Condo Investment Advice From Hunter Milborne of Milborne Real Estate
Hunter Milborne, President of Milborne Real Estate Inc has sold tens of thousands of condos. He is quite possibly the most experienced and successful condo investor ever in Toronto, having started his career in 1976 by selling 33 Harbour Square. The “Dean of Condos” sits down with Andrew la Fleur to share some of his secrets to success from a nearly 40 year career in the Toronto condo market.
Hunter Milborne Interview Highlights
0:20 Who is Hunter Milborne?
1:40 Toronto’s Shrinking Condos
1:25 How Hunter Milborne Got Started in the Condo Industry
16:40 Did You Ever Imagine Toronto Would Look How It Does Now?
19:15 The “Aha” Condo Investing Moment
20:18 The Crash of the Late 80s
23:58 What Would You Tell Your Past Self Looking Back?
28:00 Were You Ever Wrong About a Project?
30:57 How Do You Personally Evaluate a Condo Project?
34:35 How Long Should You Hold On to a Condo Investment?
36:12 What is WorldHousing.ca?
40:50 Citylights on Broadway
45:16 How to Reach Hunter Milborne
Globe and Mail article on 3 bedroom condos (Built for families but occupied by students)
How to Leave a Review for The True Condos Podcast on iTunes
Hunter Milborne Interview Transcript
Andrew la Fleur: Welcome back to the show. On today’s show we’re going to be talking to Hunter Milborne. Very excited to bring this interview to you. It’s one I’ve been trying to get for quite a long time but I was finally able to get the schedules to line up and I was able to sit down with Hunter. He’s known as the dean of condos in Canada and rightfully so he’s been selling condos for longer than pretty much anybody.
He’s been doing it since 1976 when he first started selling the 33 Harbour Square building down on the Waterfront which at that time condominiums were totally new concept in Canada. Even just downtown living in general was a totally new concept. He’s got more experience than anybody in terms of sales but more importantly and more relevant to you the listener is I wanted to speak to Hunter as a condo investor because a lot of people don’t realize it but he is a huge condominium investor himself personally.
He’s been buying and selling condos for … Also for about 40 years and still actively is doing it today. He doesn’t buy in any single one of the projects that sells though so I ask one of the questions I ask them is, “How you decide which ones you’re buying into? Which ones you don’t buy into?” That you want to listen to that interview to catch that amongst many other interesting things we discussed.
Before we get to that interview again just wanted to talk about something that’s in the news today. Right now and the article this week I’m looking at is from The Globe and Mail and it his headlined at Toronto’s shrinking condos. Built for families perfect for roommates or couples without kids. Interesting article which is looking at the three bedroom condo phenomena downtown specifically now depending on where you’re building downtown on certain areas of the downtown. Developers are required by the city to put in a certain percentage of units as three bedroom units and this came about a few years back.
Basically what’s happened is that these units are incredibly small and they’re really … Not really three bedroom units they’re just kind of three bedroom units on paper just to sort of satisfy the city’s requirements. Anyone who knows condos and knows floor plans will look at them and basically say, “Yeah, this is pretty much a joke of a floor plan and it’s not really a three bedroom unit.”
That’s sort of how the developers have been getting around these regulation is basically turning it two bedroom unit. They’re typically around 800 to 900 square feet and they’re turning these two bedroom units into a three bedroom unit in quotation marks by just sectioning off the space of the condo and calling it a bedroom. Obviously this is not really producing the desired result which presumably the desired result was to encourage families to stay in the core and stay downtown as opposed to moving out to the suburbs or the inner suburbs and to encourage more diversity of demographics in the downtown core.
My take on this whole thing obviously is that the floor plan as they are really not working. It’s sort of a bit of a joke forcing these three bedroom units on to developers when there’s not really a market for it yet. That being said I definitely am a strong believer that we are moving towards a Manhattan model where families will be living downtown, where families will be living in high rise apartment style condos more and more and more as we move forward.
We’re not quite there yet though and I think the biggest thing that’s really missing to the whole equation is the schools. In a sense we’re putting the [carpy 00:04:18] for the horse by building these condos or these three bedroom family condos which of course is I said not really three bedroom condos. By forcing developers to do that first but rather I think we would see a dramatic shift if the city would just invest, the city and the province and the various levels of government would invest in the infrastructure to support families living downtown. Most specifically I’m referring to schools.
If there was … A lot of families want to live downtown, a lot of families would love to stay downtown when they have that first kid or that second kid and they’re starting to run it as based in their condo. They’re forced into moving away from the downtown even though many people love to stay there because there aren’t really schools in the downtown or for them to go to or the schools that do exist. The sad truth is that there are bad schools, they are … They ranked amongst the lowest in the province for all the rating systems that look at how schools are performing. You can look at any website and just pick any downtown school and you’ll see what I mean.
People when they look for a house to buy in the city when you have kids the first thing or the very near at the top of the list of things that you’re looking for is what school district is it in. Is it close to a good school with a good reputation that performs well on these tests and different websites that rank the different schools. What I would say and my take on it if the city wants to encourage more families living downtown which I think they definitely should.
Then they need to look at that question and sort of back up the train a bit and say, “How can we build the infrastructure and supports in place so that people will want to live downtown that will drive the demand so that developers will start building larger units and that will drive the supply changing.” One example would be CityPlace, CityPlace is a great downtown neighborhood in terms of location, it’s affordable and there’s a lots of choices. The buildings have great amenities, lots of choices of buildings to live in but there’s no school.
If the city for example, this is just an example, the city would put a brand new school, elementary school into the CityPlace neighborhood say and they would really make a big investment into making that a … To be a great school then I guarantee you that families would flock to that neighborhood overnight and people would gladly move into a building with great amenities at an affordable price with decent size units that are designed for families. They can walk to work, their kids can walk to school, you can walk to the Waterfront, you can walk to the aquarium, the Center, the Roger Center, all the museums downtown.
That would be one example of a neighborhood that could really be serving as a model for this whole movement of getting families in the downtown core. I think the sweet spot for these units is not this 800 to 850 or may 900 square foot three bedrooms that developers are currently building. I think the sweet spot for these types of units would be something like a thousand to 1200 square feet for affordability reasons so that would keep the units relatively affordable in a downtown location.
Maintenance fees would stay in check if the units are not getting too large. You’re talking about $600 a month on a maintenance fee is an amount that most families would gladly pay in order to be in a great downtown location with all the convenience as a condo living. An end price let’s say around $700,000 to live in a nice unit like that downtown I think would be a great choice for a lot of families as opposed to purchasing a house for let’s say … A $700,000 house as we all know within the city of Toronto now doesn’t get you very much.
It gets you pretty much a typical house might 8o to 100 year old house, needs work, it’s probably around a similar size believe or not these Toronto houses are small. They’re typically around 1200 – 1300 square feet, typically three bedrooms, one bath. They are small city houses and they need work. To get a decent house of larger … A larger than say 1400 square feet in a decent area in the city of Toronto you are looking at a million dollars right now. Just shop around and try to find something less in that with the decent size.
I think many families would gladly move into something like that and I think developers should work towards that super model. Okay, I’ve gone on long enough for this introduction here. I won’t talk anymore about that but let’s get to the interview now with Hunter Milborne. Here you go.
Andrew la Fleur: Okay. It’s my pleasure to welcome to the show Hunter Milborne. Hunter is the president of Milborne Real Estate Inc. Hunter, welcome to the show.
Hunter Milborne: Thanks Andrew.
Andrew la Fleur: Hunter, I thought it would be great to just get started tell a little bit about your story, your background, how did you first get started in the condo industry.
Hunter Milborne: I graduated from University of Toronto and had a student loan and a Volkswagen I guess like a lot of people that time. Had good advice from some mentors and I think that’s good for young people today because one of the advice I always give to younger people is to get a mentor, to have somebody that they can look up to and get advice from and then later they can be one themselves.
I got good advice and from a gentleman that was more senior from school that I knew and he said, “Look,” he said, “If you … Whatever you decided to do you should specialize in something and then once you’ve decide what you’re going to specialize in you should decide that you’re going to be in the top 5% of that field whatever the specialty is.” No specifics yet, all right.
I graduated from University of Toronto in 1972 at the Bachelor of Commerce and I had a sales scale, I was working for a book company Grolier selling books to teachers. Looked at the market in a 1967 condominium legislation was enacted which people don’t … That’s not that long ago. Before that there were no such thing as condominium, 66 in British Columbia, 67 in Ontario. It look like something that was emerging so I thought, “Well, you know, if I could specialize in condominiums,” there was no field so it used to be in the top 5%. It sort of just evolved from that simple discussion.
Andrew la Fleur: You started off … What do you do your university studies?
Hunter Milborne: I did a Bachelor of Commerce so I had an interest in business. The other thing on a personal level I looked around at the word and different people have different goals one of mine was to become financially independent because money is good and it helps. I thought who has money, you look in the world and if you look at people who own real estate have money and people who own their own businesses have homey. I thought if I can ultimately own my own real estate business and end up owning a lot of real estate that could be a good combination.
Andrew la Fleur: What was the first condo building that you sold?
Hunter Milborne: The first condo building that I sold as an individual was I work for a company called Consolidated Building Corporation which I don’t even think is in business anymore. It was a building called the Master on the middle road borderline between Etobicoke and Mississauga. I was a sales person, I work there for the company. The first one that Milborne Real Estate, when I started my own business about a year later the first building that Milborne Real Estate Inc. sold was 33 Harbour Square.
That was interesting because at that time it had been built, was finished in April of 1974. This was June of 1976 that we took it over. There was 539 suites they built it as a rental. The most they ever rented was about 160 so it was kind of a failure. They tried to convert it, they convert it to condominiums because nobody really cared at that time. There was no rental housing protection act or whatever.
Then the rental people were upset because they wanted a rental, anybody who wanted to buy was upset because you said we didn’t get a chance to buy at the beginning it was a rental. It really … It was press in the Toronto Star, it was White Elephant, a Mistake on the Lake. It was really not a very prestigious beginning but we kind of dug our heels in and started working on it hard and selling it and it was ultimately success and they decided to launch a second phase 5565 Harbour Square next door. Then we did Harbour Terrace and Kings Landing going down the water front. Most of the first few buildings we sold around the Waterfront.
Andrew la Fleur: For those of us who weren’t there at the time describe to us the … What was the Waterfront in that part of the city? What was it like in the mid 70’s when you started selling?
Hunter Milborne: It was pretty isolated. If you look at aerial pictures, Queen’s Quay Terminal was a cold storage warehouse and there was absolutely nothing in either direction. Harbour Square or 33 Harbour Square and the Harbour Castle Hotel were finished in April 74 and they were the only things there. There was a belief in certain people that, “Hey, it’s still a big city. It’s still a Waterfront.” It was very industrial, it was very isolated, had been cutoff from the city by the Gardiner Expressway for many years. It was barren, it was isolated, it was bleak, it was …
Andrew la Fleur: What was the selling point then? We see it now and we say, “Yeah, the Waterfront is a great place to be specially that’s what they are turned out to be the epicenter of the Waterfront.” How did you sell it? I’m just curious like what someone comes in to that sales center and like you say it just bleak everywhere around. How did you sell that?
Hunter Milborne: I think in any innovation curve you see the early adopters and the late adopters and then the mainstream comes later. There was enough people … People from Toronto would come in and they say, “You know $80,000 for a two bedroom that’s a lot. Will I ever be able to sell it again and how I own this little piece of this guy and there’s no land attached to it.” People from Switzerland and Germany would come in and they’d say, “Wow. This is really cheap. You’re going to sell a lot of these and really fast and we’re going to buy one and we’re going to call our friends to buy one.”
I thought, “Who was right? Is it the European with world experience or is it the guy who stumbles in from North York who maybe goes to Disneyland once a year?” I made a judgement that it was really the foreign buyers that were the most …
Andrew la Fleur: The once to follow.
Hunter Milborne: Sophisticated and the most knowledgeable. They bought suites, their friends bought suites. We sold people who came in and we started selling people another … I thought, “These people who once already bought because they already bought into it. If they’re living in one then maybe they should buy the one next door rented out and if they ever wanted to move into it they could expand or if they could just have a great investment.”
Andrew la Fleur: If you’re being honest did you ever imagine Toronto in those days 1976, did you ever imagine Toronto would look the way it does now in 2015?
Hunter Milborne: I wish I could say I did but no, no, and I didn’t really envision an industry and I didn’t really envision that big a business. I just thought, “This is a great job and I’ve got a little company and we’re going to sell this building. We’re going to sell another but just going to keep selling buildings.” As the market progressed and as the world grew it was surprising.
Andrew la Fleur: Yeah.
Hunter Milborne: In those days I often tell people … It sounds crazy now but that was what almost 40 years ago but prices then were $60 a square foot on average. Then one of the higher end projects we got was midtown it was Hazelton Lanes and that was the first one that was over $100 a square foot. That was 2,000 today in terms of people’s mind in a threshold.
Andrew la Fleur: Right. What was … I’m curious. What was the first condo that you purchased yourself for an investment?
Hunter Milborne: Yeah, the first one I purchased was in a suburban building, it was at Jane and Eglinton on a street called Emmett Avenue. It was a 1400 square feet, it was three bedrooms and a den and it was 399.
Andrew la Fleur: 399.
Hunter Milborne: Yeah.
Andrew la Fleur: What year was that?
Hunter Milborne: That was I think 1974 and I got a CMHC Mortgage for 90% so I put 4,00 down and I couldn’t … It was $400 a month for principal interest, maintenance and taxes and in those days … If you made 10 or 12 or $15,000 a year you were doing pretty well, that would be the equivalent to 50 to 75 today in terms of different days dollars.
Andrew la Fleur: Okay.
Hunter Milborne: I call up two of my friends from university and said, “Look, I got this big place so how would you like to rent bedroom number two and bedroom number three.”
Andrew la Fleur: Okay.
Hunter Milborne: It turned into a little rooming house to keep paying it. Then before we got involved in Harbour Square I bought a second one was a 1200 square foot one bedroom and a den which was 669 I think at that time.
Andrew la Fleur: Wow.
Hunter Milborne: I had some equity because I sold the other one for something in the 50’s and made some money on that. Move the equity over and thought this is … This part of the world beats, this beats working, you make money like this.
Andrew la Fleur: Do you remember was there a moment in time you can remember where the light bulb went off in terms of investing in condos personally and you said makes a lot of sense? Was that moment maybe you sold that first condo for a profit or was it like when you got your friends renting from you and you saw the cash flow?
Hunter Milborne: Yeah, I think probably it was even maybe just in terms of even just the [germ 00:19:38] of the idea of buying the first one. Everybody has to have that moment and it’s a bit of a leap of faith because you’re making a big commitment but the truth of the matter is is that tenants payoff other people’s mortgages and the owners reap the benefit. Not everyone has the courage or the wherewithal to own.
I think for me it was really just even before but there’s satisfying moments where you get validated. All of a sudden people move in and you can afford what you bought and you have a sale then now you’ve crystallize some of that equity as a principal resident.
Andrew la Fleur:Yeah, yeah. Fast forwarding a bit through time the crash of the late 80’s. Curious how did that affect you personally and your business?
Hunter Milborne: That was pretty challenging time because just I remember that we launched a project in June of 1989 out in Etobicoke by the Kipling Subway Stop which was one of the last or the bluer line. That was the last project that we launched that was a for profit project until November of 1994. We went for almost five years.
Andrew la Fleur: Sorry. What do you mean by for profit? You mean that it made a profit?
Hunter Milborne: In other words for somebody that wasn’t a workout because what happen was let’s say between November … Sorry. Between June of 89 and the spring of 91 we really didn’t launch anything, we just put our helmets on and held on. Because when you’re selling from plans, when you’re selling pre-sales it’s a much more discretionary purchase than is if somebody is listing and selling and buying for need.
If I need to get something bigger, if I need to get something smaller, if I need to move for some reason, I have a need. Whereas if I’m buying something for a two or three or four delivery it’s a little bit more discretionary. In our business we focused largely on the pre-sales but in the spring of 89 all of a sudden a lot of the banks had repossessed buildings from builders that had people didn’t close or the builder had potential problems and couldn’t make their loan payments.
We started selling buildings on behalf of the lenders and that kept us buys through 91, 92, 93 and most of 94.
Andrew la Fleur: You have a pivot moment where you still product to sell you just who you are working for changed.
Hunter Milborne: Right. Because they were motivated they said, “It doesn’t matter that the unit sold for X and the loan was Y if all we can get for it today is Z then that’s we have to sell it for.”
Andrew la Fleur: Right. Did you personally suffer, I mean, did you see your own investments go way down? Did you sell properties at a loss yourself or did you just hold on to things? Did you see it coming?
Hunter Milborne: No. It was one of those things I don’t know that … It was any credit crisis, it always just temporary, it always comes back but I think a lot of people, a lot smarter than I were caught. We had three or four units that we sold at a loss to keep cash flow going. For largely we stayed marking time and then you live for another day it’s like the famous football coach Vince Lombardi once he said, “We never lost a game. We only ran out of time.”
As long as your president accounted for, when it’s over and times get better then you’re good. Because that was a very long and deep recession.
Andrew la Fleur: Right. Would you say … I mean, everything that this … The United States has gone through over the past six, seven years is it similar to what you saw here in those days or was it worst?
Hunter Milborne: Yeah, very similar. Yeah, prices fell, prices fell and activity fell. It was very similar and I think probably the most recent US crisis was probably more severe but they were both right up there.
Andrew la Fleur: Knowing what you know now and everything you’ve experienced, what would you tell yourself looking back? If you go back to yourself 1976 when you had the first job selling Harbour Square, what advice would you give yourself back then?
Hunter Milborne: I think that I might have structured my business a little bit differently because there was a lot of, there’s the old saying you can’t dance at every wedding but there was lot of a missed opportunities and I guess it’s always easy in hindsight. The guy who was the property manager at 33 Harbour Square ended up building a big property management business. We had that leadership position in the industry and we probably had the opportunity to create a bigger resale business.
We probably would have, we could have had created an investment pool and brought passive investors in to purchase more units. To hindsight is always 20/20 so I think that it’s probably easier to look at the missed opportunities now obviously than it was then. Again, we also had a focus so we just said, “Okay, our business is marketing and selling new urban and resort pre-sale condominiums.” If I had done, tried to do all those other things then maybe it wouldn’t have worked out as well on the project sale wise.
Andrew la Fleur: Do you have any regrets? Moments where you look back and you say, “I wish I had made this decision or that decision. I wish I had followed my guide at this point.”
Hunter Milborne: No, I think I’m pretty happy the way things turned out.
Andrew la Fleur: I can see why. Have you ever lost money on any condos that you’ve personally invested in?
Hunter Milborne: Yeah, there was a few, I mean that we purchased in the mid-80’s that we sold in the early 90’s because just the timing was wrong. That leads me to in terms of advice that I give people today is is just two things. I mean, Warren Buffett who’s to be the world’s best investor has two rules for investing and some people who are listening may know what they are and others will be surprised when they hear what they are. The rule number one is don’t lose your money. Rule number two is see rule number one.
I thought, here’s the guy who’s the best investor in the world and his two rules for investing are totally defensive. There’s nothing there that says anything about industry sectors or strategy or leverage or anything, it’s just don’t lose your money. It’s be conservative. To me the [corollary 00:26:56] of that is don’t sell at the wrong time and don’t buy more than you can afford.
What I did was I had leveraged myself because I believed in it, I was in love with this and stuff. I was a little bit too leverage. If I bought one unit and paid cash for it instead of have five or six with mortgages on I would have been fine. Right?
Andrew la Fleur: Right.
Hunter Milborne: I think that there’s a prudence that you learn and so the advise I give people today with respect to condos is buy what you can afford and don’t sell it at the wrong time. If you follow those two rules which are pretty simplistic then you won’t lose. By default, if you’re not losing then you’re going to be winning and gaining and profiting because you’ll see when you choose to sell.
Andrew la Fleur: Is that philosophy something that you evolved over time through those rough experiences of that 80’s and 90’s or is that something?
Hunter Milborne: Yeah, I think it’s a lot easier. It’s a lot easier to tell somebody those things now than going through it, right?
Andrew la Fleur: Right.
Hunter Milborne: Hopefully somebody is listening who will listen to that and it will make a difference for them.
Andrew la Fleur: Was there ever a building or project where you said, “I don’t think that’s a good investment. That doesn’t make sense to me. I don’t see how people are paying the prices they are paying there.” You are later surprised to find out actually it was a great investment for those who bought in. You pass up an opportunity because you thought it didn’t fit your criteria, you know what I mean?
Hunter Milborne: The one that comes to my mind now and hopefully Lanterra won’t give me a shake of confidence and that they’ve gone on to a big, you know we’ve done many many thousands and thousands of units for them. When we launched Maple Leaf Square in 2004.
Andrew la Fleur: 2004, right.
Hunter Milborne: It was 450 square foot and across the street was another literally across the street was another project that you could purchase. A unit with similar finishes, not to dissimilar just difference in branding because obviously Maple Leaf Square had better branding. It was about $400 a square foot which is significantly less and we open the sales office and people were running in. I remember one of our sales people looked at me once. I mean, she obviously had the same opinion. She said, “What are these people thinking?” Because you know it’s busy neighborhood 2 to 300 days a year. You got hockey game, basketball game, concerts.
Andrew la Fleur: Again, at the time 2004 that whole south core area was, there was really other than the Canada Center there’s really nothing there.
Hunter Milborne: There was nothing there. You had King and Bay was the financial core the Waterfront had developed nicely but there was this middle piece that was pretty isolated which called the south core now. Now you’ve got office buildings, hotels, it’s really quite dramatic and we went on to sell Maple Leaf Square was to send 900 units. Ice was around just 1,400 units. Harbour Plaza was just under 1,400 units.
Andrew la Fleur: That’s been a very good intersection for you over the past decade.
Hunter Milborne: That’s been a good corner.
Andrew la Fleur: Yeah, certainly on Maple Leaf Square I mean definitely I was one of the ones too who look at the prices then when they were pre-construction. I thought, yeah so much higher than the area. So much higher than, took the average resell price downtown and yet …
Hunter Milborne: I think it’s a …
Andrew la Fleur: Huge success and now today in resales one of the highest, we should mention that’s one of the highest trading, buildings on a per square foot basis like 700, 750 a square foot is often achieved there.
Hunter Milborne: Short days on the market because you got a good sale market, good run on market but I think it’s a testimonial to the principles of Lanterra. Mark Mandelbaum and Barry Fenton had that vision to do it and Cadillac Fairview was a partner and Maple Leaf Sports was a partner on that so there was a pretty significant …
Andrew la Fleur: Brain trust behind it.
Hunter Milborne: Sponsorship group there.
Andrew la Fleur: Yeah. How do you evaluate again speaking and thinking of the condo investor who’s listening to this maybe they are new and they are just getting into condo investing. How do you personally evaluate a condo project? How do you choose which? Because you invest personally in a lot of the projects you work on and some of the projects you aren’t even working on. How do you decide which project is a buy for you personally?
Hunter Milborne: I mean, it’s somewhat subjective I mean but I think that proximity to transit the developer who’s doing it. Obviously the initial pricing I mean sometimes when you have a multi face project with one, two, three, four, if you have two buildings, three buildings, four buildings it’s better to buy in the first building than if it’s stand alone buildings. Also, we have a bit of a joke saying that in the stock market people go to jail for insider trading because it’s public markets won’t.
The real estate market, there’s lot of insider trading and I mean we’re an insider so we get to see the projects that are coming as their plan, it’s usually three to six months from the day we get a mandate to do something to what for sale. You’re involved in planning the suites.
Andrew la Fleur: Right. Let’s maybe ask that question. If you are shaping your own building for your own perfect investment, what are the ingredients that you want to put into that building to say, “Yeah, this is one that I’m going to buy in for sure myself.”
Hunter Milborne: I think a lot of it depends on the amenities, a lot of it depends on the common expenses. The common expenses built to not have too much adequate stuff but not too much stuff because usually it’s a stuff that will increase your common expenses over time. I’ve always found that in terms of selecting investments that there’s premiums in a building. You can have an apartment in a stack on the 7th floor is one price, on the 37th floor it’s another price. The better view is premium a little bit more than the less desirable view.
What I’ve always found is it’s usually better to be at one end of the spectrum or the other. It’s usually better to pay the premium that the high premium and the view premium because typically what I’ve seen is those premiums get bigger over time ass opposed to less. The other option is to say, “Gee, I’m going to just buy … ” You know the old saying is if you want to make money in real estate buy the cheapest house in a subdivision because it gets dragged up with all the others.
The other philosophy I’ve had is just pick the ten least expensive or five least expensive suites in the whole community and purchase those because when you’re renting them out maybe the rent isn’t that much different. The rental person may not pay the same pro rata premium so if you do a real cash on cash analysis. If you got two identical suites, one is at the low end one is at the high end the low end one probably has a better cash flow so it’s going to have a better return on your initial cash.
The more expensive one is probably going to have a better internal rate of return which is your weighted average of your cash return and your ultimate return when you sell it. Because even though you don’t have as much income per dollar invested you probably have faster appreciation. Hopefully that’s not complicated.
Andrew la Fleur: No, that’s a couple of great tips. Absolutely. How long should you hold on to a condo investment? Do you have a rule for that?
Hunter Milborne: Not really. I mean I think that I’ve got ones that I’ve bought and sold after two or three years. Sometimes if the tenant moves in and stays then we’ll just keep it and keep it and keep it and keep it. If all of a sudden after two, three, four years a tenant moves out then you got a chance to reevaluate and say, “Okay, maybe we’ll sell this one now.” We don’t really have any particular strategy but there’s a magic in compound interest.
If you look at it and I recommend your potential investors do I mean if you look at amortization schedule, it’s really a curious thing to look at because in the first few months your payment is pretty much the same over 20 years or 25 years but that the ratio of the principle you pay that the interest changes pretty much every payment. It’s very, very small at the beginning but towards the end or in the middle it’s significant.
If you can have a mortgage with some pre-payment privilege and just pre-pay even once or twice through out the term of that. It really, really accelerates the period of the amortization and the amount of interest that you pay.
Andrew la Fleur: Right, right.
Hunter Milborne: That’s an interesting exercises to just study that amortization.
Andrew la Fleur: Use it to your advantage.
Hunter Milborne: Yeah, just say, “Okay, gee if I do it at 10% pre-payment or even if I do a thousand dollar pre-payment what does that do to the term.” I may end up making payments for nine months less, right?
Andrew la Fleur: Right, right. I don’t know if you want to talk about something that you recently told me about which is very interesting and there’s a website called worldhousing.ca. Do you want to talk about that?
Hunter Milborne: Yeah, I love to talk about worldhousing.ca.
Andrew la Fleur: Okay, great. It’s a very interesting program that you’ve been involved with. What is it and how does that work?
Hunter Milborne: It’s a one to one gifting model. It was inspired by a guy named Blake Mycoskie who started a company called TOMS Shoes and they had modeled it. If they sold a pair of shoes in first world they would give away a pair of shoes in the third world too, some poor and deserving person. Two of my friends and partners flew on a plane with him and sat beside him just out of total coincidence and at the end of the plane ride they said, “You know, if you can do it for shoes why can’t we do it for homes.”
They called seven other friends and we capitalized this non-profit called World Housing. Created a website worldhousing.ca so this was about maybe two or three years ago and we thought well if the premise was that if a developer launches a 400 suite condominium say that every time someone purchases a condominium we could give away a home in a third world. No, it’s a modest home but we thought before we can go and approach developers with any credibility we need to know can we make them how much do they cost, how long do they take.
We had to capitalize this company with our own money and that was done in a pretty substantial manner. We have given away about 200 of these homes and there was a project that launched just last year in Vancouver which was a first one that was registered in the World Housing program called Vancouver House in Vancouver done by Westbank. Ian Gillespie was the principal. He’s also the developer of the Shangri-La here in Toronto.
Andrew la Fleur: Here in Toronto.
Hunter Milborne: He bought into the idea and said all his projects are going to be done this way now and I think the theory is that and it’s proven correct is that obviously the purchaser is not going to pay more.
Andrew la Fleur: Right.
Hunter Milborne: Units are prices at market and the developer shouldn’t make less because there’s so much press and attention that’s surrounding this projects that the developer can certainly say, “Gee, if I hadn’t spend that money on a house I probably would have spent that money in an advertising budget.”
Andrew la Fleur: Right. You’ve created a really interesting great model where it’s really a win win. Win for the obviously the person receiving the house gets the biggest win because they got a house when they didn’t have one. The developer gets a win because it’s like you said the money is actually coming out of their marketing budget as opposed to we’ll just raise the price on the unit or something like that or I’ll just pay it out of my pocket extra.
Actually built into their marketing cost which are often multi million dollar budgets for this project and the purchaser or the investor of the condo also gets a great benefit of just being able to take part in that and their purchase is directly benefiting somebody overseas who needs housing.
Hunter Milborne: Definitely, I think if someone has a close call will I purchase at project A or project B and project A is a world housing designate it could be something that tips the …
Andrew la Fleur: Absolutely. Tell us, I mean, people are probably curious what do this houses look like exactly and how much do they cost to build.
Hunter Milborne: They are small, they are about 10 by 10 which is certainly modest by North American Standards. They are built on stilts because a lot of these Cambodia and Philippines where we’re active now have big wet seasons. It cost about $2,000 U.S. They are insulated, you can lock the door and they have a little ability to cook underneath so you can see it on the website.
Andrew la Fleur: Worldhousing.ca.
Hunter Milborne: Worldhousing.ca.
Andrew la Fleur: We’ll definitely, we’ll include a link to that on the show notes as well for people who want to check that out. Is that something that’s coming to Toronto as well?
Hunter Milborne: It’s going to come to Toronto for sure.
Andrew la Fleur: Okay.
Hunter Milborne: I haven’t figured out which project yet first.
Andrew la Fleur: Okay. Be sure to let every body know which I mean I’m sure everyone will hear as you said the media will be all over that story. Shifting gears to I know you have a lot of exciting projects that you’re selling right now. One project that I wanted to ask you about was Citylights. Citylights by Pemberton Yonge and Eglinton. What should investors know about that project and why in your opinion is it a good buy?
Hunter Milborne: That’s a really good one of all the ones we have coming out this year. I think that will be one of the best selling for a couple of reasons. Number one, is that Eglinton and Yonge neighborhood is obviously very close to the Yonge and Eglinton Subway but you have now the new Eglinton Crosstown which is under construction. It will be another stop at Mount Pleasant so when you have a transportation hub like that I mean right now you’ve got Yonge and Bloor, you’ve got Yonge and Sheppard and those two hubs are any development around those has been very active.
Now, Yonge and Eglinton is going to come into that category and the way the building was designed it’s two towers and there will be a … It’s a fairly large complex. It’s about 900 suites and that way when you have a concierge you can amortize your … It’s going to have relatively lower maintenance fees for a building that might be comparable of let’s say that was half the size or a little bit smaller. Because the city has a requirement for related per suite for area for amenities indoor and outdoor amenities it’s going to have a very large I believe it’s about an 18,000 square feet indoor amenity complex.
Andrew la Fleur: Yeah, the amenities were … I was very surprised at how extensive they are.
Hunter Milborne: It’s because of the large number of suites and because there’s a big podium so it’s really I think when I look at the plan for the amenities it reminded me of a Las Vegas hotel, swimming pool and deck. Then, there’s about I believe it’s 18,000 outside and about 10,000 inside. Maybe it’s the other way around. Sorry, I think it’s 18,000 inside amenities and 10,000 square feet outside.
Andrew la Fleur: It’s huge, yeah when you see the best way to see it is if you see the renderings of the gym and the pool and everything.
Hunter Milborne: The suites they are all affordable. I mean the end prices of the suites are from the low 200’s to the low 400’s. The average price of a condo in a city today is about 454,000. There’s not a suite in the building if you pick the most expensive top corner Penthouse it’s less than the average. I think that that end prices definitely opens the market to more buyers and because of Pemberton’s strength financially they decided to try to make it a little bit more affordable deposit wise because as I’m sure you find in your practice too with 20% deposit required on most buildings …
Andrew la Fleur: Which is typical.
Hunter Milborne: Which is typical, a lot of people have 40, 50, $60,000 deposit but if they want to buy a two bedroom they are looking at 400,000 plus and then that’s 80. That can make the difference between buying or not buying so here you could buy $400,000 apartment with $60,000 deposit 10% this year and 5% next year so thy spread it out a little bit so it gives it … I think it’s that affordability factor on the end price and the deposits and the lower common expenses because every dollar you’re not paying in common expenses can go towards mortgage.
Andrew la Fleur: It’s really the only as far as I can tell and as far as my research it’s the only project that Yonge and Eglinton that you can purchase with 15%. Everything else has been 20%.
Hunter Milborne: Yeah, we did a very thorough market analysis. I mean, there’s no shortage of competition at Yonge and Eglinton because it’s such a desirable area. I mean it’s one of the biggest employment centers and I think there was an article or study done that said it was one of the I think it was the fourth best neighborhood out of a 169 neighborhoods in Toronto. I mean, there’s a lot of …
Andrew la Fleur: Toronto Life I think.
Hunter Milborne: Superlatives of that neighborhood but I think when you can combine the affordability deposit with the affordability of the end prices and the lower common expenses Pemberton has a great track record. They deliver a nice product so that looks like it will be a very good one.
Andrew la Fleur: It should be a home run. Looks like, good. Hunter, thank you very much for your time today. People who want to get a hold of you or if they want to learn more about Milborne and your company, what’s the best way to reach you?
Hunter Milborne: Our website is Milborne.com and I’m Hunter@Milborne.com is my email so I’ll be delighted to hear from people.
Andrew la Fleur: Great. Okay, thank you very much Hunter and hopefully we can have you on the show again soon.
Hunter Milborne: I love to. Thanks.
Andrew la Fleur: Great.
Andrew la Fleur: Okay, there you have it. That was my interview with Hunter Milborne. I hope you enjoyed that. For all the show notes on this episode just head on over to TrueCondos.com/Hunter and you’ll find links to everything we talked about including his charity which he’s involved with called World Housing, worldhousing.ca is the website and that’s a very, very interesting model. Very excited to hear about that and to see that actually happening. It’s already been done in Vancouver and very looking forward to seeing who’s the first developer who’s going to bring it here in Toronto.
Of course Citylights, if you’re interested in more information about Citylights at Yonge and Eglinton which is a very good project if you’re looking to make an investment this year. A very attractive end prices, the amenities are great and obviously the location at Yonge and Eglinton speaks for itself. If you’re looking for more information on that you can head on over to TrueCondos.com/Hunter again for the link to Citylights or you can always send me an email Andrew@truecondos.com and thank you very much for listening.
Again, I appreciate your support for the show and thank you for all your great reviews on iTunes. If you want to leave a review on iTunes again if you just go to the show notes TrueCondos.com/Hunter there’s a little video that actually shows you exactly how to do that. It takes about two minutes and I’d really appreciate it if you did. Thanks and have a great week.
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