REAL ESTATE THROUGH TIME

Jacques Lépine 's name in the real estate field is well-known: he is the founder of the Quebec Real Estate Investors Club as well as the author of the best-selling book Financial Independence Through Real Estate .

During our interview, Mr. Lépine was reassuring about the future of the Quebec market. As a real estate investor who is learning the trade, I must admit that my decisions are regularly affected by popular beliefs and sensationalism found in the media. In retrospect, this attitude has often caused me more harm than good.

Jacques Lépine has already owned over 1,000 doors during his investing career. So I was curious to know how he makes his investment decisions during various economic cycles.

He explained that, just like the seasons, real estate goes through four cycles. Any property that loses value will eventually regain it, and then some. That’s why it’s wise to hold on to our properties as long as possible before selling them. While no one can predict the future, the signs seem to show that we’re about to enter the winter cycle. This is when property values decline, due to an increase in inventory. So, caution is advised.

To be successful as a real estate investor, Mr. Lépine also told me that it is crucial to stay informed about the economic, political and global climates.

You have to think objectively and look for opportunities where others don't, especially during the most difficult economic cycles.

THRIVING IN A DIFFICULT MARKET

The average sale price of a single-family home peaked in May 2021, according to the Professional Association of Real Estate Brokers of Quebec (APCIQ). Comparing the number of sales in August 2022 with those in August 2021, we see a 15% decrease in sales. That said, if we compare the price of sales during this period, we still see a 9% increase in the sale price.

However, the current increase in interest rates and mortgage rates will have the effect of affecting the number and price of sales.

Despite the bleak market situation in the fall of 2022, there are still real estate investors who are managing to pull it off in creative ways. Patrick Filliatrault, a seasoned real estate investor and owner of more than 200 apartment buildings on Montreal's South Shore, admits that he acquired his buildings during different real estate cycles, even those considered riskier. What does he attribute his success to? Profit on purchases and prospecting for off-market buildings.

This involves soliciting building owners with the aim of buying a property below its market value. Door-to-door and sending letters to building owners are some of his methods. According to Patrick Filliatrault, perseverance is required to acquire off-market buildings at attractive prices: "Before reaching 200 doors, I had to send more than 4,000 letters to homeowners; I was refused several times."

Profit is made on purchase

One of the pieces of advice advocated by Jacques Lépine is: profit is made when you buy. This means that as an investor, it is important to buy a property below its market value. This allows you to have a safety cushion in the event of rapid fluctuations in property values and to cope with more difficult economic periods, particularly for income properties.

The mistake most novice investors make is to focus their search solely on Centris, the digital property sales platform, while experienced investors find deals from several different sources.

A considerable profit can be made by buying what others do not want, such as a building in need of extensive renovation. Profit on the purchase can also be made by finding motivated sellers, such as individuals who need to move out of the country due to work, inheritances or bank repossessions.

To finance the purchase of properties, it is important not to limit yourself solely to conventional financing (offered by banking institutions). Jacques Lépine and Patrick Filliatrault agree that private loans should also be considered.

With his partner, Jesabel Cortés, Jacques Lépine operates the Société de Crédit Immo Québec . It offers private loans, which provide the possibility of financing buildings that do not qualify through the conventional process, as well as other advantages that banking institutions do not grant. Although the interest rates for private financing are higher than conventional financing, private loans offer more flexibility. In fact, banking institutions are wary of financing house or rental property flips due to the risks involved in a flip. In fact, a flip can easily turn into a disaster, whether it is due to extended deadlines, lack of manpower or unforeseen events. However, the private lender analyzes the building's optimization potential and grants the loan when the request seems relevant.

Although the future may look bleak in the real estate sector in the coming months, let's keep in mind that behind the biggest problems, there are the biggest business opportunities. For my part, I intend to remain open to investment opportunities and continue to acquire properties in the coming months, but with caution. I keep in mind that the best time to invest is not tomorrow, but rather today.

Gabriel Ccopa, founder of the company Excellence Construction Rénovation , spoke with Jacques Lépine and Patrick Filliatrault at Quartier DIX30 in Brossard on September 8.