How Multifamily Investors Build Wealth with Off-Market Commercial Real Estate

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Show Summary

In this episode of the Real Estate Pros Podcast, host Micah Johnson interviews Nathan Legg, a commercial real estate professional with a focus on multifamily properties in Canada. Nathan shares his journey from running a travel business to pivoting into real estate during the pandemic. He discusses the importance of viewing real estate through an investor’s lens, the differences between the Canadian and American multifamily markets, and the strategies he employs to source deals. The conversation emphasizes the significance of building relationships in the industry and how Nathan’s personal investment goals align with his professional endeavors.

Resources and Links from this show:

• • • Investor Fuel Real Estate Mastermind
    • Investor Machine Real Estate Lead Generation
    • Mike on Facebook
    • Mike on Instagram
    • Mike on LinkedIn
    • CDNGLOBAL’s Website 
    • Nathan Legg’s Email Address: [email protected]
    • Nathan Legg’s Phone Number: +1 778 222 8370

  Listen to the Audio Version of this Episode

  Investor Fuel Show Transcript:

  Nathan (00:00)
  No, definitely, you you got to go pound payment. You got to hunt. And of course, being when you laser focus on an asset class in a market, you get to know the players and you get to know who owns what. So I’ve been there with Sue, know, I’ve got good relationships. I’ve got phone numbers, emails. So if I wanted to just pick that brand, say, hey, look, like if there’s ever a moment where you’re looking to start that building, please let me know because I would love to buy it. Like I could easily go and do that. But it’s you never know when that’s going to come along. So you can’t just wait.

  for that to fall on your lap.

  Micah Johnson (02:02)
  Hello everyone, welcome to the Real Estate Pros Podcast. I’m your host, Micah Johnson. And today I’m joined by Nathan, who’s been making some serious moves in the commercial real estate industry for the past five years now. Nathan, welcome in man, glad to have you.

  Nathan (02:15)
  Thanks, Micah. Good to be here.

  Micah Johnson (02:16)
  Absolutely, absolutely. I’m excited for our talk today. I think there’s a lot of value that you’re going to bring on, especially for folks interested in the commercial real estate market there in Canada. So let’s dive in for folks who aren’t familiar with you yet. Tell us a more about yourself. What’s your main focus right now?

  Nathan (02:34)
  Yeah, of course. So

  thanks again. My name is Nathan Legg. I work for commercial real estate brokerage called CDN Global, and I work for our national investment sales team. I’m here in Calgary, Alberta. I’m also licensed in British Columbia as well. I was previously working in the Vancouver office and I solely focus on multifamily. That’s all I look at every day, whether it be on the disposition or acquisition side.

  Micah Johnson (02:55)
  Okay. So how’d you get to where you are today? What led you to real estate and ultimately what you do now?

  Nathan (03:01)
  Well, it was a pandemic driven pivot. Prior to the pandemic, I had a travel business that obviously once the pandemic came around, it sort of tanked the industry for a bit. So I sold the business and through that with the clients I had, the network I had in Vancouver, I had people and mentors sort of guiding me into, you you’ve got the spare time now. Have you ever thought about maybe investing in real estate, doing something different? And so I dipped my toe and I started buying into some multifamily properties.

  and really enjoyed that process, obviously, from an investor perspective and getting the passive income side of it and a different income stream. And then with that, I came an opportunity to turn it into a career. And I just jumped with the chance. I thought that was a fantastic idea. so obviously, yes, I started in the Vancouver office. And then two years ago, my fiancee and I, moved here to Calgary.

  Micah Johnson (03:52)
  Okay, love that man. So you were an investor first, then you became an agent where you’re doing this for other people. How does that help you in what you do now? Just that insight, because you don’t just see things through one lens.

  Nathan (04:06)
  That’s right. think it’s pretty straightforward. Then you just look at it, through like that investor lens, that bias. What are you going to look at that’s going to, obviously, either make you scared or excited about the opportunity? Of course, you underwrite the financials, and everyone’s going to look at it differently, at the building, at the numbers, what they care more about.

  location specific, it’s the cash on cash return specific, obviously we all love cash flow, of course it’s really important. But you do get that ability to, with the realtor as well, to almost empathize with the other side because you would have that same hesitation if it was a building that you did like but you have concerns. I would understand it because I would be that same person. And of course you have to balance that out, right? Because if you are representing the seller.

  of you have a fiduciary duty, you’ve got to represent the seller, not the buyer. But you try to just, I guess you could say, balance the understanding on both sides. And it does allow me to look at it through, like you said, like a different lens, which I found to be, know, birds of a feather flock together, right? If you’re talking to a fellow investor who’s also having to be a realtor, you can have a more candid conversation about an opportunity because they get it.

  Micah Johnson (06:12)
  Right. Yeah, because it’s, you know what the other person’s going through. And that is a, that’s like a miniature superpower in a way, because it’s, it changes your whole conversation, how you’re talking to them, how you’re, just the way you present the information, because you’ve been the person who signed the documents. You’ve been the person who did the inspection walk. You’ve done it. You know exactly what they’re fixing to go through.

  Nathan (06:16)
  Yeah.

  Yeah.

  Micah Johnson (06:35)
  Even on both sides, I’m not sure if you’ve sold any properties yet, but it just your ability to know what that person is fixing to walk out is extremely valuable in my opinion for people that are going through it because unless you do it every day, you don’t really do it every day, right? Like there was a benefit to being constantly around real estate because it changes fast. You need to know what’s going on. Now question about the, this is just a personal one.

  Nathan (06:56)
  Yeah. Yeah.

  Micah Johnson (07:01)
  I’m not sure how much you know about the American multifamily market, but I’m interested in the differences. What’s something that, if you can think of it, that stands out, that’s different, that you deal with up there? And then just taking us through the process of how you’re solving what you’re solving.

  Nathan (07:16)
  Yeah, I I certainly, I unfortunately don’t know too much about the American multi-county market versus the Canadian one. I will say though that I know for certain that your cap rates, your going in yields are significantly better than they are here. know, in Calgary, for example, you know, let’s just keep it really, really simple. Let’s say the 20 unit property value adds, know, since 1970s vintage, it’s got some room to grow, optimization.

  cap rate on that right now would be around 5.25%, where I’m pretty sure in other parts of the state, it’s double that or even higher. Obviously, in a major market like Vancouver, for example, it’s even less. I mean, it could be three and half percent. So trying to get maybe an American to see why on earth would I invest into a place that’s going to give me that sort of initial yield, that’s a tough sell.

  I think too, you know, mean, in VCs specifically, there is property transfer tax. So whenever you buy multifamily, you have to pay a transfer tax on title. And that is obviously at a cost to the buyer. And that isn’t insignificant. I mean, it could be a hundred grand or more. So that thought process comes into negotiations, rent control.

  Micah Johnson (08:29)
  Right.

  Nathan (08:35)
  There’s another one. I don’t know if every state in America has rent control or it’s a more like the Wild West. ⁓ There’s rent control in BC, no rent control in Calgary. So you get two very different investors here versus there. I think that’s really, those are the, I guess you could say the biggest differences I’m assuming are different in the US versus the Canadian market, but definitely that cap rate, that initial yield. You guys have some tasty, very tasty yields.

  Micah Johnson (09:02)
  I heard that man and it’s a friend of mine. He’s Canadian and invests up there in America. And he was, were talking about that transfer tax you were just mentioning and I was blown away the first time I heard about it. Like it is a significant number that has to be factored into the math. That’s how big it is. Like it can kill a deal. That’s how big it is. And I was really blown away by that because again, not something that we have to deal with.

  Nathan (09:15)
  Yeah.

  Yep.

  Micah Johnson (09:30)
  And I mean, if everybody’s got to deal with it, everybody’s got to deal with it, right? Like at least it’s a, it’s a rule all the way around. However, what it does to those cap rates, what it, what becomes your normal operating environment and our quote unquote normal, that’s where those shifts really happen. Just because in the end, math’s math. And if there’s numbers on one side, there’s gotta be numbers on the other side that balance that out or look better, or we’re just going to run out of room. Now for your Canadian investors where

  Nathan (09:51)
  For sure.

  Micah Johnson (09:58)
  That’s their normal, that’s what they do. What’s like a busy transit, someone that’s buying a lot, how much are they buying in a year, you would say?

  Nathan (10:41)
  Are we talking like, are we talking institutional capital here, like REITs, are we going private?

  Micah Johnson (10:45)
  ⁓

  private, let’s go private. someone that you’re going to, I don’t know if it’s your ideal customer. I’m not sure exactly everybody you work with, someone you’re going to, know, an investor you’re working with regularly. What are, what’s like a good year for them?

  Nathan (10:48)
  Okay.

  Yeah, yeah, no, I ⁓

  Sure.

  A good year for them. let’s just say, let’s say Calgary here first, private to private. You know what? It’s funny. They always give me the, the target is never a dollar value. It’s always a number of units. It’s always like, need a hundred units this year. I need, I need 200 units this year. So I would say in Calgary, it’s around eight to 10 million. If you’re looking at private to private, these guys who

  buy like a small multifamily, like 10 to 20 units value, well, they just like, they just bang these out, you know? Then if you’re getting to, let’s say you’re getting into British Columbia and you obviously, you know, it’s a higher price per door in most of the major areas in BC, again, still private to private, you’re then around, you know, 10 to 15 million.

  Micah Johnson (11:28)
  Yeah.

  Nathan (11:45)
  where they still want about 200, 300 doors. But obviously it just costs more because it’s just the price for doors more. Yeah. Yeah.

  Micah Johnson (11:51)
  Gotcha. Gotcha.

  And what are their, like in terms of the strategies at long-term hold, they’re going to keep this building for a long time. What are they typically trying to do with them?

  Nathan (12:00)
  Yeah, most guys are long-term buy-in holes. There’s lots of syndicators out there. There’s obviously two general partners and then the rest are limited and they have a long-term lens. They buy these, again, these value add, they pump money into them and then they refinance and then they just do that with another building, another building. Yeah, long-term lens, in both markets, dealing with private to private. There’s only a couple instances where, and normally it’s…

  Micah Johnson (12:18)
  Got it.

  Nathan (12:26)
  when it’s been like a distress situation, know, something’s happened in their life that they just can’t manage building anymore. They’ve had to move or something like that, where they bought it within the last, let’s just say 10 years and they’ve had to sell it, you know, but that’s very rare. Most of the time guys are looking to buy and they’re holding it for a month.

  Micah Johnson (12:45)
  Gotcha. Gotcha. Now let’s dig into your investment experience a little bit. Like what are you looking for up there? What’s your goal this year for your, for your personal investments?

  Nathan (12:54)
  I would love, gosh, I’ve just been so busy on the actual work side. I do want to get more into getting that assets column a bit more full. I would love it for me, really, really small this year, but I would love just to buy something in like that 10 to 20 door range. Just something, just a building, really, really small here because it’s easily manageable. There’s great property managers.

  Micah Johnson (13:16)
  Gotcha.

  Nathan (13:19)
  here in the city that I know would really do like a fantastic job. And yeah, that it’s a small target for me this year, I would say I’m getting married this year. So I’ve got other things more important to thank you. Thank you. So yeah.

  Micah Johnson (13:29)
  Oh, congrats, man. Congrats. No, that’s cool. Well, I mean, 110 to

  20 unit, that ain’t nothing you’re operating and economies of scale at that point, like you’re utilizing that for a very specific reason. Now, how do you go about sourcing your deals? what, what would, what, what do you think has to happen for that to come true? Does that make sense? Like how do deals show up in your world? Are you getting to find them yourself and what it’s getting presented to you? Or are you looking a different way?

  Nathan (13:56)
  No, definitely, you you got to go pound payment. You got to hunt. And of course, being when you laser focus on an asset class in a market, you get to know the players and you get to know who owns what. So I’ve been there with Sue, know, I’ve got good relationships. I’ve got phone numbers, emails. So if I wanted to just pick that brand, say, hey, look, like if there’s ever a moment where you’re looking to start that building, please let me know because I would love to buy it. Like I could easily go and do that. But it’s you never know when that’s going to come along. So you can’t just wait.

  for that to fall on your lap.

  So it’s just, you treat it like as if you’re doing it for another client. You’re you’re going out there, you’re just trying to find another building that the owner, maybe not right now, but in the near term, might consider an unsolicited offer. And it’s just, you know, about the only way you’re really gonna make that prick their ears up is to be serious in that, you you can obviously share your background and you can either go maybe even a bit more

  Micah Johnson (14:40)
  Right.

  Nathan (14:52)
  say motivational and maybe paper something right away. I say, look, this is what I would be prepared to offer you. If these things turn out as good as I think they are, this is what I’ve prepared. You could go about it that way if you wanted to. I don’t think that there’s, that’s always a bit more risky, obviously. But yeah, I think you would be a matter of, could just tap up into the network or treat it like as if it was a client and go find something fresh. But it’s always off market. It always starts with an email or a phone call, right? You can’t, it’s just.

  Micah Johnson (15:03)
  Right.

  Right.

  Nathan (15:19)
  It’s really hard to just sort of pick up that phone and take them seriously. Let them take you seriously at first phone call to be like, who the heck are you? I don’t know why you’re calling me, why are you offering me this? So sometimes it’s good to slow play it a bit, just to get them to know who you are a bit before you kind of go in. Too heavy.

  Micah Johnson (15:26)
  Right.

  And that’s a good point, because it’s not small numbers you’re talking at that point. it’s more way more business mindset than than any of anything else. And so if you are in that industry and you’re not the first person I’ve heard say that that it is it’s very much a pound the pavement build relationships. You’re the it’s almost as if would you love to walk in and somebody be ready to sell? Yes. But it’s almost suspicious if they’re that ready that fast is kind of the mindset like it’s it’s.

  Nathan (16:20)
  No.

  True.

  Micah Johnson (16:43)
  It’s very much you’re, getting in there, you’re building relationships where like you’re saying now, actually, as long as you don’t stop what you’re doing, your dream can come true because you will be in that position with your clients eventually when they want to sell. All right, Nathan, man, I’m getting ready to sell. Okay. Well, what if I just buy that one from you today? Boom. Right. Like, that’s, that’s one thing I love about real estate, especially when you’re, when you get to be a realtor, it’s like the only industry that encourages insider trading.

  Nathan (17:01)
  Yeah. Yeah.

  Micah Johnson (17:11)
  If you can make it your job, you literally are just working every day, making your money while still participating in the part that you want to do. And I’m always like, yes, I love this doubling up. I like doing one thing and it does a bunch of things. I’m kind of obsessed with those actions and real estate has a bunch of them in there where like literally showing up for your customers is showing up for you at the same time. My mentor, we’re calling it, he calls it paying it forward to your future self.

  Nathan (17:11)
  Yeah.

  Micah Johnson (17:38)
  Like how, how is what you’re doing right now taking care of you later too? And it’s just like, Ooh, what a fascinating question. Whether it’s personal or work or whatever it is, like, how are you doing right now? Cause it in real estate and especially your version specifically, it rewards people who can build relationships well and who are going to be there a long time. Cause that’s what I imagine those investors in the one that I know you don’t just randomly own those buildings.

  Right. It took a lifetime in a career to pull those kinds of things off. And they’re not about to just let some random person come in and represent them on that. Like that they didn’t get there by accident. Right. And that’s where that showing up being that professional, especially so it’s, if you’re listening to this and you’re interested in commercial real estate, like, and you don’t mind pounding phones, that’s what it does. Get out there and talk to them, build those relationships. If it’s right for you, it’ll line up now.

  Nathan (18:05)
  No.

  Yeah.

  Micah Johnson (18:33)
  Also want to say this, if you’re out there listening and you’re interested in the Canadian market, I try to say this each time we bring professionals on here for a reason. Folks that have been doing what they’re doing for a while and know what’s going on because that’s who you want to get advice from. So Nathan, for those that are listening here, that’d be interested in touching base with you, tapping into that expertise that you have in your area just by being an investor and now working in it for five years, what’s the best way for them to reach out to you?

  Nathan (19:01)
  Always a call first, direct up to my cell, my number I’m happy to give it and my email is always a good backup. So my cell is 778-222-8370 and then my email is n for nathan, legg at cdnglobal.com.

  Micah Johnson (19:22)
  And how do you spell legg I’ll make sure it’s in there, but if someone wrote that it’s two G’s, right?

  Nathan (19:26)
  You got it, yeah, legg with two G’s.

  Micah Johnson (19:28)
  Perfect. Like I said, if you’re listening, check the show notes for all of Nathan’s contact info. We’ll make sure it’s there. Nathan, again, man, thanks for joining us today. I love your story, your perspective. I always, find it interesting how people get into real estate and then use again that past experience to create the life that you want now that’s gonna launch into that future, man. So also congrats on getting married this year. Enjoy that. Looking up for you there, man.

  Nathan (19:37)
  Thanks for having me.

  Thank you. Thank you very much.

  Micah Johnson (19:53)
  And thanks everybody out there for listening and watching in. If you got value out of today’s episode, please like this episode, share it with someone else you think you get value out of it. As always, if you don’t follow yet, follow along and subscribe to our podcast. We appreciate every single one of you that are out there with us. We got more conversations coming up with operators just like Nathan out there building a real business in the industry. Thanks for being with us. We’ll see y’all in the next episode.

  Nathan (20:16)
  Thanks, Micah.