Welcome back to the Wisdom Lifestyle Money Show. I'm your host, Scott Dillingham. Today, I have an amazing guest with us, Mike Nikolica. Welcome, Mike.
Mike Nikolica:Thank you for having me, Scott.
Scott Dillingham:Yeah. You're most welcome. So I wanted to have Mike on because he is essentially a serial investor. Right? So so flipper, he flips properties, and then he is journeying into The States for multifamily properties.
Scott Dillingham:So I wanna hear about your story, Mike, how you kinda got into flipping, maybe some tips and best practices, and then we'll talk about sort of The US and what's bringing you there and how it looks for, you know, someone who's hearing this that might wanna partner or invest with you along the journey.
Mike Nikolica:Absolutely. So I'll try to synopsize twenty years in two minutes, I guess. Basically, started investing when I was 22 in Windsor, where we both are from. So the market was kind of different then. It was a very affordable place, but still, I was I was pretty young, and I decided to before it was kind of coined as house hacking, basically bought a duplex by the university, lived with my buddy, rented out the other unit, and then kind of fixed it up and and realized, hey.
Mike Nikolica:This is a good kind of way to kind of minimize your housing costs and, you know, watch appreciation kind of increase your net worth. And from there, I kind of got hired with police service and ended up moving away. And part of that was a little bit of movement throughout the province. So every place I went to, I basically wouldn't say house hacked so much. Some of them, I rented out portions of the house, but more it was like live in kind of flips and capitalizing on the principal residence exemption on those those properties because it was staying for a couple years, so it was fine.
Mike Nikolica:And then finally made my way back to Windsor and really decided to kind of take it up notch. And that was twenty fifteen, twenty sixteen, when the market was kind of still down before everything took place. And so I was doing flips. I was doing Airbnbs, long term rentals, and that sort of thing. And then I discovered Wealth Genius and and Mureson, who's from Windsor as well, and basically got involved with some coaching, and then recognized like, wow, there's a whole other market out there with The States.
Mike Nikolica:That is, you know, at first intimidating until you kind of understand the nuances of it. You know, some of the mortgage issues that you might encounter as a non resident, and I know we've talked about this in the past, but like DSCR loans, which, you know, it's just a different animal over there.
Scott Dillingham:Mhmm.
Mike Nikolica:But the opportunity is so much greater, I feel, because you've got 10x the properties, 10x the people. Right? Yeah. So, you know, where you might see kind of economic impacts in in a certain location here that can can kind of be like a little bit more a bit of a hindrance to kind of, you know, buying properties that are still cash flowing. Down in The States, there's like places like Cleveland, and you know, Florida where you got pad splits, Texas, Arizona, some of the places I'm looking at, and it's just a lot more opportunity to make things cash flow.
Mike Nikolica:So that was a long winded answer. Yeah. Setting up I set up corporations down there through a lawyer in The States, and so I've got a and that's a whole other topic of discussion is trying to figure out what the best strategy is for setting up a corp. Yep. So like a c corp, and then an LP that's so one's in the c corp's in Wyoming, and the LP is held in Ohio to start doing acquisitions there.
Scott Dillingham:That's awesome. No. That's incredible. I I think It's lot. I think for for those listening, because I know we speak to investors every single day.
Scott Dillingham:And people are calling in and they're like, there's this sense of urgency and I think that's more so now than when you and I started investing, I think people want now, now, now, right? That's kind of the culture we live in. But I think investors need to realize because I know you summarized that in like three minutes, but that was years of you getting there, right? You started off slow moving into them, staying there from what I heard, right? You stayed there a couple of years, you did that thing, right?
Scott Dillingham:You house hacked and then you moved on because you can do that, right? You can tap into 5% down, move into the property and add units and convert it to a rental, live there a little bit and move on. So for those listening, right? Like this journey, it's not like flick a switch and it happens tomorrow, like it can be over years, however, real estate has proven time and time again, right? It's a physical tangible asset, but it's proven that it can grow and it can make money over time.
Scott Dillingham:Even right now, we're looking at markets where, you know, values are lower and I'm speaking specifically Canada at this moment, but values are lower than what traditionally they have been the past few years. But if you're like me, like you, and you've invested years ago before that, we're way up. I'm way up over what I bought these places for. Do you know what I mean? So it's a long term game.
Scott Dillingham:It's it's not overnight. So I just wanna call that out as like a takeaway for for somebody listening. But no, I I love your story. So you're you're flipping properties over here and then you decided to go to The States. Now what kind of triggered the the states?
Scott Dillingham:I know previously we spoke about cash flow. Was that is that still your number one reason, or do you have additional reasons?
Mike Nikolica:Yeah. Like, we're you know, and I'm sure we could go on about this for hours and just, you know, the the 1% rule. Right? You're looking for 1% of, you know, your purchase price in terms of rent, you're not seeing that as much in Ontario and some other places in Canada, whereas, like, you know, a place like Cleveland, you're seeing 2%, 2.5%, which is crazy. Now you have to factor in the dollar exchange and that, but what I also like about Cleveland and Ohio specifically is that it's very favorable to landlords.
Mike Nikolica:So it's a lot more balanced over there. I've had bad experiences with, you know, eighteen months to get a hearing in Ontario for the tribunal while my tenants didn't pay and trash, you know, your units. So a place like that is just very appealing, and I think a lot of people have kind of moved or at least opened up their horizons that way. What spurred it was a boots on the ground that I did with Thomas Lorini and went and scoped out some properties there and just saw the value. And, you know, it's a kind of a comeback story for Cleveland as well as Detroit.
Mike Nikolica:I also really like Detroit, and that's changed substantially in the last few years. So what, you know, what I'm looking at is cash flow. I'm looking at appreciation in those cities where there's major investments going on. Cleveland Clinic's got a billion dollar investment. Detroit's, you know, for anybody that hasn't looked at it, really growing fast, and a lot of great places to eat, nightlife, that sort of thing.
Mike Nikolica:And just different models, like in Florida, a fellow that we both know is doing pad splits. And you know, the cash flow in that is absolutely incredible. So it's keeping in mind to some of these other opportunities, and it all depends on what you're looking for. Are you looking for cash, you know, in terms of a flip real fast, or are you looking for long term appreciation and cash flow? You know, there's different strategies, of course, and it depends on the investor and what they're trying to achieve.
Scott Dillingham:No. I agree. I love it. And I love specifically that you're tapping into the multifamily, and I'm I'm gonna elaborate a little bit why. You might not even know this, but certain markets where they have cheap real estate prices.
Scott Dillingham:So like Ohio and Michigan, there's a few Southern states too that are very, very cheap. And what's happening is, and again, it's more towards like single family homes and smaller properties, but the lenders, they are raising their minimum loan sizes in those markets. Some lenders even pulling out because the smaller loans, like how it kind of works in The States, if you're not aware is the lenders, when they give you the loan, the loan doesn't stay with that lender. And I'll give you a perfect example, but ultimately they sell the debt. So in Canada, right?
Scott Dillingham:If you go to bank A and you get your mortgage, ten years later when you get your mortgage statement, it's still gonna be with bank A. But there is a Canadian bank and I won't say names or anything, but there's a Canadian bank that got into some issues there in The States and they got into some issues and they had fines. So what they did to pay the fines, was they sold their mortgage book, part of it, to another bank in The States, they could have liquidity to pay the fines. So in The States, that's very, very common. So to tie it back in, these loans, they're being sold and they're not being held on that lender's books.
Scott Dillingham:So nobody's buying these small loans and lenders don't want it on their books. They wanna stay liquid, right? So they can, you know, money in and out. That's how they wanna operate. And it's good for the customers in that sense too, because say the bank goes under, right?
Scott Dillingham:Like, they close or in foreclosure because it happens to The US banks. It's okay for you as customer, because that loan will be sold to another bank and it's not like you're in this massive trouble and what do you do? Because you have a loan at this bank, but anyways, to tie it all in, those smaller markets, the lenders are increasing their minimum loan sizes. So I see clients more and more that are buying these fifty, sixty thousand homes because you can and they can't get any financing on it. So I just wanna preface it that the minimum loan amount on those smaller areas is a 100,000.
Scott Dillingham:Again, with you buying multifamily, that should be a non issue, but for investors hearing this and they wanna jump in like that, that's a problem, but multifamily is fantastic. Now, you say multifamily, how many units are you looking at personally?
Mike Nikolica:I'm looking at anywhere between, like, eight and twenty four. Nice. You know, I I walked a property that I'm kinda kicking myself for not moving on faster, but it was 11 units, and I'm just like floored by it. The sellers bought it for $380,000, and the rents are around a thousand bucks a unit. Now that's at market rent, and some of these units obviously needed rehabbing.
Mike Nikolica:But they were they turned over five units when we walked it, and they were asking $6.90. And I think it was ended up selling for around that price. But, you know, you do another six units, and you're getting, you know, somewhere around that thousand dollar mark at that 600, you know, purchase price. It's it's just it's really and the economies of scale are there, and, you know, again, the favorable landlord laws. It's a really and this is a purpose built, you know, brick building with, like, carports in the back, like, in a in a C class neighborhood.
Mike Nikolica:Yeah. So you're you're not seeing that. Even in Windsor, which was, you know, one of the cheaper places to invest in, we're seeing like six plexes for $1,500,000 You know? It's pretty wild. So yeah, that's kind of what is really appealing to me about that, and kind of the model that Thomas outlined as well, how he acquires, underwrites, and then brings in investors to, you know, be the passive side while he handles all the operations and the the turnover of the the property.
Scott Dillingham:I love it. I love it. And that's what listeners here can do, right? Like if you wanna get started in this and you like what Mike is talking about, I'm gonna leave Mike's details at the end here in the show notes. So anybody can reach out to Mike and get that going.
Scott Dillingham:But that's fantastic. So what I've discovered just from seeing and underwriting many of these US loans, is that there's a lot of US investors that don't manage their properties properly and they don't maximize things like a Canadian does. Do you find that is a common theme over there?
Mike Nikolica:You know what? It it seems like there's a lot of people that perhaps are, from what I'm seeing, that are out of state investors. So they're probably not using it to the highest and best use. Like, there's outbuildings that could be, you know, turned into storage units and and that sort of thing. Like, I'm always keeping an eye to that.
Mike Nikolica:Can I modify the property in any way to add some more value? And I think for the folks that are, know, older, that have a large portfolio that perhaps don't want to sink any money into it because they were looking to exit, they they have left some money on the table that way. But again, where there is that opportunity, there's opportunity for profit. Right? So I I kind of really I I love that.
Mike Nikolica:Yep. So anytime there's something that we can do to kinda change use perhaps, or sever, or, you know, add another unit, that obviously increases value. So we're always kind of scoping and looking at it from a different lens. Right? Always having multiple sets of eyes.
Scott Dillingham:No, there's just to share this with you, I don't think it would be possible on a smaller loan like this, I feel like the lenders would want it to be a bigger loan, but in The States, they're very open at business and they get creative. So this investor that I know is buying this, it's about $10,000,000 complex. They've got to renovate a bunch of units, they're anticipating it'll be worth $20.25 when it's done and Ari's bringing in awesome income. But anyways, we were able to like essentially line up debt plus equity. So we got them a 100% financing essentially on the full amount of the purchase because the lenders and investors could see that it was gonna be worth so much more, and then at the end, we just do a regular refinance through an agency loan through Freddie or Fannie, and then we pay off this debt and equity sort of bundle.
Scott Dillingham:And it's specifically called like mezzanine loans and things like that. So there are so many options out there when you get into the investment space. It's crazy that are just not, like, not really in Canada unless you wanna pay like top, top, top dollar to get it. You know what I mean? So I I love that, and I'm sure that you found that too.
Scott Dillingham:Like, just the creativity and how the market works is is just so much different over there.
Mike Nikolica:A 100%. Yeah. You when you said that they're open for business, it's it's just a different mentality. Everything's faster. Money is more prevalent and available.
Mike Nikolica:I think people are a little bit more I I don't wanna say they that they're risk takers, but maybe maybe that is an accurate description. I think people are willing to kind of take chances for the for the opportunities of Gain, where I think Canada's a little bit more conservative in that regard. You know, of course, with our mortgage lending practices and and that, which, again, could be a whole other three hour podcast episode. Yeah. You know, it just it makes it a lot more difficult here, you know, to kind of get mortgages.
Mike Nikolica:I've just heard that they're, you know, they're passing if it's not already in place, that you can't use HELOCs to finance secondary properties, which, again, that's just, you know, that's incredible. That's your equity, you know, you should be able to use it, but, you know, in The States, there's just a lot more leniency and freedom, so and and a and a bigger market.
Scott Dillingham:Yeah. And I think what they do in Canada too is they look at trends. So if they start to see like, okay, we've had a couple power of sales and they happened because someone was using a line of credit as the down payment. So then they stop all that in in the because they they do look at the trends. So it's it's weird like that because, like, when I think of a trend, I think of something like everyone's doing.
Scott Dillingham:Right? But they'll look at it and they'll just spot like just an isolated handful amount, and then policies change across the board. So it is really hard because things are always different here, but no, and you're right. That's what I love about The States and usually in The States, can always find a lender. The challenge is, or the only challenge that I see that's not like fully lined up over there is if you're buying a smaller property and you wanna get a 100% financing, there are some options on that with like flip financing, but on permanent, you know, buy and hold, it's usually not the case.
Scott Dillingham:Or I know in Canada, can potentially line up some of those things as well, but beyond that, yeah, I just think, like I said, it's open for business, there's many more options. Okay, so we're coming to the close of the show. So I'd like to hear sort of last thing, if you have any opportunities right now and maybe high level what they look like, and then let us know how an investor could get in touch with you if they want to invest passively with you. So do you have anything? And then how do people invest with you?
Mike Nikolica:Well, I am looking at an eight plex and a 24 unit in Cleveland. I'm waiting on some numbers in in regards to that. So if anybody's interested in finding out more about that, absolutely contact me. I'm also looking at Pat Splits in Jacksonville because, again, the cash flow is just so good, and the market is very open to that. So in terms of laws and that, so but I'm also actively looking at Memphis, and Detroit, and Phoenix, surprise, Arizona.
Mike Nikolica:There's a lot of opportunity there as well. Again, there's there is if you do some market research, depending on what you're interested in, again, you know, quick kind of flip money or, you know, more of an appreciation, you know, cash flowing type game, but we can discuss any of that. If anybody wants to reach out, please do, and we can set up a chat.
Scott Dillingham:That's awesome. So how do they reach out? Email, phone number? Do you have a website?
Mike Nikolica:Yeah. Cactuscapital.ca, support at cactuscapital. Ca for email, and there's also a booking link there. So if you want to book a call, you can do that on there, and we can meet on a Zoom call and and, you know, just kind of exchange ideas or, you know, possibly partner up in some sort of joint venture.
Scott Dillingham:I love it. Thanks for for coming, Mike. I I greatly appreciate it. I love hearing people's stories and kind of what they're what they're up to and and what's getting them out of bed. So thank you for coming.
Mike Nikolica:Thank you for having me. Was awesome.
Scott Dillingham:No worries. Take care, everybody. Take care.
Mike Nikolica:Bye now.
Scott Dillingham:Awesome. Good work. So I'll stop there.