Maximizing Shareholder Value in Real Estate: Milena Cardinal's Insights

Introduction

Welcome to the Wisdom Lifestyle Money Show. I'm your host, Scott Dillingham. The show is designed to help Canadians invest better in Canada and the United States. We are the North America-based mortgage financing lender and provide education to both countries.

Discover how you can become a better investor and access the financing you need. Okay, Melina, I think we're live.

Yay. All right.

So how are you doing? I'm good. I'm really excited to chat about our topic today, maximizing shareholder value in real estate. So why don't you let us know a little bit about what that entails?

The Core Idea

Well, really what sparked the idea of having this particular topic and talking about using or leveraging shareholder relationships and corporations for investors was the conversation about was a conversation about different types of structures that can be used to hold real estate investments. Most structures, especially in the multifamily world or in the development world, will involve multiple corporations and different tools, sort of like linking them together. But really, at its core, one corporation could be enough to run a project and it's got big advantages. It's got the advantage of simplicity, but then it also has some drawbacks.

But the idea being that if it's possible for a particular project, then to have the project owned by a corporation and then have all of the investors simply invest as shareholders, meaning they all own a piece of the pie, that's really the simplest, maybe besides a joint venture on its own, the corporate structure of having investors with shares and then a shareholder agreement to determine sort of the rights and obligations of all the parties is one of the simplest structures that we can have. So if it's at all possible for a project to do that, there are so many advantages, mostly cost and the level of complexity when presenting a project to an investor.

No, absolutely. That's super cool. Because you're right, there's so many different things and we're seeing like different entities require different types of financing from the lender standpoint.

So we can go over all of those as well. So where do you want to start? Like where do you find, what's the biggest bang for the buck? Like what's your best advice that you can give on this?

Deep Dive

Well, to me, everything is, it's an exercise in determining the pros and the cons of each type of structure when deciding what's the best option for a particular project. So for example, if I had a client who said, well, I want to buy a 20 unit building and I want to raise capital from 15 different people and I'm going with CMHC mortgage, right away in my mind, I'm thinking GPLP is probably the best structure because if we only do a corporation to hold the 20 unit and all of the investors only have shares in the corporation, then it's very likely that CMHC will require them to qualify.

So from what I understand that different lenders have different requirements, if I understand that correctly, Scott. That's right.

Yeah, that's right. So like depending on how it's set up or the ownership percentage, and I don't want to go over specifics here because like you said, it's completely custom to the deal.

It's different. Every lender is different. But ultimately, yeah, if you're a majority shareholder or owner of an entity, sometimes you're forced to apply with lender A and sometimes lender B, they're okay with it as is, right? As long as, like I'll give you an example, one of our lenders, so we do obviously US and Canada, but one of the lenders says as long as you own 20% of the entity, you can be the only one that applies.

Practical Steps

We don't need anybody else as long as you own just 20%, right? And so I said I wasn't going to give numbers, but that one, it was a very firm number, so they don't care. But again, every lender is different. Some lenders, they want every single director on the mortgage, right?

So you can bypass that through shareholders. But then again, on the flip side, if there's one director who is then a 50% shareholder and then there's someone else who's on there as a 50% shareholder, a different lender may want them both on, right? Because they can see, you know, even though they're on the record, it's still 50-50, right?

So they... Yeah. And oftentimes, when we're talking about this at the onset of a matter, I'm like, you have to understand that if you make that choice, you may be borrowing yourself from some lenders, right? You may be borrowing yourself from the best mortgage out there for you because the lender will want every investor or every shareholder to qualify for the mortgage.

And it's not only painful in the process of the investor having to apply and having to be approved, but then it's also the fact that that investor is personally guaranteeing the mortgage a lot of the time. And I know personally, if I'm investing $100,000 in a deal where, you know, I don't know, like a $10 million purchase when we're raising $3 million, I really don't want to qualify for that $7 million, or I don't want to personally guarantee that $7 million mortgage, right? Because the end result is that each personal guarantor guarantees the entire mortgage.

Key Takeaways

So it's a lot of liability to put on your investors when really, like, they're kind enough to invest their money in your project and probably not a good idea to also ask more of them in the sense of full-time. But I have seen that happen, though. I have seen certain projects where the investors, especially when the investors have a bit more of a vested interest, maybe they're a little bit more involved in the management of the project, and then they're all happy to qualify. So in that case, it would be a waste of money and a waste of time to do a GPLP structure, and that may be satisfactory.

Yep. No, and you're right. And just to touch on the fact, again, that it's, like, completely random, right?

Some of the lenders, right? Because you said, I don't want to be responsible for that loan. But depending on the lender, depending on the loan, depending if it's right, if we're using an MLI select program, depending on the points that you have on the loan, some are full recourse, some are limited recourse, and some of the big, big stuff can even be no recourse, depending on the deal, again, property, location, amount, all of these things. So you do want to be careful because, you know, maybe it is one of those where you do have to apply on the loan, but maybe there is limited or no recourse.

So, you know, it may not matter. So you really have to look at everything holistically, but I do agree, you know, the proper structure and how you set it up absolutely determines the lenders because if you're setting up on a weak foundation, yeah, there might be lenders that will help secure this deal for you, but if you have a lot less lenders, you're meeting their terms, right? You don't get to try to negotiate, right? You're meeting their terms, higher rates, potentially higher fees.

Resources

So by setting it up the best way and having that consultation with an expert like you allows the investor to maximize their financing options. It's even more than that. I would say that we as the experts together have to collaborate.

For sure. You're all the best way and it doesn't mean that we can't also pivot, right? I've had cases where, you know, when the deal is put under contract, we use a corporation for the purpose of putting it under contract and when in consultation with the mortgage broker, we come to terms with the fact that the ideal scenario is a GPLP structure, then we put together the structure to make it happen.

Absolutely. What did you mean by recourse? What's the meaning of that word in that context?

Recourse is like liability. Like you're fully liable for the loan, you're partially liable for the loan or depending on the deal, there can be no recourse, which means no liability, right?

Introduction

Okay. Yeah. I want to call it recourse. Like I want recourse so if you don't meet the terms, I can come after you so I have full recourse.

Got it. Okay. So it's like from the lender's perspective.

Yeah. All right.

I love that. But from an investor, right? If you are, say, you're only partially on the hook for a loan, right?

The Core Idea

That's better, right? It reduces your risk a little bit.

That's interesting. So, yeah.

How do we get started? So I have a property. I want to make sure I have the best structure.

What's the most step? A consultation typically is the first step. And what I usually recommend to my clients is let's have a chat right off the bat so you know what to do next. It doesn't necessarily mean that we'll have enough data at that point about financing, about the deal itself, about how it's going to happen, but at least it'll be enough.

Deep Dive

We should have enough from the onset to discuss the core points and make sure that if there's something to clean up, for example, if I have clients who have a clean co or a holding co at the top of their structure and then they say, okay, well, I'm going to want to buy, I'm going to want to create a new corporation for this project, I might say, well, if you're still in due diligence, don't create the corporation just yet, don't waste the money just yet on creating the corporation, but clean up your holding because no matter what you do, you're going to need to have that minute book in place, you're going to need to have those pieces well put together so that we can act a lot faster when the lender starts asking for these documents, right?

So it's a lot easier on a brand new corporation, but sometimes a corporation that's got a little bit of age, it's ideal to then clean that up. So really, my advice will vary drastically from client to client. So I usually say, let's have a first chat and then, you know, towards the end of due diligence, I'll usually meet my clients again, at least for this type of project. I'll meet with my clients again, if not multiple times in between.

As we go, figure out the best way to structure the deal. Yes. Now, another question for you, because I know investors will find a property, they get excited and they want to raise capital right away and do all these different things. would you suggest that they sit down with you first before raising capital?

That way, the capital raise doesn't necessarily affect the structure. You know what I mean?

Practical Steps

Yes, 100%. So things that we've done in the past, investors are really leery. I find like passive investors are really leery to put their money in a project when the corporation is not in place, due diligence is not complete, right? They're afraid that their funds will be used for the due diligence.

They're afraid their funds will be, and then the deal will die and they will have zero security. So what we often do is we get our clients, so the buyer, to sign a direction directing us not to release that money to them until their passive investor has signed the contract. And so then the passive investor has all of the control of the transaction, but can still deliver the funds ahead of time in our trust account, which then allows for the transaction to happen a lot faster when the time comes.

Awesome. So that's one way that we've done it before. There's all kinds of rules now in terms of collecting funds, and our clients don't necessarily know what those rules are, so they will fumble sometimes on not following those rules, and that could put them in hot water. So, and unfortunately, these things take time.

It takes time to ascertain all of the data that we need to gather. So typically, if a passive investor is sending us funds for one of our clients' deals, we need to verify source of funds, we need to verify for anti-money laundering purposes, so there's certain declarations that the investor needs to do, we need to verify ID, there's all of these steps that need to happen, and so if we receive funds on the day of closing, that can get really dicey and can really delay the transaction.

Key Takeaways

So oftentimes we say, well, it would be ideal if we got the funds early, but that's when we find ways of reassuring the passive investor that the money won't be used until everything's in place, the corporation's complete, shareholder agreement's signed, everything is done. Nice, nice.

Yeah. Now, I know so far we've been talking about GPLP, which is mainly what I hear about too, and this is more of a question for you because obviously this is more of what you do for knowledge level, but are there any other type of structures that investors want to get set up or is it mainly the GPLP structure?

Yeah, absolutely. So, and sometimes it's a combination of things. For me, it's kind of like tools and tool belt, right? Sometimes I need a hammer and sometimes I need a saw and sometimes I need both in combination with one another at different levels, different times during the project.

So, you know, when people say, do I need a hammer or a saw? I say, well, sometimes you need both, right?

Resources

It really depends. So, and we can bring those tools together, but a very simple project, it's usually one or the other. It's either a JV, which is a joint venture, where then either corporations or individuals will collaborate on the project but still remain separate by law. And then there's the simple corporation and I've used simple corporations for projects like, we have a land banking deal.

So all of our investors own shares in the corporation, corporation owns the land, right? With a land banking deal where we didn't get financing, that was the easiest way to do it because we were buying it cash. All of the investors just got shares in the project and then we have a shareholder agreement sort of tying it together and determining who's responsible to do what and who has what voting rights, what happens if one of us dies, all of that stuff.

Mm-hmm. So, and I've also used simple corporations like this in development projects when the purchase of the property was cash purchase or with private lending. Then we don't need a GPLP structure oftentimes at that point. And then sometimes that gets converted.

So I've actually seen cases where it's bought with a corporation, then it's converted to a joint venture when the first investors invest the seed money for pre-construction costs. And then it's converted to a GPLP structure when we're ready to do construction. So I've actually seen matters where we transition from one structure to another at different stages of a project.

Introduction

Yeah. And I've also seen cases where we've created almost sort of like a GPLP, but without it actually being a limited partnership through a joint venture. So what we do is we create one corporation that's going to own and manage the project, one corporation where all the investors invest their money, and then we tie the two corporations together through a joint venture. That works really well, actually, with lenders because the lender typically will only see the corporation that manages the project.

So to them, it's a buy, it's, it's, sorry, that only works when there's no down payment. So when the refinance happens, the lender just works with the managing corporation and no, there's, there's, it just simplifies the process and avoids the, the, the use of a GPLP structure.

No, I love it. And another question for you because I actually see this a lot where, you know, a client will ask both the proper entity setup for liability and taxation purposes. Of course, our license doesn't cover that. So we're always like, you know, speak to the experts.

And then the feedback that we get is my accountant told me this, but my lawyer told me that. And there's, there's all this back and forth. And so how, how would you recommend to like streamline that? So the accountant and the lawyer are on the same page and, and we can make this happen, you know, the best for the, for the customer.

The Core Idea

So I'm glad you bring this up because this happens all the time. Right? The reality is that both are right.

All are right. People will talk to their accountant, their lawyer, and their mortgage broker get three different answers, right? As to what structure should I use? Should I be incorporated for this purchase?

I see this all the time. All three are right. The accountant is looking at it from a taxation perspective and is like, how do I minimize your taxes? That's how the accountant looks at it.

The average lawyer will look at it from how do I minimize your liability? Right? So the accountant might say, oh, it's, you have to be incorporated. And then the lawyer might say, yes, you should be incorporated for this.

Deep Dive

It'll protect you from liability. And then you should have a holding on top. And then the mortgage broker might say, no, do it in your personal name. It'll cost you less in terms of interest.

Right? Yeah. What we do, the expertise that we've built over the years allows us to look at the big picture. So we actually look at six different factors, different categories of factors.

So tax minimization, of course, is important. We need to understand what are going to be the repercussions. And so we will work closely with the accountants of our clients to determine what are going to be the tax implications of the different options that I see for my clients.

Then liability protection. Of course, we want to protect from liability. And those are the two main reasons why people incorporate, why people put together these types of structures.

Practical Steps

Right? At their core, those are the two main reasons. But there's four, actually four other categories that I look at. Financeability, that's where you come in.

So I will work closely with mortgage brokers to make sure that whatever structure we decide maximizes the financeability for clients, not just for now, but also at refinance. Right? And at refinance and then at refinance and then at refinance. So we want to always have in mind, what are you going to do in five years when that mortgage comes to term?

Are you going to be able to refinance? Because you can really shoot yourself in the foot. So one example that I have for that is family trusts. Family trusts are a fantastic tool.

They really are. But it makes it so difficult to qualify for financing. So when people set up the three-tier structure with a family trust on top at the very beginning of their journey as investors, it breaks my heart.

Key Takeaways

It really does. Because real estate investors need to be able to qualify for mortgages at least when they're starting out. It takes a really long time to build a portfolio when you're no longer dependent on banks.

Financeability, absolutely essential. Even though an accountant would say, from a tax perspective, a family trust is the best way to go.

Right? Yeah. And just on the financing, right, and then I love to hear the other things that you look at too. But you're right because the thing is, is when lenders look at it, especially if it's a refinance, right, purchase, they don't, they can't tell.

But when you're refinancing, they look at it and they'll come back and they'll say, where's the income? We don't see it. It's not on the personal tax return.

Resources

Yeah. And then, so anyways, because I understand the structure very well, I explain it to the lender. So I find it's a very big education piece. And I'm going to say most of the time they then are okay with it.

They understand. However, let me rephrase that. They understand where the income is at that point, but some of them won't complete the refinance if that process is going to continue because it's in the personal name. Where some of them are okay with it.

And then obviously we have some all together that you can put it in the corp and the trust doesn't matter. But that is, so for anybody who's listening, that's what you want to have your lender be shown, right, is where the income is because they don't get it, right? They're looking at the personal tax return for income.

They're not seeing it. I see it all the time. Clients will call me and say, and say, I want to bear trust agreement for this property. And I said, okay, but you realize that when, when comes time for refinance, your lender will need to put this, you'll need to put it in the corp.

Introduction

You will need to refinance in the corp. So, so if you want to purchase it, so what, one thing that we, the way that we've used bear trust a lot in our journey is when do we want to be competitive on a purchase? Because we know, especially when we were buying small multis, we knew that we were going to be a lot more competitive in our offer if we could give a seven-day close. And a seven-day close can only happen, in my world anyway, can only happen with a, a, a, basically a residential mortgage.

So as long as, at the beginning, when we still were able to get residential mortgages, we knew we could get an approval very, very fast. So, we would use bear trust to buy in our personal name and then, and then have the ownership in the corp. Knowing full well, though, that five years later, when the, when the bank asks for, assuming a five-year term, of course, when it's time to refinance, the bank is going to ask for our income and they're going to see that the income is not in our personal name, it's in the corp.

So we knew that then we would have to gear up to refinance this property inside the corp. Yeah.

Yeah. So there's, there's, so this happens all the time with clients with bear trust and we have to navigate that very carefully because you're totally right. But that could be used as a positive on the flip side because if a client buys a property a year later on a five-year mortgage, a year later comes to see me and says, I want to put this in a brand new corporation that has zero activity.

The Core Idea

Fantastic. We put it in the corp with a bear trust agreement. Now, if you have four years to build income in that corp. So four years later when they go to the lender and say, I want a new mortgage in my corporation and yes, by closing, the property will be in the name of the corp but it's been operating for four years in the corporation.

Look at all this beautiful income that's going to really help with the refinance rather than going to a bank five years later and saying, I have this empty corp. I'd like to qualify for a mortgage on the property that I own personally. It's a little bit more difficult.

Yep. And like you said, so that's why I like your little buckets and I want you to finish them but just wrap up this thought like, but again, right, so from financing standpoint this strategy makes sense from an income tax perspective, right, it's deemed that the income is in the entity like you mentioned but from liability you're exposed because it's still in your personal name, right? So if you want personal liability protection, this is not necessarily the vehicle.

So it's interesting. There are so many angles. If you give me just a minute, I can share my screen. I actually have a visual of this.

Deep Dive

Sure, yeah. Wheel.

I do this full screen. So, okay.

Give me a second here. Okay, I've never shared my screen on this.

Oh, easy enough. Okay.

Practical Steps

Yeah, yeah. It's not too hard. Okay, so, uh, I see it. Yeah, so, let me just go through the slides here.

How do I get, right there. Okay, yeah. So of course, liability protection we talked about, tax minimization, finance abilities, the next one. The next one is investor attractiveness.

So this is where it comes in that we need to protect our investors, right? When I raise capital, I will absolutely protect my investors and I will have that in mind when I set up my structure so that when client asks, I have the answer. I already know when a client asks me, am I going to have to qualify for that mortgage? Am I going to personally guarantee this mortgage?

Am I going to be on the hook for any of these debts of the project? And what the answer I want to give to my investors, unless, like I said, they're very closely linked to the project, is like, no, your only risk is losing the money you put in, really. And of course, I will guard it with my life, but the only risk is the money you put in. We're not going to put any liability or any responsibility for the project on your shoulders.

Key Takeaways

Your money is all that we are grateful for your investing in the project. So to me, that's really important. And when I have clients who maybe are starting out and they're hearing about, you know, buying properties with other people's money and they're like, this is really great, but I don't want to pay an extra 1% on my mortgage, so I'm going to put it in my personal name. I'm like, ah, your investors may not like that.

It may look like you're a newbie, which you are, but, you know, and your investors should know that, but let's not, you know, hint at lack of knowledge, right? So really depends on each project. It is so, it is so on a case by case basis, but for me, investor attractiveness is super important when I raise capital and so, of course, I want to have the structure that's going to best protect my investors. The flip side of that, though, is that the more complex the structure, even though it provides more protection for investors, it is also more difficult to understand for some investors.

So the flip side is sometimes it will kill the deal because of the complexity of documents, for example, in a GPLP structure, and then if investors are left to go and to go to their own lawyer who maybe hasn't really dealt with GPLP structures before and say, can you review these documents, it may really be prohibitive, the cost may be prohibitive for the investors. We have ways around that that I suggest to my clients, but just the flip side of the complexity which brings protection is also complexity, right?

Okay. The next one is life and legacy goals. So as a lawyer, one thing that I always look at with my clients is what do they want out of this? It is going to be very different if a client tells me I want to replace my income so I can quit my job and someone who says I've got a child with learning disabilities and I want to ensure their future.

Resources

Very, very different goals and very different way of looking at it because anything in personal name is going to be subject to probate, take a long time to transfer, and which can cause a depreciation, not in the taxation sense, but in the sense of the value will go down if it takes a long time to deal with someone's estate while it sits there and the debts still need to be paid, right? Whereas, if it's in a corporation with a secondary will, we can not only bypass probate, but also it allows for the transfer of the shares very quickly and then the heirs or the trustees or whoever is named by the testator can take over the portfolio very quickly and it protects the estate significantly on top of actually saving time.

So, it is something I'm going to look at always depending on their life and legacy goals. What do they want for their retirement? What do they want after their passing?

Do they have children? Are they married? All of that factors inform me. And then the last one is cost, right?

Because the ideal structure is always going to be too expensive no matter what. So, we got to find ways that make sense financially for the project and for the business of my clients. So, these are the six pillars that I look at ultimately of the different factors to decide the best structure.

Introduction

I love that. So, what you're saying is you don't need to argue between your lawyer and your accountant. They just need to call you and you're going to kind of look at all angles holistically and come up with the best solution.

Correct. And oftentimes I will do that in collaboration with the lawyer and the accountant.

Okay. Right? Because with the, sorry, the accountant and the mortgage broker, sometimes they have a financial advisor.

Right? So, the idea is to bring the experts together and have them working together because, yes, if clients will go to their accountant and they'll come to me and they'll be like, I'm so confused. I'm not sure what's the best way to go. My broker said one thing, my accountant said another, my financial advisor thinks another.

The Core Idea

Like, how do I clear out the noise? Which one's right? And like I said, usually they're all right. The question is bringing it all together.

because if the accountant says, well, no, it has to be in a family trust because, you know, income tax split between family members and it allows for passing income tax free. Like, yes, but if you fail to see the financeability part, there will be nothing to transfer. It will be an empty shell that will transfer because these are real estate investors and they need to qualify for mortgages.

Right? So, it's the most obvious example I can come up with, but there are all kinds of nuances like that. So, when I have conversations with accountants and brokers and other experts, really, it's a dynamic conversation of like, how do we balance out all of these different elements to come up with the very best solution for our clients? So, it's such a, they're difficult questions to answer and sometimes the answer is something that clients never thought of.

Right? Sometimes they'll say, is it a JV or a GPLP? And I'm like, actually, you're ready to open an MFD.

Deep Dive

Right? So, it's like, really depends on each client and they don't always have all of the tools that I've seen in my, in the firm or in my experience and I may be able to come up with a brand new solution that we haven't thought of, that we haven't thought of, that will balance these out better.

Absolutely. And, and just, just about financing because that's what I do but I will say on the residential side, right, this is where the way that you set up your entity can be detrimental to your financing, right? On commercial, it doesn't so much matter. They're used to it but they'll ask us for like a tree, right?

They want to see the flow, what company owns what company and in what order, right? They want to see all of that so we make them a corporate structure tree but beyond that, yeah, so like I just want to clarify that, yes, if you're buying apartment buildings, retail, like all that stuff, this is generally no problem however you decide to set this up for the financing but on residential, it matters. Residential, they, they often want holding companies, right? It cannot be an operating company that owns the property.

You got to be careful of that. Now, of course, there are lenders that will be okay with operating companies but it's just they're drastically less. You don't want to pay this cost, right? Get it all set up and kind of you can't get the financing you want.

Practical Steps

So it's, yeah, I agree. It's a team. Let me ask you something else too because one thing that I've noticed, some of my clients, they will only put one property, especially if it's a five plus unit, if it's commercial, they will only put one property in one corporation.

Like they won't stack them. And so what I've heard from clients is, and frankly, what I've experienced as well, is if there are multiple properties in one corporation, when we want to refinance one of them, then we have to provide a bunch of information for all the properties we currently have in the company.

Yeah. Now, you know, a couple of things with that. So I mean, for full disclosure, you are supposed to ask your lender if they want everything that you own or just the entity or subject property in question.

Okay. Every lender's difference.

Key Takeaways

A hundred percent. We even have some lenders that even if you own properties in the States, they want you to claim it over here on your application.

Right. Where other lenders don't care. So it really is subjective to the lender.

Yeah. But I will tell you this. I mean, it's definitely more expensive to have one core per property.

Yeah. But when it comes to looking at the numbers, right, and just analyzing, we're only looking at that one set of financials, right?

Resources

So we can tell. But if you have multiple properties in there and everything's grouped together and there's a loss, let's just say there's a loss, that looks really bad to the lender, but this property might be really strong, right? And that's the property you want to refinance. So there really is pros and cons both ways.

But as far as like ease of reviewing the file, I think the one entity per property is easy. Is it financial, like financially sound?

Like should you do that? Is that going to have crazy accounting fees annually?

Yeah. Probably, right? Because you mentioned in there as well, right? It's got to be financially feasible.

Introduction

It has to make sense. Exactly. That your savings does not get eaten up by the cost to set up these entities, right? And if you're filing 20 tax returns.

Yeah. I mean, it depends on the size of the business, right? Like I do certainly have clients who do at least 20 of them, but the size of their business justifies it, right? And so when I have clients who buy, you know, 20, 30 unit buildings, typically we're doing one corporation per building, if not one GPLP structure per building.

Yeah. But five units is tricky. When you're around the five unit mark, it's really tricky because oftentimes the project won't carry how high the cost will be to have one corporation own the five unit. But some of my clients, they still make that choice.

And so I know personally what I would probably do is I might put two five units together, probably no more than that, but I might put two five unit buildings in one corporation as long as they're the same use and they're at the same stage and that that they're not with JVs or anything like that, right? Right. So if I have one that's that I'm like flipping, I have to know that until that one's stabilized, I can't refinance the other because otherwise I'm going to be at a loss until they're both stabilized, for example.

The Core Idea

Yeah. And I'm going to make my own suggestion as well, not from a tax perspective or anything like that, just what I would do with my investment portfolio, because I do think it's smart to look at the exit strategy. I think that's something an investor should consider. And so I'm going to say, right, let's we'll keep to your five unit property.

I'm going to say if I can insure this deal with CMHC or even get MLI select, which is even better, I would rather have one entity per property if it's with CMHC, because that CMHC note is worth something as well. So I think, you know, like I know investors that deliberately build properties, get it all rented, qualify for CMHC financing, and then they sell it, right, on purpose, because a lot of people don't go through that themselves or don't have the capacity. But if it's just a regular fiveplex and we're just going with a conventional lender, I don't think there's anything special about that.

And so I would agree with what you said there and I would probably put in a couple. I wouldn't just do the one. That would be my, what I would do if it was me. The other benefit of having only one project in one corporation is that you can sell the shares of the corporation rather than sell the building.

Absolutely. So a little bit more due diligence for the buyer to do because there's more risk involved in the shares, but then there's no land transfer tax. So there's like good and bad in both for sure.

Deep Dive

Yep. But oftentimes that means assuming all of the existing reams. So that the buyer can assume your existing mortgage if buying the shares of the corporation. So there's like, there's so many layers in here, right?

That's why there's no such thing as a clear cut answer. Oh, if I'm, you know, I have clients sometimes who say like, if I buy a 10, 10 unit building, should I do a GPLP? I need a lot more data to answer that question.

Who are you financing? Who are you getting like, who are you raising capital from? Are you raising capital from one or two people or from 20, right? Are you raising capital from accredited investors or not, right?

So there's so many different layers. It's funny to see that you get similar questions, obviously about your field and we do ours. Like we'll get clients to say, oh, you know, our household income is 120.

Practical Steps

What can we get? And so, you know, it's so much more than that.

Right? Yeah.

But I get it, right? They're looking for the answers and stuff.

But yeah, I agree. You have to be much more thorough so you can get that accurate information, which I like.

Key Takeaways

So, no, that's awesome. So, we'll wrap up for today, but let's say, you know, somebody's listening to this and they want to touch base with you and set up that consultation where you'll do the holistic approach and look at things and see what the best structure is.

How do they reach you? Like, what's next? ca, two L's, and, and there's a, they, they just fill out the contact us and usually within a day we get back to them.

Okay. ca, again, two L's, and, and that'll reach my assistant, June, and she will make sure that, that we book you something. And also, you can just reach out, reach us by phone as well.

Yeah. That's awesome.

Resources

Well, thanks so much, Melina. It was, it was great. I love the value that you, you add to every, every time we meet.

So that's awesome. And, uh, looking forward to the next one.

Me too. All right.

Have a great day. Bye everyone. Thank you so much for tuning into the show today. If you found value, please follow the show and rate it five stars.

Introduction

It would mean the world to me. And lastly, all the resources that we spoke about are at the bottom of the show notes. Looking forward to seeing you in the next episode.