E119 Can a Low Cap Rate Deal Still Make You Money?

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In E119 of the REI Hot Seat, Andrew Hines and David Hulshof analyze an on-market nine-unit apartment deal in Hamilton, discussing its financials, debt structure, and value-add potential.

They emphasize the importance of cap rates, financing strategies, and structuring deals wisely to maximize returns.

The listing price is $1.89M (210K per door) with a 4.67% cap rate, which they consider too low given current debt rates.

To make the deal more attractive, they propose an offer of $1.6M, which would increase the cash-on-cash return to over 4%.

Key value-add opportunities include introducing paid parking ($50 per spot) to boost cash flow, securing CMHC financing for better debt terms, and potential rent increases for under-market units.

They highlight that negotiation, deal structuring, and identifying overlooked revenue streams are critical to making an investment work.

The episode wraps up with a discussion about renaming “hybrid” deals to better define this investment approach and a reminder for listeners to engage with their insiders' list for off-market opportunities.

Don't forget to join the Insiders list for access to off-market deals and other unique opportunities.

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E119 Can a Low Cap Rate Deal Still Make You Money?

02:14 - Why Cap Rates Matter

04:21 - Creative Financing Strategies

07:00 - Finding Hidden Value

08:04 - The Power of Paid Parking

10:00 - Negotiation Tactics

11:20 - Making the Deal Work

12:30 - Lessons for Investors

13:08 - What’s Next?

Disclaimer: This episode, as with every episode of this show, should NOT be considered as advice. Investment advice is NEVER given on this show. Always consult a competent investment advisor before making an investment decision.

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Andrew Hines is a seasoned real estate investor, business-builder, educator, and podcast host, well-recognized for his extensive experience in the field. Andrew graduated with an HBA from the Richard Ivey School of Business in 2008 and spent three years teaching introductory business at Western University as a Lecturer. He has been investing in real estate since 2011 and completing value-add projects since 2015, primarily in the luxury student rental space. Andrew started a project management company for building out new-construction townhomes in 2016 and has since built over 50 residential units throughout Southwestern Ontario. Andrew is an advocate for treating real estate investing like a business and uses his experience in his educational endeavors, coaching numerous investors on strategies to achieve financial independence and scale their portfolios effectively.

His podcast, "The Andrew Hines Real Estate Investing Podcast," serves as a platform for sharing insights, strategies, and success stories, connecting a community of like-minded individuals passionate about real estate investing. With a background that blends practical investing experience and investor-focused work, Andrew has become a pivotal figure in the Canadian real estate investing community.