Scott Dillingham: 0:22

Welcome back to the wisdom lifestyle money show. I'm your host, Scott Dillingham. And today I have an awesome guest with us, Tom McCormick. Welcome, Tom.

Tom McCormick: 0:29

Hey, thanks for having me. I really appreciate it. It's been a long time coming.

Scott Dillingham: 0:33

I'm excited. Yeah, I'm really excited because there's so much talk about Canadians wanting to invest in the states and you're actually doing it, right? and so that's that's what I love and I'd love to hear more of your feedback and just different angles and stuff, but before we get into that I just want to know like how you got to where you are now. So do you mind sharing your, your story?

Tom McCormick: 0:52

Yeah, absolutely. So I got into real estate back in 2020 around the COVID times, right? There's a, there's a kind of uncertain time to jump in, but I was sick and tired of sick, being sick and tired with like the day job as a side note, I'm an engineer by trade. I took mechanical aerospace at the university Windsor. Then I got more into the automotive, go figure planes to cars, but I, I realized that My, my salary isn't necessarily guaranteed, especially with COVID times, and I almost got laid off and just the uncertainty of everything made me really want to hop into the market. And what catalyst actually, and I got to give kudos was to my brother. He actually had bought a duplex near the university. And I said, heck, my little brother, mother's doing this. Then I need to, I need to step up my own game because I'd wanted to for such a long time. It's just, I, I spent my money in on more experiences, but it was about time to. I had to really invest myself into into my future.

Scott Dillingham: 1:49

That's awesome. That's that's crazy. So then what was your

Tom McCormick: 1:51

first purchase? Yeah, good question. So I bought a single family and I, and I thought to myself, I've heard of house hacking. How can I make this work? So I don't have to pay my own mortgage. And I actually, I jumped to the deep end and I made an ADU, an additional dwelling unit. So it was, it was actually a project that I, I picked a very terrible property. Honestly, I could have chosen a lot better because I didn't really know what I was looking for and I didn't really understand all the requirements, but I said, you know what, I'll fail forward and I'll figure it out. So I gutted this thing completely to the studs and I put in a lot of sweat equity initially because I quickly ran out of money to pay people. So I had to figure out. Ways to raise capital as well. So my first investor was actually my father to give me a little extra injection so that I could complete actually my basement unit and actually start cash flowing slightly. So it was a good experience. I learned a lot how the city works to and I, as an engineer, I I dug into the code to just to make sure I really understood it in and out. And that was a good project to get my feet wet. And it gave me confidence for future projects like flips and stuff like that. Later on.

Scott Dillingham: 3:02

Yeah, no, that's, that's awesome. We actually have a very similar story, slightly different, but like I yeah. So I went to a rich dad, poor dad class and I went to wholesaling and rent to own. So I found this investor who said, look, you find me a property, I'll buy it and then we'll split 50 50. So I'm like, okay. So I found this terrible property. I lived in Sarnia at the time. And I found this terrible property. I bought it for 56, five. And when I got the offer, I presented it to him and he, he ran away. He was gone and I'm like, what? And I did a cash offer too. Cause I'm following this guy's instructions, right? Like how to secure these deals. So he ran away, but the, the property needed everything. So I went to the bank and I did a, like a construction loan on this. Property. Okay. So I had the, the lender finance everything and the renovations and that's, that's exactly how I started. So I put in at the time, like almost what I paid for the house. We redid everything and, but I learned cause I had to do everything in the house. So it set me up for the future projects after that.

Tom McCormick: 4:11

Man, that must have been daunting, but yeah, it sounds like you made it happen.

Scott Dillingham: 4:14

Yeah, yeah, no, it works really, really well. So we had roughly a hundred into it. And when we sold it, it was like almost for 300. And that was like, now it'd probably be four maybe even a little higher

Tom McCormick: 4:26

nowadays

Scott Dillingham: 4:28

still. So it was awesome. But, but yeah, no, that's, that's great. So that's, that's cool. So then from there, right. So you started in, in, in Windsor it's during COVID time. How did it trigger to like invest in the

Tom McCormick: 4:40

States? Well, great question. I was actually at this time since around 2017, I was actually working in the U S as an engineer. So I got fortunate enough to, to be able to hop the border and make that U S dollar. That's the best raise. I always joke that I ever got because I made at the time, 1. 3 cents, which is like a 30 percent raise, and now it's even a little bit more, but because I already was working in the States, I understood. The so some of the Detroit market and I already had my SSN and bank accounts and I was building my credit. So my foot was already in the door and I saw some, my actual friends who are also already us citizens over there doing deals. So I thought, well, maybe. I can I can do a cross border since it's so close to Windsor. And, and because of that, and as too, it's like in Canada, there's a lot more tax and it's the price per door is a little higher. The landlord laws are a little bit more lacks here in terms of getting tenants out of you have to, unfortunately. So there were many reasons why I was looking to hop across the border. And because I worked there, I think it may be a little less scared to actually take the leap because I understand a lot of investors or people who are thinking of investing outside of the country are a little fearful and rightfully so, but I think I was already. Sensitized to the fact that the U. S. isn't actually that big of a hurdle to, to get into. So,

Scott Dillingham: 6:08

yeah, it's, it's so similar. And you're right. That's, that's our number 1 question. Like, we, we are actually talking to more Canadians that want to buy in the states than Canadians that want to finance properties here. I wasn't anticipating that shift, but that's, that's how it's happening. And you're right. It's, they're fearful of it, but it's, there's not a lot of steps. You want to set up an entity ideally. Yeah. So that's good to go. And then, yeah, find your strategy. Right? Are you flipping? Are you buy and hold? Like, what are you doing? And then find your team. And then it's done.

Tom McCormick: 6:43

Yep. And especially when you have someone like yourself to walk you through the process and then do your your financing, I think, then you're in good hands and you can rest easy because I know when we started out, we also didn't have all the answers to questions, but we said, you know what? There are people in our network. There's people like you, Scott, who can guide us. So even if we, Okay. Aren't perfect or our structure is not the craziest GPLP structure, whatever it has to be, we can still at least start. And it's, it's something you just got to take action. And so that was our, our model. We said, okay, let's just have some speed here. And like I mentioned earlier, we'll fail forward. If we do like we weren't planning to fail, but in case it does. No problem. We'll learn from it and we'll continue on.

Scott Dillingham: 7:27

That's the best way. That's the best way. So I know you purchased a property in Detroit, right? As a flip. Can we talk about that? Like, how's that going? Maybe share some numbers on some potential

Tom McCormick: 7:40

returns that you guys are looking at. Absolutely. So actually this is one you helped us finance and I really appreciate you doing this because I'll tell the listeners this was actually a crazy monster of a deal, not in terms of just being big, but in terms of complexity, because this property we bought was really dilapidated in Detroit, you'll find that certain houses almost seem like they need to be condemned for lack of a better term, their shells or they've been abandoned for quite some time. So they need sometimes structural repair or they need A lot of like exterior work and maybe got a recess or some Joyce and raise the floors. So, in our case, we bought this property. In the north end. So if you have the center of Detroit, you go about 10 minutes north and you're in the north end. So this is still like a C neighborhood. It's becoming gentrified. We're not first shovels in the ground, which is great because you have a tough time making comps or knowing what your air v is going to be, but we saw that this area in the north end was actually promising. And we got this property for 75, 000. Originally it was listed for hire, but. Based on some appraisals that we did, we were able to haggle them down and we worked with them and we actually had two extensions and Scott saved us on those. He was fighting for us trying to find us the proper lender to actually take on this project because we had some issues in the fact that the property itself costs less than the renovations would be. So our renovation budget currently is approximately in that a hundred K zone. And so that's, that caused some. Some concern with the lender saying, well, we don't know if we want to fund this. So you need to bring more down payments or some lenders completely just walked away because they don't like Detroit. And also they said, well, you haven't flipped a whole ton in the U. S. yet. So we also don't like that. You're not. Super, super experienced. Mind you, we've done some stuff in Cleveland, but it's in process, so we still didn't have those kind of three, four deals underneath our belt that would allow us to get those better financing terms and open the flood gates to other lenders for sure.

Scott Dillingham: 9:39

And, and, and you, you're right, it's tough and I just wanna like, so what that's called. It's called an upside down loan. So that's when your renovations are more than your property's value. So those are absolutely the hardest on a flip because for the financing anyways because lenders. They're looking at like, is this actually a property we want to do? So it's not that there's not lenders that do it, right? There, there is, but there's just less of them. So be considerate of that. Especially cause I, I get a lot of clients that are calling and they're saying, Hey, what, what's the rates? What's the loan to values? What's this all going to look like? And in a perfect scenario, right? The numbers are fair and they work. But when you when you work with an upside down loan, right? It does change things, right? I know you guys need to put a little bit more money down than you would have traditionally if the renovations were smaller. So that had challenges. But, yeah, we're able to do it, which is, which is great. Can you share about like some of the renovations that you're doing to the property or potential returns at the end of it when you, when you guys do sell? For sure. So

Tom McCormick: 10:48

in, within this kind of a hundred K budget, it's looking like we're actually going to come on pretty, pretty close to the actual estimated budget, which is great. We're, we're actually, like I mentioned earlier, we're going to resister some Joyce, which means that we're going to do some work to the structure. So the main floor had a little bit of sag, so we have to just jack that up a little bit. So once we get the structure done, that main framing, the house will be solved to build on. So that's been the biggest cost driver. About actually, we're nearing 15, 000 on that one specifically, and this is in US dollars. And then we have a whole new bathroom that we're adding. So this is going to be a four bed, three bath. So we're going to add the additional bathroom to add a lot of value. And What we're also going to do is we're making it slightly open concept. Usually Detroit homes are pretty great in terms of having a nice kind of big living room and dining room connected, but we have a kitchen off to the side, which we're going to make into one cohesive space. We do have to do a little bit of electrical as well because the previous tenant or previous owner. It looked like a bomb hatch job, to be honest with you. Oh, man. Really unsafe. And, and, there's, there's a little bit of novelty to it. So we said, well, since it's already gutted, let's just rewire the whole place. So it's the framing and the electrical that are going to cost the most. And then after that, it's the additional bathroom and then kitchen. And once we do that, we can save a lot of the second floor. The second floor is a lot of plaster, so only a slight repair job. And then on top of that, classic paint and some some vinyl flooring on the second floor. We're going to actually re, refinish the, the wood on the main floor, just to keep that classic Detroit feel. Because the last thing I'll say about that is a lot of people in Detroit, they, they seem to like that older vibe. The, the kind of the classic Detroit feel with the nice wood staircase. And wood trims. So we're trying to keep that, keep that alive. And

Scott Dillingham: 12:49

that's awesome. And you can't, you can't find wood. Like I guess you could at a cost, but you really can't find wood like that. So it's, it's good that you guys are preserving it as opposed to covering it or gutting it. So no, that's super cool.

Tom McCormick: 13:04

Yeah.

Scott Dillingham: 13:04

So when do you anticipate? You, you can

Tom McCormick: 13:07

sell it. Like, do you have goals lined up for that? We do. Yeah. So we're targeting the spring. So basically our drop dead date for having this project completed is Easter. So once we have that done, that'll mean the project was about four months, four and a half months, which is actually pretty good. And then we expect it to be on the market though, for another kind of two months. So we want to factor in that they could sell sooner, but we want to factor that into our budget and be a little conservative And I should mention actually, ARV right now, we're projecting around that 260 to 270 zone conservatively. So that's pretty decent a healthy profit for us and our investors. And we saw actually a comp that was actually around three 15. However, that's an outlier. So I don't want to guarantee that to anyone, but that'd be great. Like great Sherry on top. If that did push up to the three hundreds, but usually it's in that kind of mid to high two hundreds in this area of the North end,

Scott Dillingham: 14:05

for sure, for sure. And that's awesome. Well, hopefully you never know. In spring too, there, there might be more sales too. So. Help bring up the values. Now I think another key part that you've talked about here is you keep talking about investors. So obviously you brought partners to the table and I know that there's many more projects that you're looking at and you're looking for more partners. So can you talk about that? Like about the partnership with you and how that works and maybe some of the things that you guys are looking at next.

Tom McCormick: 14:36

Yeah. So on this project, along with the project we've done in Cleveland as well. We've always had some partners because it's easier to go further with people. People help you scale and it's great to lift others up with you as you go. And eventually me and my brother we did, we're doing all these deals. We ran on money pretty quickly, just in, in certain, certain avenues that we've already deployed. So how do we keep buying properties? It's who partners. And so what we've done is on this Detroit, when we gave 50, 50 split they come with a chunk of the money and we will manage the project, manage the contractors, source the deal manage the corporation and the taxes. And we also brought a little bit of construction finances as well just to get us to that first draw. So we, cause we know it, it's, it's easier to partner with someone when you both of you actually have skin in the game. Instead of purely saying, okay, you bring the full 75, 000 amount. And then they say, well. It feels more fair that way. If we, we chip in a little bit too. So 50, 50 split on this one and returns again, 50, 50. And we're looking forward to doing more of them as well. Because I think in partnerships, you want to have everything as equal as possible because then no one's sour on the deal. No one's kind of thinking, ah, did I get gypped? Everyone kind of everyone's happy and that's our goal, right? Because we, we want to build a relationship in the well deeper. So we can do more deals in the future together, not just a one and done.

Scott Dillingham: 16:06

So, yeah, I love it. And even you guys acquired financing too, which did require less capital from the investor who is partnering with you. So that's, that's super cool too. No, that's, that's awesome. So do you have any projects lined up? So say I'm listening to this. I want to go in the States, but I, I haven't built up enough confidence or set up an entity or just done certain things yet. So it's easier for me to partner with you on this and bring some money into the deal. So what do you have coming up or that you're looking at? That may be somebody might jump on

Tom McCormick: 16:40

what might be interesting to hear. We actually have a mixed bag. So we have two flips where we were looking at just out the other week that I walked, had some great numbers on it. And this would be similar to to this angle with property that we were just talking about around that 60 to 75 K zone. And again, usually returns within the six months. That's kind of the, the project timeline. We have actually some bigger ones. Now we walked a couple shells. So I, like I said, a lot of these properties need a lot of love. And a lot of properties, especially these bigger multifamilies, they're really cheap, lands cheap, but you need to do full renovations. So we actually were walking a couple eight plexes and we actually saw a 12 plex just in January. So we've been running our numbers and actually we think these could. Could really could really satisfy some lenders requirements and, and we're really excited about this because it's in a decent area. Again, C neighborhood that's on the cusp of turning B. So there's, there's a kind of a selection to choose from. If you want more active income quick in and out. Great. But I will just preface with more of the 8 to 10 units that we were talking about. These are more of a over a year return. So this is something it takes a while to do. Complete and stabilize and then refinance and pull the money back out because we can almost hit the 1 percent rule on on this deal here.

Scott Dillingham: 18:00

That's super cool. Awesome.

Tom McCormick: 18:01

No, I'm

Scott Dillingham: 18:01

excited for you guys. There's just so much There's so much going on and it's literally in our backyard and people don't realize it, right? So, I know

Tom McCormick: 18:10

it's it seems like detroit gets a bad rep But honestly, I think that's a stigma from the past because now detroit's a lot safer Downtown, if you've ever been there, it's super vibrant. Don't get me wrong. I love Windsor, but Detroit, it's, it's, it's in Unari's backyard. So why not hop over there sometimes and do deals in both, both locations?

Scott Dillingham: 18:30

That's the point. Exactly. Yeah. It doesn't matter. Like to me anyways, it doesn't necessarily matter the location. If the numbers are there. Right. And market fundamentals, you got a deal there. So absolutely. That's awesome. I think just go where you're, go where you're treated best. That's it. No, exactly. I agree. And you're right over there. Even though you're paying in us dollars, which have, have a premium overall guys the price is still so much cheaper, right? To buy something equivalent right across the border in Windsor, I'm going to guess. And maybe correct me if I'm wrong, I haven't seen the property, but I'm going to guess that as a teardown, you probably would have bought that for around 200 Canadian plus Renos. Would you say that's about right? Approximately. Yeah. Yeah.

Tom McCormick: 19:16

So it's

Scott Dillingham: 19:16

pretty

Tom McCormick: 19:16

reasonable.

Scott Dillingham: 19:17

So to buy a 75. Yeah. Even when you factor in the exchange, you're still buying it at a discount. So absolutely.

Tom McCormick: 19:23

Yep. I think the price per door is not quite one half, but maybe call it two thirds of prices in Canada. And in decent areas, so, yeah, it's, it's, it's definitely makes a lot more sense for numbers wise and actually getting cash flow as well.

Scott Dillingham: 19:37

Yeah, we had on a previous episode, just for your knowledge, we had Derek on my team. He's already bought in the States. And he does the us lending for us as well. And he bought a brand new construction property for 260, 000, like brand, brand new, and just like

Tom McCormick: 19:54

Ontario, you

Scott Dillingham: 19:56

can't maybe the small, small communities, but like beyond that, yeah, it's, it's unlike. Yeah. Yeah. So it's, it's really interesting, but no, that's awesome. So then we're going to wrap up the show for today. So for everybody that's listening and they want to invest in the States and they'd like to do it with partners, right? Cause they don't want to jump in themselves. How can they reach out to you or what's, what's the best way so they can speak to you about potential partnerships?

Tom McCormick: 20:21

Yeah. Yeah. I'd say reach out. I'm on most social media, so I'm on Facebook. Look me up. Tom McCormick. I'm actually on YouTube now. So again, Tom McCormick and I can also, if you want drop, drop a, you a link tree for later on the description and people can connect with me there just by clicking a button. Yeah, that'd be perfect. That'd be perfect. Awesome. Tom. Well, it was great to hear your story. Thanks for coming on. I really appreciate it. Yeah. Thank you so much. I appreciate the opportunity and looking forward to doing more more work with you in the future too. Sounds great. Thanks, Tom. Awesome. Thank you. Take care, everyone.