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:Hey, thanks for having me. I really appreciate it. It's been a long time coming.
Scott Dillingham:I'm excited. Yeah. I'm 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.
Scott Dillingham:And I I'd love to hear more of your feedback and just different angles and stuff. But Mhmm. Before we get into that, I just wanna know, like, how you got to where you are now. So do you mind sharing your your story?
Tom McCormick: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.
Tom McCormick:As a side note, I'm an engineer by trade. I took mechanical aerospace at the University of Windsor. Then I got more into the automotive, go figure, planes to cars. But I realized that my salary isn't necessarily guaranteed, especially with COVID times. And I almost got laid off.
Tom McCormick:And just the uncertainty of everything made me really want to hop into the market. 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.
Tom McCormick:It's just I I spent my money in on more experiences, but it was about time to to really invest in myself into into my future.
Scott Dillingham:That's awesome. That's, that's crazy. So then what was your first purchase?
Tom McCormick: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.
Tom McCormick: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 loss equity initially because I quickly ran out of money to pay people. So I had to figure out ways to raise capital as well.
Tom McCormick: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 too. And I, as an engineer, I dug into the code too, just to make sure I've really understood it in and out. And that was a good project to get my feet wet.
Tom McCormick:And it gave me confidence for future projects like flips and and stuff like that later on.
Scott Dillingham:Yeah. No, that's that's awesome. We actually have a very similar story slightly different, but like, yeah, so I went to a rich dad, poor dad class 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 fifty fifty. So I'm like, okay.
Scott Dillingham:So I found this terrible property. I lived in Sarnia at the time. Okay. And I found this terrible property. I bought it for $56.05.
Scott Dillingham: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 because I'm following this guy's instructions, right? Like how to secure these deals.
Scott Dillingham:So he ran away. But the the property needed everything. So I went to the bank and I I did a like a construction loan on this property.
Tom McCormick:Okay.
Scott Dillingham: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 because I had to do everything in the house. So it set me up for the future projects after that.
Tom McCormick:Man, that must have been daunting. But yeah, it sounds like you made it happen.
Scott Dillingham:Yeah. Yeah. No. It works really really well. So we had roughly a 100 into it.
Scott Dillingham:And when we sold it, it was like almost for 300. And now it's like, now it'd probably be 4. Maybe even a little higher.
Tom McCormick:So inflation nowadays in Kansas.
Scott Dillingham: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?
Scott Dillingham:So you started in in in Windsor, it's during COVID time. How did it trigger to, like, invest in The States?
Tom McCormick:Well, great question. I was actually at at this time since around 2017, I was actually working in The US as an engineer. So I got fortunate enough to to be able to hop the border and make that US dollar. That's the best raise I always joked that I ever got because I made, at the time 1.3¢, which is like a 30% raise. And now it's even a little bit more.
Tom McCormick:But because I already was working in The States, I understood the 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 of my actual friends who were 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?
Tom McCormick:And, and because of that, and as to 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 lax here in terms of getting tenants out if you have to, unfortunately. So there are many reasons why I was looking to hop across the border. And, because I worked there, I think it made me 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 US isn't actually that big of a hurdle to to get into. So
Scott Dillingham:Yeah. It's it's so similar. And and you're right. That's that's our number one question. Like, we we are actually talking to more Canadians that wanna buy in The States than Canadians that wanna finance properties here.
Scott Dillingham: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 wanna set up an entity ideally. So that's good to go.
Scott Dillingham:And then, yeah, find your strategy. Right? Are you flipping? Are you buying whole? Like, what are you doing?
Scott Dillingham:And then find your team. And and then it's it's done.
Tom McCormick: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. We said, you know what? There are people in our network. There's people like you, Scott, who can guide us.
Tom McCormick:So even if we 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 gotta take action. And so that was our our model. We said, let's just have some speed here. And like I mentioned earlier, we'll fail forward if we do.
Tom McCormick: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:That's the best way. That's the best way. So I know you purchased a property in Detroit, right, as as a flip. Can we talk about that? Like, how how's that going?
Scott Dillingham:Maybe share some numbers on some potential returns that you guys are looking at?
Tom McCormick: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 resistor some joists and raise the floors.
Tom McCormick:So in our case, we bought this property in the North End. So if you have the center of Detroit, you go about ten minutes north and you're in the North End. So this is still like a sea 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 ARV is going to be.
Tom McCormick: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 100 ks zone.
Tom McCormick: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. Also they said, well, you haven't flipped a whole ton in The US 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.
Tom McCormick: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 floodgates to other lenders.
Scott Dillingham:For sure. 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.
Scott Dillingham:So those are absolutely the hardest on a flip because for the financing anyways, because lenders, they're looking at it like, is it 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 Mhmm. Be considerate of that, especially because 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?
Scott Dillingham:What's this all gonna look like? And in a perfect scenario, right? The numbers are fair, and they work. But when you when you work with an an upside down loan, right, it does change things. Right?
Scott Dillingham:I know you guys needed 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 Yeah. You know, potential returns at the end of it when you when you guys do sell?
Tom McCormick:For sure. So in within this kind of 100 k budget, it's looking like we're actually gonna come on pretty pretty close to the actual estimated budget, which is great. We're we're actually, like I mentioned earlier, we're gonna resister some joists, which means that we're gonna 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.
Tom McCormick: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 gonna be a four bed, three bath. So we're gonna add the additional bathroom to add a lot of value. And what we're also gonna do is we're making it slightly open concept.
Tom McCormick: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 gonna make into one cohesive space. Now, we do have to do a little bit of electrical as well. Because the previous owner looked like a Bob Patch job,
Scott Dillingham:to be honest with
Tom McCormick:you, man. Really, really, I say. And and there's there's some was a little bit of an opportunity that we've Well, it's already gutted. Let's let's rewire place. So it's the framing and the electrical that are gonna cost the most.
Tom McCormick:And then after that, it's the additional bathroom and then kitchen. And once we do that, we can save a lot of the 2nd Floor. The 2nd Floor is a lot of plaster. It's only a slight repair job. And then on top of that, classic paint and some some vinyl flooring on the 2nd Floor.
Tom McCormick:We're gonna actually re refinish the the wood on the Main Floor just 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 people with the the nice wood staircase and wood trim. So we're trying to keep that keep that alive.
Scott Dillingham:And That's awesome. And you can't you can't find wood like, I guess you could at a 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 or gutting it. So No. That's super cool.
Tom McCormick:Yeah.
Scott Dillingham:So when do you anticipate you you can sell it? Like, do you
Tom McCormick: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.
Tom McCormick: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 wanna factor in that. They could sell sooner, but we wanna factor that into our budget and be a little conservative. And I should mention actually, ARV right now, we're projecting around that two sixty to two seventy zone conservatively.
Tom McCormick:So that's pretty decent, a healthy profit for us and our investors. And we saw actually a comp that was actually around $3.15. However, that's an outlier. So I don't want to guarantee that to anyone. But that'd be great, like, great share you on top if that did push up to the 3 hundreds.
Tom McCormick:But it usually it's in that kind of mid to high 2 hundreds in this area of the North End.
Scott Dillingham:For sure. For sure. That's awesome. Well, hopefully, you never know. And spring to there, there might be more sales too.
Scott Dillingham: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 and how that works and maybe some of the things that you guys are looking at next?
Tom McCormick:Yeah. So on this project, 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 do we're we're doing all these deals. We ran on money pretty quickly just in in certain certain avenues that we've already deployed.
Tom McCormick:So how do we keep buying properties is who are partners? And so what we've done is on this Detroit when we gave fifty fifty 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 because 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.
Tom McCormick:Then they say, well, it feels more fair that way if we we chip in a little bit too. So fifty fifty split on this one and returns again fifty fifty, and, we're looking forward to doing more with 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, did I get gypped? Everyone kind of everyone's happy.
Tom McCormick:I just and that's our goal. Right? Because we we want to build a relationship in the well deeper we can do more deals in the future together, not just a one done.
Scott Dillingham:So Yeah. I love it. And 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.
Scott Dillingham: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 maybe somebody might might jump on?
Tom McCormick:Well, it 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 Englewood property that we were just talking about around that 60 to 75 ks zone. And again, usually returns within the six months.
Tom McCormick:That's kind of the the project timeline. But we have actually some bigger ones now. We walked a couple shelves. So I like I said, a lot of these properties need a lot of love. And a lot of properties, especially these bigger multi families, they're really cheap, land's cheap, but you need to do full renovation.
Tom McCormick: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. See neighborhood that's on the cusp turning B. So there's,
Scott Dillingham:there's a
Tom McCormick: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 eight to 10 units that we're talking about. These are more of over a year returns. So this is something it takes a while to complete and stabilize and then refinance and then pull the money back out because we can almost hit the 1% rule on on this deal here.
Tom McCormick:Yeah.
Scott Dillingham:Yeah. That's super cool. Awesome. No. I'm excited for you guys.
Scott Dillingham: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
Tom McCormick:know. It's it's 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 is is in Uniri's backyard.
Tom McCormick:So why not hop over there sometimes and do deals in both both locations?
Scott Dillingham: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?
Scott Dillingham:And market fundamentals, you got a deal there. So Absolutely. That's awesome.
Tom McCormick:Just go where go where you're treated best.
Scott Dillingham:That's it. No. Exactly. I agree. And you're right over there.
Scott Dillingham: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 gonna guess it as a teardown, you probably would have bought that for around 200 Canadian plus renos. Would you say that's about right?
Scott Dillingham:Approximately. Yeah. Yeah.
Tom McCormick:Yeah. So that's so that's pretty recent. So
Scott Dillingham:to buy at 75, yeah, even when you factor in the exchange, you're still buying it at a discount. So absolutely.
Tom McCormick:Yep. I think the price per door is not quite one half, but maybe call it two thirds of prices in Canada 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:Yeah. We had on a previous episode, just for your knowledge, we had Derek on my team. He's already bought in The States. He does The US lending for us as well. And he bought a brand new construction property for 260,000.
Scott Dillingham:Like brand brand new. And just like Ontario. Honestly. Yeah. You can't.
Scott Dillingham:Maybe the small small communities, but like Sure. Beyond that. Yeah.
Tom McCormick:It's It's unlike Yeah.
Scott Dillingham:Yeah. So it's it's really interesting. But no, that's awesome. So then we're gonna wrap up the show for today. So for everybody that's listening and they want to invest in The States and they'd to do it with partners, right?
Scott Dillingham:Because 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:Yeah. Yeah. I'd say reach out. I'm on most social media. So I'm on Facebook.
Tom McCormick:Just look me up Tom McCormick. I'm actually on YouTube now. So again, Tom McCormick. I can also if you want drop drop out you a link tree for later on the description and people can connect with me there just by clicking a button.
Scott Dillingham:Yeah, that'd be perfect. That'd be perfect. Awesome, Tom. Well, it's great to hear your story. Thanks for coming on.
Scott Dillingham:I really appreciate it.
Tom McCormick:Yeah. Thank you so much. Appreciate the opportunity and looking forward to doing more more work with you in the future too.
Scott Dillingham:Sounds great. Thanks,
Tom McCormick:Tom. Awesome. Thank you. Take care, everyone.