February 18, 2025 • 21 mins
In this episode, Scott interviews Tom McCormick, a Canadian investor who successfully transitioned from investing in Windsor to flipping properties in Detroit. Tom shares his engineering background, initial property ventures, and how he navigated the challenges of cross-border investments.
Key Timestamps:
[0:00] Introduction and Guest Background
- Tom's journey into real estate during COVID-19
- From automotive engineering to property investing
- How his brother inspired his first investment
[4:30] 🏠 First Real Estate Purchase
- Creating an additional dwelling unit (ADU)
- Learning through "failing forward"
- Sweat equity and financing challenges
- Scott shares his similar first investment experience
[10:15] 🌎 Transition to U.S. Market Investing
- Advantages of working in the U.S. before investing
- Building U.S. credit history and obtaining SSN
- Comparing Canadian vs. U.S. real estate markets
- Overcoming fears of cross-border investing
[15:45] 🔨 Detroit Property Flip Case Study
- Purchasing a $75,000 property in Detroit's North End
- Managing an "upside-down loan" with higher renovation costs
- Detailed renovation budget breakdown
- Expected ARV of $260,000-$270,000
[20:30] 💰 Partnership Structure and Future Projects
- 50/50 split with investors
- Balancing capital contributions
- Upcoming opportunities: 8-plexes and 12-plexes
- Short-term flips vs. long-term buy-and-hold strategies
Key Concepts Covered:
Cross-Border Investment Advantages:
- U.S. dollar earning potential (30% "raise" through exchange rate)
- Lower price per door compared to Canadian markets
- Different landlord-tenant laws
- Gentrification opportunities in emerging neighborhoods
Detroit Market Specifics:
- C neighborhoods on the cusp of becoming B neighborhoods
- Preserving classic Detroit architectural features
- Balancing modern renovations with historical character
- Managing expectations for selling timeframes (2-month market time)
Property Acquisition & Renovation Strategy:
- Identifying structurally challenged properties at discount
- Strategic improvements for maximum ROI
- Renovation breakdown: structural repairs, electrical rewiring, bathroom additions
- Preserving original wood features for market appeal
Partnership Model:
- Equal skin in the game philosophy (50/50 splits)
- Division of responsibilities (management vs. capital)
- Building long-term relationships for multiple deals
- Leveraging financing to reduce capital requirements
Investment Timeline Examples:
- 4-5 month renovation timeframe
- 6-month total project cycle for flips
- Longer-term (12+ months) for multifamily stabilization
Financing Challenges:
- Managing upside-down loans (renovations exceeding purchase price)
- Lender hesitation with Detroit market
- Importance of building track record for better terms
- Balancing investor capital with financing
Real World Numbers:
- $75,000 purchase price
- $100,000 renovation budget
- $260,000-$270,000 projected ARV
- Potential for higher returns based on market timing (spring selling season)
Resources Mentioned:
- Tom's social media presence on Facebook
- Tom's YouTube channel
- Upcoming link tree for direct connections
Important Note:
Before investing across borders, consider setting up proper legal entities, understanding market fundamentals, and potentially partnering
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Scott Dillingham (00:01):
Welcome back to the wisdom lifestyle money
show.
I'm your host, Scott Dillingham.
And today I have an awesomeguest with us, Tom McCormick.
Welcome, Tom.
Tom McCormick (00:08):
Hey, thanks for having me.
I really appreciate it.
It's been a long time coming.
Scott Dillingham (00:12):
I'm excited.
Yeah, I'm really excited becausethere's so much talk about
Canadians wanting to invest inthe states and you're actually
doing it, right?
and so that's that's what I loveand I'd love to hear more of
your feedback and just differentangles and stuff, but before we
get into that I just want toknow like how you got to where
you are now.
So do you mind sharing your,your story?
Tom McCormick (00:31):
Yeah, absolutely.
So I got into real estate backin 2020 around the COVID times,
right?
There's a, there's a kind ofuncertain time to jump in, but I
was sick and tired of sick,being sick and tired with like
the day job as a side note, I'man engineer by trade.
I took mechanical aerospace atthe university Windsor.
Then I got more into theautomotive, go figure planes to
(00:52):
cars, but I, I realized that My,my salary isn't necessarily
guaranteed, especially withCOVID times, and I almost got
laid off and just theuncertainty of everything made
me really want to hop into themarket.
And what catalyst actually, andI got to give kudos was to my
brother.
He actually had bought a duplexnear the university.
And I said, heck, my littlebrother, mother's doing this.
(01:14):
Then I need to, I need to stepup my own game because I'd
wanted to for such a long time.
It's just, I, I spent my moneyin on more experiences, but it
was about time to.
I had to really invest myselfinto into my future.
Scott Dillingham (01:28):
That's awesome.
That's that's crazy.
So then what was your
Tom McCormick (01:30):
first purchase?
Yeah, good question.
So I bought a single family andI, and I thought to myself, I've
heard of house hacking.
How can I make this work?
So I don't have to pay my ownmortgage.
And I actually, I jumped to thedeep end and I made an ADU, an
additional dwelling unit.
So it was, it was actually aproject that I, I picked a very
terrible property.
(01:51):
Honestly, I could have chosen alot better because I didn't
really know what I was lookingfor and I didn't really
understand all the requirements,but I said, you know what, I'll
fail forward and I'll figure itout.
So I gutted this thingcompletely to the studs and I
put in a lot of sweat equityinitially because I quickly ran
out of money to pay people.
So I had to figure out.
(02:11):
Ways to raise capital as well.
So my first investor wasactually my father to give me a
little extra injection so that Icould complete actually my
basement unit and actually startcash flowing slightly.
So it was a good experience.
I learned a lot how the cityworks to and I, as an engineer,
I I dug into the code to just tomake sure I really understood it
(02:32):
in and out.
And that was a good project toget my feet wet.
And it gave me confidence forfuture projects like flips and
stuff like that.
Later on.
Scott Dillingham (02:41):
Yeah, no, that's, that's awesome.
We actually have a very similarstory, slightly different, but
like I yeah.
So I went to a rich dad, poordad class and I went to
wholesaling and rent to own.
So I found this investor whosaid, look, you find me a
property, I'll buy it and thenwe'll split 50 50.
So I'm like, okay.
(03:01):
So I found this terribleproperty.
I lived in Sarnia at the time.
And I found this terribleproperty.
I bought it for 56, five.
And when I got the offer, Ipresented it to him and he, he
ran away.
He was gone and I'm like, what?
And I did a cash offer too.
Cause I'm following this guy'sinstructions, right?
Like how to secure these deals.
So he ran away, but the, theproperty needed everything.
(03:25):
So I went to the bank and I dida, like a construction loan on
this.
Property.
Okay.
So I had the, the lender financeeverything and the renovations
and that's, that's exactly how Istarted.
So I put in at the time, likealmost what I paid for the
house.
We redid everything and, but Ilearned cause I had to do
everything in the house.
(03:46):
So it set me up for the futureprojects after that.
Tom McCormick (03:50):
Man, that must have been daunting, but yeah, it
sounds like you made it happen.
Scott Dillingham (03:53):
Yeah, yeah, no, it works really, really
well.
So we had roughly a hundred intoit.
And when we sold it, it was likealmost for 300.
And that was like, now it'dprobably be four maybe even a
little higher
Tom McCormick (04:05):
nowadays
Scott Dillingham (04:07):
still.
So it was awesome.
But, but yeah, no, that's,that's great.
So that's, that's cool.
So then from there, right.
So you started in, in, inWindsor it's during COVID time.
How did it trigger to likeinvest in the
Tom McCormick (04:19):
States?
Well, great question.
I was actually at this timesince around 2017, I was
actually working in the U S asan engineer.
So I got fortunate enough to, tobe able to hop the border and
make that U S dollar.
That's the best raise.
I always joke that I ever gotbecause I made at the time, 1.
3 cents, which is like a 30percent raise, and now it's even
a little bit more, but because Ialready was working in the
(04:42):
States, I understood.
The so some of the Detroitmarket and I already had my SSN
and bank accounts and I wasbuilding my credit.
So my foot was already in thedoor and I saw some, my actual
friends who are also already uscitizens over there doing deals.
So I thought, well, maybe.
I can I can do a cross bordersince it's so close to Windsor.
(05:04):
And, and because of that, and astoo, it's like in Canada,
there's a lot more tax and it'sthe price per door is a little
higher.
The landlord laws are a littlebit more lacks here in terms of
getting tenants out of you haveto, unfortunately.
So there were many reasons why Iwas looking to hop across the
border.
(05:24):
And because I worked there, Ithink it may be a little less
scared to actually take the leapbecause I understand a lot of
investors or people who arethinking of investing outside of
the country are a little fearfuland rightfully so, but I think I
was already.
Sensitized to the fact that theU.
S.
isn't actually that big of ahurdle to, to get into.
(05:46):
So,
Scott Dillingham (05:47):
yeah, it's, it's so similar.
And you're right.
That's, that's our number 1question.
Like, we, we are actuallytalking to more Canadians that
want to buy in the states thanCanadians that want to finance
properties here.
I wasn't anticipating thatshift, but that's, that's how
it's happening.
And you're right.
It's, they're fearful of it, butit's, there's not a lot of
(06:07):
steps.
You want to set up an entityideally.
Yeah.
So that's good to go.
And then, yeah, find yourstrategy.
Right?
Are you flipping?
Are you buy and hold?
Like, what are you doing?
And then find your team.
And then it's done.
Tom McCormick (06:22):
Yep.
And especially when you havesomeone like yourself to walk
you through the process and thendo your your financing, I think,
then you're in good hands andyou can rest easy because I know
when we started out, we alsodidn't have all the answers to
questions, but we said, you knowwhat?
There are people in our network.
There's people like you, Scott,who can guide us.
So even if we, Okay.
(06:43):
Aren't perfect or our structureis not the craziest GPLP
structure, whatever it has tobe, we can still at least start.
And it's, it's something youjust got to take action.
And so that was our, our model.
We said, okay, let's just havesome speed here.
And like I mentioned earlier,we'll fail forward.
If we do like we weren'tplanning to fail, but in case it
(07:03):
does.
No problem.
We'll learn from it and we'llcontinue on.
Scott Dillingham (07:06):
That's the best way.
That's the best way.
So I know you purchased aproperty in Detroit, right?
As a flip.
Can we talk about that?
Like, how's that going?
Maybe share some numbers on somepotential
Tom McCormick (07:19):
returns that you guys are looking at.
Absolutely.
So actually this is one youhelped us finance and I really
appreciate you doing thisbecause I'll tell the listeners
this was actually a crazymonster of a deal, not in terms
of just being big, but in termsof complexity, because this
property we bought was reallydilapidated in Detroit, you'll
find that certain houses almostseem like they need to be
(07:39):
condemned for lack of a betterterm, their shells or they've
been abandoned for quite sometime.
So they need sometimesstructural repair or they need A
lot of like exterior work andmaybe got a recess or some Joyce
and raise the floors.
So, in our case, we bought thisproperty.
In the north end.
So if you have the center ofDetroit, you go about 10 minutes
(08:00):
north and you're in the northend.
So this is still like a Cneighborhood.
It's becoming gentrified.
We're not first shovels in theground, which is great because
you have a tough time makingcomps or knowing what your air v
is going to be, but we saw thatthis area in the north end was
actually promising.
And we got this property for 75,000.
Originally it was listed forhire, but.
(08:23):
Based on some appraisals that wedid, we were able to haggle them
down and we worked with them andwe actually had two extensions
and Scott saved us on those.
He was fighting for us trying tofind us the proper lender to
actually take on this projectbecause we had some issues in
the fact that the propertyitself costs less than the
renovations would be.
So our renovation budgetcurrently is approximately in
(08:44):
that a hundred K zone.
And so that's, that caused some.
Some concern with the lendersaying, well, we don't know if
we want to fund this.
So you need to bring more downpayments or some lenders
completely just walked awaybecause they don't like Detroit.
And also they said, well, youhaven't flipped a whole ton in
the U.
S.
yet.
So we also don't like that.
You're not.
(09:04):
Super, super experienced.
Mind you, we've done some stuffin Cleveland, but it's in
process, so we still didn't havethose kind of three, four deals
underneath our belt that wouldallow us to get those better
financing terms and open theflood gates to other lenders for
sure.
Scott Dillingham (09:18):
And, and, and you, you're right, it's tough
and I just wanna like, so whatthat's called.
It's called an upside down loan.
So that's when your renovationsare more than your property's
value.
So those are absolutely thehardest on a flip because for
the financing anyways becauselenders.
They're looking at like, is thisactually a property we want to
(09:40):
do?
So it's not that there's notlenders that do it, right?
There, there is, but there'sjust less of them.
So be considerate of that.
Especially cause I, I get a lotof clients that are calling and
they're saying, Hey, what,what's the rates?
What's the loan to values?
What's this all going to looklike?
And in a perfect scenario,right?
The numbers are fair and theywork.
(10:01):
But when you when you work withan upside down loan, right?
It does change things, right?
I know you guys need to put alittle bit more money down than
you would have traditionally ifthe renovations were smaller.
So that had challenges.
But, yeah, we're able to do it,which is, which is great.
Can you share about like some ofthe renovations that you're
doing to the property orpotential returns at the end of
(10:24):
it when you, when you guys dosell?
For sure.
So
Tom McCormick (10:27):
in, within this kind of a hundred K budget, it's
looking like we're actuallygoing to come on pretty, pretty
close to the actual estimatedbudget, which is great.
We're, we're actually, like Imentioned earlier, we're going
to resister some Joyce, whichmeans that we're going to do
some work to the structure.
So the main floor had a littlebit of sag, so we have to just
jack that up a little bit.
So once we get the structuredone, that main framing, the
(10:49):
house will be solved to buildon.
So that's been the biggest costdriver.
About actually, we're nearing15, 000 on that one
specifically, and this is in USdollars.
And then we have a whole newbathroom that we're adding.
So this is going to be a fourbed, three bath.
So we're going to add theadditional bathroom to add a lot
(11:10):
of value.
And What we're also going to dois we're making it slightly open
concept.
Usually Detroit homes are prettygreat in terms of having a nice
kind of big living room anddining room connected, but we
have a kitchen off to the side,which we're going to make into
one cohesive space.
We do have to do a little bit ofelectrical as well because the
previous tenant or previousowner.
(11:32):
It looked like a bomb hatch job,to be honest with you.
Oh, man.
Really unsafe.
And, and, there's, there's alittle bit of novelty to it.
So we said, well, since it'salready gutted, let's just
rewire the whole place.
So it's the framing and theelectrical that are going to
cost the most.
And then after that, it's theadditional bathroom and then
kitchen.
And once we do that, we can savea lot of the second floor.
(11:54):
The second floor is a lot ofplaster, so only a slight repair
job.
And then on top of that, classicpaint and some some vinyl
flooring on the second floor.
We're going to actually re,refinish the, the wood on the
main floor, just to keep thatclassic Detroit feel.
Because the last thing I'll sayabout that is a lot of people in
(12:14):
Detroit, they, they seem to likethat older vibe.
The, the kind of the classicDetroit feel with the nice wood
staircase.
And wood trims.
So we're trying to keep that,keep that alive.
And
Scott Dillingham (12:28):
that's awesome.
And you can't, you can't findwood.
Like I guess you could at acost, but you really can't find
wood like that.
So it's, it's good that you guysare preserving it as opposed to
covering it or gutting it.
So no, that's super cool.
Tom McCormick (12:43):
Yeah.
Scott Dillingham (12:43):
So when do you anticipate?
You, you can
Tom McCormick (12:46):
sell it.
Like, do you have goals lined upfor that?
We do.
Yeah.
So we're targeting the spring.
So basically our drop dead datefor having this project
completed is Easter.
So once we have that done,that'll mean the project was
about four months, four and ahalf months, which is actually
pretty good.
And then we expect it to be onthe market though, for another
(13:06):
kind of two months.
So we want to factor in thatthey could sell sooner, but we
want to factor that into ourbudget and be a little
conservative And I shouldmention actually, ARV right now,
we're projecting around that 260to 270 zone conservatively.
So that's pretty decent ahealthy profit for us and our
investors.
And we saw actually a comp thatwas actually around three 15.
(13:30):
However, that's an outlier.
So I don't want to guaranteethat to anyone, but that'd be
great.
Like great Sherry on top.
If that did push up to the threehundreds, but usually it's in
that kind of mid to high twohundreds in this area of the
North end,
Scott Dillingham (13:43):
for sure, for sure.
And that's awesome.
Well, hopefully you never know.
In spring too, there, theremight be more sales too.
So.
Help bring up the values.
Now I think another key partthat you've talked about here is
you keep talking aboutinvestors.
So obviously you broughtpartners to the table and I know
that there's many more projectsthat you're looking at and
(14:05):
you're looking for morepartners.
So can you talk about that?
Like about the partnership withyou and how that works and maybe
some of the things that you guysare looking at next.
Tom McCormick (14:15):
Yeah.
So on this project, along withthe project we've done in
Cleveland as well.
We've always had some partnersbecause it's easier to go
further with people.
People help you scale and it'sgreat to lift others up with you
as you go.
And eventually me and my brotherwe did, we're doing all these
deals.
We ran on money pretty quickly,just in, in certain, certain
(14:35):
avenues that we've alreadydeployed.
So how do we keep buyingproperties?
It's who partners.
And so what we've done is onthis Detroit, when we gave 50,
50 split they come with a chunkof the money and we will manage
the project, manage thecontractors, source the deal
manage the corporation and thetaxes.
And we also brought a little bitof construction finances as well
(14:57):
just to get us to that firstdraw.
So we, cause we know it, it's,it's easier to partner with
someone when you both of youactually have skin in the game.
Instead of purely saying, okay,you bring the full 75, 000
amount.
And then they say, well.
It feels more fair that way.
If we, we chip in a little bittoo.
So 50, 50 split on this one andreturns again, 50, 50.
(15:22):
And we're looking forward todoing more of them as well.
Because I think in partnerships,you want to have everything as
equal as possible because thenno one's sour on the deal.
No one's kind of thinking, ah,did I get gypped?
Everyone kind of everyone'shappy and that's our goal,
right?
Because we, we want to build arelationship in the well deeper.
So we can do more deals in thefuture together, not just a one
(15:44):
and done.
Scott Dillingham (15:45):
So, yeah, I love it.
And even you guys acquiredfinancing too, which did require
less capital from the investorwho is partnering with you.
So that's, that's super cooltoo.
No, that's, that's awesome.
So do you have any projectslined up?
So say I'm listening to this.
I want to go in the States, butI, I haven't built up enough
(16:06):
confidence or set up an entityor just done certain things yet.
So it's easier for me to partnerwith you on this and bring some
money into the deal.
So what do you have coming up orthat you're looking at?
That may be somebody might jumpon
Tom McCormick (16:19):
what might be interesting to hear.
We actually have a mixed bag.
So we have two flips where wewere looking at just out the
other week that I walked, hadsome great numbers on it.
And this would be similar to tothis angle with property that we
were just talking about aroundthat 60 to 75 K zone.
And again, usually returnswithin the six months.
(16:39):
That's kind of the, the projecttimeline.
We have actually some biggerones.
Now we walked a couple shells.
So I, like I said, a lot ofthese properties need a lot of
love.
And a lot of properties,especially these bigger
multifamilies, they're reallycheap, lands cheap, but you need
to do full renovations.
So we actually were walking acouple eight plexes and we
actually saw a 12 plex just inJanuary.
(17:01):
So we've been running ournumbers and actually we think
these could.
Could really could reallysatisfy some lenders
requirements and, and we'rereally excited about this
because it's in a decent area.
Again, C neighborhood that's onthe cusp of turning B.
So there's, there's a kind of aselection to choose from.
If you want more active incomequick in and out.
Great.
But I will just preface withmore of the 8 to 10 units that
(17:25):
we were talking about.
These are more of a over a yearreturn.
So this is something it takes awhile to do.
Complete and stabilize and thenrefinance and pull the money
back out because we can almosthit the 1 percent rule on on
this deal here.
Scott Dillingham (17:39):
That's super cool.
Awesome.
Tom McCormick (17:40):
No, I'm
Scott Dillingham (17:40):
excited for you guys.
There's just so much There's somuch going on and it's literally
in our backyard and people don'trealize it, right?
So, I know
Tom McCormick (17:49):
it's it seems like detroit gets a bad rep But
honestly, I think that's astigma from the past because now
detroit's a lot safer Downtown,if you've ever been there, it's
super vibrant.
Don't get me wrong.
I love Windsor, but Detroit,it's, it's, it's in Unari's
backyard.
So why not hop over theresometimes and do deals in both,
both locations?
Scott Dillingham (18:09):
That's the point.
Exactly.
Yeah.
It doesn't matter.
Like to me anyways, it doesn'tnecessarily matter the location.
If the numbers are there.
Right.
And market fundamentals, you gota deal there.
So absolutely.
That's awesome.
I think just go where you're, gowhere you're treated best.
That's it.
No, exactly.
I agree.
And you're right over there.
Even though you're paying in usdollars, which have, have a
(18:30):
premium overall guys the priceis still so much cheaper, right?
To buy something equivalentright across the border in
Windsor, I'm going to guess.
And maybe correct me if I'mwrong, I haven't seen the
property, but I'm going to guessthat as a teardown, you probably
would have bought that foraround 200 Canadian plus Renos.
(18:51):
Would you say that's aboutright?
Approximately.
Yeah.
Yeah.
Tom McCormick (18:55):
So it's
Scott Dillingham (18:55):
pretty
Tom McCormick (18:55):
reasonable.
Scott Dillingham (18:56):
So to buy a 75.
Yeah.
Even when you factor in theexchange, you're still buying it
at a discount.
So absolutely.
Tom McCormick (19:02):
Yep.
I think the price per door isnot quite one half, but maybe
call it two thirds of prices inCanada.
And in decent areas, so, yeah,it's, it's, it's definitely
makes a lot more sense fornumbers wise and actually
getting cash flow as well.
Scott Dillingham (19:16):
Yeah, we had on a previous episode, just for
your knowledge, we had Derek onmy team.
He's already bought in theStates.
And he does the us lending forus as well.
And he bought a brand newconstruction property for 260,
000, like brand, brand new, andjust like
Tom McCormick (19:33):
Ontario, you
Scott Dillingham (19:35):
can't maybe the small, small communities,
but like beyond that, yeah,it's, it's unlike.
Yeah.
Yeah.
So it's, it's reallyinteresting, but no, that's
awesome.
So then we're going to wrap upthe show for today.
So for everybody that'slistening and they want to
invest in the States and they'dlike to do it with partners,
right?
Cause they don't want to jump inthemselves.
How can they reach out to you orwhat's, what's the best way so
(19:58):
they can speak to you aboutpotential partnerships?
Tom McCormick (20:00):
Yeah.
Yeah.
I'd say reach out.
I'm on most social media, so I'mon Facebook.
Look me up.
Tom McCormick.
I'm actually on YouTube now.
So again, Tom McCormick and Ican also, if you want drop, drop
a, you a link tree for later onthe description and people can
connect with me there just byclicking a button.
Yeah, that'd be perfect.
(20:21):
That'd be perfect.
Awesome.
Tom.
Well, it was great to hear yourstory.
Thanks for coming on.
I really appreciate it.
Yeah.
Thank you so much.
I appreciate the opportunity andlooking forward to doing more
more work with you in the futuretoo.
Sounds great.
Thanks, Tom.
Awesome.
Thank you.
Take care, everyone.
Welcome back to the wisdom lifestyle money
show.
I'm your host, Scott Dillingham.
And today I have an awesomeguest with us, Tom McCormick.
Welcome, Tom.
Tom McCormick (00:08):
Hey, thanks for having me.
I really appreciate it.
It's been a long time coming.
Scott Dillingham (00:12):
I'm excited.
Yeah, I'm really excited becausethere's so much talk about
Canadians wanting to invest inthe states and you're actually
doing it, right?
and so that's that's what I loveand I'd love to hear more of
your feedback and just differentangles and stuff, but before we
get into that I just want toknow like how you got to where
you are now.
So do you mind sharing your,your story?
Tom McCormick (00:31):
Yeah, absolutely.
So I got into real estate backin 2020 around the COVID times,
right?
There's a, there's a kind ofuncertain time to jump in, but I
was sick and tired of sick,being sick and tired with like
the day job as a side note, I'man engineer by trade.
I took mechanical aerospace atthe university Windsor.
Then I got more into theautomotive, go figure planes to
(00:52):
cars, but I, I realized that My,my salary isn't necessarily
guaranteed, especially withCOVID times, and I almost got
laid off and just theuncertainty of everything made
me really want to hop into themarket.
And what catalyst actually, andI got to give kudos was to my
brother.
He actually had bought a duplexnear the university.
And I said, heck, my littlebrother, mother's doing this.
(01:14):
Then I need to, I need to stepup my own game because I'd
wanted to for such a long time.
It's just, I, I spent my moneyin on more experiences, but it
was about time to.
I had to really invest myselfinto into my future.
Scott Dillingham (01:28):
That's awesome.
That's that's crazy.
So then what was your
Tom McCormick (01:30):
first purchase?
Yeah, good question.
So I bought a single family andI, and I thought to myself, I've
heard of house hacking.
How can I make this work?
So I don't have to pay my ownmortgage.
And I actually, I jumped to thedeep end and I made an ADU, an
additional dwelling unit.
So it was, it was actually aproject that I, I picked a very
terrible property.
(01:51):
Honestly, I could have chosen alot better because I didn't
really know what I was lookingfor and I didn't really
understand all the requirements,but I said, you know what, I'll
fail forward and I'll figure itout.
So I gutted this thingcompletely to the studs and I
put in a lot of sweat equityinitially because I quickly ran
out of money to pay people.
So I had to figure out.
(02:11):
Ways to raise capital as well.
So my first investor wasactually my father to give me a
little extra injection so that Icould complete actually my
basement unit and actually startcash flowing slightly.
So it was a good experience.
I learned a lot how the cityworks to and I, as an engineer,
I I dug into the code to just tomake sure I really understood it
(02:32):
in and out.
And that was a good project toget my feet wet.
And it gave me confidence forfuture projects like flips and
stuff like that.
Later on.
Scott Dillingham (02:41):
Yeah, no, that's, that's awesome.
We actually have a very similarstory, slightly different, but
like I yeah.
So I went to a rich dad, poordad class and I went to
wholesaling and rent to own.
So I found this investor whosaid, look, you find me a
property, I'll buy it and thenwe'll split 50 50.
So I'm like, okay.
(03:01):
So I found this terribleproperty.
I lived in Sarnia at the time.
And I found this terribleproperty.
I bought it for 56, five.
And when I got the offer, Ipresented it to him and he, he
ran away.
He was gone and I'm like, what?
And I did a cash offer too.
Cause I'm following this guy'sinstructions, right?
Like how to secure these deals.
So he ran away, but the, theproperty needed everything.
(03:25):
So I went to the bank and I dida, like a construction loan on
this.
Property.
Okay.
So I had the, the lender financeeverything and the renovations
and that's, that's exactly how Istarted.
So I put in at the time, likealmost what I paid for the
house.
We redid everything and, but Ilearned cause I had to do
everything in the house.
(03:46):
So it set me up for the futureprojects after that.
Tom McCormick (03:50):
Man, that must have been daunting, but yeah, it
sounds like you made it happen.
Scott Dillingham (03:53):
Yeah, yeah, no, it works really, really
well.
So we had roughly a hundred intoit.
And when we sold it, it was likealmost for 300.
And that was like, now it'dprobably be four maybe even a
little higher
Tom McCormick (04:05):
nowadays
Scott Dillingham (04:07):
still.
So it was awesome.
But, but yeah, no, that's,that's great.
So that's, that's cool.
So then from there, right.
So you started in, in, inWindsor it's during COVID time.
How did it trigger to likeinvest in the
Tom McCormick (04:19):
States?
Well, great question.
I was actually at this timesince around 2017, I was
actually working in the U S asan engineer.
So I got fortunate enough to, tobe able to hop the border and
make that U S dollar.
That's the best raise.
I always joke that I ever gotbecause I made at the time, 1.
3 cents, which is like a 30percent raise, and now it's even
a little bit more, but because Ialready was working in the
(04:42):
States, I understood.
The so some of the Detroitmarket and I already had my SSN
and bank accounts and I wasbuilding my credit.
So my foot was already in thedoor and I saw some, my actual
friends who are also already uscitizens over there doing deals.
So I thought, well, maybe.
I can I can do a cross bordersince it's so close to Windsor.
(05:04):
And, and because of that, and astoo, it's like in Canada,
there's a lot more tax and it'sthe price per door is a little
higher.
The landlord laws are a littlebit more lacks here in terms of
getting tenants out of you haveto, unfortunately.
So there were many reasons why Iwas looking to hop across the
border.
(05:24):
And because I worked there, Ithink it may be a little less
scared to actually take the leapbecause I understand a lot of
investors or people who arethinking of investing outside of
the country are a little fearfuland rightfully so, but I think I
was already.
Sensitized to the fact that theU.
S.
isn't actually that big of ahurdle to, to get into.
(05:46):
So,
Scott Dillingham (05:47):
yeah, it's, it's so similar.
And you're right.
That's, that's our number 1question.
Like, we, we are actuallytalking to more Canadians that
want to buy in the states thanCanadians that want to finance
properties here.
I wasn't anticipating thatshift, but that's, that's how
it's happening.
And you're right.
It's, they're fearful of it, butit's, there's not a lot of
(06:07):
steps.
You want to set up an entityideally.
Yeah.
So that's good to go.
And then, yeah, find yourstrategy.
Right?
Are you flipping?
Are you buy and hold?
Like, what are you doing?
And then find your team.
And then it's done.
Tom McCormick (06:22):
Yep.
And especially when you havesomeone like yourself to walk
you through the process and thendo your your financing, I think,
then you're in good hands andyou can rest easy because I know
when we started out, we alsodidn't have all the answers to
questions, but we said, you knowwhat?
There are people in our network.
There's people like you, Scott,who can guide us.
So even if we, Okay.
(06:43):
Aren't perfect or our structureis not the craziest GPLP
structure, whatever it has tobe, we can still at least start.
And it's, it's something youjust got to take action.
And so that was our, our model.
We said, okay, let's just havesome speed here.
And like I mentioned earlier,we'll fail forward.
If we do like we weren'tplanning to fail, but in case it
(07:03):
does.
No problem.
We'll learn from it and we'llcontinue on.
Scott Dillingham (07:06):
That's the best way.
That's the best way.
So I know you purchased aproperty in Detroit, right?
As a flip.
Can we talk about that?
Like, how's that going?
Maybe share some numbers on somepotential
Tom McCormick (07:19):
returns that you guys are looking at.
Absolutely.
So actually this is one youhelped us finance and I really
appreciate you doing thisbecause I'll tell the listeners
this was actually a crazymonster of a deal, not in terms
of just being big, but in termsof complexity, because this
property we bought was reallydilapidated in Detroit, you'll
find that certain houses almostseem like they need to be
(07:39):
condemned for lack of a betterterm, their shells or they've
been abandoned for quite sometime.
So they need sometimesstructural repair or they need A
lot of like exterior work andmaybe got a recess or some Joyce
and raise the floors.
So, in our case, we bought thisproperty.
In the north end.
So if you have the center ofDetroit, you go about 10 minutes
(08:00):
north and you're in the northend.
So this is still like a Cneighborhood.
It's becoming gentrified.
We're not first shovels in theground, which is great because
you have a tough time makingcomps or knowing what your air v
is going to be, but we saw thatthis area in the north end was
actually promising.
And we got this property for 75,000.
Originally it was listed forhire, but.
(08:23):
Based on some appraisals that wedid, we were able to haggle them
down and we worked with them andwe actually had two extensions
and Scott saved us on those.
He was fighting for us trying tofind us the proper lender to
actually take on this projectbecause we had some issues in
the fact that the propertyitself costs less than the
renovations would be.
So our renovation budgetcurrently is approximately in
(08:44):
that a hundred K zone.
And so that's, that caused some.
Some concern with the lendersaying, well, we don't know if
we want to fund this.
So you need to bring more downpayments or some lenders
completely just walked awaybecause they don't like Detroit.
And also they said, well, youhaven't flipped a whole ton in
the U.
S.
yet.
So we also don't like that.
You're not.
(09:04):
Super, super experienced.
Mind you, we've done some stuffin Cleveland, but it's in
process, so we still didn't havethose kind of three, four deals
underneath our belt that wouldallow us to get those better
financing terms and open theflood gates to other lenders for
sure.
Scott Dillingham (09:18):
And, and, and you, you're right, it's tough
and I just wanna like, so whatthat's called.
It's called an upside down loan.
So that's when your renovationsare more than your property's
value.
So those are absolutely thehardest on a flip because for
the financing anyways becauselenders.
They're looking at like, is thisactually a property we want to
(09:40):
do?
So it's not that there's notlenders that do it, right?
There, there is, but there'sjust less of them.
So be considerate of that.
Especially cause I, I get a lotof clients that are calling and
they're saying, Hey, what,what's the rates?
What's the loan to values?
What's this all going to looklike?
And in a perfect scenario,right?
The numbers are fair and theywork.
(10:01):
But when you when you work withan upside down loan, right?
It does change things, right?
I know you guys need to put alittle bit more money down than
you would have traditionally ifthe renovations were smaller.
So that had challenges.
But, yeah, we're able to do it,which is, which is great.
Can you share about like some ofthe renovations that you're
doing to the property orpotential returns at the end of
(10:24):
it when you, when you guys dosell?
For sure.
So
Tom McCormick (10:27):
in, within this kind of a hundred K budget, it's
looking like we're actuallygoing to come on pretty, pretty
close to the actual estimatedbudget, which is great.
We're, we're actually, like Imentioned earlier, we're going
to resister some Joyce, whichmeans that we're going to do
some work to the structure.
So the main floor had a littlebit of sag, so we have to just
jack that up a little bit.
So once we get the structuredone, that main framing, the
(10:49):
house will be solved to buildon.
So that's been the biggest costdriver.
About actually, we're nearing15, 000 on that one
specifically, and this is in USdollars.
And then we have a whole newbathroom that we're adding.
So this is going to be a fourbed, three bath.
So we're going to add theadditional bathroom to add a lot
(11:10):
of value.
And What we're also going to dois we're making it slightly open
concept.
Usually Detroit homes are prettygreat in terms of having a nice
kind of big living room anddining room connected, but we
have a kitchen off to the side,which we're going to make into
one cohesive space.
We do have to do a little bit ofelectrical as well because the
previous tenant or previousowner.
(11:32):
It looked like a bomb hatch job,to be honest with you.
Oh, man.
Really unsafe.
And, and, there's, there's alittle bit of novelty to it.
So we said, well, since it'salready gutted, let's just
rewire the whole place.
So it's the framing and theelectrical that are going to
cost the most.
And then after that, it's theadditional bathroom and then
kitchen.
And once we do that, we can savea lot of the second floor.
(11:54):
The second floor is a lot ofplaster, so only a slight repair
job.
And then on top of that, classicpaint and some some vinyl
flooring on the second floor.
We're going to actually re,refinish the, the wood on the
main floor, just to keep thatclassic Detroit feel.
Because the last thing I'll sayabout that is a lot of people in
(12:14):
Detroit, they, they seem to likethat older vibe.
The, the kind of the classicDetroit feel with the nice wood
staircase.
And wood trims.
So we're trying to keep that,keep that alive.
And
Scott Dillingham (12:28):
that's awesome.
And you can't, you can't findwood.
Like I guess you could at acost, but you really can't find
wood like that.
So it's, it's good that you guysare preserving it as opposed to
covering it or gutting it.
So no, that's super cool.
Tom McCormick (12:43):
Yeah.
Scott Dillingham (12:43):
So when do you anticipate?
You, you can
Tom McCormick (12:46):
sell it.
Like, do you have goals lined upfor that?
We do.
Yeah.
So we're targeting the spring.
So basically our drop dead datefor having this project
completed is Easter.
So once we have that done,that'll mean the project was
about four months, four and ahalf months, which is actually
pretty good.
And then we expect it to be onthe market though, for another
(13:06):
kind of two months.
So we want to factor in thatthey could sell sooner, but we
want to factor that into ourbudget and be a little
conservative And I shouldmention actually, ARV right now,
we're projecting around that 260to 270 zone conservatively.
So that's pretty decent ahealthy profit for us and our
investors.
And we saw actually a comp thatwas actually around three 15.
(13:30):
However, that's an outlier.
So I don't want to guaranteethat to anyone, but that'd be
great.
Like great Sherry on top.
If that did push up to the threehundreds, but usually it's in
that kind of mid to high twohundreds in this area of the
North end,
Scott Dillingham (13:43):
for sure, for sure.
And that's awesome.
Well, hopefully you never know.
In spring too, there, theremight be more sales too.
So.
Help bring up the values.
Now I think another key partthat you've talked about here is
you keep talking aboutinvestors.
So obviously you broughtpartners to the table and I know
that there's many more projectsthat you're looking at and
(14:05):
you're looking for morepartners.
So can you talk about that?
Like about the partnership withyou and how that works and maybe
some of the things that you guysare looking at next.
Tom McCormick (14:15):
Yeah.
So on this project, along withthe project we've done in
Cleveland as well.
We've always had some partnersbecause it's easier to go
further with people.
People help you scale and it'sgreat to lift others up with you
as you go.
And eventually me and my brotherwe did, we're doing all these
deals.
We ran on money pretty quickly,just in, in certain, certain
(14:35):
avenues that we've alreadydeployed.
So how do we keep buyingproperties?
It's who partners.
And so what we've done is onthis Detroit, when we gave 50,
50 split they come with a chunkof the money and we will manage
the project, manage thecontractors, source the deal
manage the corporation and thetaxes.
And we also brought a little bitof construction finances as well
(14:57):
just to get us to that firstdraw.
So we, cause we know it, it's,it's easier to partner with
someone when you both of youactually have skin in the game.
Instead of purely saying, okay,you bring the full 75, 000
amount.
And then they say, well.
It feels more fair that way.
If we, we chip in a little bittoo.
So 50, 50 split on this one andreturns again, 50, 50.
(15:22):
And we're looking forward todoing more of them as well.
Because I think in partnerships,you want to have everything as
equal as possible because thenno one's sour on the deal.
No one's kind of thinking, ah,did I get gypped?
Everyone kind of everyone'shappy and that's our goal,
right?
Because we, we want to build arelationship in the well deeper.
So we can do more deals in thefuture together, not just a one
(15:44):
and done.
Scott Dillingham (15:45):
So, yeah, I love it.
And even you guys acquiredfinancing too, which did require
less capital from the investorwho is partnering with you.
So that's, that's super cooltoo.
No, that's, that's awesome.
So do you have any projectslined up?
So say I'm listening to this.
I want to go in the States, butI, I haven't built up enough
(16:06):
confidence or set up an entityor just done certain things yet.
So it's easier for me to partnerwith you on this and bring some
money into the deal.
So what do you have coming up orthat you're looking at?
That may be somebody might jumpon
Tom McCormick (16:19):
what might be interesting to hear.
We actually have a mixed bag.
So we have two flips where wewere looking at just out the
other week that I walked, hadsome great numbers on it.
And this would be similar to tothis angle with property that we
were just talking about aroundthat 60 to 75 K zone.
And again, usually returnswithin the six months.
(16:39):
That's kind of the, the projecttimeline.
We have actually some biggerones.
Now we walked a couple shells.
So I, like I said, a lot ofthese properties need a lot of
love.
And a lot of properties,especially these bigger
multifamilies, they're reallycheap, lands cheap, but you need
to do full renovations.
So we actually were walking acouple eight plexes and we
actually saw a 12 plex just inJanuary.
(17:01):
So we've been running ournumbers and actually we think
these could.
Could really could reallysatisfy some lenders
requirements and, and we'rereally excited about this
because it's in a decent area.
Again, C neighborhood that's onthe cusp of turning B.
So there's, there's a kind of aselection to choose from.
If you want more active incomequick in and out.
Great.
But I will just preface withmore of the 8 to 10 units that
(17:25):
we were talking about.
These are more of a over a yearreturn.
So this is something it takes awhile to do.
Complete and stabilize and thenrefinance and pull the money
back out because we can almosthit the 1 percent rule on on
this deal here.
Scott Dillingham (17:39):
That's super cool.
Awesome.
Tom McCormick (17:40):
No, I'm
Scott Dillingham (17:40):
excited for you guys.
There's just so much There's somuch going on and it's literally
in our backyard and people don'trealize it, right?
So, I know
Tom McCormick (17:49):
it's it seems like detroit gets a bad rep But
honestly, I think that's astigma from the past because now
detroit's a lot safer Downtown,if you've ever been there, it's
super vibrant.
Don't get me wrong.
I love Windsor, but Detroit,it's, it's, it's in Unari's
backyard.
So why not hop over theresometimes and do deals in both,
both locations?
Scott Dillingham (18:09):
That's the point.
Exactly.
Yeah.
It doesn't matter.
Like to me anyways, it doesn'tnecessarily matter the location.
If the numbers are there.
Right.
And market fundamentals, you gota deal there.
So absolutely.
That's awesome.
I think just go where you're, gowhere you're treated best.
That's it.
No, exactly.
I agree.
And you're right over there.
Even though you're paying in usdollars, which have, have a
(18:30):
premium overall guys the priceis still so much cheaper, right?
To buy something equivalentright across the border in
Windsor, I'm going to guess.
And maybe correct me if I'mwrong, I haven't seen the
property, but I'm going to guessthat as a teardown, you probably
would have bought that foraround 200 Canadian plus Renos.
(18:51):
Would you say that's aboutright?
Approximately.
Yeah.
Yeah.
Tom McCormick (18:55):
So it's
Scott Dillingham (18:55):
pretty
Tom McCormick (18:55):
reasonable.
Scott Dillingham (18:56):
So to buy a 75.
Yeah.
Even when you factor in theexchange, you're still buying it
at a discount.
So absolutely.
Tom McCormick (19:02):
Yep.
I think the price per door isnot quite one half, but maybe
call it two thirds of prices inCanada.
And in decent areas, so, yeah,it's, it's, it's definitely
makes a lot more sense fornumbers wise and actually
getting cash flow as well.
Scott Dillingham (19:16):
Yeah, we had on a previous episode, just for
your knowledge, we had Derek onmy team.
He's already bought in theStates.
And he does the us lending forus as well.
And he bought a brand newconstruction property for 260,
000, like brand, brand new, andjust like
Tom McCormick (19:33):
Ontario, you
Scott Dillingham (19:35):
can't maybe the small, small communities,
but like beyond that, yeah,it's, it's unlike.
Yeah.
Yeah.
So it's, it's reallyinteresting, but no, that's
awesome.
So then we're going to wrap upthe show for today.
So for everybody that'slistening and they want to
invest in the States and they'dlike to do it with partners,
right?
Cause they don't want to jump inthemselves.
How can they reach out to you orwhat's, what's the best way so
(19:58):
they can speak to you aboutpotential partnerships?
Tom McCormick (20:00):
Yeah.
Yeah.
I'd say reach out.
I'm on most social media, so I'mon Facebook.
Look me up.
Tom McCormick.
I'm actually on YouTube now.
So again, Tom McCormick and Ican also, if you want drop, drop
a, you a link tree for later onthe description and people can
connect with me there just byclicking a button.
Yeah, that'd be perfect.
(20:21):
That'd be perfect.
Awesome.
Tom.
Well, it was great to hear yourstory.
Thanks for coming on.
I really appreciate it.
Yeah.
Thank you so much.
I appreciate the opportunity andlooking forward to doing more
more work with you in the futuretoo.
Sounds great.
Thanks, Tom.
Awesome.
Thank you.
Take care, everyone.
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