How to invest without renovation headaches

Choosing the right property in which to invest is only half the battle—the other half is ensuring that it’s renovated to full potential.

But what if there were somebody to do both for you?

In 2013, Magellan Wealth Management was founded by Carlos Rodrigues, an erstwhile advisor for Freedom 55 Financial who realized that his personal real estate investments produced vastly superior yields to what he was contractually obligated to sell his clients. While still a fine wealth advisor, Rodrigues considers himself an even more astute real estate investor.

Magellan buys single-family houses and converts them into multi-family homes, and in doing so pumps their values through the roof. Operating on either joint ventures, or accepting up to five investors at a time, Magellan finds properties, renovates and then manages them from start to finish.

“The investor puts up capital and, typically, we’ll be on title of the mortgage to qualify for it,” said Rodrigues. “We take care of all the work but we take half the risk off of the investor’s shoulders. We find that people want to get into real estate but don’t have the time because when something is being renovated, you need to be present.

“Right from the beginning, we have our own real estate agent who’s in-house and who can qualify the investor for financing. We endeavour to make the whole process of real estate investing no work at all for the investor. It’s as hands-off as possible for them, but—on the joint venture side, for example—they’re getting the full potential of being the owner of a rental property without all the headaches.”

Magellan sometimes flips the properties, but that’s only if an eye-popping offer is made. What it usually does is hold onto the properties and eventually buys out its investor partners after around half a decade. The opportunity exists for the investor(s) to buy out Magellan, too, says Rodrigues.

“We never try to sell,” he said. “We get asked all the time, ‘Do you flip these properties once they’re renovated?’ If it’s appropriate, then sure, but the real money is made by holding it. We haven’t flipped any because they’re all cash cows.”

The company currently operates in Hamilton, where it’s based, St. Catharines, Welland, Cambridge, Kitchener-Waterloo, and Brantford, but it has designs on the areas east of Toronto where cash flowing properties are aplenty, like Oshawa and Ajax.

An example of a Magellan property is in Hamilton Mountain, where the company turned a house purchased through estate sale into a duplex.

“We gutted it completely,” said Rodrigues. “It went from three bedrooms with one kitchen and one bathroom to five bedrooms with two brand new kitchens and bathrooms. It has proper insulation now with spray foam, which is nice for temperature maintenance; we painted everything and went the extra step of making it a legal apartment, which we do with all of our properties. Hamilton Mountain has proper fire and sound separation, and we increased the size of windows.”

Even ensuring both units have separate outlets is part of the renovation plan.

“If, for example, you have a house with two apartments and one outside outlet, it has to be connected to one of the panels, so who pays for the guy downstairs vacuuming his car? We go as far as splitting everything up and going the extra step of mitigating any issues that may come down the pipe.”

With years of experience as an investor, Rodrigues knows opportunity when he sees it.

“With the need for rental accommodations such as they are in the region, it’s easy to buy a house and bump the value of the property up with a second stream of income,” he said. “That’s why we hold onto our properties—we’re still cash flowing just short of $800 a month with the Hamilton Mountain property, so why sell the cow providing all the milk?”

Find out more about Magellan Wealth Management at the Investor Forum on March 2.

Neil Sharma

Neil Sharma is the Editor-In-Chief of Canadian Real Estate Wealth and Real Estate Professional. As a journalist, he has covered Canada’s housing market for the Toronto Star, Toronto Sun, National Post, and other publications, specializing in everything from market trends to mortgage and investment advice. He can be reached at neil@crewmedia.ca.