’s mind — the ability to stay curious, humble, and open to new ideas while maintaining the confidence of a master who knows that years of experience and well-honed systems will allow him to overcome challenges.

You cannot predict, but you can prepare. By understanding probabilities, accepting uncertainty, and staying disciplined, you succeed in the long run. Life is a game of probabilities, and the key is making optimal decisions, even if the results aren’t always immediately favorable.

So, whether you’re a beginner investor or a seasoned manager, remember this:

♠️ Never stop learning. Markets, the economy, and the world evolve. Those who stop learning get left behind.

♠️ Root yourself in solid principles. Discipline, patience, and risk management are your best allies.

♠️ Stay humble. Even the greatest investors make mistakes. What matters is recognizing them and learning from them.

♠️ Surround yourself with the right people. A competent team and wise advisors are essential to navigating complex waters.

♠️ Take responsibility. Leadership is service. You have the power to create value but also to change lives.

Finally, remember that every challenge is an opportunity to grow, and every success is just another step toward a greater goal.

Investing, like life, is a marathon, not a sprint.

So stay the course, stay curious, and keep building — not just for yourself, but for all those who depend on you.

#RealEstateInvesting #RiskManagement #InterestRates #PassiveInvesting

The real estate industry stands at a crossroads. As urbanization accelerates and housing demand continues to surge, we face an unprecedented challenge: balancing the need for affordable housing with our responsibility to mitigate climate change. Real estate accounts for approximately 40% of global carbon emissions (World Green Building Council, 2022), stemming from both operational energy use and embodied carbon in construction materials. This dual crisis — affordable housing shortages and environmental degradation — demands innovative solutions. At Fierbrooke Communities, we are tackling this challenge head-on by integrating green financing, adaptive reuse, and low-carbon development into our projects, with a vision of transforming not just neighborhoods, but the entire real estate industry.

Green Financing: Aligning Capital with Environmental Goals

Green financing has emerged as a pivotal tool for addressing the twin goals of affordability and sustainability. Tools like C-PACE (Commercial Property Assessed Clean Energy) financing are reshaping the economics of sustainable construction. C-PACE allows property owners to access long-term funding for energy efficiency, renewable energy, and water conservation upgrades, repaid through a property tax assessment. This mechanism lowers upfront costs, making it particularly valuable for affordable housing projects that prioritize energy-efficient designs.

At Fierbrooke, green financing enables us to reduce lifetime energy costs for residents while improving environmental outcomes. For example, integrating solar panels and high-performance insulation into a development funded by C-PACE can lower operational energy costs by as much as 50% over the building’s lifespan (U.S. Department of Energy, 2023). This dual benefit of economic and ecological savings creates a compelling case for scaling green finance in the affordable housing sector.

Adaptive Reuse: Transforming Existing Assets into Housing Solutions

Adaptive reuse — the process of repurposing old or underutilized buildings for new uses — offers a sustainable alternative to ground-up construction. According to a report by the American Institute of Architects (2021), adaptive reuse projects generate 50–75% less construction waste and use 40% less energy compared to new builds. At Fierbrooke, we see adaptive reuse not only as an opportunity to conserve resources but also as a strategy to preserve the cultural and architectural heritage of our cities.

One of our flagship projects involved converting an abandoned industrial facility in Quebec into a vibrant mixed-use community with affordable housing, retail spaces, and green public areas. This approach not only reduced material waste but also revitalized an otherwise neglected urban area, creating economic opportunities while minimizing environmental impact.

Low-Carbon Buildings: Redefining Urban Sustainability

Buildings are responsible for a significant portion of global carbon emissions — 28% from operational energy use and an additional 11% from embodied carbon in construction materials (IEA, 2021). At Fierbrooke, we are committed to developing low-carbon buildings that address both of these sources.

Low-carbon buildings integrate renewable materials such as cross-laminated timber (CLT), which has a significantly smaller carbon footprint than steel or concrete. Additionally, our projects leverage solar and geothermal energy systems to minimize operational emissions, and advanced energy-efficient designs reduce energy consumption by up to 40%.

A recent Fierbrooke development incorporated passive house principles, achieving near-zero energy consumption through superior insulation, airtight construction, and high-performance windows. Residents benefit from lower utility bills, while the project serves as a model for how sustainable housing can also be financially viable.

Greening Our Cities and Protecting Natural Habitats

Urban real estate development often comes at the expense of green spaces and natural habitats, exacerbating biodiversity loss and urban heat island effects. According to the United Nations (2022), cities cover only 3% of the Earth’s landmass but are responsible for 60–80% of energy consumption and 75% of carbon emissions. To address these disparities, we must reimagine cities as integrated ecosystems that prioritize green infrastructure alongside housing.

At Fierbrooke, we incorporate urban agriculture, rooftop gardens, and biophilic design elements into our developments. These features not only improve air quality and reduce heat island effects but also create healthier, more livable urban environments. Research from the Environmental Protection Agency (2023) shows that green infrastructure can reduce stormwater runoff by 20–40% while lowering urban temperatures by up to 2°C.

By focusing development within urban cores and reducing urban sprawl, we can preserve natural habitats outside cities, safeguarding biodiversity and protecting critical ecosystems. At the same time, denser, more sustainable cities reduce transportation emissions by encouraging walkability and public transit use.

Collaboration as a Catalyst for Change

The scale of these challenges necessitates collaboration across sectors. At Fierbrooke, we work closely with local governments, private stakeholders, and financial institutions to align resources and expertise. Public-private partnerships (PPPs) are particularly effective in scaling solutions like green financing and adaptive reuse, allowing us to stretch limited resources further.

In one notable example, our partnership with a local municipality enabled the redevelopment of underutilized land into a low-carbon housing community. By pooling public funds, green financing, and private investment, we delivered affordable housing that met stringent environmental standards without compromising on quality or accessibility.

The Future of Real Estate: Building Greener, Stronger Communities

The real estate sector has a profound opportunity to reshape the trajectory of global urbanization. By embracing green financing, adaptive reuse, and low-carbon development, we can build cities that are not only affordable but also sustainable and resilient.

At Fierbrooke, we believe the future of real estate lies in integrating ecological and social responsibility into every phase of the development process. By prioritizing sustainable practices, we can reduce the industry’s carbon footprint while enhancing quality of life for residents. Our mission is clear: to create homes and communities that serve people and the planet, proving that profitability and purpose can go hand in hand.

As we look to the future, let us reimagine real estate as a driver of positive change — one that builds not just buildings but also a healthier, greener, and more equitable world.

Canada’s housing crisis has reached a tipping point, with many citizens struggling to secure safe, reliable, and affordable housing. From coast to coast, demand for housing has outstripped supply, while high interest rates and the widening gap between income levels and housing costs have pushed home ownership further out of reach for millions. Renters aren’t faring much better. So, how did we arrive here? And more importantly, how do we move forward?

Understanding the Crisis: The Perfect Storm

A confluence of factors has led to Canada’s housing shortage. Much of the country’s current housing stock was acquired during a period of historically low interest rates in the 2010s and early 2020s, encouraging a wave of buyers who wanted to improve their quality of life. This period coincided with a significant surge in immigration and domestic migration to urban centers, particularly in cities like Toronto, Vancouver, and Montreal.

But by 2023, as interest rates rose sharply to combat inflation, the cost of home financing surged, dampening the appetite for new construction and squeezing homebuyers. This came at a time when new multifamily developments were crucial to meet the demands of a growing population. Bureaucratic red tape — lengthy permitting processes, outdated zoning laws, and building code restrictions — made it even harder to address the rising demand.

Additionally, Canada’s long-standing preference for single-family homes, codified into zoning laws that limit density in many areas, has contributed to urban sprawl and scarcity of affordable housing. According to research from the Canada Mortgage and Housing Corporation (CMHC), Canada needs to build 5.8 million new homes by 2030 to restore housing affordability. This goal is achievable only with systemic changes to zoning laws, government incentives, and private sector participation.

International Examples of Success

Countries facing similar housing crises have implemented innovative solutions that could serve as models for Canada. In Japan, the government has relaxed zoning regulations, allowing for taller and denser buildings in urban centers. This shift has dramatically increased housing stock in cities like Tokyo, where housing affordability is now among the best of any major global city. Japan’s approach to streamlining construction regulations and incentivizing private-sector developments has led to an efficient housing market.

Germany’s concept of “Baugruppen,” or cooperative housing, has also become an international best practice. Citizens band together to co-design and co-own their apartment buildings, which keeps costs low and encourages community building. In Berlin, this model has proven successful, blending affordability with sustainable urban living. Canada could benefit from policies that encourage collective ownership and mixed-use development, particularly in cities where housing has become prohibitively expensive.

The Fierbrooke Vision: Rethinking Housing as a Social Asset

At Fierbrooke, we view housing as more than a mere commodity; it’s a social infrastructure vital to the health and prosperity of our communities. Our mission is to deliver developments that create lasting social impact while achieving financial returns. We’re focused on sustainability, integration with public spaces, and urban densification. By incorporating community features like gardens, small businesses, and pedestrian-friendly areas, we can build vibrant, thriving neighborhoods that are more than just places to live — they’re places to grow and connect.

In Sherbrooke, our Quartier Soko initiative is a shining example of this vision. This revitalization project is more than a housing development — it’s a holistic approach to community building that includes green spaces, small businesses, cultural integration, and urban agriculture. Through projects like these, we aim to reshape the narrative around real estate development in Canada, showing that profitability and social impact can go hand in hand.

Canada’s Population Boom: The Challenge of 2024 and Beyond

Canada’s major cities are experiencing an unprecedented population surge. In 2024, Toronto alone added over 220,000 new residents — more than the entire population of St. John’s, Newfoundland. This influx is driven by high immigration targets and internal migration, with Canadians flocking to urban centers for job opportunities. But this population growth is putting immense strain on an already undersupplied housing market.

Multifamily housing developments, such as apartment complexes and co-living spaces, are key to addressing this demand. These types of developments, when designed with sustainability in mind, can reduce urban sprawl and reliance on automobiles while creating more livable, walkable neighborhoods. By building upward instead of outward, cities like Toronto and Vancouver can alleviate the pressure on the housing market and curb rising costs.

The Role of Policy: Removing Obstacles to Innovation

The Canadian government has recognized the housing crisis, but current efforts must be scaled up. The 2024 federal budget set aside $6 billion for new construction, with stipulations that provinces must remove single-family zoning restrictions and allow for fourplexes and higher-density developments. This is a positive step, but more needs to be done to modernize the approval processes that have slowed construction for decades.

In cities like Minneapolis, policymakers have eliminated single-family zoning, allowing developers to build duplexes, triplexes, and apartment buildings in areas that were previously reserved for detached homes. Canada could benefit from such bold reforms, which would not only increase the housing stock but also make cities more walkable, environmentally sustainable, and socially inclusive.

Looking Ahead: Bold Ideas for 2025

As we move toward 2025, we must continue advocating for policies that prioritize high-density housing, remove barriers to new construction, and encourage innovative public-private partnerships. Governments can incentivize the private sector to develop affordable housing by offering tax breaks, low-interest financing, and land grants. At the same time, the private sector must recognize that its long-term success is tied to creating sustainable, inclusive communities.

Investing in modular housing is another way to meet growing demand quickly and efficiently. Modular homes can be built offsite and assembled in urban areas, significantly reducing construction time and costs. This approach is already gaining traction in cities like Vancouver, where modular housing units are being used to provide temporary shelters for the homeless population.

Additionally, embracing the concept of “15-minute cities” could drastically improve housing and quality of life. This urban planning model, pioneered in Paris, focuses on creating neighborhoods where residents can access all their daily needs within a 15-minute walk or bike ride. By incorporating more mixed-use developments and making neighborhoods self-sufficient, we reduce the strain on transportation infrastructure and enhance community ties.

A Brighter Future: Collaboration and Action

Canada’s housing crisis is complex, but it presents an opportunity for innovation and collaboration. By combining smart policy reforms, public-private partnerships, and community-driven development, we can pave the way for a future where every Canadian has access to safe, affordable, and sustainable housing.

Through my roles at Fierbrooke and MREX, I am committed to being part of the solution, and I encourage others in the real estate community to join in this mission. Together, we can turn Canada’s housing crisis into an opportunity to build stronger, more resilient communities.

As a real estate developer and impact investor, I have always believed that real estate should do more than just generate returns — it should make a difference in the lives of the people it touches. From as young as 5 or 6 years old, as an immigrant child of a family struggling to make ends meet in Los Angeles, I saw firsthand how real estate can change lives for better or for worse. Now, 30-some years later, I am deeply encouraged and motivated by the growing recognition that investing isn’t just about financial gain anymore. Investors are asking deeper, more meaningful questions about the role their capital plays in shaping society. Nowhere is this more evident than in the realm of real estate, particularly in light of the recent housing crisis taking hold in Canada. Not only are companies like my own, Fierbrooke, championing this shift, but this movement is gaining momentum across the world. One might look to other companies in Quebec, like Sebastien Gariepy and his Groupe Inspire, or Nathalie Voland with GI Quo Vadis. In Toronto there is the Windmill Development Group led by Jonathan Westeinde, Dream and their group of companies, and TAS_Impact led by Mayzar Mortazavi. In the United States, so many come to mind, like my friend Evan Holladay who leads Holladay Ventures. In Europe, the awe-inspiring Urban Partners and their various arms like NREP, led by Mikkel Bulow-Lehnsby. I could go on, but the point is clear — the future holds immense potential, even in the face of the challenges ahead.

The Housing Crisis: A Catalyst for Reflection

The housing crisis, which has begun to tighten its grip on cities across Canada and other countries worldwide, has pushed the need for a serious reflection on how we approach housing as an asset class. The question of how we, as investors, balance profit with the essential human right to safe and secure shelter is more urgent than ever. Discussions are emerging about the moral implications of making money off something as fundamental as housing. When we step back and consider Maslow’s hierarchy of needs, it becomes clear that housing, like food and water, is foundational. It is, quite literally, the roof over people’s heads. Without it, the pursuit of higher-level needs — like personal growth, education, and even community involvement — becomes impossible.

In many ways, real estate investment resembles farming. Just as farmers cultivate the land to produce food — an essential resource for survival — real estate developers create homes, fulfilling another fundamental human need: shelter. Both professions are rooted in providing for the base of Maslow’s hierarchy of needs, and yet, there is a crucial distinction that is often overlooked. Farmers are widely respected for their role in sustaining life, even though their work results in wealth from a primary resource. That wealth isn’t demonized because it’s understood that farmers are essential providers, not profiteers. The same perspective should apply to real estate investors.

Real estate investors, like farmers, aren’t merely profiting from a basic need; they are meeting that need by creating it — building, maintaining, and sustaining the environments where people live. This isn’t an easy job, nor is it a quick path to wealth. Much like farmers who see their wealth tied up in the value of their land and crops, real estate developers often have their wealth locked up in illiquid assets. The value they generate is long-term, often requiring years of hard work, perseverance, and the ability to weather both economic and societal shifts. It’s a profession that, like farming, is not for the faint of heart.

The stereotype of the slick, greasy-haired seminar coach driving a red Ferrari is far from the reality of the committed real estate developer. Real estate investing is about far more than flashy deals and quick returns. It is about creating communities, building the homes where families grow, and ensuring that the environments we cultivate are sustainable, inclusive, and beneficial for everyone. We need to shift the way we see investors — not as opportunistic profiteers, but as providers and stewards, much like the farmers who feed us.

The Legacy of the “Landlord”: Time for Change

Historically, the term “landlord” has conjured images of a figure with dominion over land and the people who live on it. This feudal legacy, originating in medieval times, implied a kind of lordship — where the landlord had absolute control and authority. In today’s world, this antiquated mentality is not only outdated but harmful. The idea of seeing oneself as a “lord of the land” or “lord of the people” should be relegated to the past.

Instead, I believe we must evolve towards a new vision of real estate investment, one rooted in stewardship and guardianship rather than empire building. I envision real estate developers and property owners as curators of land, responsible for creating and maintaining spaces where people can live securely, grow, and thrive. As curators, we are entrusted with the well-being of the land and those who reside on it, ensuring that our developments serve the greater good.

This shift from landlord to steward is more aligned with a consciously evolved approach to development, inspired by Maslow’s final addition to his hierarchy of needs: self-transcendence. Maslow, in his later years, recognized that beyond self-actualization lies the need for individuals to transcend their own personal success and contribute to something larger than themselves. This understanding guides how we approach real estate development — not just as a means to build wealth, but as a way to build communities and make a lasting, positive impact on the world.

Influence of Thought Leaders

Many developers, including myself, have been influenced by thought leaders like Robin Sharma, Wayne Dyer, and Eckhart Tolle, whose teachings challenge the traditional notions of power and leadership. In his book The Leader Who Had No Title, Sharma encourages us to lead without the need for a formal position of authority — just as we, as stewards, must lead without the need to dominate our tenants or our developments.

Wayne Dyer and Eckhart Tolle, in their writings on consciousness and purpose, remind us of the interconnectedness of all beings and the importance of living and working in alignment with our higher selves. Tolle’s concept of a “New Earth” calls for a shift in consciousness that transcends ego-driven pursuits and moves towards collaboration, sustainability, and service to others. This philosophy resonates deeply within the realm of real estate development, where our actions can have a profound and lasting impact on the people and environments we touch.

Impact Investing’s Slow Arrival to Real Estate

Impact investing, for some time, has been a well-established concept in industries like venture capital and private equity. Funds have been set up with the express purpose of creating social and environmental impact alongside financial returns. We’ve seen impressive initiatives in renewable energy, education technology, and healthcare. However, real estate has lagged behind. Perhaps because of its traditional focus on bricks and mortar, many investors saw it as a sector where financial gains were more predictable and social impact was less of a concern.

But now, the tides are turning. The housing crisis has made it clear that how we build, where we build, and who we build for has a profound impact on society. This is why impact investing in real estate is more than a trend; it’s a necessary evolution. In Canada, this shift is especially important as we work to address the growing gap between the housing supply and the needs of our population.

Creating Sustainable, Affordable Communities

In this new era of impact-driven real estate, the focus is not just on making homes affordable but also sustainable. These two objectives go hand in hand. In the same way that venture capitalists have funded green technologies and socially conscious businesses, real estate investors now have the opportunity to finance developments that make a tangible difference in people’s lives. This means building energy-efficient homes, creating inclusive communities, and offering housing solutions that serve a diverse range of incomes.

At Fierbrooke, for example, our projects are designed to not only meet market demands but also to contribute to the communities they serve. We recognize that housing is more than a commodity — it’s a cornerstone of a thriving, equitable society. By aligning our investments with the principles of sustainability and inclusivity, we’re creating developments that offer both financial returns and social impact.

Balancing Profit with Purpose

Of course, none of this means that impact investing is about abandoning profit. Far from it. Real estate investors can — and should — expect solid returns on their investments. What is different, however, is that these returns don’t have to come at the expense of the communities in which we build. By focusing on projects that align with our values, we are able to deliver both financial gains and meaningful social outcomes.

One of the most exciting aspects of this shift is that impact investing is still relatively new in real estate. This creates tremendous opportunity for early adopters who see the potential to lead the charge in this new frontier. By being among the first to embrace this approach, we can set the standard for how real estate development should be done moving forward. It’s about being smart, being innovative, and being willing to invest in projects that prioritize both people and the planet.

The Future of Real Estate is Impact-Driven

As the world grapples with challenges like the housing crisis, climate change, and inequality, the role of real estate developers and investors is evolving. We are no longer just building structures; we are shaping the future of our cities and communities. And in this future, impact investing will play a pivotal role.

In venture capital, impact investing has already proven that aligning capital with purpose can lead to extraordinary results. Now, it’s real estate’s turn. By investing in developments that provide affordable, sustainable housing while still generating financial returns, we have the opportunity to drive positive change on a massive scale.

At Fierbrooke and Collège MREX, we are fully committed to leading the way in this movement. Our developments are more than just buildings — they are part of a larger vision to create a world where everyone has access to a safe, secure, and affordable home. The courses we teach are about empowerment, not profiteering. This is the future of real estate. And for those of us with the vision to see it, the possibilities are limitless.

Debt is the multifamily real estate investor’s best friend during the good times, but it can be his worst enemy in bad times.

Apartment buildings relatively stable cash flow lends itself to the use of leverage in order to maximize returns, jump on many opportunities and diversify one’s portfolio.

But one must never forget that real estate is a long term and relatively illiquid asset, therefore one’s capital structure should never go to long without the longest form of liabilities — equity.

Equity is the cushion to see you through the toughest of times and these will inevitabily and often unexpectedly occur — when playing with alot of leverage, one must master the science of turning the unexpected into the predictable, to a certain extent.

At least 3 times in the last 40 years, real estate has failed to meet the stress test of maintaining equity value when financed over 65 %, as is happening currently with compressing cap rates and increasing interest rates.

Despite this, the guru seminar industry continually strives to push the get-rich-quick and no-money down strategies without teaching proper risk management and understanding of market cycles and real estate finance.

Risk management and market cycle comprehension are way more important things to learn as an investor than over-leverage techniques. Life does not exist without death, growth does not exist without decay, up does not exist without down.

The truly successful real estate investors can navigate even the roughest of waters.

More and more people in the multifamily real estate world have been talking about an impending downturn. Consequently, this always brings up the question about leverage and what is the ideal “leverage level” if an apartment building owner wants to minimize risk heading into a down market.

Now everyone knows that I talk a lot about debt being your friend on the way up, but it can be very harsh on the way down. I have always been a debt person, but I view it as a bet, a double-edged sword. It is absolutely wonderful when you win a bet but it is equally if not worse when you lose a leveraged bet.

LTV is short for loan-to-value. If you have a 750 000$ loan on a million dollar building, your LTV is 75%.

Growth generally occurs incrementally when you win eight out of ten or nine out of ten years, but when you lose, you lose big. Despite all our statistical models, you can never be sure when those couple of years are going to come. The good thing, as you will discover later in this article, is that the multifamily market allows us a bit of time to prepare in advance, similar to hurricanes which we see a couple days if not weeks in advance versus earthquakes that remain undetectable until the hit.

DSCR is short for debt-service coverage ratio. If your property generates 1 150$ of net operating income every month and your mortgage payment is 1 000$, your DSCR is 1.15.

For the first time in history, we are seeing interest rates rise and cap rates continue to drop. We have never seen so much capital come from outside our country, and the scars of the last stock market crash are still quite tender despite a bull market. This is creating a discrepancy in the relationship between interest rates and cap rates. Therefore, the current market is a lot different because I do not think LTV (loan-to-value) is the thing to watch so much today as much as debt-service coverage. Normally they went hand in hand. That is, if you told me you had a 75% LTV, I could tell you that you had a 1.15 DSCR (debt-service coverage ratio). That meant that debt coverage was about one (1.00) if say interest rates rised from 5% to 5.75%, a significant 15% rise. Now if your initial interest rate upon acquisition was 3.75%, that same 0.75% rise would not be a 20% increase therefore turning your DSCR into a distaterous 0.95. If anything happened adverse to your cash flow (a negative DSCR) you would risk losing your property, and on top of that, if the market value fell, and you were forced to sell, you would lose not only any gains from the last 5 years but you would also lose your initial down-payment and then some.

The multifamily real estate market today is more different than ever and investors must master financial engineering and risk management. Depending on the product you bought and the market you are in, you could have 80% or 85% LTVs and coverage in the 1.15 range because interest rates were so low and cap rates had not yet ajusted to the lower interest rates. Certainly if you have 1.15 coverage, you are going to survive if interest rates stay put and cap rates don’t move or even drop a bit.

I stress the word ‘’survive’’ because if you have 80–85% LTV and a 1.15 DSCR, your cash-flow and your capitalization would at least be protected in the case of stable interest rates and slight rises in cap rates. In this case, your property would not be threatened as your ability to make mortgage payments would not have changed, only your ability to leverage your capitalization would which would simply stunt the growth of your portfolio as usually you would have pulled money out at refinancing and used that cash (coming from the refinancing of your capitalization) to purchase a subsequent property. If you bet that interest rates don’t move up and cap rates stay stable or only move up a small percentage and you are holding the property, you’ll be alright.

If interest rates rise, this is a whole other story; you will be the sucker with low cards bluffing a full house who went all in.

When interest rates rise, usually capital disappears from the market. History shows us that values fall when capital disappears. If you do not have to sell it, values recover because supply stops, income picks up, and supply lags growth, in addition to inflation and the capital returns. As interest rates dropped, lending criteria became tighter (the lender needed a better credit bureau and stronger finances) because banks could be picky due to the enormous quantity of lenders desiring to acquire and finance property.

Rising interest rates momentarily reduce demand for loans as less people wish to buy property in a rising interest rate world. However after a certain time of reduced demand for loans, banks, who are in the business of lending, must loosen their lending policies as there are fewer active investors. This ends up eventually attracting more investors because it becomes easier to qualify for a loan. Therefore, the value returns.

If you think back around 9 years ago in the United States, values were on the floor. Today they have mostly all recovered. This is generally great news for the multifamily real estate investor and it is one of the reasons why this sector of real estate is so popular and offers such strong Sortino and Sharpe ratios (risk-ajusted return on investment).

However, if the rise in interest rates was big enough to eat up your capitalization upon refinancing, the investor not only loses and potential cash needed for further acquisitions but also must now recapitalize the initial property; meaning he must now put in a second down-payment at term.

Imagine the investor acquiring a 10-unit apartment building in 2014 with only 150 000$ down. 5 years later upon refinancing, he might actually have to inject another 50 000$-100 000$ into the property if the new loan is lower than the balance of the initial loan. This can happen because the higher interest rate would negatively effect DSCR which in turn would reduce the amount of the new loan therefore negatively affecting what I call Economic Value.

I have always been a debt person, but I view it as a bet, a double-edged sword.

What happens in the case of the average over-levaraged investor or the over-zealous syndicator with poor underwriting standards ? He or she is incapable of finding another 50 000$ -100 000$, as he or she had assumed that he or she would be pulling money out of the refi’ in order to buy a second property and has already put all of his or her money in the initial down-payment five years ago. This would therefore result in the loss of the property or a liquidation event; a rapid discounted disposition. Imagine this scenario in the presence of an insured loan with all it’s fees or a syndicated deal with all it’s fees, someone will be losing out and it will not be the bank nor the syndicator (financially at least, on the flipside his reputation will be destroyed among his limited partners).

Most investors think that it is a given that they can just weather the storm. But in order to weather the storm and be ready to jump on offense when they come out of it, the key is DSCR not LTV. Every multifamily property investor should be calculating DSCR in case of a higher interest rate at refi at least bi-annually or even quarterly. This would in turn give the investor the time to turn the boat around by either increasing revenues or reducing expenses, by re-orienting capital from other projects or investments or by finding cash partners to come in and help recapitalize the property in exchange for shares.

This is why I stress that multifamily real estate investors learn multifamily financial engineering and portfolio risk-management.

Remember, offense is great fun and very exciting, but defense wins championships!

Don’t forget to follow me on LinkedIn, Facebook and Instagram!

Plusieurs d’entre nous pensons, à tort, qu’être courtier immobilier signifie uniquement la routine suivante :

• installer sa photo sur des dizaines de pancartes à travers une ville, sur les bandes entourant la patinoire à l’aréna, sur le dosseret du banc d’autobus et dans le journal local;
• passer ses soirées à visiter des dizaines de « bungalows » avec des jeunes couples et négocier sans fin pour réduire le prix de vente de quelques milliers de dollars tout en allant chercher quelques inclusions de plus;
• se garder occuper pendant des heures et des heures lors de visites libres le Dimanche après-midi;
• se promener entre les dizaines de groupes de réseautage tel que les BNI, les chambres de commerce et les 5 à 7.
• faire du porte à porte le Samedi matin afin de distribuer « son calendrier » à tous les résidents du quartier.

Dans le monde des courtiers immobilier qui ont trouvé une niche auprès d’investisseurs immobilier multilogements, c’est tout le contraire! La routine de ces courtiers immobilier qui se concentrent davantage sur le multilogements ressemble plutôt à ceci :

• La majorité du travail du Lundi au Jeudi de 9h à 19h et le Vendredi de 9h à 15h;
• peu ou aucun travail la fin de semaine;
• aucune visite sans l’acceptation d’une promesse d’achat;
• aucune visite libre;
• aucun « homestaging » ni de photos dispendieuses.
• peu ou pas d’émotions et de coups-de-cœur, beaucoup de logique et de chiffres, une mentalité d’affaires;

Par contre, les investisseurs immobilier sont d’une espèce différente. Ils ne tolèrent pas une mentalité transactionnelle, c’est-à-dire la manière d’être du « bon vieux courtier » avec ses paroles de « vendeur de voitures usagées ». Être une machine à lister des mandats de vente dans l’immobilier résidentiel est souvent la voie de la réussite.

Dans l’immobilier multilogements, c’est le courtier qui saura agir avec une mentalité de fiduciaire et qui agira à partir d’une vision de réussite à long terme qui saura inciter l’intérêt des investisseurs immobilier et bénéficiera ensuite de leur fidélité qui est le fruit de leur niveau d’activité transactionnel constant et continuel.

En ce moment, les investisseurs immobilier sont mal desservies. Peu de courtiers immobilier ont décidé d’en faire leur niche, et plusieurs ont tenté sans succès; faute de connaissances et de compétences, soit le « savoir-faire » et le « savoir-être ».

Voilà une belle opportunité pour la nouvelle génération de courtiers immobilier!

Ceux et celles qui sauront croître leur « savoir-faire » et développer leur « savoir-être » seront libres de puiser dans une clientèle de haute qualité qui leur offrira la chance de démontrer toute leur expertise à travers des dizaines et centaines de transactions de plex (2 à 4 logements) et de blocs (5 logements et plus).

Sur une période habituelle d’un an au Québec, il y a plus de :

• 2 milliards de dollars ($ 2G) en transactions multilogements;
• 100 millions de dollars ($ 100M) en commissions potentielles;
• 4 000 transactions qui nécessitent l’expertise de véritables professionnels, ce qui représente en réalité 8 000 cotés de transactions (4 000 du coté de l’acheteur et 4 000 du coté du vendeur).

Encore en 2017, une grande partie de ces transactions sont faits « à la bonne franquette » de gré a gré. Seulement le tiers (environ) se trouve sur Centris.

Il ne reste qu’à vous, cher courtiers immobilier, de développer votre expertise et ensuite de la diffuser convenablement.

Vous pourrez ensuite chanter la version améliorée de la fameuse chanson 99 problems de Jay-Z :

« I’ve got 99 problems, but making hundreds of thousands of dollars helping real estate investors buy and sell apartment buildings ain’t one ».

Mais n’oubliez surtout pas, plus vous vous concentrez sur le « cash » au bout du fil, moins vous serez un fiduciaire. Moins vous agissez comme un fiduciaire, moins vous aurez de succès auprès des investisseurs immobilier.

Vous devez être capable de démontrer un niveau d’expertise impressionnant quant à l’ingénierie financière (les mathémathiques) ainsi que d’être un maître-négociateur. La véritable valeur qu’apporte un courtier immobilier dans une transaction multilogements est d’agir comme médiateur, d’être la colle qui tient le « deal ».

À partir de la soumission de la promesse d’achat initiale jusqu’au processus de vérification diligente (financement, inspection, tests de sol, expertises etc), un expert courtier saura « garder la rondelle en jeu » là ou la partie aura pris fin normalement entre deux particuliers.

De plus, vous devez être un ninja du marketing. Remarquez ici que je ne parles pas d’être un bon « vendeur ». Au contraire, vous devez maîtrisez toutes les nuances du marketing par permission et surtout oubliez la culture de vente maintenant désuète.

Si vous n’êtes pas un génie des chiffres liés aux investissements en immobilier et que vous n’êtes pas un meilleur négociateur que votre client-vendeur ou que votre client-acheteur, pourquoi voudraient-ils faire appel à vos services ?

Pour lister leur immeuble à vendre ? Je ne crois pas, l’internet a enlevé cet avantage aux courtiers.

Pour leur trouver un immeuble à acheter ? Encore, internet a mis beaucoup de pouvoir dans les mains des particuliers.

Bref, l’internet a fait bien des ravages. Révolue est le temps où tout le data et tous les listings résidaient dans une voûte privée contrôlée par la communauté des courtiers. Les investisseurs font partie d’une population généralement plus allumée et à jour.

Si vous, en tant que courtier immobilier, avez 2 milliards de raisons pour vouloir vous concentrer sur le marché multilogements, vous devriez en échange offrir bien des raisons à ces acheteurs et vendeurs aguerris de faire appel à vos services!

Le programme CMS (Chartered Multifamily Strategist) donnée par le Collège de la MREX lance une première cohorte de 25 courtiers le 20 janvier 2017. Pour placer votre nom sur la liste d’attente et vous inscrire à cette cohorte ou à une des prochaines, visitez le https://www.facebook.com/events/501710570015005/

Défier le statut-quo est tout aussi important en immobilier qu’en affaires. Réfléchissez à pourquoi vous faites certaines choses et surtout réfléchissez à la validité des doctrines qui vous sont poussées.

Voici une histoire qui pourrait vous aider à réaliser combien on avale n’importe quoi parfois, lorsque des figures d’autorité nous proclament leur vérité :

Des chercheurs ont placé 5 singes dans un enclos.

Au milieu de cet enclos, ils ont placé une échelle menant à une banane perchée au sommet.

Chaque fois qu’un singe montait sur l’échelle, les chercheurs arrosaient les 4 autres singes avec de l’eau très froide…

Après un petit moment, chaque fois qu’un singe essayait de monter sur l’échelle, les 4 autres l’empêchaient d’atteindre le sommet et allait jusqu’à le battre violemment.

Après un bout de temps, les 5 singes n’avaient plus le courage de tenter de grimper l’échelle pour aller manger la banane.

Les chercheurs ont ensuite substituer l’un des singes par un nouveau singe. La première chose que le nouveau singe a tenté de faire, vous l’aurez deviné, c’est d’escalader l’échelle afin de manger la banane. Les 4 autres singes l’ont alors attrapé et battu avant qu’il ne puisse atteindre le sommet…

Après quelques essais (et raclées), le nouveau membre n’avait plus l’envie de monter l’échelle.

Les chercheurs ont ensuite substitué un deuxième singe de la quintette originale.

La même chose qu’est arrivé au premier nouveau singe s’est donc reproduite.

Le premier singe a également participé et a aidé ses compagnons à frapper le deuxième nouveau singe lorsqu’il a tenté de grimper l’échelle.

Une fois de plus, les chercheurs ont substitué un troisième singe. Ils ont pu observer le même résultat.

Et puis, ils ont substitué un quatrième singe, avec toujours le même résultat.

Finalement, ils ont substitué le cinquième singe… Ce qui voulait dire que dans le nouveau groupe, aucun des singes n’avait reçu une douche froide lors de la quintette originale. Malgré cela, les agressions étaient répétées dès que le cinquième singe tentait de monter l’échelle…

Il est impossible de communiquer avec ces singes afin leur demander pourquoi ils répétaient ce comportement, mais leur réponse aurait très bien pu ressembler à ceci : « Je ne sais pas, c’est la façon dont les choses fonctionnent ici ! »

Est-ce que cela vous semble familier ?

Ne manquez pas l’opportunité de réfléchir à ceci lorsqu’une personne vous proclamera une thèse qui semble être trop beau pour être vrai.

La première loi qui régie la réussite en investissement immobilier est l’éducation.

Vous devez investir en votre éducation. Mais pas aveuglement. Vous devez réfléchir et utiliser la logique, à défaut de devenir un autre singe de l’immobilier.

Et lorsque les marchés sont moins cléments, ce sont les singes-investisseurs qui s’effondrent.