Hi folks - I'm trying something new here. This is the first of hopefully many transcribed interviews I will be having with experts in second suites and high density housing.
So today I'm having a chat with Rob Chaine, a highly-sought after home inspector (Carson Dunlop trained!), real estate investor, and now a secondary suite expert. Rob and his wife Lisa have also been clients of mine in the past year, having worked on four second suite conversion projects in St.Catharines.
Moving forward, Rob and I will be working together to assist homeowners and investors with their legal suite conversions, and help them avoid the issues and problems that we have encountered.
That's enough from me, now let's hear from Rob.
AT (Andy Tran): Hey Rob, thanks for doing this. Can you give me a bit of background about yourself and how you got into home inspections, and now a full-fledged real estate investor?
RC (Rob Chaine): My wife and I had been talking about investing in real estate for the longest time. She’d picked up a book by Don Campbell of REIN on a friend’s recommendation and then joined REIN. Meanwhile, I had always been into home renovations and carpentry such as furniture-making and always had a natural interest and knowledge in getting things done around the house. My friends and family call me MacGyver. I ended up leaving my job in the corporate world after many years to train as a home inspector since it seemed like a great fit for my renovation/building knowledge and my background as a customer service manager. My wife met Erwin Szeto of Mr Hamilton at a REIN event and we started attending his inner circle meetings at Rockstar which is a great organization. We ended up working with realtor/investor Martin Kuev and bought 4 properties in 6 months! All in St. Catharines.
AT: That's a great story! Thanks for providing the context. So like Macgyver, can you do anything crazy with a paperclip?
RC: I can usually find many uses for a paperclip, broken ear bud hangers for instance.
AT: Why is a home inspection important, and what are some of the big items people should be aware of before purchasing?
RC: Real estate can be one of the biggest investments people make in their lives, unless you are very familiar with buildings it only makes sense to have a home inspected by someone trained in looking for deficiencies in homes. Renovated spaces are usually the biggest areas where concerns arise, especially if the renovations have been made DIY without permits. These are the cases where we see electrical and plumbing shortcuts made. Many of these can be safety hazards that need to be corrected.
AT: As a former inspector myself, I agree 100%.
AT: Do you also do seller's home inspections? And why is that beneficial?
RC: We do see these but they are the minority of inspections. I would encourage sellers to consider doing them however. Having an inspection report already done means the seller is aware of where potential buyers might try to negotiate the price down, and it also demonstrates transparency, and typically eliminates delays due to buyers needing to schedule inspections after an offer is accepted. Essentially, it can cut down the stress and time involved in negotiations.
AT: Agreed - it's great for sellers because it eliminates the buyers using the inspection as a negotiating tool. Probably more useful now since it's turned slightly back into a buyer's market - even though it'll probably be temporary.
AT: Can you give us a funny or scary home inspection story?
RC: Sure. One story is funny in retrospect but it was a big surprise when I found it. I was on an inspection and found a gas log fireplace, the type that doesn’t have a protective glass. I was looking up the flue which seemed blocked. I was trying to figure out the issue and finally upon a closer look, I realized it was blocked by a bird that had long since passed. My wife loved that story. Another example was an older home in the Niagara region. The house needed a lot of renovations but the buyer said it had ‘good bones.’ Only when I went into the crawlspace did I realize the bones were from skeletal squirrels! It did bring some uneasy laughter…
AT: Hahaha - yes we do see a lot of animals in their final resting places in this job!
AT: So what led you to consider doing a secondary suite in all of your real estate investments?
RC: Everything we’d read on secondary suites made sense, especially the numbers. It really makes the case in terms of cash flow.
AT: Why do you feel it's important to do them legally versus illegally?
RC: The biggest reason is safety for our clients, we want our tenants to know that they are living in a safe and legal place. Having a process that has integrity and is honest allows us to sleep at night. A side bonus is also that the value of the house will be better when appraised with a legal unit vs. non-conforming.
Here are 4 houses Rob and Lisa own in St.Catharines with legal second suites in each for a total of 8 doors
AT: And I'm sure it also makes you feel a lot more comfortable that a nosey neighbour can't just call into the city, and have you shut down right?
RC: Oh absolutely, neighbourly relations are interesting, especially when the bin shows up, all kinds of questions arise. A lot of fear of the change in neighbourhood. But again, knowing and sharing our plans of a safe place to live for nice people is a start to building those bridges.
AT: I know you had several challenges and hurdles on your first conversion, and now you're on quite a roll with the remaining ones. Can you give us 3 examples of things that you found to be difficult and what you did to overcome them?
RC: Yes, we call it our “learning house!” Seriously it’s been about learning as you go. First example is trying to save cash by keeping some of the existing layout. As with most renovations, once some walls and ceilings come down, all kinds of things are exposed from hidden junction boxes and other people’s renovation attempts. The solutions to some of these can become complicated and more costly when the simplest route would have been to start with a clean slate. Part of the budget process needs to include more worst case scenarios so that when that part of the reno is happening you’ve costed for it.
A second example has been around how long things can take in terms of getting things done. You spend quite a bit of time researching contractors only to have them not call back, not show up, or show up but never quote. Then there is the time to go through the city to get the permit and all the inspections done – there can be up to 11 inspections on one unit, all done in sequence, so there is no shortcut!
A third and last example is around pricing of the unit. Watch the hit rate on your ads – actual inquiries divided by the number of views. If the ratio is less than 2% you are probably priced too high. We waited too long to drop the price.
AT: Thanks for that invaluable advice. I'm sure our readers will benefit a lot from your experience.
AT: At the end of the day, are you glad that you went through the legal route?
RC: Absolutely, we can sleep at night knowing we’ve done everything to make the suites legal and safe. it may take a little longer and cost a bit more. but once complete no one can come back on us.
AT: Other than the big bucks of course. What's your reason for investing in real estate? In other words, your "Why?".
RC: That’s a great question. We are doing this to create some flexibility in our lives, carve out additional retirement income, and improve our ability to give back. It is also a great learning opportunity for our son to learn about real estate investing.
AT: I know you spend a lot of time with your son on Cub scout activities. That's awesome, and I hope to do that with my boy one day. I also know your son is super into house design. How did you get him into that, and what tactics can I use for my kids?
RC: For him it was watching HGTV, he got hooked on Fixer Upper, Love it or list it and the Home to win. The funny challenge though is when we talk specific renovations, he always suggests removing a wall to make the space more open concept – he is pretty impressed with massive kitchen islands! He had a blast working with me for an afternoon pulling up old laminate in one of our properties. Called it “demo day!”
AT: Maybe you can get him a sledgehammer for his next birthday. That's great - I'll make sure to PVR a ton of HGTV to prep my kids!
AT: I know that you plan on providing "walk-through" consultation services for investors/homeowners looking to purchase homes that can be legally suited. Can you provide a bit more detail on that?
RC: Absolutely. At one of the investor forums we attended, one person asked “I want to have an inspection but can’t or I will lose the bid – what can I do?” My wife put up her hand and replied “marry the home inspector!” When she and I are shopping, I have a process to evaluate the property for reno cost estimate, and second suite potential etc. So as investors, it really is a great advantage because I know what to look for. Not long after that meeting, a repeat investor client suggested the concept of going shopping with investors BEFORE any offers are made. I am going to pilot it over the next few months and determine the interest. It’s going to be a plan where I will go shopping with an investor for a half day/day – to 2 or more homes. There will be a price discount for every additional home viewed and the inspection will be up to one hour per property, focused on major items only, with a basic bullet-point report provided after.
AT: Great advice from your wife! Haha. And would you have an option to tie that in with your home inspection services?
RC: Yes. It will be a package deal that provides fair pricing to combine a pre-purchase walk-through inspection with a thorough/detailed post-purchase inspection to help prep for reno estimates by contractors.
AT: That's great. I'll be sure to share that with my readers and people within my network.
AT: Was there anything else you want to share with our readers that you feel may be helpful?
RC: I think it’s really important for people to not get swept up in the excitement of shopping – to remember that you have to do your due diligence. The majority of the investors we know that are actually coaching and teaching other investors always get an inspection. Try to build it in somehow pre or post purchase – it truly is an education and can help limit later surprises. Run the numbers, research the neighbourhood and tenant profile, get to know some good contractor contacts really early (get referrrals) and do the right thing in terms of creating a great place to live for your tenant customers.
AT: I couldn't agree more. Thanks so much for your time Rob. And by the way congratulation on setting up your new inspection company! If people want to get a hold of you for home inspections or secondary suite consulting, how can they get a hold of you?
Thanks again to Rob for sharing his story. Hopefully you (the readers) found this interview format to be helpful. If you enjoyed it, I would appreciate if you can let me know either by commenting below or emailing me on the contact page.
I plan to do more of these in the future with other experts and people who have experience with real estate and second suites. Thanks for sticking around to the end!