Pitch Please

00:01.32
mike_flywheel
What's up everybody. It's Mike we're here on the pitch these podcast again and today I've got Alex Ladu from perch we're gonna be talking about what they do, we're gonna be talking about his background but Alex how about, but you start us off with what perch does and what we're gonna be talking about today.

00:13.27
Alex
Awesome! Thanks for having me mike glad to be on so perch. We're a digital mortgage platform and effectively we held first time home buyers optimize their path to home ownership and then we help existing homeowners unlock as much value from their real estate as they can. So. Telling them when they should break their mortgage. What their value is how much they can refinance things like that. We're really here to just offer a holistic approach to home ownership for canadians.

00:38.73
mike_flywheel
I'm excited I think this is going to be a really important topic for anybody on all sides of my spectrum whether they're founders or just people in my network. Um I imagine this is a hot topic today and continuing to be a hot topic as people start to come up to renewals especially with the way mortgage rates are so I'm excited to learn from you. Excited to learn what perch does but before we do I think it's important to learn a little bit more about you? Um, so maybe start us off with a little bit of background on on yourself and your career and and what guy kind of got you to where you are with Perch today.

01:08.80
Alex
Yeah, so I guess ah, it's crazy how fast time flies but essentially yeah, so I've been in the space for about 11 years now so when I started out of school this finance went straight into the banks worked in a variety of roles. So residential, underwriting commercial underwriting audit corporate finance. Ended up landing and and staying in the corporate finance route. So a lot of my role revolved around strategy analytics and I guess the joke I make is you know you can? How do? How do you help the bank make as much as they can from each person and then now it's how do you help now I'm helping people save as much as they can from the bank. Ah, but ultimately yeah, that then started six years ago kind of got this itch that it was going to go digital so quit my job full time and then essentially went into perch and 2018 so it just been building it since and yeah, six years later here. We are.

01:54.73
mike_flywheel
Wow, that's amazing and and the timing of that's pretty interesting too and I'm sure maybe that'll play into 2018 where and how rates in the markets were returning but maybe even around your background. So You know you worked in the banks then you worked On. You know in in a mortgage corporation at that time and either of those did you think you were going to be an entrepreneur or even before that because that's not like a traditional path. Um for you know, a lot of serial entrepreneurs and I don't think you are this is your first startup right.

02:24.53
Alex
Yup, so definitely my first startup. But I think I've always so like the part that always made me laugh is when I told people I started a business. Nobody was surprised so it was it was kind of interesting in that sense. But yeah I've been doing like my own little ventures here and there like since I was a kid.

02:30.28
mike_flywheel
Um, okay.

02:40.20
Alex
Ah, so whether it was like an air rating business or like you know, selling hustling Pokemon Cards at like the the playgrounds or whatever it is like essentially it's since the beginning. Um, but but yeah, no, it was ah I think it just yeah I just felt conviction in the idea and I really just kind of wanted to see it through so I loved my job I love the work that I did but I just. Yeah, at some point just couldn't stop thinking about it so decided you know why not and that was a good time to take that bet.

03:03.70
mike_flywheel
It's so funny that like common thread of a lot of people where they did a traditional career path but people weren't Surprised. Um when they became an entrepreneur because they just like through their life had these moments of things or they were like hustling or trying things out or hacking at things or. You know, reselling their ah their built legos or air rating and log cutting and a common one that always comes on is like window washing or painting like college pro painters and I think there's like something that sticks with your style that where where one day it comes Up. Um.

03:24.62
Alex
Yeah, yep.

03:34.40
mike_flywheel
But was there you know in in those moments was that just like in your personality or was there someone like around you that you sort of looked up to that was an entrepreneur or something that sparked that desire to do that one day or for you to even embark on doing those things.

03:46.88
Alex
Yeah I think it was maybe more like inward versus a internal versus external influence because yeah, it's just always been like I've gravitated towards those things of like you know I wouldn't say I'm risk seeking but I'm definitely not risk Averse. So I'm always just you know up to just try something because like what's the worst that could happen. Ah, kind of mentality versus yeah I mean thinking inwards of like yeah there wasn't really a mentor or anything like that where where most of the people I know like are actually opt for the less stressful route which is you know you climb to corporate Ladder You do a lot of those things and then you you don't take undue risk.

04:09.90
mike_flywheel
Okay, okay.

04:22.20
mike_flywheel
Yeah, well, it's always fascinating to me like is it nature is a nurture of how and where and people find themselves into entrepreneurship. Um, so you said you know just felt right and so what was like the spark and like what what was the change of timing where. You know you started working on this was it a scribble on paper was it an idea over beer like what kind of was the breakout moment for you to start perch.

04:41.23
Alex
I Think for me, it was just looking at the current process so I was in it right? So when I lay I'm like you know what? there's a lot of room for automation and then also I mean there's ah, there's a lot of intricacies within like the actual like the mortgage space as Well. So a lot of lenders are heavily reliant On. Let's say the Broker Channel or things like that to get a volume. When I kind of looked at the space I Just thought you know what there's an opportunity to go direct to consumer um and essentially scale a much like and create a better experience because what I thought was interesting is when you talk to clients you talk to realtors you talk to the lender everybody kind of operates a bit in a silo. Um, but there's not. Like this comprehensive center point that can help everybody benefit because ultimately real estate is one of the largest investments people will make but people treated treat it very transactionally. But it's much more holistic than that So I couldn't see anything that was being done in that space. And the more that I poked into the idea I Just kind of saw a huge opportunity and then yeah I eventually just decided to go. You know if I think it's that good an ideal I'll put my money around my mouth as.

05:42.65
mike_flywheel
I Love it. So maybe let's start with that which is like what were some of those gaps like can you expand upon them and some of those interconnectednesses that were missing because I think it'll really help us set the foundation of this industry. What other people are doing where this.

05:50.71
Alex
A king.

05:59.22
mike_flywheel
You know, traditional mortgages and banking systems are versus innovation. You're seeing versus where perch fits in for.

06:04.47
Alex
Yeah, so I mean literally you can pinpoint I'll give you examples like across the entire lifecycle. So the first step is in deciding to buy so a lot of people I think the biggest issue with real estate is is so it's kind of the the gift and the curse of it. So relationships are the number 1 factor in real estate. So. People will pick their realtor their bank or their broker like it'll be you know the last their parents their family like their friends who did you use and that's I think that's something like 70% of transactions are done that way. It's not at all like that and a lot of other things but real estate just for for decades and and probably centuries has been very relationship driven. Um. But the issue with that is that there is a lot of people and like there's a lot of various parts. But so much misinformation and so there's people like let's just start at the beginning that get bad advice on when they should buy when they're definitely not able or shouldn't be buying. There's people that are told they can't qualify but it's not true. They actually could. Ah, so there's a lot of people that miss the opportunity where either let's say they get in when they shouldn't have and they they cost them. Ah a lot of money or they don't get in and then especially in Canada when house prices have been rising so fast that decision to delay or defer ends up costing them hundreds of thousands of dollars or ends up like just. Borrowing them completely from the real estate market. So that's kind of where I see a lot of gaps at the beginning is that the issue with real estate is that a lot of it is usually commissioned so the Realtor the broker. Everybody only gets paid if the deal works. So if you're 2 3 hree years out from being able to buy. You know you'll call and then it'll be call me in a year and a half but

07:35.30
mike_flywheel
Yeah, there's no urgency or immediacy I can't transact you right right now.

07:38.30
Alex
No one? Yeah, exactly right? So it's like you know and arguably so like no one's going to invest the time because like a lot lot of the times like people are going to come across probably hundreds of different professionals so spending time with you like 2 years out like there's no guarantee you're ever even going to close with them. So you know I totally get where that kind of mentality comes from. But then we wanted to develop a system where like how do you give people advice that's essentially automated. So it's not like you don't need intervention or like human resources to kind of like put into it. But how do you get people on a path where they can essentially optimize and and and kind of go down that path. And then another part in the lifecycle is let's just say like as people choose a mortgage. Um, so I think we've come a long way just in the last 10 years of it but like raid comparison sites were kind of the first foray into helping people understand that there's more than just the the posted rate that you see at your bank. Um, now it's moving a lot deeper so like. Beyond the posted rate. We're not optimizing for what I argue is even more important is the parameters of the rate. So. It's like no, you might have the lowest rate. But if you plan on breaking your 5 year fixed high penalty mortgage in 2 years like that's not actually the best product for you. So how do you go beyond helping somebody pick but like how do you really address suitability is kind of the next element. Um, let's go even further then like when somebody gets preapproved I need a realtor. How do you help me find one so we help connect everybody throughout our ecosystem. So the realtor the lawyer. Whatever it might be we. We have the parties that we can relate to um and I think the biggest gap is then post closing.

09:08.50
Alex
Ah, so real estate and mortgages especially is historically very transactional. So you know you get your 5 ive-year mortgage I'll call you in four and a half years when you're coming up for renewal. But there's so many life changes in between those those four and a half years where there needs like there are a lot of things people can do but they don't understand the options that are available to them. So we wanted to address that of how do I make your home part of your financial plan. So the next channel we're really focusing on this year's wealth advisory because we think there's a huge opportunity where people don't treat it the right way so to give you a really good example. A lot of people. The canadian dream is you pay down your mortgage as quickly as possible and then you retire. The issue with that is then a lot of people don't have enough assets especially because we've seen defined benefit pensions things like that go out the window and now they actually have to save and manage their own investments leading into retirement so then to let's say 105 years into retirement you run out of money you want to go take out a mortgage. Well you no longer qualify. Ah, so it's like there's a lot of these things then you need a reverse mortgage or a private mortgage you burn a lot of the equity that you've accumulated so things like that that we see common where we now want to work with wealth advisors and go hey instead of renewing you're nearing retirement. You should set up a home equity a lot of credit. You should take out some of those assets reinvest it into something that's liquid fund your retirement and then you can afford your mortgage payments. Whatever it might be like we're working with people to really look at their house more holistically? Um, so those were all the key gaps that we kind of saw in the market. A lot of it. We can only address it.

10:35.79
Alex
1 small part at a time but over 6 years we've really expanded the breadth of what our product can solve for and then now we're really trying to be that lifecycle mortgage product and partner.

10:44.93
mike_flywheel
Okay, well maybe let's break it down that way. Let's talk about where the product is at today in each of those those different areas you've you know, called out a bunch of challenges and in the market and so I'd love to talk about you know where perch plays into each of those and then maybe um, where there's.

10:48.96
Alex
In.

11:03.14
mike_flywheel
Ah, you don't have to name competitors but where you're seeing innovation beyond yourselves I think what we're going to get to is you you cover the whole spectrum and that is innovation and and you know the aggregation of that but you know just so people are aware. Um, so maybe let's talk about that first bit you know you talked about. The example of hey I just want to know like I'm planning to buy a house in the future. My first time home I'm doing this you know rsp stuff that eventually I'll try to use to buy my first home or maybe I don't even know about that and I'm just trying to talk to someone but no one wants to talk to me because I'm not looking to buy.

11:33.31
Alex
Yeah, yeah.

11:39.11
mike_flywheel
And I haven't checked that box that says looking for a home in the next 30 to 60 days I need a realtor and I need a mortgage broker and I'm gonna I'm gonna make this happen. So those people are left to I assume just bing in Google stuff like they just started searching but they're sort of left. They might get someone that you know invested time or energy to to. Educate. Maybe there's a broker that that is going around doing some pre-education. But where do you fit into that where do you fit into the first time home buyer solution of of of help.

12:06.31
Alex
Yeah, and I think so so it's a great point and I completely agree. It's so the thing is is what ends up happening is they don't get right? The good like the right advice and then a lot of the times. The only people that are going to be wanting to kind of pick up those kind of deals are usually the people that are new to the business because they'll take whatever lead they can get right. Then you end up getting potentially bad advice which is even worse than no advice in some cases. Um, so I think really what we've built out is so so purchase core underlying platform is essentially on 2 sets of algorithms so we have what's called auto adjudication so we are able to look through what the lender would require. And we can assess where somebody qualifies based on their specific situation. So think of it as like a recommendation engine where we know we have access to let's say 2000 mortgage options across 35 lenders so we'll then look at where you qualify and then rank them accordingly. So why? That's efficient is because it's very hard for. Like the average broker will maybe follow 3 to 5 lenders typically because that's all you can really kind of keep up with there's just so many things changing all the time but beyond that there's sometimes like very niche products or things like that that come up. So if you can auto adjudicate effectively, you're able to spot those like in seconds rather than hours. Um, so you get better answers. Overall. Um, the second part of our algorithm is optimization. So now. Let's say I ought to adjudicate and you don't qualify anywhere. So then it's like well what should you do about it. So then optimization is then looking at where are the deficiencies or not deficiencies. But let's call it shortfalls. Um, and then we look at and essentially iterate the.

13:37.36
Alex
Possible things someone could do to to solve for that shortfall. So if income isn't high enough if your down payment isn't high enough if your credit's too low. Those are typically like the 3 things you need to get a mortgage so we're then optimizing for those factors and the combination of the 2 is really powerful because then you can see what do you qualify for today. And what's the best path for you forward and what should you do to essentially fasttrack your path to home ownership. So we have a solution that does that fully automated and how it works with the client is essentially the the goal is to help them kind of solve through it and then. As we want to improve it. We want that solutioning right now is done by our advisor but we want that to be done by essentially the algorithm down the line.

14:14.37
mike_flywheel
Wow. And so how does that work I come to your website I sign up and do I just put the numbers in myself does this connect into existing systems like how seamless and frictionless is that today.

14:26.76
Alex
Yeah, so right now I mean so you sign up and basically you're filling out a profile in about 5 minutes so it is manually entered by the client. We have a couple integrations. We're actually bringing into the our platform in the next quarter so we'll be eliminating some things like the the credit check to bring in all the that payments things like that. And then the rest of it like we're we're kind of getting hit them off 1 at a time but overall it takes people roughly. Let's say like less than 5 minutes to complete a profile from there. We're able to then calculate all the factors or are the numbers you need and you're typically uploading documents if if you want to move forward with the pre-approval. Otherwise you can still essentially chat. Call book an appointment with an advisor and then the advisor will kind of run the algorithm and figure out which solutions make the most sense and package it for the client.

15:10.69
mike_flywheel
Got it So the beginning is like if you are just anyone considering buying a home your first time home where I guess a new home because this is still like even if you have an existing home you still might want to have a sense of where you're at for Pre-approval is this mostly for new home buyers. Okay.

15:26.90
Alex
So No for both. So So exactly that use case where let's say you're a moveup buyer. Um, you'd want to know how much equity might should I expect on the sale of this property and then how much do I qualify for the next home or for a lot of people. Can I rent my existing property and then buy my next place like do I qualify for that. So helping them kind of navigate those options.

15:43.87
mike_flywheel
Got it. So I do that? Um, and then the next piece is if I'm liking what I see then I can get a formal pre-approval which I guess is a little bit a little bit of additional documentation to make it more real. So The piece of. Approval You get is far more accurate is that sort of the next phase of this.

15:59.80
Alex
Exactly So basically up until now like it's a prequalification based on like we assume everything you've told us is true and as anybody who's gone through the mortgage process. They'll know that like the bank is pickier than than you then you are so we'll kind of sift through like okay well you're qualifying incomes going to be different. And this is especially true for people who are self-employed hourly workers things like that or seasonal work. But we're essentially it's our job to help you navigate that so we just ask you for the raw inputs and then we're able to actually like calculate what it's going to shake out to.

16:32.40
mike_flywheel
Got it and I guess just as ah as ah eyes wide open compared to the average mortgage broker. Um perch is able to through multiple connections I assume Apis and other information have a wider view of the market than any one person's relationships but they're you know 4 to 6

16:33.73
Alex
I.

16:49.38
mike_flywheel
Lenders You have the widest spectrum of lenders and so you're giving them the widest aperture on what is possible not even rates yet but just like are you going to get approved. What are the flexibilities around what you're trying to do now it goes to pre-approval and then you can start to eventually get to rates. So.

17:02.42
Alex
Yeah, so not only is the process way more seamless. So like I said takes 5 minutes but like the application automatically asks for documents as you populate. So like the goal is like you go through it once and then you're ready to have that conversation rather than like the traditional process is a lot of back and forth emailing pdfs things like that maybe a couple days till you get an answer. And then once we do get to rates. It's not actually just the rates. It's more like what options are even eligible or the best fit for you. So we're able to get like essentially we're underwriting you 2000 times in 10 seconds whereas the typical broker might take you know 3 hours 4 hours to really sift through all the options and then come back to you. From a limited subset that they're working with to start.

17:39.90
mike_flywheel
Got it and so far it sounds like everything's digital which I don't know I know some people that were faxing or dropping off things of their mortgage brokers or like having to take pictures and and stuff.

17:43.91
Alex
Yeah, everything's digital. We've I mean for years. It's been fully digital.

17:53.19
Alex
Oh oh in general. Yeah I was thought that you're talking about us. So yeah, we're fully digitals but there are definitely I still see paper applications or like things like that where they have to go in and fill it out by hand.

17:58.00
mike_flywheel
Yeah, yeah, I'm just saying I don't like having to drive somewhere anymore. So the digital is is super appealing. Um, so I think just just to close out the first one. So um.

18:14.89
mike_flywheel
To to be able to to understand where I sit if I'm buying my first home or looking to eventually buy a new home and to get the pre-approval at this stage. Um, there's no like locking commitment like I don't need to hey you can only use this or tap into this t minus sixty days

18:31.80
Alex
Here.

18:33.76
mike_flywheel
Before you're buying something because we still want to talk to you as perch and so for that and we'll talk pricing on all up but is there like ah how does that piece work. Do I pay just for that component or do like how do I access that.

18:45.33
Alex
Yeah, so the best part is like so the way it works like we get paid the same way Any traditional mortgage broker would so we get paid when the deal closes. So there's no platform fee. There's no monthly cost. There's nothing. There's no cost for their user. They give free insights.

18:51.47
mike_flywheel
Okay.

19:00.70
Alex
And ultimately like our motive is that we want to make the incentive to sign up strong enough because you're getting good data and analytics from us and then selfishly we want you to use us for your mortgage. Obviously so we can then monetize it but it's at no cost to the consumer we get paid by the lender.

19:09.26
mike_flywheel
Um, yeah, and that's because you've done it at a digital scale. So you've made this accessible for all without having to consume hours and hours of your time to do it at that scale makes total sense so to to first time home buyers. People are to buying your home. You might as well try perch there's absolutely no cost to do these initial steps. Um, so then the next step which is I know most we are just going to fixate on the rate and it's probably important to talk about that right? A lot of people coming up to renewal so I'm sure a lot of people listening right now are like okay, cool Mike just tell us what rate I can get through perch. Um, but you know to your point there's there's a more holistic conversation. You'll you'll tell them all the information but talk to us about that part as the next step.

19:48.60
Alex
Yeah, yeah, so I think and the biggest thing is like so most people and and the vast majority of canadians I think it's 60% of people just go to their bank and they'll just get whatever is offered there. So we've seen tons of use cases. So I'll give you a really good example where if people fixate on the rate. Um, I've seen people lock into 5 year high penalty mortgages and they've sold their house a year later because it just was not at all a good fit. So I think the mentality or for people is they'll go in and get a pre-approval and it's kind of a binary outcome where I mean they're preapproved or I'm not but it's not actually the case where. We've had cases where their bank preapproved them for 400 grand. We got them 700000 so it's not so much like the rate is 1 factor but then you have to look at it again holistically where if you buy this house that you know you're going to outgrow within 2 years You're going to pay a 5 % realtor commission plus land transfer taxes plus all these closing costs to transact and sell to years later that then like if you were to add that to your rate like your effective rate is way higher than what you thought you were getting but people just are so fixated on the rate and they don't look at anything else. Um.

20:54.60
mike_flywheel
But yeah, it's like how house math house math. But the money that the money they've made on the growth of their home. They didn't take into account breaking an old mortgage. They didn't account for all the Realtor fees the moving cost the property tax changes the heating bill changes. Um, so.

20:57.19
Alex
Yeah, or it's like all the raid is like like it becomes the goal.

21:03.39
Alex
Yeah, yeah, it's like this what I bought it this one I sold it for how much money I made it's like ah no, not quite. Yeah.

21:11.15
mike_flywheel
But so your platform helps educate on some of these what that could mean for you based on some criteria you ask or assess of of the individual.

21:21.19
Alex
Yeah, so our goal and and this is a mixture of you know man and machine here. So essentially we've got our advisors probing and asking the questions and then we also have our system kind of helping people understand so a really good example in a downward rate environment which is what I'd argue we're in now in the next couple years is not all.

21:27.28
mike_flywheel
Um, yeah.

21:40.86
Alex
Like not all fixed rates are created equal. So like the the penalty you're going to pay with some lenders against other lenders can be a factor of 2 or one and a half times so helping people understand those differences is really critical. A lot of people also have variable rate mortgages. So. There's actually most people don't even know but there's an adjustable and a variable rate mortgage. So. Some payments go up and down some don't um so now a lot of people went into. Let's say a variable rate mortgage and they were counting their lucky stars because they didn't get hit immediately for the last a couple years of rate hikes. But now it's worth thinking. Yeah yeah, no, you've got an infinite or a yeah negative amortization. But.

22:10.49
mike_flywheel
Till I see that 90 year amortization

22:18.47
Alex
Now it's worth thinking about? Do you want to renew into that because if rates are going to go down your mortgage payment isn't going to go down so it's like is that still a good option for you. So there's a lot of things like that we're helping people understand the terms that come with it What the future outlook looks like the flexibility. It gives them. Um.

22:19.80
mike_flywheel
Mean.

22:34.24
Alex
Like especially with like things like home equity lines of credit. Not all lenders offer it so is there a chance that you think you're gonna have to pull out money to do renovations invest it like those are the things that people don't really think about so we have big plans this year to actually start automating more and more of kind of ah I compared to like building a car where I want to help people understand kind of the the cost and effect.

22:48.41
mike_flywheel
Yeah.

22:53.69
Alex
Each decision they make as they as they go down the mortgage selection process rather than needing an advisor for it. Ah, but yeah I mean there's a lot of cool improvements. We can do now we're already helping people with a lot of those insights. But I think it it can go a long way.

23:06.43
mike_flywheel
Got it and because you've got like the the man and machine or like the copillot I work at Microsoft and I use the copilot term but you got the copilot. We got an individual actually speaking to to the um to the person seeking lending. You're able to explain and talk through some of these and assess the scenario.

23:10.54
Alex
Yeah.

23:16.89
Alex
I.

23:23.12
mike_flywheel
How like flexible are the scenarios here like can you do a hey I want a helock for the fold 80% value of the house and then I want to be able to lock in x and y like are the structures super flexible just like they would be anywhere else.

23:36.98
Alex
So it's yeah, essentially we'd have the access to the same subsets. So it's not like we have any like special privileges or things like that when it comes to like what we can get at let's say td it'll be the same as what another broker can get I mean we might be able to get better pricing because we do more volume but like besides that it's the same underlying product set right? Um, so.

23:39.66
mike_flywheel
Okay, okay, okay.

23:46.60
mike_flywheel
Yep.

23:50.95
mike_flywheel
Okay, okay.

23:54.64
Alex
The 1 thing where it really differs. It's more so so it's kind of a combination of 2 things. So if you have good systems to help like filter down and recommend the right product. We also then are able to do more volume so I can then hire only senior mortgage advisors. So you're also getting higher quality answers because like so for example, our average mortgage advisor has been doing this twelve years

24:12.40
mike_flywheel
Wow.

24:14.40
Alex
Um, so it's not like they're a junior mortgage agent trying to kind of like just throw bodies at it as we scale. It's really like we're we're really big on customer service. Ah and and if you look at our Google like we've got like 101 reviews and a hundred of them are 5 stars so we're we're big on customer service.

24:29.23
mike_flywheel
I love it. Who's that one? no just kidding. Um, always the one always the one it was because you didn't get them that extra point zero zero one percent off on their rate. So and I guess presumably because the scale of this.

24:33.85
Alex
Yeah, there's always the one. Ah.

24:39.82
Alex
And they'll never let me forget it.

24:46.62
mike_flywheel
Um, someone's I know someone's asking this someone's listening and they're like okay Mike but is it guaranteed that no matter what I will get the best rate with perch and you're probably going to say it depends but because you've got a wide spectrum Could there be a scenario where like. Technically across that spectrum of lenders you are going to get help someone get the best rate and product for them.

25:08.91
Alex
Yeah, so I'd I'd say so on average, we're usually about forty fifty basis points lower than a lender and about a quarter point lower than and sorry I mean 40 basis point or 50 base points would be like half a percent and then or like lower than a lender or a quarter percent lower than other brokers on average. Ah.

25:10.21
mike_flywheel
Yeah, yeah.

25:19.43
mike_flywheel
Okay.

25:26.73
Alex
So what I'll say is we're not always the best rate? Yeah so that's not ah, an an immaterial saving. So I think the only use case that we see typically where people get a better deal just going directly to their bank is like I call it the sweetheart deals and it's usually just for high net worth clients. So if you've got like a $2000000 account at.

25:28.50
mike_flywheel
That's and that's significant. That's significant, especially with what mortgage rates are in Canada. Yeah.

25:45.22
Alex
Of your bank's private wealth like they're going to throw the lowest rate at you because they want to keep you forever because they also want to keep your investments So those are very tough to compete with and like typically it's just untouchable, but for the vast majority of people We're able to help them on two fronts. So just to reiterate the rate isn't always the most important so we can get them a lower rate in most cases.

25:50.44
mike_flywheel
Yeah.

26:05.30
Alex
But a lot of the times it might just be like we can help them qualify for a higher loan amount which is what they really need.

26:10.10
mike_flywheel
Yeah, okay, interesting all right? so that we covered the first one which is like if you're looking to buy or a first time home buyer the second which is like in the process of actually getting the best advice and the widest aperture of what is available to you as lending products. Um, and then. You start talking about the other piece which is continuous planning future wealth planning maybe retirement I don't know how you bucket that but let's talk about that a little bit.

26:34.60
Alex
Yeah, yeah, so basically in the third bucket. So so the minute that they close and actually this isn't even just for customers who close with us like anybody can sign up to perch and add their properties and they'll get an instant insight on it. So what we do is I it's almost like a. I call it like almost like portfolio management for your real estate. So every month we're updating the property value the mortgage balance how much equity you've built every week we're calculating how much the new market rate is for your product for your mortgage and if you should break and if you would break what would be your penalty. How much would you save an interest and should you do a yes or no, um. So where this is especially relevant is no one has the time to like on a weekly or monthly basis to keep checking their mortgages nor is it ah a good for your sanity like no one needs to stress out of a mortgage rates that much so it's like let us do it for you. Um, so for example in early Twenty Twenty two when the yield curve started to really shift as a interest rate hike expectation started to dramatically change most of it was just triggered predominantly like as geopolitical turmoil started to heat up with like let's say Russia and Ukraine or things like that our algorithm picked up that. Immediately the change in expectations for variable rates had changed pretty much overnight materially so we had auto triggered a ton of people were getting switch notifications of like you're in a variable rate you should lock in fixed asap and a bunch of people did so it's like I was locking them in for two point two two point four

27:49.14
mike_flywheel
Oh wow.

27:55.95
Alex
And today they would like they saved a fortune on on interest rates. So the the window of opportunity for mortgage rates is usually it can be very short when you have dramatic shifts so you won't catch it like it's just not part of your day to day so we catch it for you and then the other piece is people are usually trying to solve for 3 things is's going to be I want to.

27:57.22
mike_flywheel
Yeah.

28:07.51
mike_flywheel
Yeah.

28:15.22
Alex
Improve my cash flow especially in today's scenario this is one of the biggest things the second is going to be I want to increase my returns or my third is just I want to build wealth whether that might whatever that might be so helping people plan for the next property purchase the move up purchase like helping how do you help them increase cash flow. These are all things that we help people whether they're homeowners or their rental property investors. Everybody has a different problem. It's just a matter of we have the same system to help them solve it though.

28:42.92
mike_flywheel
That's awesome and so um in that regard. So once I've signed up for the platform. Ah obviously it sounds like I'd have to have acquired my mortgage through you and once I've got a mortgage through perch but with whoever the lender is. You'll continue to as a service just proactively help me manage what I've signed up for is that how that works. Okay, oh wow, you can let me know hey are you done what you're on today. Fy fy proactively.

29:05.74
Alex
No, so actually even if you didn't get it with us. We give you the same insights. So like let's say you went to ah another lender or another broker you have your mortgage. We still can calculate their penalty. Yeah so.

29:19.11
mike_flywheel
So yeah I love that proactiveness and it's the I think it's the the promise that so many financial advisors or banks or lenders or Brokers would tell you but they just can't operate at that scale and you're using technology to operate this where it's like hey like.

29:31.74
Alex
Yeah.

29:37.51
mike_flywheel
Alex isn't waking up every day and checking across 10000 clients like did something change. Um.

29:40.96
Alex
Well, actually because you know what most people do so if they're reaching out at all the vast majority don't is once a year they'll kind of do their annual check-in but like in those three hundred and sixty five days there might have been like 50 opportunities for that person to switch and you missed all of them. Um, so it's it's one of those things of like yeah so you need tech to scale that effectively and the second is also around. So the reason we give it out like essentially it's it's even if you didn't get your mortgage with purge I mean I always joke that there's 2 people. There's people that are purch clients and people that are going to be purch clients. So if they're getting insight support.

29:59.32
mike_flywheel
Yeah.

30:14.38
mike_flywheel
Yeah.

30:16.13
Alex
Analytics all these things from us and they're not getting it elsewhere and we can get them a better aid than they're coming to us for renewal or for the reffire for their next purchase.

30:19.80
mike_flywheel
Yeah, that it makes so much sense now. Do you on on the financial advisor bit is that also so you know you talked about the brokers or like seasoned 12 years they're paired with tech to be able to operate at scale and make the most informed guidance. Are you also partnering with or have in-house financial advisors on on the backend for your wealth planning and future planning.

30:42.31
Alex
Yeah, so on the financial advisory side. It's not in-house so we refer everything out so we we do work with financial advisors where we send clients to because we also like we don't try to do everything. We just do what we're good at and then we send them to everybody else who's great at what they do so on the financial advisory side. There's kind of 2 elements to our financial advisory piece. So.

30:46.20
mike_flywheel
Okay.

30:52.68
mike_flywheel
Yeah.

31:01.84
Alex
Um, we have the brokerage. We also have a private mortgage arm. So we raise capital from a lot of retail investors. So it's called a mortgage like a mick a mortgage investment corporation. So it's like a high yield. So right now we pay like about nine and a half percent dividend rate. Um so people will invest in the mick and then we lend that money out. So with financial advisor. It's kind of a 2 wo-pronged approach where people need financial advice and we can work with the advisor or at the same time we work with financial advisors that are looking to invest their clients in our mortgage fund. Um, so where the financial advisory comes in that's specific to the mortgage though is that time and time again what you'll see is people just. Get their mortgage aggressively pay it down and then try to get into retirement but eventually they might run out of assets like a lot of people are underprepared for retirement. So if they retire and their house is their only asset. The issue is eventually once you run out of liquid assets your house isn't liquid. You need. Yeah, you can't pay for the grocery. You'll.

31:51.10
mike_flywheel
Yeah, you need liquidity the property tax bill that I just got that. That's not nice.

31:56.88
Alex
Yeah, but then the issue is that your qualifying income is gone so you can't get traditional mortgage financing or if you can you definitely can't get as much as you could have got before so people end up having to get reverse mortgages Private mortgages. All these things that are way more expensive than a traditional mortgage and you. Burn through equity or ultimately you have to rent rooms in your home rent out your basement or sell your house in a worst case Scenario. So which most seniors have 0 intention of doing So what we do instead is we go hey like you're heavily concentrated in real estate. It's pretty much the entirety of your net Worth. Instead of just renewing Why don't you book a call with this person and they're going to help you just Diversify. So maybe instead of renewing refinance. Take some of that equity out put in something that's liquid and help that pay for your retirement. So we're helping kind of reshape. How people think about their home because it should be part of their financial plan. Not.

32:48.96
mike_flywheel
Yeah, yeah, totally and probably not enough. People have paid attention to that over the years and I think some changing market conditions now are probably making people try to think about that but to your point cash flow and managing these so the financial advice piece is key so you refer that out.

32:49.55
Alex
The plan.

33:06.00
mike_flywheel
Um, if someone's a financial advisor and listening I guess they could reach out to perch and if there's a mutual value or is there you like only bring on so many over over time. How does that work. Okay.

33:12.70
Alex
So we can only bring on so many, but we're definitely not capped out yet. So yeah, when there's people if there's people that you want to like we're definitely looking for for for the right partners. So yeah, absolutely we're we're more than happy to to chat with people and then where you never know how a howled turn out. So yeah, we're definitely not closed off.

33:20.33
mike_flywheel
Yeah, yeah.

33:26.90
mike_flywheel
I Never know who's listening to my podcast right? So if there's a financial advisor list. They they might be Interested. There's a piece that we skipped over. Actually there's 2 Wow Man. There's so much I Want to talk about um, don't let me forget I Want to talk about this piece that you talked about about private lending because it feels like it's a whole other aspect of what perch does that I want to talk about. But. I think I missed over you talked something about the the actual real estate ah transaction element at the beginning when you were breaking out the chunks are you involved in any way or help support the the journey in any way around the real estate transaction right.

33:57.65
Alex
Yeah, so in 2 ways So when let's say because a lot of our clients will come to us from a realtor so we have ah a lot of really great Realtor partners and that's already said but we have clients that come to us and they don't have a realtor yet. So then we'll connect them with the realtor but really from there. It's kind of like they go into this this chasm where. You have your pre-approval and you go out into this rough ah rough buying Horizon I mean the market's not so bad for buyers right now. But I remember the yeah, you'd You'd be bruised going into the house hunting Market back a couple years ago where you're just getting how bid everybody's going over asking and there's just chaos. Um, so during that period of time how we make ourselves relevant is really in two ways. So one if there's in it like if people are coming up against barriers and their budget's not realistic then we go back to the drawing board of okay, what can we do to optimize your qualifying power further and help you out or 2 we have what was our house hunting Application. So. With the property Details. We're able to spit out an instant max bid price for essentially any property. Someone's looking at so this is really really useful for the client but also really useful for the realtor. Um, So if you're thinking about putting in an offer because the thing with pre-approvals or the dirty little secret of pre-approvals is they're.

35:00.57
mike_flywheel
H.

35:10.90
Alex
Not not only are they on mining but they're also a best estimate but the issue with the pre-approval is you know the credit. You know the income. You know the down payment but you have no idea what the property is so you could see a pre-approval for a $500000 condo in Toronto or a $500000 detached in in suby and both like. Both are $500000 but you probably qualify for four seventy on the condo in Toronto and maybe 5 10 or five twenty on the house in Sudbury. Why because one has massive condo fees one has different property tax rates but those things are all specific to each home. So traditionally what will happen is people will have a find a house that they like. And they send an email to their banker or their broker and then they go hey what about this one. What do I qualify for this one. So now. The issue is let's say it's a weekend or it's an evening. Um, especially if houses are going off the market in less than 3 days by the time you email your bank at six zero P M on a Friday like by Monday when you get an answer like that property is already gone. Um, so we built a tool where essentially the algorithm will just pick up the property details that you submit and spit out what that equates to so the Realtor doesn't can you know it's midnight on a Sunday whatever you can do it in real time you are the realtor.

36:20.10
mike_flywheel
That's amazing and so ah, if there's realtors listening realtors should equally get in touch with you is that like it sounds like it's kind of like a bottomless pool of partners that you can have because ideally their clients could use and benefit from you or what's that look like.

36:33.31
Alex
Yeah, so we we build reciprocal partnerships with realtors. So we do it a bit more territorially so we will try to sponsor people in different cities. So right now we have a lot of great Realtor partners. So a lot of the cities might already ah be up for grabs. But we're a big fan of competition. So.

36:37.31
mike_flywheel
Okay.

36:47.67
Alex
Somebody really thinks they can make a dent and and and outperform or drive more value. Well listen.

36:48.42
mike_flywheel
Yeah, yeah, and and either way they probably like Obviously there's a reciprocation on the partnership. But I think either way even if not realtors knowing about your tool sounds highly impressive like even if I'm not getting anything for sending my client to you I'm getting great service from my client.

36:59.67
Alex
Yeah, yeah.

37:07.46
mike_flywheel
And great advice for my client they can help So I think that's that value and hit out.

37:08.39
Alex
Yeah, so actually yeah so I'm glad you brought that up just to clarify. So we're selective of who we send clients to but essentially anybody can utilize our services if it's their clients Essentially so the the tools the insights but the biggest value that we drive for realtors is increasing the qualifying power of their buyer.

37:16.67
mike_flywheel
Yep.

37:26.48
mike_flywheel
Yep Yep! I love it. So can we talk about this like other um, other aspect I guess to Perch is it like a separate component the because one is like getting lending.

37:26.77
Alex
Ultimately we turn more of their leads into closed transactions which is what they ultimately are looking for.

37:43.60
mike_flywheel
This other one sounds like giving lending and maybe it's ah, an investment strategy as well for people in the private lending world. Yeah.

37:46.46
Alex
Yep. Yeah, so essentially so we have the brokerage which is one entity and then we have a a mortgage investment corporation which is that so it's a private mortgage lending Entity. So Essentially how it works is so they are separate entities where and the brokerage will come across deals that might be a good candidate for a private mortgage but the vast majority of deals of a traditional lending it just goes. We'll broker it to the bank. The monolines the credit unions or wherever it needs to go is just some deals will be private and then that might be a fit for our fund. We Also service as external brokers or and a limited list of external brokers for for the mortgage fund.

38:12.88
mike_flywheel
Yep.

38:23.53
Alex
Um, so really how that works is is kind of a twofold approach so a mortgage investment corporation raises funds from Retail or institutional capital will pay them dividends and then we lend it out as mortgages and then we collect the mortgage payments to pay the dividends so we essentially act as a lender in that case and.

38:40.42
Alex
Since it's private mortgages. It's kind of the way it goes is you have your a or your bank lending. You have your b or your alternative lending and then you have your private lending which is the most expensive bucket but it's usually meant to be a band-aid solution. So just to give you an idea of the difference like an a bank mortgage today would probably be you know, 5 to 6% a b or an alternative lender might be about 7 to 8% and then a private mortgage would probably be in like the 12 to 13% range. Um, so again with that kind of yes.

39:06.76
mike_flywheel
Like to the to the person paying the interest rate. Okay.

39:11.59
Alex
So that's what the borrowers paying on their interest rate. So again hence why it's not meant to be a long term solution. It's very hard to sustain yourself on a 12% interest rate. Yeah, typically we see a six month term at the most.

39:16.36
mike_flywheel
And is that like like for a bridge period like couple months a year what's sort of the length of terms. Okay, so to get you get you over? Okay and so.

39:28.81
Alex
Yeah, so so what we do on that end is so we find deals and we fund them but then the benefit is that it's a registered account so you know rsp tfsa etc and then right now we're yielding close to nine and a half percent so it's a really good strategy from a diversity standpoint because like it's a good asset to have like if you look historically, you'll see that. Mortgage investment fund returns are essentially a straight line because there's no stock market price volatility anything like that. It's really just conditional on you being funding good deals and not having people default because if people stop paying you can still get your money back. It's just a drawn out process to take ah a property through power of sale or foreclosure.

39:56.23
mike_flywheel
Yeah, yeah.

40:05.28
Alex
And then on the other side you have people where if you if you have people making their payments then in theory like you don't lose any money until the house has to get sold. So it's really, it's where it changes the dynamic is a lot of people view real estate investment as like I have to be the property manager. Um, and it's exhausting like you'll see all these articles now where people are like cash for keys you have to deal with bad tenants. You have to do ton of Ranos like it's not easy to get that you kind of yield like sure you can make fantastic returns but it's not for everyone. Um, so this is great because yeah, sorry, go ahead.

40:29.97
mike_flywheel
Yeah, so if I want to no, it's I Just say if I want to invest in this do I is it like hey you sign up you ship over like you E transfer purchase a bunch of money do I buy this in my stock portfolio like what's the minimum bar to participate in this.

40:45.38
Alex
Yeah, so yeah, our minimums 10000 and then essentially it's registered eligible. So if you have a wealth advisor and they have this on the shelf you can invest through them. Otherwise you can invest directly but the caveat here is that we have what's called an offering memorandum. So it's a private investment so you have to go through what's called an exempt market dealer.

40:48.80
mike_flywheel
Okay, okay.

41:03.84
Alex
So it's essentially an independent third party that'll screen it to make sure it's suitable for you and then they'll pass it on to us if they if it you know if they take the box there. Okay.

41:06.19
mike_flywheel
Yeah, got it so you can buy it in your rsp or tfsa brokered in this way but you could buy this as ah as an asset class.

41:17.31
Alex
Yeah, exactly so it's it's what called it. It fits in the bucket of alternative investments essentially so you've got your bonds your equities your alts. It's is all the rage nowadays. So private credit is is really something that's caught a lot of attention. And and for good reason it's a really good yield with a very risk adjusted return. So we're paying nine and a half percent that it doesn't hurt.

41:34.37
mike_flywheel
Got it and what what's sort of the average yield in that right now that's pretty good. That's pretty good. Is there a cap to what I can invest.

41:45.73
Alex
Yeah, yeah, there's no yeah I mean the the calf is essentially what you're limited to so so it'll be whatever your inherent cap is but but also it should just in general like we typically alts. Yeah, exactly so usually people are doing like 20% maybe 30% of their portfolio would be alternatives and we might just be 1 of that twenty thirty percent

41:48.70
mike_flywheel
Ah, yeah.

41:54.79
mike_flywheel
Diversify your risk too.

42:00.79
mike_flywheel
Um, yeah, yeah, totally makes sense. Cool. Well I don't understand why someone wouldn't ah you know be rushing right now to to purchase website which maybe we'll drop it now. We'll drop it at the end. But if you want to. Find out more sign up or start using Perch where where should they go and we'll put in the description too. But where should people go to find out more about perch.

42:21.10
Alex
Yeah, so on the mortgage side of things like you know, first time home buyers, existing homeowner etc. So it's my perch io so that's where they would go on the broker side and then for the investment piece. It's perch capital dot c.

42:35.15
mike_flywheel
Got it perch capital dotsier and myperchioverysimple. we'll get those in the description too. Alex I've learned a ton. Um, maybe just like to kind of close us out on all this amazing learning your first time entrepreneur. What. You know is some advice you've you've had along the way that you think others would value from.

42:53.42
Alex
Oh man, the amount of mistakes I've made in six years I think yeah, so so it's funny I'm everyone I started I always got so insulted when people were like oh we don't invest or partner with firsttime founders and I was like oh why like why? not now I'm like I totally get it because I had to redo everything like there's so many things I've been fasttrack. But. I think like so the first thing is I think people usually network within their own space. So coming out of banking what became very obvious to me is on the fintech side I knew a lot of the fin but not a lot of the tech. So then when it came down to actually building product like I'm like but the hell is a product manager. What's it like how many designers do I need what engineering stack should we build like I had no idea how to do any of those things. So.

43:22.12
mike_flywheel
M.

43:33.14
Alex
I had to proactively network get integrated into some of the like different circles of influence and it would have been so much easier if I just already knew those people to start. So I'd say it's great if you want to just stay in your industry and move up like ah because you know eventually you'll you'll know somebody at every every institution within your sector. If you ever want to branch out or do something on your own. You're gonna need people from different departments and different teams and different skill sets so proactively just find ways to network where it's not just always the same people that you're meeting with and like go find new circles of influence is definitely number 1 um number 2 is so getting good advice is really hard. Ah, like there's like a million thought leaders out there but there's very few that like have ah tangible things to really help you move so people are selfish. They're going to only help you if there's really kind of something in it for them. So I think early on I surrounded myself with a really good advisory board.

44:21.52
mike_flywheel

44:23.22
Alex
Where it's like you know it's sweat equity you're you don't have much cash. They don't need cash. They just they're they're interested in what you're doing so bring them on board but then leverage them strategically you won't have enough money when you're starting a business to pay all these people and have them on full time so like pick their brains 2 hours a month 5 hours a month. It's well worth your time and your and your dollars and then they can also open up opportunities. So I think when you start surrounding yourself with good people but bring them on like don't just look for essentially the the altruistic routes where there's not enough people out there. That'll do it that way and then network proactively. So.

44:54.47
mike_flywheel
I I think that's very valuable I think you know everyone gets advice and advice is everywhere and everyone have an opinion but your your point around Great advice is hard to get or nearly impossible to get for free or finding it. It'll take a lot longer and you don't have a lot of cash but be smart about building a. Formalized Advisory board where you're making these people vested in your success. They're smart. They're willing to give you know deliberate time a couple hours a month and whatnot in exchange for equity or options of some sort so they don't need the cash flow. But they do need something at the end of the day because they believe in you and you want to make sure that the advice you're getting as good as good as possible so day 0 or early to be very thoughtful in an advisory board and I think that's really good advice that I haven't heard yet on the podcast of setting up ah a structured advisory board. Not just a whole bunch of friends and tell you what you want to hear.

45:44.65
Alex
Yeah, because you know what it is is a lot of people talk about a side hustle right? So usually the common use case is someone's not making enough money in their full- time job and they have a side fus hustle to top up their income but I actually don't think that's the like the only use case the other use case I think for side hustles is you have people in very well paid jobs that feel.

45:48.78
mike_flywheel
Yeah, yeah.

46:04.20
Alex
Not trapped, but like like they want some of that entrepreneurial like they want to taste it but then they don't also want to jeopardize everything that they already have so like these are really smart people that have huge connections networks that they are are willing to open up. And they want that side hustle but it it can be equity. They want to make big bets and then they want to feel valuable. So yep.

46:20.77
mike_flywheel
And it's a long range bet too right? like they don't need the cash today but it doesn't mean they're not going to want to retire one day and then be like oh damn look all this work that I helped Percho with this is has paid off.

46:28.96
Alex
Hundred percent absolutely so it's like you're giving those people kind of a risk-f free way to get a taste for the startup environment to see if they want it. So it's like never underestimate how powerful or valuable that actually is because there was tons of people in very well-paid jobs that really want that opportunity right.

46:42.15
mike_flywheel
Brilliant brilliant I love it. Um Alex thank you so much for coming on the show today I'm sure we're going to have to do another one of these, especially when mortgage rates are going crazy if people are going to unhear updates. Thanks for joining again if if you've listened to the show. Everything will be in the show notes.

46:54.86
Alex
Yep, okay.

46:59.59
mike_flywheel
Um, but if you want to check them out myperch io Alex thank you so much for joining us this evening and looking forward to hearing the next guest on the next podcast but I definitely want to bring you back.

47:07.40
Alex
Awesome! Well thanks Mike Really appreciate your time.