July 25, 2020

JF2153: Canadian Market With Natalie Cloutier


Natalie works with Transport Canada full-time and is a part-time real estate investor. She started investing in 2014 building her first home from the ground up with no money down. If you are curious about the Canadian market this episode will give you some insight to how she invests in Canada. 

Natalie Cloutier Real Estate Background:

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Best Ever Tweet:

“Real estate investing is not easy, you have to be willing to put in the work and hustle.” – Natalie Cloutier


Theo Hicks: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. My name is Theo Hicks, and today we’ll be speaking with Natalie Cloutier. Natalie, how you doing today, and how did I do with the pronunciation?

Natalie Cloutier: You actually did it perfectly except for my [unintelligible [00:03:15].22] you know. It’s fine…

Theo Hicks: How do I pronounce your first name?

Natalie Cloutier: It’s Natalie; it’s fine.

Theo Hicks: Okay, perfect. So how are you doing today?

Natalie Cloutier: Good, how are you?

Theo Hicks: I am doing great. Thanks for asking. So before we dive into our conversation, a little bit about her background – she started investing in 2014, building her first home from ground up with no money down. She currently works for Transport Canada full-time, currently holds 13 doors, most being new builds with one BRRRR, based in Ottawa, Canada. You can say hi to her at a robnatbuildingwealth.ca. So before we get any further, do you mind telling us a bit more about your background and what you’re focused on today?

Natalie Cloutier: Sure. So my background is I come from a family that did a lot of these new builds, and that’s where I learned most of what I do today. My husband and I both met in college while we were studying Architectural Technology, and that’s how we got started. We bought a condo, decided it wasn’t for us, and then we decided to build our own house using no money down, which is a special kind of loan that we can talk about later, and then we house hacked that and we kept going with that same special recipe. Over time, we’ve acquired a total of 16 units, but we sold three last year, and right now, there’s not much going on. We’ve just finished our first BRRRR and we are getting ready to build a fourplex in the next few months. So that’s where we are today.

Theo Hicks: Well, thanks for sharing that. So let’s talk about that no money down new build loan. Can you tell us about what that loan program is?

Natalie Cloutier: Sure. It’s funny because it’s a loan that not a lot of people know about, but my parents got us into it because they were doing that type of loan about 30 years ago when they first started. They built four houses in four years. It really is called an auto construction loan. So what it allows you to do is to use your labor as your downpayment. So instead of putting the traditional 20% down payment, you can do a lot of the work yourself in order to save that money, and the bank will consider that your down payment.

So just to give a quick example with easy numbers, let’s say, the blueprint of the house you want to build was valued at $100,000. The bank will say, “Okay, well, we’ll loan you 80% of that value, and it’s up to you to build it for that amount.” So they give you progressive draws as you progress in the construction, and you build it with that amount. If you go over budget, well, it’s up to you to cover that cost, and if not, if you actually come in under budget, well, you can just pocket the difference. So it really allows you to get started with a house that’s at 80% of the market value with no money down, and then by house hacking it, you can add value and refinance and do the traditional financing that other investors do, but that’s the gist of an auto construction loan.

Theo Hicks: Is this something that just Canada does or is this in the US as well?

Natalie Cloutier: You know what? That’s a great question. I’ve been trying to figure out if that happens in the US. This is something that’s typical to a local credit union that we have here. I haven’t found them in other banks. They do do it, but it’s usually comes with a lot more strings attached. It’s a little more complicated than that, but this credit union is really great. You can do it in the States, but I usually tell people the best way to achieve it is through a private lender and treat it as you would a BRRRR. Instead, just build with a private lender and you even get a private lender that will give it to you in progressive draws. So you only pay interest on what you borrow as the construction progresses, and then when the construction is over, then you can refinance and get your money back and get your mortgage in place. The only thing I would say about investing with new builds is that you need a specific market that really works. So it has to be a market where the cost to build will be less than the cost to buy. So if you’re in a market where you can get a house for 150k, chances are it’s going to cost you more to build it. So then it’s not really worth it. Here in Ottawa, the values, especially lately in the past few years, values have been going up a lot, so it’s been really advantageous to build a property because you know that the market value to buy the same house or building will definitely cost you more than it does to build it because the building costs are always about the same. No matter the market, a house will always cost you about the same amount. So yeah, you need a typical market to make it work, but it’s a great way to do it, especially in a high market when it’s very hard to find deals. This is our way to take control of our investments and create our own deals.

Theo Hicks: How do you find out if you’re in a market where the cost to build is lower than the cost to buy? I guess you need to find those two metrics. So how do I find those two metrics?

Natalie Cloutier: That’s a great question. You can probably just talk to an appraiser in the area and you can get their take on it, but usually, you know there are some parts– let’s say you’re in an older market. I don’t know, I’m just– I’m gonna stay Canadian here… But let’s say you’re in Saskatchewan in a rural part, where houses are going for really, really cheap. Well then if you can buy a single family home for $100,000 or less, it’s going to cost you way more to to build it, so then you know it’s not worth it. But if you’re somewhere in Vancouver, where houses are like a million and you go somewhere you can find a piece of land for like $100,000, the price to build a house is probably going to be about $350,000. So you know that then that’s worth it. These are extreme examples. If you’re in a market where you’re not too sure, then just have a set of plans done, get it valued by an appraiser and then you’ll know if it’s worth it for you or not.

Theo Hicks: Perfect. Thanks for sharing that. So after you build these properties, what do you use them for? Have you been consistently house packing every property, or are they used as rentals? Are you flipping them?

Natalie Cloutier: They are all rentals. Our strategy, we call it build and hold. So we’ve done one house hack, where we still live in today, but all the rest, we have just done build and hold. There’s three that we sold last year just because the market was really high, and these were underperforming properties, so we decided to get rid of them and use the money towards better cash-flowing properties. But most of our units are small multi-families, maybe duplexes, fourplexes and we’re holding them for as much as we can. We’re trying to build up our cash flow so that I can join my husband full-time in the business. He’s full time since 2018. He’s building, he’s doing a lot of the work himself, so it’s not like he’s not working or retired. He just replaced a job with another job I guess, but I would like to get there with him as well one day. So our main focus right now is long term, build and hold and cashflow.

Theo Hicks: Perfect. Do you mind walking us through on one of those deal that you sold, the numbers? So how do you found the land or the house that you knocked down to build, the cost of building, why you built that specific type of property, what you rented it out for, and then what you sold it for?

Natalie Cloutier: Sure. Gotta find one… So this one, we found a lot — we were just driving around and  there was a sign on the street; so it was an MLS listing. We were interested in it because it was a smaller lot on a little busy road, and I think a lot of people weren’t interested in it because we’re outside of Ottawa, so we’re about 20 to 30, 40 depending on where we’re building exactly; we’re in the outskirts of Ottawa, so usually when people move outside of the city, and they’re looking for a vacant lot it’s because they’re looking to build that dream home on a quarter-acre property or more. So we’ve had a lot of success finding these smaller lots that nobody really wants that are maybe awkward, that could have an issue building on. So they’ve been really great for us.

This specific lot, there was a small garage on it that needed to be torn down, and there was also an old well, and it was between older homes that weren’t really nice to look at. So we bought the property. I think the land was– we bought it for $45,000, which is really good because in our area, everything goes for over $80,000 for a vacant property. So we bought that and we built a single family home, two-story. I don’t have the numbers for construction in front of me; this is back in 2017. I believe we built it for about $220,000 give or take – don’t quote me on that – and that includes the land, and… It might have been more than that. But anyways, somewhere around that and we rented it for $1,700 a month, but it wasn’t a good cash-flowing property. I think we cashflowed maybe $100 a month, but we ended up selling it last year. We sold it for– what did we sell it for? We sold it for $308,000. Yeah, it’s $308,000. So it was a good flip property if you look at it that way. It wasn’t our intention to do it, to sell it within a year or so, but we made a good profit on that one.

Theo Hicks: Thanks for sharing those numbers. Switching gears a little bit here, I guess a lot of it… So your husband works in the business full-time, and then you are working full-time, so what are some tips you have for other investors who are just starting out, and they are working a full-time job while also trying to grow a business that is big enough to replace their full-time income? What advice would you give that person?

Natalie Cloutier: Well, you know what, we’re still figuring that part out too. So it’s a lot of work. Real estate investing is not easy. You’ve got to be willing to put in the work to hustle. The best thing I would do is just make sure that you have a business plan in place. One thing that we’re actually struggling with ourselves is separating the roles and responsibilities of who does what, and it’s something that it’s really important to do, because you can find yourself fighting over the little details that is a waste of time. You’re fighting because he’s doing that, when typically it’s my job or whatnot…

So I think it’s really important to separate the roles and responsibilities so you can avoid conflict and so that you can be on the same path together. But mostly, I would probably say too– the hustle is good, but take the time to relax and celebrate the small victories, because if you work yourself to the bone like we have… We’ve done this in the past, we’ve worked crazy, busy hours, and at a certain point, it does affect your health, both physically or mentally, and it’s really important to take the time to celebrate and relax, and make sure to give yourself some business hours, too. After a certain time, you’ve got to shut off the computer, shut off the emails or shut off the rehab, or else you’re just going to slow yourself down. It’s going to be harder for you to achieve your goals. So I think finding that balance is a real challenge that honestly, I’m still figuring out myself, but I think that’s a few things that we’ve learned along the path, so hopefully that can help some people.

Theo Hicks: Oh, yeah, I think it definitely well. Okay, what is your best real estate investing advice ever?

Natalie Cloutier: I would say, write down a mission statement for your business; it’s different from a goal. A goal can usually change and probably will change as an investor, but if you have a mission statement for your business, that mission statement should bring you back to your core every time you’re faced with a tough decision.

Just an example of that, recently, we were shopping for our first BRRRR. We almost bought a fiveplex that probably would have cashflowed about the same as the duplex BRRRR we ended up buying instead… And the only reason we were looking at is because we wanted to be able to say that we added five extra units in our portfolio in one shot, when really that wasn’t the important thing.

What’s important is not the number of units you have, but the cashflow they generate. So our business mission was really just to provide a great service to our tenants and a great quality product, too… So we ended up going back to our CMA and realizing that that fiveplex, there wasn’t much — it was a lot of [unintelligible [00:14:56].17] units; it was a lot of value add to it. So we went back to “If we can’t give a good quality product and good quality service, then the duplex was a better choice”, and in the end, I think it was, because the numbers made a lot more sense with the duplex than the fiveplex did. So have a mission statement and think about cashflow and not number of units.

Theo Hicks: Are you ready for the Best Ever lightning round?

Natalie Cloutier: I think so.

Break [00:15:20]:07] to [00:15:58]:04]

Theo Hicks: Okay. What is the best ever book you’ve recently read?

Natalie Cloutier: So this is a Canadian book, but I think there’s a lot of value to it, even if you’re in the States, and it’s called The Secrets of the Canadian Real Estate Cycle by Don Campbell. This book was really helpful because it helps us get into the mindset of preparing for market downturns. It talks about how to think about as a strategic investor, and think of stuff that’s going on in the market and how to predict how the next cycle is going to come up or when it’s going to come up, and we’ve got a lot of value from it, and I think I’m actually going to read it again, because I think the second time I’ll read it, I’ll get a little bit more out of it… But I definitely recommend that book.

Theo Hicks: If your business were to collapse today, what would you do next?

Natalie Cloutier: Oh, God. I think that I would repeat the same steps we’ve been doing, focus as a passive investor and try to– I’m a big believer of lowering your personal expenses and FIRE movement and trying to get your financial independence. So I would do the same thing all over again, because I think that it truly is the best way to get back on track. I would make sure that I learned whatever mistake I did make to get my business to collapse. I will write down notes, I will make sure that I’ve learned from it and I won’t repeat it. But definitely just keep focusing as a passive investor. I think that’s just the best route to take.

Theo Hicks: If you don’t mind, tell us about a deal that you lost the most money on. How much you lost, and then the lesson you learned?

Natalie Cloutier: There’s not really anything that we’ve lost a lot of money on, but I can say that the deal where it was the least lucrative, I guess, is the first property we ever bought, which was a condo. We bought it right out of college, and we learned that a condo outside of a big city does not appreciate very fast; however condo fees do. So condo fees kept going up and we learned that there’s a lot of back-story to that property, but we rented it where the cashflow was negative $300 a month, and then when we did sell it this year – we sold it on February 1st – it sold for maybe 20 grand more than when we bought it six years before. So yes, we had paid down our capital and we did end up walking away with some money, but definitely wasn’t worth the time and effort we had put into those six years. So that’s one property that we’ll try to never repeat again.

Theo Hicks: What is the best ever way you like to give back?

Natalie Cloutier: Sure. I love that question. So there’s two ways we love to give back. We love to encourage local businesses, and we do have this one charity where we donate to regularly. One way that we encourage local businesses is by hiring just all the local trades. We don’t go outside the big city. We stay in the local trades in the town and we order all our lumber and materials from the local lumberyard.

I also give these welcome baskets to our tenants when they first move in and I try to incorporate little baggies or gift cards or business cards from local businesses, especially if it’s for tenants who are outside of town and they come in and they get this basket with all of local businesses. It’s a nice welcome community feel.

The charity that we like to donate to is an animal rescue charity. So again, a local couple about my age, they rescue and rehabilitate domestic and exotic animals, and they go across country and telling people about  responsible pet ownership. And we’ve helped– we’ve donated their flooring when they moved into their new facility, we’ve helped paint, we’ve helped to raise money for them on certain occasions, and it’s a great charity that really holds true to us. So that’s one charity that we absolutely love to donate to.

Theo Hicks: And then lastly, what is the best ever place to reach you?

Natalie Cloutier: The place I’m the most active on is Instagram. My handle is @rn.properties. I also just started a blog recently and that’s robnatbuildingwealth.ca.

Theo Hicks: Perfect. Well, thank you for joining us today and walking us through your journey and providing some of your best ever advice. A few of the big takeaways for me is this no money down new build loan. I never heard of that before. It’s called the auto construction loan that you get through a local credit union, and essentially you are able to use your labor as the down payment instead of putting 20% down. So the bank will loan 80% of the cost, and then as long as you can build it for 80% of the cost, then you don’t have to put any money down. If you go over budget, you had to pay it, but if you go under budget, you get to keep the money. You talked about your advice for new builds, which is to find a market where the cost to build is lower than the cost to buy, and so you can get that through talking with local appraisers in the area. You also walked us through an example deal that you bought, and then you gave us some advice on working full-time while also trying to become a real estate investor, and that was to make sure you have a business plan in place, make sure you are separating the roles and the labor that needs to be done so you know who does what, and then making sure you take the time to relax and celebrate the small victories.

And then lastly, your best ever advice, which was to make sure you write down a mission statement for your business, which is not the same as a goal; a goal will change year over year, month over month, maybe even day over day, but a mission statement will always stay the same, and it’s the thing that you go back to whenever you are in a sticky situation. So again, thank you for joining us today. Best Ever listeners, as always, thank you for listening. Have a best ever day and we will talk to you tomorrow.

Natalie Cloutier: Thank you so much for having me.

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