Investment Story #9: Duplex Conversion with Real Estate Investor Quentin D’Souza

Our 9th Investment Story features Quentin D’Souza who is real estate investor and coach.  He is the  Chief Education Officer of the Durham Real Estate Investment Club and author of 3 real estate investing books.

If you are interested in JV opportunities or learning to become an active real estate investor, then you can reach Quentin at quentin@quentindsouza.com

I have no financial relationship with Quentin to disclose.

Please tell us a bit about your background.

My name is Quentin D’Souza. I’m 45 and I retired from teaching in Ontario when I was 40. I had been investing in real estate for 10 years before I retired so 15 years, but it was really at age 35 when I started purchasing 3 to 4 properties a year.

I have three degrees including a Master’s in Education and my Principal Qualification, and was on the sunshine list for a few years at the end of my career. I didn’t want to go down the administration route and had been investing in real estate which allowed me to choose what I wanted to do. I’m not special or different. I believe that anyone who is determined can retire from any profession in 5 years or less, if they are persistent enough.

I have written three books that help other real estate investors. I am the author of

We have an eight figure residential real estate portfolio with single family homes up to twelve unit buildings and everything in between, which spans from Pickering to Cobourg, Ontario, as well as workforce housing in Florida. I am the active partner on all our properties and I have passive money/financing partners. Only on one property which is more like a business, a 50 unit storage unit facility, where I am more of a passive partner.

Please describe one of your real estate investments

I’ve got three projects on the go right now, one of which is a new build duplex. One of these projects is the purchase of a distressed single family home which I am converting to a legal 2 unit property, through the addition of an accessory apartment.

My team removed 5 – 40 yard bins of garbage/tenant belongings from the property and began renovations. The tenants left lots of stuff behind including some cats, a turtle, and a grand piano. (The animals were brought to the humane society.) There was graffiti on the walls and some rooms were painted black, there was water damage from a leaky roof, and some badly done renovations.

Where is the property located?

Bowmanville, Ontario

Are you the active or passive investor in this investment? How did you/your partner find this
investmen
t?

I am the Active Partner.

I had a passive partner that did not want to do the financing (was the first time I was working with them) and pulled out of the project. I always have at least 3 plans for every project, so I went to plan B. I decided to go with a private lender and do it myself. Plan C would have been to sell it after the renovations are completed.

I am the Chief Education Officer of the Durham Real Estate Investor Club and am a well- respected and known member of the real estate investment community.

People make the mistake of thing real estate is about bricks and mortar, it is a people business. I do what I say I’m going to do and people know that about me. This deal was brought to me through my personal network and was purchased privately. 70-80% of the properties I purchase are not listed on the MLS. I am not a real estate agent or mortgage agent.

If you were in the stock market this would be considered insider trading. One the many benefits of real estate is insider trading is legal.

What was the risk of this investment? What was the security?

We purchased the property at a distressed price privately. So our purchase price was the security. The risk is that our renovation costs will exceed our estimates of $60,000. We purchased the property at $385,000 and comparable properties of single family homes across the street sold for $525,000 in the last 120 days. As a legal 2-unit property, the after repair value should be worth between $575,000-$600,000.

How much was the original investment? What is the breakdown of your/partner’s
investmen
t?

20% of $385,000 = $77,000
Closing Costs = $5,000
Holding Costs = $10,000
Renovations = $60,000

Passive Partner Responsible for Mortgage and Funds = $152,000
Refinance at $575,000 is a new mortgage of $460,000. Which means I should pull out all my initial funds.

What was the annualized ROI? What is the breakdown of the ROI?

On this project for me it is an infinite return, if all funds are refinanced out within 6 months.
Rents are $1800+ Utilities Upper Unit and 1400+ Utilities lower unit.
Using this tool: http://durhamrei.com/calculation/

  • Cash Flow/yr = $4900
  • Mortgage Paydown/yr = $8292 (4% Interest Rate/30 Year Amortization)
  • Appreciation/yr = $28750 (Using 5% Appreciation)
  • If applicable, Forced Appreciation/yr = Already Included in Number
  • TOTAL $ Increase/yr = $41,942
  • OVERALL ROI in first year = (TOTAL / Investment x 100 %)
    $41,942/0 x 100% = Infinite

When do you/your partner get the original investment back?

In this project, 6 months, which is a homerun. Typically, my goal with partners is to have all their initial funds back within 5 years.

What did you like or didn’t like about this particular investment? Would you recommend this
investment to your friends/family members? Any advice to give to the readers?

There was lots of value add and equity that I was able to get access to on the purchase of the property. I knew that converting it to a 2 unit property would make it a great investment. Finding and converting to the highest and best use for any property is where I usually find the best types of investment property.

Yes, cash flowing buy and hold investment property in appreciating markets have allowed me to leave my profession. I highly recommend them to my friends and family. But sadly, most are too scared to do anything.

Get started. There will never be a better time than now. There will always be an excuse – economy, money, financing, family … but the persistent investor always succeeds.

If any reader wants to contact you, what is the best way to contact you?

quentin@quentindsouza.com

Please leave any comments/questions for Quentin below. Thanks!

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I don’t think many of the paper investors understand the profits that can be made with good real estate investing. Especially those who enjoy working with teams. I see the whole point of paper is to do almost ZERO because then you would minimize taxes by not shuffling things around all the time. RE is an area where if you want to be creative, it is very possible even for small investors. Plus with RE, you can design it any way you want. There is no need to be married to one way of investing versus the other. I like… Read more »