This investor has 725 doors

by Neil Sharma on 04 Oct 2021

Andrew Brennan has been an investor since 2008 and today has about 725 doors. The trick, he says, is to build a portfolio in the multifamily sector because commercial mortgages are much easier to obtain than residential mortgages.

“Part of challenge over the last four, five years is it’s harder to get mortgages from the point of view of debt coverage ratio for a portfolio, or the amount of mortgage you can get in the residential space, but we don’t have that problem when it comes to commercial,” said the co-founder of Palm Tree Investments. “I’m able to get mortgages and not have the same frustration. The other thing is when we deal with a bigger amount of dollars, it's the same amount of time to get a quote for a roof for a 40-unit building as it is for a four-unit building, so it’s the same economy of scale.”

The other trick is to steer clear of Toronto and much of the GTA, where cap rates are too low, Brennan added. As a result, Palm Tree Capital is most active in Simcoe County and along the 401 corridors by Belleville and Kingston—the company has even set up a new office in the latter.

“[The GTA] requires much more upfront funds sometimes,” Brennan said. “I had one down in Oshawa but I decided to wholesale the building. If I found a decent building that was large enough and if rent roll was significantly below market, then I’d consider it based on the value-lift.”

Brennan doesn’t see anything wrong with buying single-family homes as investment properties, but he recommends duplexing them to extract more rental income from the property.

“Multifamily or even a duplex would be good for a beginner,” Brennan said. “The other option would be to buy a single-family home and put a basement apartment in it, which would overcome the debt-rent ratio. I have some friends who do those conversions but even some of them wouldn’t get 80% loan-to-value.”

Nevertheless, choosing the right location appears to yield better returns on investment. Brennan has properties in Midland, ON, a town of 18,000 people with $500,000 homes. But in this town, he says, the smart money is on duplexes.

Just avoid condos.

“Condos and single-family homes have poor debt ratios when you compare the rent amount to value, and that limits how many properties you can buy in the future.”

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