Erwin  

Hello my fellow wealth hackers, happy summer to you all. And shout out to all those who are finding better deals out there today it was better than the deals that were available five six months ago. Even though I wasn’t very good social sciences I do find the market behaviours interesting. For example, duplexes east and west of the Greater Toronto Area where we service investor clients, the cash flow better today, even though interest rates are way higher. But anyways, our cash flow still better today than it is five six months ago, when duplexes would receive five to 15 offers sometimes 20. Today, they’re still selling, but it takes a week or two, and often a conditional offer will win. So how’s that possible? How can cashflow be better when interest rates have doubled, prices have fallen so much that mortgage payments and in turn cash on cash investments, cash on cash return has improved? So again, because the price has fallen so much your mortgage payments so much smaller? And yeah, you can cash flow a couple 100 bucks more today than you could live six months ago. Crazy. In the stock world. One of my favourite companies Costco or cheering I reliably spend hundreds of dollars each week. The stock is down considerably over the same period. Why? Profits are expected to decline because they like many other companies in their space like Walmart and Target. They purchased too much inventory and or some of that inventory have arrived late. For example, I tend to just perfectly I’m being sarcastic. But I wonder patio furniture two months ago, paid full price, nothing was on sale, even bought something off the showroom floor. They wouldn’t discount it one bit because it’s all they had. This past weekend, while I was reliably ordering our weekly hundreds of dollars of sacrifice to the Costco masters. I noticed Costco was offering huge rebates on patio furniture, patio furniture in mid June, which is peak patio furniture buying season is The Strange Days we live in. My point is that the pendulum is swinging in the Investor Buyers and consumers favour these days. Consumer favourite things really early gas prices have calmed down a bit already. I still think it’ll be elevated. But all the things that aren’t affected by Russia and Ukraine, while other stuff is getting cheaper. So again, as an amateur social scientists, it will be fascinating for myself to observe chain I personally raising capital, I’ve been mentioned that for quite some time, we’re still waiting for our refinance stuff to come through the bank made some errors on our paperwork. So the bank, notice that they actually valued our property, one of our properties and double double the appraised value. So that mistakes no good, so that’d be rectified. So we’re waiting for our correct paperwork to unlock some of our capital and our rental properties. I also had deliberately left cash on the sidelines and both my RRSP and TFSA accounts with the intention to stick it in the stock market after we’ve bought them hopefully in the next few months. 

Erwin  

And honestly, if you show while we’re talking about stock market bottoms, we have my stock my friend Derek Foster, who is successfully retired, and he retired a long time ago. 2004 was the last time you worked a job. And Derek is retired, tired. As in he’s enjoying his time off chilling, raising his eight. That’s right, eight kids. So it’s not like he has nothing to do. But my point is that he’s not pursuing any business ventures or creating any new trading programmes or anything like that. He’s chilling out. He’s truly the classic definition retired. myself as a wealth hacker, I have a natural interest in studying those who got rich, preferably in lazy ways, like Derek has done for almost two decades. He also has written about time six best selling books on the subject. Recently, he’s been navigating the stock crash quite masterfully, as at the time of recording, which was about two weeks ago, which doesn’t really help you. Anyways, the stock market was down at the time of recording 15% while their own portfolio was down overall portfolio was down 5%. Hence, he’s completely outperforming the market and likely outperforming pretty much every professional money manager out there. Is there any wonder why we hired Derek to help us teach stock hacker Academy? I think on a recent visit to the nation’s capital model while we’ve been invited Derek and his wife to lunch, and to record this podcast at our Airbnb, it’s great to catch up with Derek and more importantly learn how he’s investing in stocks these days. So that you listener and I may learn and hopefully create another passive income stream hopefully a really successful one. Just like Derek please enjoy the show. 

Erwin  

Hi Derek. What’s keeping you busy these days?

Derek  

Oh, the kids I guess I don’t know. You know nothing else basically.

Erwin  

How many kids? 

Derek  

Eight. 

Erwin  

Is it expensive to have eight kids. 

Derek  

Yeah

Erwin  

I have two. It’s pretty expensive. You have Four times as many as I do. 

Derek  

I mean, it can be expensive. And is the car expensive? It depends if you drive a BMW versus if you drive a Hyundai or whatever kind of thing. Yeah, I mean, of course it costs money to have kids and stuff. My kids do some activities. I guess there’s a bit of a cost like they we chose to send them to a private school so we spent a little bit of money there, but they’re not going to competitive hockey or anything crazy like that. So yeah, so it costs money I guess.

Erwin  

Hockey costs more than private school?

Derek  

I guess it depends on how much the hockey costs. Yeah, this is not a posh fancy private school. This is just Yeah. Okay. Yeah. So easy, really affordable, I guess.

Erwin  

Can I ask why private school over public? 

Derek  

We thought that the education will be better their peer group would be better? That kind of thing.

Erwin  

Yeah. Yeah. My wife and I talked about it. There’s none that are that close to us in our public schools only formula hawk. 

Derek  

Yeah, that’s actually we’re sorry, I’ll cut it in half. But we’re, we live in our neighbourhood. There’s a there’s an elementary school within 10 minute walk or whatever. And there’s a high school within a 10 minute walk the opposite direction. So it’s really well situated for that. But yeah, we just felt that the education was better. their peer group was better. They were getting more attention, whatever. So it was it was a hard hurdle to jump. But that’s what we did. Yeah.

Erwin  

And you just teach them how to be rich?

Derek  

Yeah, but what about everything else? Right. There’s so many things. I don’t.

Erwin  

 What else is important?

Derek  

I don’t know. Let’s let’s I don’t know. Yeah.

Erwin  

You’re off the rails already. Oh, how much Korean Can you speak? How much? Because he caught me off guard when we were eating dinner that one time.

Derek  

I was just trying to impress you because you don’t know Korean. Right. So I say a few words. I could be saying random words that would impress you. I guess I would say I guess I can speak enough Korean to get into trouble and not enough Korean to get out of trouble. Is that fair?

Erwin  

So that you’re comfortable? completely comfortable at a restaurant then?

Derek  

Restaurant? Yeah, because it’s fairly limited. I can’t carry on a conversation. I mean, my wife’s Korean. So I can speak to my stepdad because he understands my Korean, which nobody else really understands. Yeah, I mean, if there’s like a Korean drama on, I’ll understand 10 or 20% of what they’re going. And because you get context to get pictures, whatever, that kind of thing. I would not call myself anywhere close to being fluent. But yeah, I can converse with my wife’s parents, especially her dad, but no, not not that good. No.

Erwin  

And then when did you start getting serious on investing?

Derek  

Ah, that’s a good question. I think in my teenage years, oh, sorry, serious. I mean, I started investing, I didn’t do it. Well, when I was 18, or 19, against what I do, I bought, okay, so I was working at RadioShack. At the time, it’s now called the source probably a dying business. But by this is going back to the early 90s. So we’re really going back in time here.

Erwin  

Does RadioShack even have physical locations anymore in the states, companies?

Derek  

They are separate companies. So RadioShack in the States was called Tandy, and then RadioShack in Canada was part of inter 10, which then stood for international Tandy Corporation. They were separate companies, I don’t know the history of when they split off or that kind of thing. But it was they started working there. They had a share purchase plan for employees, I started buying some shares. And, you know, this is what I was, like 18 or 19, I thought, Oh, this is a good company, I mean, seems to be busy. I didn’t know anything about investing. So I bought but my life savings at the time, I think I’d saved up $5,000. And I bought 200 shares of inner 10 or RadioShack stock here in Canada. And it was 25 $24 a share. And the year before it started working, it was $60 a share. So I figured I was getting a good deal. So that was my basically first stock investment.

Erwin  

So looking back, what kind of diligence would you have done instead? Compared to what you did at the time? 

Derek  

Well, I didn’t do any diligence. So I think doing some is better than none. I was just working there. And I thought, Oh, they make money. You know, I mean, I see customers coming in and stuff. So I just bought shares, but I had no idea of what they were doing. I mean, by the way, I bought for $24. About a year later, they went down to 12. And so I bought more and then they went down to six at which time I sold them. So that was my first foray into the stock market. But yeah, doing some research and stuff, having an idea of the company you’re dealing with is much more beneficial than not having a clue what you’re doing. So at that time, it didn’t have a clue,

Erwin  

Right! And then for for listeners benefit your six time best selling author, you have what I would think most of our listeners are looking for all 17 listeners is you have a whole bunch of freedom in your life.

Derek  

Yeah, I mean, the kids curtail that to a degree but yes, generally speaking, yeah.

Erwin  

You could argue that’s a choice. 

Derek  

Yeah, sure. Yeah. 

Erwin  

You haven’t had a boss for over 20 years. 

Derek  

As long as my wife doesn’t count then Yeah, we’re good. But yeah, I guess the last time I worked a regular job would have been 2004. I was teaching at a university in Korea.

Erwin  

But you loved that job. Didn’t you?

Derek  

Loved it. Yeah, I liked the job. Yeah, I was teaching English. I can speak English so I can teach it right. So yeah. Yeah. No, that was a good job. That was that was a lot of fun. That was good for that time in my life. It’s quite exciting. Actually. It was high octane kind of lifestyle. I would go out with my students. And yeah, it was it was a lot of fun. But yeah, that was that was my last real job. I guess.

Erwin  

Wish I knew you back then. Actually, when was the first year did you come up with your first book?

Derek  

2004. After I left Korea, we came back to Canada. And which one was that? Stop working? Here’s how you can love this book. Yeah, there you go. Yeah, that was my first book back in 2004. dog eared it up. Here we go. Hey, you read it. But yeah, that was that was my first book. And it was just basically talking about how I was able to retire at the age of 34.

Erwin  

This is a phenomenal book. Thank you. I can’t think of someone coming into high school who shouldn’t read this. Like I think this is

Derek  

A basic foundational book. Yeah, it’s very, very simple. Um, I remember when I was when I was writing it, you know, some people get like professional business editor to check the book or something. And I at the time, I asked my mom, I said, Hey, I’m writing this book. Can you read it? So it might work for you to get and she’s like, what’s the dividend? ended like, wow. And then no. But then suddenly I realised like, hey, and that’s the key because prior to that book, a book came out by the name of The Wealthy Barber, I’m not sure if you’ve heard that I’m going way back in time. But he made it very simple. And when my mom asked, What’s a dividend that kind of clicked in my mind, it’s like, okay, I want to, I want to really simplify this. So I went back and rewrote a lot of it and made it much simpler and stuff. And I think I think that was the key because it reads very easily. I don’t think there’s a lot of jargon or that kind of thing.

Erwin  

And we’re jumping all over the place. But you mentioned dividend, what’s a dividend? Why is it important that you invest in companies that pay dividends?

Derek  

Yeah, no, that’s a fair question. With investing in the stock market a lot. There’s, there’s all these little phrases, people say like buy low, sell high, and that kind of thing. And the whole premise was basically, I mean, the analogy I give, I think, in the book is, you know, you have you have some money saved up, let’s call it the seeds. And the typical investor, the way they think, is they want to plant the seeds, and they want to grow a tree. But as soon as the tree grows, they want to chop it down and sell it off for firewood, make a quick gain and get out. Whereas dividend Based Investing, yeah, you’re still planting the seeds, you’re growing a tree, but you’re not cutting it down, what you’re doing is you’re coming along, and you’re harvesting the fruit, because then you can come next year and harvest the fruit again, and again and again. So a dividend is basically when you have a company, the ultimate goal of a company is to make a profit. And if they do make a profit, the management has to determine what they’re going to do with that profit. Now, some companies will take that and reinvest it to grow. And that’s, that’s reasonable. Some companies will take a portion to grow and return a portion to shareholders in the form of dividends. In other words, they mail you a check, they send you a check, and that’s it. 

Erwin  

You basically built a career. Is that is that the right term? You built the career collecting dividends?

Derek  

Yeah, like I mean, I started investing. As I said, that first foray, I’ll go back here, because you’re jumping around, I’ll jump around, too. So so after investing in RadioShack, I think I bought a junior mining stock where I lost 90% of my money or something. And then I said, Okay, I’m never investing in stocks, again, stocks are simply absolutely too risky. So again, this is the early 90s. So ETFs weren’t really common, or I didn’t even know they existed, but it was they probably existed, but they were in their infancy. So I looked at a mutual fund, there was this mutual fund that a that I was interested in, called the Templeton Growth Fund. And it started in 1954, their advertising material, they had this big chart, they said, had you invested $10,000, you know, in this fund in 1954, it would now be worth and this is going back to the early 90s, something like $2 million, or two and a half million, whatever it was at the time. So I thought, well, that that makes sense. I don’t know about investing, but I’m going to invest in these mutual funds. So I started buying that I bought mutual funds for a few years. And then I was still interested stocks, I read a few a number of books about stocks, I guess. But one thing book by Peter Lynch really grabbed my attention. And most of it was too hard for me to follow, because he talks about finding the next hot stock and the next, you know, up and coming thing, but I’m dealing with a small intellectual horsepower engine type thing, I don’t have the ability to determine what the future is going to hold. But one line in that book really drove it home for me. And he said you could do a heck of a lot worse than simply investing in the stocks and the Moody’s Handbook of high dividend achievers. And so again, this back in the 90s, but there was actually a book that they published every year called The Moody’s Handbook of high demand Cheevers. And I went to my, well, my local library didn’t have it, I had to go to the downtown library. But I was flipping through the book. And it was a list of companies that have managed to increase their dividends for 10 consecutive years. So you know, they started at this amount, and every year, you got a pay raise. And the light bulb just went off. I said, this is what I want to do, you know, I started buying these companies. And, you know, if I bought 100 shares of ABC Company and paid $1 a share, I’d make $100 a year, and then it raised its dividend to $1.10. You know, I’d make $110 and 120 130. And it just kept going up. So that’s basically what I did. I started investing in that.

Erwin  

And do you still hold a lot of these things? 

Derek  

Yeah, I did for a long time.

Erwin  

We’re recording we’re joking around, because in your book, you detail a lot of the interviews in newspapers and podcasts and just speaking to you and reading your books. Yeah. You mentioned a lot about just buying and holding forever.

Derek  

Yes, yes. Yes, you sold. That’s fair. Let’s let’s back up the truck a bit here, though. So when you’re looking for these companies, you’re looking for something that’s simple enough for a six year old, illustrate with a crayon, you want to keep it very, very simple. So the example I think I gave my book, I think I dedicate a whole chapter to it would have been Colgate Colgate toothpaste. I mean, you know, we all brush our teeth, we hope every day, right? It doesn’t take a brain surgeon to figure out what Colgate does. And brush your teeth. It prevents you from getting cavities that might freshen your breath, whatever. And the interesting thing for me and I’m guessing are boring guys, you know, if I if I go to my local supermarket or Walmart or whatever, and I look at the toothpaste style, you know, there’s two major dominant brands and it’s Colgate and crest. And when I was a kid, it was Colgate and crest my dad was a kid it was Colgate and crest it’s been around for over 100 years. Right? And it’s simple. It doesn’t change. It’s just you you wake up in the morning, you brush your teeth, whatever, you know, if the economy goes bad if something else happens, people keep brushing their teeth, and that’s a very reliable, you know, dividend paying company. So for many years yeah, all I did was was buy these companies when there was a some sort of short term issue and it could be anything I mean, I’m thinking back to the if I’m going way back in time here but back in the late 80s. Coca Cola developed new coke because they were losing market share to Pepsi and that was that was an absolute fiasco and you know, Coke shares went down but it was a good opportunity to buy Shares cheaply, you know, whatever. So I bought these kinds of very, very idiot proof, simple stocks, and I, you know, bought them over time and my dividend income kept going up. And then at a certain point in time, I was able to retire at the age of 34. So I did that. But yeah, right now, so I’ve sold that I had a lot of those stocks well over a decade, I don’t know years and years and years and just sit there and collected evidence do nothing else. Very, very, it’s very simple to do. But in the last couple of years, COVID has sort of walked out the system a little bit, too. But stock valuations are incredibly high. In my opinion, there’s a lot of speculation in the market. So yeah, so I’ve taken profits on a lot of them. Now, part of this was the Canadian political system, too, because like we had balanced budgets, five, six years ago, and then the Liberal government has increased the deficit. And then during COVID went up, huge amount. I mean, I think the total national debt has doubled in the last few years. So the economy has been mismanaged, or that public finances have been mismanaged, whatever my feeling, rightly or wrongly, was that at some point in time, and I still feel this way that taxes would have to go up. And now we’re getting into complicated taxation issues. But basically, capital gains are taxed at a 50% inclusion rate, they call it in other words, half of your gains are taxed. But back in the day back in the 90s, there was taxed at 75%, my feeling is at some point in time, the taxes will have to come up. And that’s a nice juicy target for the governments because you’re taxing the rich, you know, making everybody pay their fair share. So I thought I’d beat them to the punch and sell take profits now at a lower tax rate when I feel it’s going to go up in the future. That’s one point. And number two, stock market values were kind of at nosebleed levels. I mean, it was, you know, looking at a variety of metrics, whether it’s a cape Shiller metric, or whether it’s the total market capitalization of GDP, whatever valuations are very, very high. So will it be a crash or not? Who knows? But if you hold them for the next decade, your total returns are going to be relatively low? Because you’re starting at a very high valuation level. So yes, so I took some profits to answer your question. Yes.

Erwin  

And then you’ve been pretty public about it that you’re you’re very heavily cash these days. 

Derek  

Yeah, I have a lot of cash. I guess I was a little bit early on that. So here we are, what we’re June of 2022. I started selling a lot of shares back in February of 2021. So a little over a year ago. I bought some stocks too, by the way, but yes, I rotate your rotated some to more defensive stocks. Yes. Triggering the capital gains paying my taxes. Hopefully. Well, I don’t know if I hope so. But lower rate if I think taxes are gonna go up, but yeah, I have carried a fair amount of cash. And I mean, it’s certainly well this year because the markets have been a little bit rocky, you know, since since January, I guess of this year. You know, they I don’t I don’t follow it that closely. But I think the NASDAQ’s down whatever, 20 25%, nearly 30% something and the s&p is down. 20%. And, you know, so

Erwin  

That’s something on Twitter that basically the retail investors money is out of the market now that.

Derek  

Okay, I don’t I don’t know about that. I show it to you later. I shouldn’t trust you. But anyways, yeah. So the markets have been down. So having a lot of cash is good. I mean, my my portfolio if it was an index, it’s off about 5%. From the highs. So it served me well. But yeah, valuations seem high. And there also seems to be this. And

Erwin  

I tell this to people all the time, like you call yourself the investor, you’re way brighter. And I always tell people do not discount Eric Foster. Fresh off the fact that you’re only down 10% When the overall market is down. So not not TSX? Because you’re more you have much more international exposure. Yeah. But the point I’m trying to get to is s&p is off at least 15% right now.

Derek  

Yeah, I think it’s in that Yeah, cuz it’s come up a little I don’t know the exact amounts or whatever. But I’m not completely in cash. No, you’re down

Erwin  

5% in view, including your cash. Yeah, that’s the whole portfolios. Yeah. So obviously, you are significantly better than market share.

Derek  

That’s not a big deal. Yeah, buffers it somewhat whatever. And, you know, the holdings are more defensive in nature and stuff. But we’ll see. I mean, I could be dead wrong. Who knows? Right. But valuations seems stretched. And yeah, that’s what

Erwin  

I know. You say you could be dead wrong. When you said you mentioned decently a while back who you’re saying how to you it wasn’t the potential for the upside. And the amount of upside was not worth the amount of downside risk that you felt was coming? Yeah. Back in December?

Derek  

I don’t remember that specific quote. But yeah. You know, yeah, I mean, it’s just right now valuations are high. So how do you get the additional growth? You know, what I mean? How do you, you could buy a company and its future is very bright, and it ends up, you know, incorporated in that price, the projecting that earnings grow 40% a year over the next decade, which would be phenomenal, and you buy the shares, and earnings only grow at 25% a year. And let me be clear, 25% of your earnings growth is absolutely off the charts phenomenal because it fell short of expectations, you as an investor could actually lose money on that investment, even though the underlying company has done quite well. And so the market seen price for perfection. And the other thing I was gonna say is interwoven in that there’s this element of craziness. I feel what I mean is, I mean, Tesla, earlier this year had a market cap over 1 trillion with a T dollars. That doesn’t make sense in my mind. I mean, Tesla’s are cool and all that but I don’t know if it’s where worth a trillion dollars? Maybe I’m wrong. That coin I think it’s a little bit crazy. I could be wrong. Nf T’s are absolutely off the wall crazy. You know, you look at companies

Erwin  

That can’t sell your body and you show you how cool they are. Finding one for 60 grand.

Derek  

Oh, there we go. Good deal. No, I was gonna say like Gamestop is a company and dying company and that, you know, GameStop and AMC. And what else? I mean, hertz I think was already bankrupt and the price spiked up. Anyways, the point is, there’s also and that’s facts, like the special purpose acquisition company. I mean, all of these things out in the market is just frothy. It’s an element of craziness and stuff. And it just, I’d rather be defensive right now. I’d rather turtle I guess.

Erwin  

 It’s kind of like a sign of the End of Times. 

Derek  

Well, I don’t know, end of times, but it’s it’s, it’s definitely I mean, Buffett Buffett says it well, and everybody requotes it but you know, it’s be fearful when others are greedy, greedy when others are fearful. And, you know, when I look at the markets, I think there’s more greed and fear right now, I still do. You know, valuations are high. So so, you know, I could be wrong. I’m not a market prognosticator or anything, but I’m quite content to have a healthy dose of cash and then a lot of defensive holdings.

Erwin  

As an exercise to see how much fear there is in the market. I go check like the CVC or CTV see if there’s any talk in the first page or two of the stock market? Sure. Still nothing? Yeah, no, I don’t know. I don’t think so. Like more great way more great in the real estate market.

Derek  

Yeah, I mean, the thing is to Irwin, like I’ve lived through the 2008 2009 financial crisis that was that was quite drastic. And then in the 2000, stock market crash as well, but I wasn’t really in tech stocks. So that wasn’t as painful as 2008 2009. I’ve seen it before, goes through progression. But but you know, I could be wrong. I don’t know. I’m just happy to be defensive right now.

Erwin  

So defensive and tech stocks, those words go together.

Derek  

Yeah, I’m not smart enough to understand tech stocks. I’ve been looking though, because some of that some stocks are really quite beaten up. And don’t you look and I mean.

Erwin  

Okay, just for the listeners benefit. Again, don’t listen to Derek is being modest. I because when we talked, we’ve talked about tech stocks, often when we’re not recording, and we keep breaking this even conversation today, we keep bringing it up. Do they have a moat? Do they vote? Yeah. Like, I’ll take an example like a company. Everybody knows zoom. Yeah. All right. Does zoom do anything actually unique? Like, for example, Microsoft Teams, I have all these friends who use Microsoft Teams like sounds very similar. Okay. Like, I can use FaceTime on my phone. Yeah. Google has its own built in video chat feature. Yeah. On the desktop. A seasonal all these technology companies don’t have modes. Yeah. So you’re dealing there’s no, there’s no way for them to defend their business. 

Derek  

Yeah, yeah. So I’m the wrong guy to talk to and probably, you know, probably go on the street at people that have 100 know more than me about about tech stocks. To be fair, you know, I don’t I don’t even own a cell phone. Right. So I’m pretty 1980s. As far as that you have that level of freedom. It’s kind of doesn’t matter. Yeah. So so yeah. So I don’t know about that. I mean, I guess some of them have first mover advantage, like, if you’re the first one to do zoom, or whatever, you know, then we’re in RvB. You know, it’s your first mover here. Sure. But then again, I’m going to date myself, but there was a company called Netscape that had first mover advantage. And Microsoft ate their lunch. So I don’t know, you know, I just don’t know. So I’ve been, I’ve been looking at the tech space, because there’s a lot of interesting stocks, and some of them like Netflix. I don’t think Netflix has a moat. I think Netflix is an online blockbuster. And I know that’s a crummy thing to say, but they don’t own a lot of their content. Right. And with so many other streaming companies coming online with their own content, they’re not gonna licence it to Netflix anymore, and the offerings and Netflix that seems to have shrunk over the last few years like what you were able to get, you know, has reduced.

Erwin  

There’s not as many blockbuster movies on Netflix.

Derek  

I don’t think so. But it was their stock is down. What is it? 80% 70% I don’t know exactly. It’s done a lot. But I don’t think there’s a moat there. So I’m not interested in buying it pals down a lot. That’s an interesting one. But again, I’m not sure that there’s a month Shopify Shopify is down 80% Do they have a moat and they’re really cool company in their auto base too. But maybe they have a moat I just don’t know. I wish I was smarter. I don’t know I can’t you know, so I’ll err on the side of caution with most of those Amazon looks intriguing. And I think they have a moat because of fulfilment to replicate that model would be very, very hard. I’m sure there’s ones that are there. I’m just not smart enough. I don’t know but it’s beginning to get interesting in the tech space. But yeah.

Erwin  

As a real estate show and speaking to real estate investors, I find generally they’re extremely defensive investors. Okay, for some reason I find there’s a whole bunch of people who go into stocks and this whole vert like a whole other category investing that’s not real estate and this ticket enormous amounts of risk and I saw myself too I have a bit of weeds dog I have some Chinese stocks I have some tech stocks is so so far from my real estate philosophy and investing okay all right, jump to the casino. It almost is it’s it’s definitely in between falls in between that say for sure. Nothing’s gotten to zero yet. Anyways, my point was that I don’t think I’ve mentioned this on the podcast is I mentioned to you at lunch and told us to couple people and we’re talking about tech stocks and zoom or Pay Pal like square. And then I asked the question, okay named three tech stocks you think have a chance of ruling the world. And those names usually are Apple, Google, Amazon, Microsoft. Yeah, I’m like, Okay, why don’t you start? They’re trying to pick one of these crazy ones. 

Derek  

Yeah, yeah. I guess people are looking for 100 bag or something. And sometimes it works. But I think the difference to Irwin is so your real estate investing is more of your core like your family eats based on your how your real estate does what you’re

Erwin  

eating. holdings.

Derek  

Yeah, so the only real estate I own is I own the house I live in, right. So I think I have to sign that treat my portfolio like an 80 year old widow, I’m going to be very defensive. I don’t want to lose what I have. Because that’s the only thing I can come up with. Does that does that make sense? Right? Yeah.

Erwin  

And then you mentioned like the movies, the movies book of growing dividend.

Derek  

That was back in the day. Now there’s a thing if you can go online, Google dividend aristocrats it’ll actually it’s a good list of companies that have increased their dividend for 25 consecutive years or more. But yeah, same same. Going back before internet days. But yeah. 

Erwin  

You currently hold any of those dividend aristocrats? That’s a really good question. Because I’m sure the point of this podcast is to learn Yeah, learn what you did. Yeah. What you got? Yeah. And now how do we repeat it today? 

Derek  

Yeah. So about a year ago, as I mentioned, so I shifted out of some of the valuations were getting really, really high. I mean, I think the example I gave at one of our talks a while ago, I just brought up Coca Cola, okay, Coca Cola back in the 90s. And late 90s, had a halo around it, because Warren Buffett was a big shareholder. And every thought, okay, Warren Buffett smart he is, you know, so Coca Cola is a great company and whatnot, but it traded at some ridiculous P E ratio of like, 50, or something, oh, or whatever, I’m just pulling from my mind, it was very, very high. And the thing is, I mean, Cokes, a great business, and it’ll continue to be a great business. And so there’s not a lot of growth there. I mean, there’s some and they’ll grow in Asia, and they’ll grow in some emerging markets and whatnot, and that I get all that, but they’re not going to grow at 20% a year, they’re gonna grow at six or 8%. You know, they’re gonna plod along, you know, a little bit of volume growth, a little bit of pricing growth, whatever, there’s no way they’re worth the price earnings ratio of 50. Sony was had you bought it in 1998, you know, at the P E ratio of 50. And you held it until now, your total like it’s gone up like, I don’t know, 20% in 20 years or something like you would have gained 1% a year. And the dividend was abysmally low at that time, because evaluation was so high. So had you bought it then and held it till today, your average return would have been something like 2.3%. Here, I’m just pulling out I don’t remember this. I don’t have the numbers in front of you. But something like that, like you would have made 2% a year you would have been better off putting it in a savings account and you know, at the time, right? So the price you paid does matter. So the dividend aristocrats in general, the prices have crept up because people want that and whatnot. So when I was selling some buy, like I sold some dividends, I sold Johnson and Johnson, I sold PepsiCo, I sold, you know, Colgate I sold Procter and Gamble, because at the time, I felt valuations were too high. And I was looking for similar type valuations. And I found some, interestingly enough in the UK market, and there was a couple of interesting things about that. Okay, so first of all, the UK market when I was buying about a year ago, the price of the general market was roughly similar to the price that had been in 1999. In other words, the market hadn’t really gone up now it had gone up, but then it come back down, and it had come back down mostly because of Brexit. And everybody’s worried about Brexit in the UK, you know, splitting off from, you know, from from the European Union. But there’s some interesting companies in the UK. Now the UK as far as global, the GDP ranking, they’re probably I don’t know, fifth or sixth biggest economy in the world. They’re not super large. And even within Europe, like Germany’s economy is much bigger than the UK. But the UK has this unique position where they ruled the world for 100 or 150 years. And so they have some interesting global companies. And so you combine world leading companies with cheap valuations. And the other kicker was because the UK has become a financial centre, there’s no dividend withholding tax. So if you buy US stocks, there’s usually a 30% dividend withholding tax, and there’s a wh then form you can fill out like if you have a brokerage account, they will automatically do it for you. So there’s still a 15% withholding tax, but UK stocks have zero withholding tax if nothing, so it’s also tax advantaged. So you get like three check marks in a row. And so it was a it was a good ground to look. And so for example, I bought some shares in Unilever. Unilever is very similar to Colgate or Procter and Gamble or whatever, you know, it’s a global in nature. It’s you know, a lot of the brands use from Unilever, if you’ve ever used a Q tip, if you ever use Vaseline if you’ve ever used x body deodorant, whatever, they have all sorts of brands, you know, Ben and Jerry’s ice cream male in that and Bryce is on bike lock. So but yeah,

Erwin  

Sorry. 

Derek  

That’s okay. Yeah, 

Erwin  

That’s a Dove soap? 

Derek  

Yeah, Dove soap, whatever, anyways, you get the idea. They haven’t, you know, they’re a global behemoth, reasonably valued, you know. So that would be there’ll be a 4% dividend, whatever that would be an example things that are more disagreeable that people like I bought a lot of shares in British American Tobacco. Why? Because it was so cheap. It was cheap because everybody knows smoking rates are going down every year. They declined two to 3% a year which is great. Great for breast health. In addition to that, a few years ago, British American Tobacco bought Reynolds America, Reynolds America on some brands, the United States, one of the big ones being Newport. Newport is the large in fact, Newport is gaining market share every year, but it’s some it’s the largest menthol cigarette in the US. And when Joe Biden won the presidency, they were talking about banning menthol cigarettes now, will that happen? I don’t know. Maybe, maybe not. But the price went down quite a bit. So you could pick those shares up at a price earnings ratio of I don’t remember eight, maybe, and a dividend yield of 8%. That’s pretty lucrative. Now you got to say, okay, are they about to go bankrupt? No, I don’t think so. They’re not going to outlaw smoking. And they’re even moving to the lower risk categories, like the non combustible tobacco products, whatever. Very interesting company. Now, the other interesting thing about that space in the US and some other markets is they’ve banned advertising, you are not allowed to advertise a product. So what does that do? Well, that does two things. First of all, it solidifies your position in the market, no one can come take your market away, because they’re prohibited from advertising as well. That’s number one. And number two, there’s no, you know, if one company advertised, the other company has to advertise to in order to keep the market share. But if the government passed a law saying none of you are allowed to advertise, well, suddenly, all that extra money falls to the bottom line. It’s an incredibly profitable business. And the interesting thing is volume declines, you know, two to 3% a year, but prices increase, you know, eight to 10% a year.

Erwin  

Sorry, their revenue volume or strong stock volume. 

Derek  

Sorry, I’m talking about actual number of products sold, sorry, the physical product, right, the number of cigarettes consumed or tobacco products consumed every year revenues are the revenues go up because they’re able to jack up their prices, you see, because prices are rise every year with them. So you got to think this through, okay, so there’s no competition. Well, there’s only there’s an oligopoly, right? There’s a few new, there’s no new entrants, no new entrants, everybody’s rational in their pricing. And think about it, too. There’s no capital costs, because if your volume is declining, you don’t have to build new factories, whatever, right? Like in a growth, like a Tesla type company, if they’re going to grow, they’re going to have to build more factories and stuff. So capital expenditure is going to suck up a lot of the money with a tobacco company, they’re not building any new factories, so all of it falls to the bottom line is very profitable. So I’m not saying go buy bridge, but I bought it, you know, I bought it as a year ago, whatever, 3940 bucks a share, and it’s plotted along, I think it’s at 4344 $45. So, you know, it’s not gonna make you rich, but it’s a nice liquid of 8% dividend, which is pretty good these days, you know, and then what is the savings account paid? 1%? Half one, I don’t know, whatever it you know.

Erwin  

Well, I’ll compare a percent to for example, I know a lot people private lend. Okay. All right. The private and I’ve said for years, I don’t think it’s the market to be private lending. Okay. Just me personally, because I’ve worried about days like today. Okay. Yeah. When the markets come down. Okay. So 8% Yeah, it doesn’t make you rich. But that’s pretty nice. Cash flow.

Derek  

As long as you can rely on it. Yeah. And it should grow over time, too. I mean, that was the interesting thing is I had shares. I’m going from memory here, but in Pepsi, right. And the projected growth of Pepsi and their earnings was between six and 8% a year they expect their earnings to grow over time, which kind of makes sense. British American Tobacco same 68% here, but Pepsi’s P E ratio was like 2829, British American Tobacco was eight. So you know, 70%, cheaper, you know, with with dividend, that’s three times as much. Now there’s an element of risk there. But good value. Anyways, you only bought it a year ago, but the stocks actually appreciated for a little bit. It’s appreciated a little bit 10% or 8%, or whatever. Yeah, I don’t care about that. The dividends pretty good.

Erwin  

And then I remember I remember when we started talking about sorry, you came in. You were a guest speaker at one of our events. Zoom was new to everybody. So I don’t remember the camera working. 

Derek  

That’s probably me. I’m an idiot. But anyway,

Erwin  

For the time was perfect. And you handed us a whole bunch of great stock tips. And I was I was writing them off to so I don’t leave people hanging. You talked about you’ve mentioned Disney. You mentioned southern core. Okay. Yeah. In Berkshire. You mentioned GE, who was crushed hard. Anyways, all 10 picks you gave give you five American five Canadian. They did phenomenally.

Derek  

Yeah, that in fairness, the market did well in that time period. So I know it takes off too. Yeah. I mean, Suncor is interesting. I mean, I sold Suncor and I bought BP in England. And also shell I bought those two just because they’re more global in nature.

Erwin  

Actually. Um, but there’s there too. They change your name, beyond petroleum.

Derek  

or whatever. But anyways, yeah, marketing thing.

Erwin  

We’re borrowing probably on petroleum. 

Derek  

It’s kind of but yeah, there was a risk in the oil sands here with I think the current government in Canada is kind of against oil in general. And so I just thought that there was a certain risk element to that. So I bought again, BP and Shell, which is kind of interesting, because there’s two British companies BP and Shell shell was a joint venture between England and the Netherlands, but now it’s based only in England. But anyhow, that’s an interesting thing, because the or the UK is only like the fifth or sixth, I don’t know, biggest economy in the world, and that they have to have the super majors. And why is that because 100 years ago, Britain was very impressed. And so that’s where they are. But they’re but they’re global in nature. They’re not necessarily British companies.

Erwin  

But you’re seeing the stock still get whacked just because of Brexit, even though there.

Derek  

Oh those stocks are whack because oil was trading negative for a day back in 2020. Right. So oil…

Erwin  

 That’s when you’re picking it up? 

Derek  

No, I didn’t pick it up that cheap. I’m not that smart. But But even still, the price was relatively cheap. So yeah, I’ve sold those now. But I mean, I bought them. These are fairly big companies. And I mean, so you’re able to buy them. And then within a year, I mean, I think shell went up about 40% and plus a dividend. And BP was last because it got hit a bit, but maybe 20 25%, whatever. So good, good returns. Everybody’s all gone home oil now. So it’s time for me to move on. As far as that goes. Yeah.

Erwin  

You just sold news to convert into cash and rotate. 

Derek  

Those ones did I know I think I’ve raised my cash position a little bit. Yeah, I think two is Disney. Sorry. I’m just gonna go You mentioned Disney. And the reason Disney I bought in the shadow of COVID. And because their theme parks were closed, they were losing money. It was all crickets right. I thought the market overreacted. I didn’t figure COVID was going to be forever. And they have really cool brands. So I bought it. And I was just lucky because Disney plus came out around that time and it just exploded. So the stock went up like 100% and the year whatever it was, but then I’m like, Okay, now there’s too much optimism built in. So I sold it. I was lucky with that, because it’s the price has come off a little bit the last few months, but

Erwin  

109 Now okay, I don’t remember what it was. But anyways, yeah. And there is something that this is something that impresses me about she was you’ve done quite well in your profit taking.

Derek  

And that’s not normal. For me. That’s recent. To be fair, no.

Erwin  

You mentioned that the news was overwhelmingly positive news on Disney. Like, how did you gauge that?

Derek  

Just everybody was oh, Disney plus is growing so fast. Like the market gets euphoric about things. And it’s time to at least take some of your chips off the table. The valuations get high. I don’t know. Like with oil.

Erwin  

Because Disney got to like 180.

Derek  

I think yeah, I think it was somewhere around there. Yeah, I don’t remember I’d have to go back. I thought I bought the 90 somewhere. I don’t think I sold as high as 180. But maybe once is I don’t remember exactly. Now. But yeah. Yeah, that was that was lucky. I don’t know. It’s just when the markets in general get euphoric. Or everybody’s all gung ho about something. It’s time to move on, or at least partially move on. Take some chips off the table, right.

Erwin  

Yeah, sure. So low lows.

Derek  

But that hasn’t started. But that hasn’t been me for years and years. I just buy bought and hold. It’s just because markets are crazy right now. It seems to me, I could be wrong. But it seems valuations are high. Everybody’s euphoric. Everybody in their dog has made money in the markets. And it’s the place to be and it’s, you know, there’s the old story. I think it was one of the Kennedy clan or something, you know, he said all like this back in the 1920s. He said, Oh, I sold all my stocks when the shoeshine boys started giving stock tips. The point is, is a trickle down, and everybody was doing it. And it was time for him to get out. And he saved. I’m not saying we’re gonna have a 1929. But I just rather be defensive right now.

Erwin  

It’s funny, because everyone talks about real estate for I don’t know how long last decade?

Derek  

Yes, yes, yes, yes. Yeah, maybe? Yeah. Maybe.

Erwin  

We mentioned you mentioned over lunch. Do you think we might be into a recession in a year or two?

Derek  

I don’t know. But I think so. I mean, usually When oil gets over, what is it? $118 a barrel or whatever the price is now? 215? At the pumps? Yeah, it’s expensive at the pumps, right? 

Erwin  

So we Fx was the cheaper here is when you know what it is here?

Derek  

I don’t know where it is where you are. I know what it is here because I bought it. I don’t really think of it. That is where you guys are. But that cuts into people’s spending. Like okay, so some people Yeah, I can, I can weather it. I grumble about it. And I guess, you know, but but I can weather it. But there’s some people that are, you know, living kind of on the edge on the margin. That’s expensive. So suddenly, what happens? Well, they have to cut back on their spending. Right? That’s huge. I think. So you know, you have the increased price of fuel and just inflation in general, I think is causing, I think it’s going to cause people to sort of retrench on their spending. You have the government fiscal like, you know what I mean? Like, there was the syrup and all these, you know, financial instead Well, those are all ending those are fading away. Right. So yeah, they’re still going. What’s that? I don’t know. Anyway, so I could be dead wrong, but I don’t think it’s going to be all gangbusters and roses. And plus, the demographic profile for Canada in the States is not that good either. We’re an ageing society and stuff. Like I mean, there’s a big worker short, like there’s a shortage of workers right now. Why I think we were talking about that over lunch. I think a lot of the baby boomers maybe have walked away or something or you know what I mean, they’re like, they’re a couple years out from retirement. They’re like, Okay, I’m done. That’s good enough. For what? I don’t know. It’s crazy. 

Erwin  

And then yeah, no one really knows. Who knows, right? Yeah. First off, we don’t know what the central banks gonna do. So if they’re gonna keep increasing rates in the next year, I’ll bet we’re into recession. 

Derek  

Well, I think they’ll they’ll keep well, that’s the other thing too, is a big thing is central banks are increasing interest rates. And I think they’ll keep doing it until they bring inflation under control. And the way to bring inflation under control is to have an economic contraction, right. So but who knows?

Erwin  

So what are you looking for in order to start deploying some cash again?

Derek  

That’s a really good question. I’m looking for really good values out there. Like I would put more into British American Tobacco, but I won’t because I have this little soft rule with myself that I don’t like to put more than 5% in any one holding, because I’ve made mistakes in the past. And if I do make a mistake, I don’t want it to be too too painful. We talked about that too. Let’s talk about some of the mistakes here. So about a year ago, I bought shares in Alibaba, that’s a Chinese tech company, kind of like the Chinese equivalent of Amazon sort of you. They’re a big, big company. And they do like everything. So So Jack Ma, the founder had a little bit of falling out with the Communist Party in China, and they sort of wrapped his knuckles, and he disappeared, you know, and well, I sort of figured, okay, that’s the Chinese government doesn’t want to kill Alibaba, because, you know, it’s sort of a crown jewel for the country. So the stock price had declined, so I bought shares. And now they’ve declined, like, 60 70%, I don’t know, 60%, from where I bought it, or whatever. So that’s huge. That’s a huge loss, right. But the thing is, I think, originally, I put 3% of my portfolio, and I don’t remember exactly, let’s call it 3%. So it’s down 60%. It’s affected my portfolio 1.8%, or whatever, you know, you know what I mean? So it’s not catastrophic. So by limiting the room, I think my plan was to buy more, but now I’m too scared, rightly or wrongly. So those mistakes will happen. But if you minimise how much you put into any one thing, you know, you can limit the downside. So you want to diversify. But so with British American Tobacco, I would buy more, because it is still very cheap. But I don’t want to I’m bumping up. In fact, I’m slightly over 5%, because the price has gone up. So I don’t want to buy any more of that just in case tobacco is outlawed. Like who knows? Right? So you don’t wanna put all your eggs in one basket? Or at least I don’t. So if that makes sense.

Erwin  

I think it’s brilliant. I found a lot of speaking to a lot of newer investors that they would have over 10% in a single stock.

Derek  

Yeah, I mean, it depends on what else they have. Like, if if they’re 90% Real Estate and 10% of stocks. Maybe that’s not a problem. That’s just that’s the way I do things for me. Yeah. 

Erwin  

And it’s worked out pretty well, hasn’t it? It’s worked out. Okay. Yes. Any idea when you think the market will be a time for you to get back in?

Derek  

Who knows? I have no idea. I just haven’t seen power on the table buys right now. I’m looking, some things are interesting. It could be individual stocks, it could be the market. I mean, I am I am buying things to six, six months ago or around that timeframe. There was an interesting thing, at&t, everybody has a TN T It’s like the Telus of the United States, right? There’s only they have a similar market to actually there’s three main players in the US. There’s three main players in Canada, right. Like there’s in Canada, there’s BCE, TELUS, and Rogers, right. I mean, there’s also shot as a fourth player, but they’re being taken out in the US. There’s 18, T, Verizon, and T Mobile, I think, or something. Anyway, so there’s three. Right? So that’s called an oligopoly. Usually when there’s a small number of players, they don’t do kamikaze pricing. Okay, they want everybody to sort of make some money. But ATMs are banks. Yeah. Banks. Very talented at making money. Yeah, absolutely. Right. So I don’t think anybody’s gonna go off the rails and the pricing, maybe I’m wrong. But AT and T they were they had this plan, like maybe a decade ago, they were gonna buy all these media companies and whatnot and consolidate. You know, if you subscribe to the at&t holding, then maybe they give you HBO for free or whatever. Anyways, it didn’t work. They squandered a lot of money on their acquisitions. And they, you know, so a new CEO is taken over, and they’ve spun off Direct TV, which is a dying business and they’ve spun off Warner Brothers discovery like they merged it with Discovery spun it off. So anyway, so six months ago, the price was so beaten up everybody’s so pessimistic that I bought some shares.

Erwin  

And then you wait for extreme pessimism to get in

Derek  

 I like extreme pessimism. This the price is that prices that afford. But yeah.

Erwin  

I have some property for your north in Hamilton. The smokestack? 

Derek  

Yeah, maybe? Who knows. But yeah, so So anyways, yeah. So so so they did that. And then, you know, a month or two ago, they spun off Warner Brothers discovery. So So now, you know, for any at&t shareholders, they also the Warner Brothers discovery shares. So I sold off the Warner Brothers discovery shares, which lowered my cost of 18 T. And I’m content to hold like it. So my point is very long winded Lee, is there will be opportunities from time to time, and you have to just look for them. Right? Like so. So could be stock specific, or it could be market specific. And I have no idea. I’m like an 80 year old widow. I’m very scared of losing what I have. So I want to be very conservative. I guess.

Erwin  

Again, I something I think that was missing from a lot of investors I’ve spoken to is that they’re they are just way too aggressive with their with what they’re investing in.

Derek  

Yeah, yeah, I guess I’ve made mistakes enough to know how painful it is like once you touch a stove element, once you tend not to do it again, same kind of thing.

Erwin  

Oh, you detailed in the book quite a bit on specifically start working about paying yourself?

Derek  

Yes, that’s to accumulate the money. That’s a different phase of my life. Right? But yes.

Erwin  

And what I’m trying to get to is for someone who’s like new to investing new to stocks, whatever, in any guidelines on how much to pay yourself,

Derek  

The more you pay yourself, the faster you get there, right? 

Erwin  

We’re talking about over lunch. And my argument was, I don’t think a lot of people get with their money. I think that’s an our listeners are excluded from most of the conversation. Statistically, anything close to two thirds of Canadians who do not have a pension will never retire. Doubt that’s our listener or 17 listeners. So paying yourself is basically you know, build a savings account. And then once you have an emergency savings, then start investing, right? Sure. Any guidelines on how much to pay yourself?

Derek  

Yeah, the financial community always says Pay yourself like 10%, or whatever. And I guess that’s a good starting point. Think, first of all, pay yourself something. I mean, I don’t know, I want to feel like I’m making progress or whatever. So So you know, again, this is for early stages starting out. But in order to be able to buy stocks or buy investments of any sort, you have to have some money, some capital, right? In order to accumulate that capital, you have to set some aside. But the faster or the greater amount that you set aside, the faster you’ll get to wherever it is, you want to go, right. I guess I’m fortunate, like, I’m not attracted to trinkets or, you know, landfill crap, basically, you know what I mean? Like, it doesn’t, it doesn’t thrill me, like, you know, it doesn’t excite me in the least. And I think that’s what a lot of people like, that’s not the way I want, I think people should invest. But if you look at the lotto 649 commercials, they don’t picture a guy, you know, getting into a Lamborghini and driving up to a mansion and stuff. No, they always say imagine the freedom and they just have a guideline on a hammock at the beach. And I think that’s what people want, I think that’s what they’re migrating towards, is just, you know, the freedom not to be inconvenienced by an alarm clock or a boss or a commute or, or whatever it is, you know, whatever it is they you know, so the faster you want to get there, the more you save, it’s as simple as that, with investing or let me broaden that with financial freedom. I think at the early stage, the more important factor is being frugal spending your money wisely saving a high percentage of your income, once you reach that stage, then not losing what you’ve saved or invested. And also doing it well getting a reasonable return, it becomes more important factor. Does that make sense?

Erwin  

I actually a friend of the show Anderson, he actually drives Uber. Okay. And like skip the dishes. Sure, sure. And then all that income from that. That’s a side hustle. Yeah, all that income goes into his savings.

Derek  

Okay, so he’s made a plan for himself, right? Again, because I’m wired this way. And maybe it’s a Scottish ancestry. I don’t spend money easily. I never had to make a budget because I just you know what, I mean, I just automatically save I don’t know, I just not really like I don’t drink coffee. I don’t smoke. I have an occasional beer, but like, I don’t really have any expensive hobbies, whatever. Obviously, don’t spend a lot on wardrobe as you can see, so there’s nothing really that sucking about, you know what the kids maybe I don’t know, but you know what I mean? So it’s like, okay, the feed Yeah, there we go. Right. But no, but I don’t know if I want something I get and I just don’t want a lot. Does that make sense?

Erwin  

 It also makes sense like to share to the first people I met who are financially free who I consider financially free in real estate one she lived she on two triplexes. No car, no kids had a dog. Okay. And she lived in one of the triplex one of the units. Okay. And she had no job. That was enough. That was enough to meet her needs. Yep. Right. And then another friend, he drove like a beat up Mr. Mazda on six student rentals in St. Catharines, Brock University students, and he resigned from his really nice government job. Right. But my point is that they’re both frugal. Yeah, yeah, they didn’t have much flashy. 

Derek  

Alright, frugal roads, greets people the wrong way. It rubs people the wrong way. It isn’t self denial. It’s just spending wisely. You know, it’s sort of like I think in my book, I talk about life enhancing a non life enhancing expenses. So, you know, if you like coffee, and you like going to Starbucks every day, let’s say, by the way, I won’t share. So go ahead. But yeah, go treat yourself. Absolutely. 100%. Right. But if you’re doing that, maybe you can’t do something else that you know, but for example, minimising your taxes would be you know, if you pay more taxes, it’s not like you’re gonna get more services. So, you know, that would be a non life enhancing expense. You want to be very vigilant about reducing that that kind of thing.

Erwin  

I sold puts on Starbucks after you said you bought it. 

Derek  

Oh, there we go. That’s my guy.

Erwin  

Actually, wish I had more. Yeah, like you said, makes me sound terrible. I don’t have a budget either. I focus more on making money. Okay, fair enough. Yeah. Yeah, I couldn’t possibly consume as much as my portfolio makes. Yeah. And even still, I’m just frugal person. I don’t like spending money into like, lavish things. Just immigrant upgrading. Yeah, there we go. Right. Yeah. Yeah. Cool. So while we covered a lot, any other tips that we can pass on to the listener?

Derek  

Keep it simple? Like, I mean, I know a lot of people you don’t get rewarded with more money if you come up with a complex idea, you know? So again, I find the best though. Well, yeah, people that invest the money and that is exciting, right? It’s exciting. But you know, I mean, I’m not saying golden bytes Colgate today, but that you wrap your head around that you can understand that you know what I mean? Coke, you can understand it people get thirsty every day, you know, and, you know, there’s Coke or Pepsi or whatever, and there’s only a couple other players and you know, a new new drinks company. I think Blackwall came out like that’s what is it? National beverage I think is a company that makes it look while the flavoured water drink anyways, that came out today. These companies have moats that well, that’s that’s my that’s my point. They came out with it. They attacked a part of the market that was under service right? And it took a couple of years but Coke and Pepsi reacted. And so Pepsi bought brought out bubbly or bubbly or whatever you want to call it and cold More recently brought out, aha. Now the interesting thing is, you know, five years from now or 10 years from now who’s going to be the market leader in that category? And I’d put my money on either the Coke or Pepsi brand, because they already have the infrastructure, right? Anytime, if you go work out at a rec centre, and you go and grab a drink afterwards, there’s a vending machine there. Well, it’s, it’s controlled by Coke or Pepsi, so you’re gonna get their rent, you’re not gonna get the other brand. And as far as shelf space and placement in the stores and stuff, where, you know, if Pepsi comes along and says, Hey, we want that space store is gonna cater more to them than this new upstart because, you know, you know what I mean? So I think they kind of have a brand now, one thing,

Erwin  

What in business sense is required to be to be a stock investor?

Derek  

I don’t know. I mean, you’re a shopper. You go around the store, look at what’s what people are buying. Yeah, one area where Coke and Pepsi was really flat footed, in were energy drinks. And because they don’t, I don’t think they taste like I don’t drink energy drinks, either. But you know, Red Bull came out whatever. And then horrible. They taste terrible, right? But Red Bull came out and then monster came out. And then what’s the other one Rockstar, whatever, right? And then there’s other ones now too. And so they were flat footed, they missed it entirely, you know, and the markets dominated. So what happened? Well, Coke has a distribution agreement with Monster so they get some of the money. And I think they bought 17 or 20% a month, just they own part of it, too. They might take it out totally someday, who knows? And Pepsi bought it rock star. So they have the Marketing Muscle now behind that, right? So they never really totally lose out. So my point is, I guess keep it simple. You know, don’t get into the complicated. I mean, by all means invest in some emerging technology, if you understand it, I don’t. So I play in a really small sandbox, and that’s fine. That works. Okay. That’s the tip I would give.

Erwin  

Right! Because we were talking about Ark, for example. Yeah. And how often a lot of them will disappear. Time on arches typically. Yeah, 10 other companies.

Derek  

I pulled a random number. Yeah, who knows, right? That’s not my style. That’s the thing about investing too. And maybe that talks or points to the point that you brought up, whereas some of the real estate investors seem to be like, pretty, you know, Intrepid, and just, hey, I’m gonna buy this, buy that and see what happens. Like, I’ll take a risk on this and take a flyer on that, whatever. But I think there’s different kinds of investors, some people are what’s called growth investors. So they’re looking for, you know, which company is going to grow, and I’ll pay, I’m not all that sensitive about the price I pay, because it’ll grow anyhow. And that can be very lucrative, like, I mean, people that bought Amazon, you know, 20 years ago, I’ve done phenomenally well, or Google or whatever, I’m not really that kind of investor, because I’ll end up buying something like a Nortel or dizzy or Alibaba or something like that. And then there’s the other time where there’s a deep value investor, you know, so they’re looking for some beaten up company as trading really cheap. I mean, for years and years, for example, Hudson Bay, which sounds crazy, but who shops at Hudson Bay, nobody does anymore. But because they had been in business for hundreds of years, they owned all this real estate. And so, you know, people would look at it and say, Oh, the value of the real estate is, you know, $10 a share, but the stocks are only trading at $7 a share. So this is a great deal, you know, and so that’s deep value, I don’t do that either. Because oftentimes, they they kind of go into business and they’re bankrupt. It’s right in the middle, like a growth at a reasonable price with a little bit of a value bent, you know, so, you know, you’re looking for companies that are growing, maybe not quickly, but they’re growing the tortoise type stocks, they’re mature companies, they’re paying dividends, and you’re looking for some sort of short term pessimism that allows you to buy them more cheaply. I mean, that’s, that’s basically what it is.

Erwin  

What sources are using to research these companies? Because for example, are you just googling?

Derek  

Yeah, that’s a good point. Sometimes they just notice things or come across things or hear things in the business media or whatever, like, you know, I look at the Globe and Mail National Post, and just sometimes things you know, sometimes things just just tweak my interest Value Line is a thing I use quite a bit value line assesses the companies and gives a basic snapshot and it gives a history of how their earnings have done and their dividends have done. I you know, that’s if I’m intentionally looking, yeah, but But you just hear things you hear, you know, like, I wish I could think about business headline off the top of my head a couple of years ago, oh, Chipotle had some salmonella in some of their restaurants, the stock price was beaten down, that would be an example. Remember that? You know, that would be an example. And so it’s like, oh, okay, that’s interesting. How much is the stock beaten up? Okay, is this a permanent issue or a temporary issue? So you’re looking for temporary issues, you’re looking for a short term problem that’s temporary in nature. So you know, okay, they had whatever it was a salmonella outbreak, is that always going to happen? Or they’re going to take steps to address that, you know, what I mean? And these sort of temporary things happen from time to time with various companies, and it’s a good opportunity to buy remember back in 2000. Again, I date myself, but I was looking at McDonald’s, okay. And McDonald’s was so beaten up the dialogue at the time was, oh, McDonald’s is, you know, their kid focused and demographics don’t support it anywhere. And they brought out the arch Deluxe, like a special hamburger targeted to adults, and they’re gonna lose their market share and stuff. And I remember looking, I’m like, nah, this is McDonald’s. I mean, they got it, you know, and did some research and stuff and again, McDonald’s is one of the biggest real estate owners like they own a tonne. There’s a real estate the United States It was so cheap. So I bought some shares. But long story short, I sold a couple years later, like a 10% profit now it’s up 10 fold or whatever, you know what I mean. So you’re looking for that pessimism, whatever that pessimism is you don’t know. And it’s temporary in nature. Does that? Does that make sense? 

Erwin  

Like the smokestacks in hamilton are temporary. 

Derek  

So so it’s not it’s not something like going oh, Kodak is not developing as much film because some people are using digital film. So now it’s time to buy Well no, because codecs basically, you know that business is gone, right. So that’s not temporary, that’s a permanent shift. Right. But if it’s a temporary problem, and that’s what you’re looking for some sort of, you know, as I say, like the chipotle having a outbreak and the restaurants or, you know, cold bringing out new coke or, or whatever the case is.

Erwin  

We mentioned Brexit earlier. I don’t know that much about it. 

Derek  

I don’t know that much about it either. But the UK basically was part of the European Union. They voted to separate and so they’re separating, right.

Erwin  

Does it really affect any business? Does it affect Shell’s ability to…

Derek  

It affects a lot of UK based businesses for sure. Right. 100% Does it affect Unilever? Maybe, maybe there’s I don’t know, I haven’t done that deal yet. Maybe there’s some extra tariffs that you know, Germany implements because of it. I don’t know. But I don’t think so. I don’t think it’s going to be catastrophic, if that makes sense. You know, it just didn’t what Unilever by the way, just throwing it out there is like I had Procter and Gamble. I switched over to Unilever. They have a lot of they compete in a lot of categories, right? Like, like, you know, Unilever will have their deodorant and Procter and Gamble as they’re doing that, whatever. But Unilever is more tilted towards emerging markets. So they’re more their growth is gonna come from, you know, some peasant in India buying their first bar of deodorant or their first Dove soap or whatever, like they they’re climbing the socio economic ladder and moving and so that’s Unilever’s growth path Colgate and Procter and Gamble, their growth, like Colgate is more exposed to emerging markets, let’s say Procter and Gamble, their growth in earnings is going to come from premiumization. So what they’re going to do is they’re going to say like you buy Crest toothpaste at $1 or two. But look at this. This gives you whiter teeth and a brighter smile. But it’s $3 a tube and can we convince you to move from the dollar tube to $3 or two? You know, that’s how they’re gonna grow. Does that make sense?

Erwin  

Fascinating. And Derek, I think, you know, we recently announced you as one of our wealth hacker conference speakers. Okay. He excited? Yeah, November? Well, of course, of course. You’re not nervous about public speaking, right. Last time, we had 1500 people this time, we’re hoping for 2000.

Derek  

I hope we get 2500. Let’s, let’s see what happens. 

Erwin  

It’s kind of crazy. Because have you done a big talk since because I know you’ve done other big talks. To me, it’s just a little bit wild. You know, we’ve been two years of social distancing. And

Derek  

for years and years, I was going to Toronto Metro Convention Centre world money show. And there was some other ones that I’ve done on everything just sort of shut down. And we were all talking online and stuff for a couple of years. So it’d be nice to be back and chatting with you. I mean, it’s just it’s a different dynamic. Right? 

Erwin  

And I mean, how was the online experience for you? 

Derek  

It was okay

Erwin  

Because it’s probably a couple 100 people for sure. 

Derek  

I don’t know, how do I know how I mean, you can’t sit without a computer. So but the thing is, like, in person you talk, you know, and then somebody’s listening in the audience. And they said, I want more information on that. And you know, you go have a break after that. There’s always breaks in between the talks, and people seek you out and they come and say, Hey, you mentioned this, how about this? And, you know, it’s more interactive? It’s, do you follow up saying, like, you can go back and forth, it’s more communicative? Like I can be going on a tangent because they hang on, hang on to that and then we switch directions online. It’s just not the same. I don’t know. Yeah, that’s my take. 

Erwin  

Yeah, no, I found online these days. Especially if it’s local. It’s gonna be local. It’s gonna be for most people is gonna be local. Toronto Congress Centre. Okay, the airport. So lots of free parking. 

Derek  

Awesome. That’s important. Yeah. 

Erwin  

You know what your talk is gonna be there yet? Well, it’s gonna be about investing in stocks. I’m sure. Right? Because it works for you. 

Derek  

Yeah, it worked. 

Erwin  

Oh, and then someone smarter than me just said the other day is funny. You laugh. I was talking to a cryptocurrency person. I was saying about my comfort level of cryptocurrency. Because, for example, if you’re in the crypto, you’re in the Bitcoin community, for example, if you’re wealthy, they have a rule of thumb, that you should have one bitcoin per family member. Right? That’s about $30,000 us each, right. So that’s one rule of thumb again, if you’re wealthy so if you have a big family, then you’re screwed. And I said, that number sounds so big to me. Versus if there’s a million dollar duplex triplex can’t write the check today. Yeah, and he said, That’s so funny. You say that I feel completely the opposite. Yeah. Stick a million bucks into bitcoin done by piece of investment, real estate. Does that work? Am I gonna lose my money?

Derek  

Yeah, people have to be…

Erwin  

And really sorry. My point is that you’re extremely comfortable in this area. You don’t always talk. But you’ve made a lot of money.

Derek  

Yeah, it’s done. Okay. Yeah. Yeah, it’s interesting, actually, because my dad had a business and for a period of time, he made a fair bit of money, and he bought real estate back in the late 80s and early 90s. Interest rates climb ended up in the NDP government in Ontario and there was rent controls and tenants wouldn’t pay him. But anyways, he basically lost everything. So I think I’m gun shy with real estate, but there’s not a logical reason. It’s more emotional, really, because so many people have made money with real estate if you know what you’re doing, and you do it correctly, but I guess back at that time, when I’m looking for my success formula, I just veered off into stocks. And I guess it’s hard to change something that’s working. So I just continue along with that, if that makes sense.

Erwin  

You know, you asked me at lunch. Why am I so interested in stocks? It’s just I enjoy making money. And again, I’m looking for yield. Yeah, you know, at lunch, we’re talking about like TV and tell us Sure, whatever. Yeah, yeah. Nice fat dividends and no tenants to talk back

Derek  

Yeah, I mean, I’m a little bit to that my my first book, actually, but if the dividends are recurring and stuff, you you don’t really do anything, the money just appears in your account. So it’s kind of nice, like, sorry, it’s lazy way to do it, I guess. But you don’t have to do anything. You just wake up and Okay, good. Somebody was deposit my account today.

Erwin  

I will write covered calls this because I, I’m on a type. So I need to you need to do so.

Derek  

There we go. Yeah. Yeah, I don’t I don’t really do much of that. either. I just collect dividends. And sorry, it’s very boring. I know. But it’s falling.

Erwin  

Boring. But you haven’t worked in? How many years? I guess it’ll be 18 years this year? Yeah. Yeah. Imagine that listener 18 years map having a job in the last 18 years? Yeah, so it’s been okay. And anyone can do this? I mean, we can repeat your steps. 

Derek  

Yeah. I mean, I absolutely 100%. I mean, again, it formula is pretty easy. You spend less than you earn and save the difference and start buying stocks and look for quality dividend paying stocks, I mean, this nine criteria in the book, but like you’re looking for recession, proof companies, right, companies are not gonna go to business like, again, the Colgate toothpaste, you look for something that is not gonna be changed by technology, something has a long operating history, something that’s has a history of growing their dividends, and you start there. I mean, and again, too, sometimes people are looking all or nothing, but think about it, think you’re starting out, right? So you’re just starting out, you know, you start saving a little bit of money to buy stocks, okay? It’s not like, Okay, tomorrow, I’m going to be able to retire. But think about it. Like, let’s say you buy some oil shares, and they pay you a dividend. And let’s say they pay you enough dividends to pay your gas. Okay, for the rest of my life, I never have to pay for my gas, this the company shares when I go, you know, to fill my car up at, let’s say, Petro Canada and they own some quarter shares. Well, the dividends have paid for my gas, so I never have to pay for gas again. So that’s one expense. That’s totally done. And then you buy some more shares, let’s say in Banbridge, or something, and that’s your natural gas. And it’s like, okay, great. I never have to pay to heat my home for the rest of my life. Again, you know that that bill is covered for that’s my life. And then you buy a food stock and great and never have to pay for groceries again. And eventually all your bills are paid. And then you don’t have to work right, and then you’re free, then you’re free. Yeah, you know, so you can see the steps. 

Erwin  

Derek, I have one final question. Because I think we’re way over time. I’ll be sorry. Do you have like a house? Most of my that’s entirely my fault. Do you ever have like a like you have too good to be true. Like spidey sense. For example, in your old older books, you talked about income trust, for example. Yes. It seems like I just see, let’s look back in history, there’s been examples of like, damn, this is really good. And then either the business fails, or the government takes it away. Do you ever have that anymore?

Derek  

Yeah, that’s, that’s exactly right. Like it’s like, you know, and it was it was just so beaten up and then then rocketed up so high, and everybody’s all euphoric and stuff. And it’s just like, this seems too good to be true. 100% 100% within them trust. That’s an interesting one, because I started buying income trusts in the late 1990s. And it’s hard to believe like you could buy like Pembina pipeline or whatever they were paying like 12 and 13% yields. That’s insane. Because it was those those are best profits from business right as the payout well, okay, let’s go with REO can at that time, I bought REO can. It was $9 a share? And I think it was paying like 90 Some cents a year. So it was like 11% yield. Right. And it was phenomenal. Okay. And why is that because everybody was focused focused on Nortel and JDS and other high tech companies, whatever. And so we wrote that pony for a while. But then the government changed the rules and you know, within a day, you know, got a big hair cut prices went down, so I guess he went some you lose some but yes, yes. To answer your question. Yes. Sometimes I do feel that way. Yes.

Erwin  

Anytime I see like double digit returns. I’m okay. My my spidey senses are tingling.

Derek  

Yeah, especially that’s a good point to kind of I know we’re over time but with stocks be very, very careful if the yields too high know why the yield is too high. Because oftentimes, that means either dividends about to get cut, or there’s some impending doom, you know, down the down the pipe. So I’m sort of talking about sides of my mouth because with British American Tobacco, I know what the risks are. And I feel they’re overstated. So I’m comfortable with that. But just be very, very careful. If the if the dividend gets too high there, there might be dividend cut coming coming down the pipe.

Erwin  

I’m seeing on these, these ETFs that have not very long histories that does pay huge yields. So I’m still looking into that I believe some of them still can recall some of them are a bit leveraged. And then some of them I think this sell stocks to pay people were sounds sounds almost Ponzi. So again, like listener, like certain advice, but yeah, be careful.

Derek  

Be careful. I mean Erwin you could give me certain amount of money and I could leverage it up to the hilt and buy the highest yielding payers and then sell covered calls on them or whatever, but it’ll work until it doesn’t I’d be very sceptical, I guess and do your due diligence because oftentimes that is too good to be true. So…

Erwin  

And I know people who are investing money in these things, I don’t know how much if it’s significant to them, but they’re investing money based on off of an influencer SEC talking about on YouTube.

Derek  

You gotta remember the guys on Wall Street and Bay Street and stuff. They’re packaging products to sell to people. I mean, a mortgage backed securities back in 2008 2009, herbage, those blew up in people’s faces. And I mean, sad because some retirees lost their their pension, like lost their retirement savings and all that kind of stuff. So you got to be very careful, but they’ll package whatever people will buy, right? So just Caveat emptor. Like, you know, the buyer beware be very cognizant and careful of those kinds of things there. 

Erwin  

Thanks so much in November 12, and you’ll be one of our keynote speakers can I personally can’t wait.

Derek  

November 12. And if, if any of your listeners have any questions, you can go to my website at stopworking.ca and fire me an email I do answer them, you know, so. Yeah, otherwise, I’ll see you on November the 12th.

Erwin  

Yeah. And of course, Derek. Thanks again for being a supportive stock hacker Academy and being part of it. 

Derek  

Okay, thank you. 

Erwin  

It’s been I think the course has been improved so much since you joined it. 

Derek  

Oh, thank you very much. Appreciate that. 

Erwin  

Thanks Derek 

Derek  

Okay. 

Erwin  

Before you go if you’re interested in learning more about an alternative means of cash flowing by hundreds of other real estate investors have already then sign up for my newsletter and you’ll learn of the next free demonstration webinar I’ll be delivering on the subject of stock hacking. It’s much improved demonstration over the one that I gave to my cousin chubby at Thanksgiving dinner in 2019. He now averages 1% cash flow per week, and he’s a musician by trade. As a real estate investor myself, I got into real estate for the cash flow. But with the rising costs to operate a rental business, it’s just not the same as it was five to 10 years ago when I started there. Forget the cash flow reduces your risk. The more you have, the more lumps you can absorb. And if you have none, or limited cash flow, you’re going to be paying out your pocket like I did on a recent basement flood at my student rental in St. Catharines. Ontario. If you’re interested in learning more, but it’s true for free for my newsletter at www dot truth about real estate investing.ca. Enter your name and email address on the right side. We’ll include in the newsletter when we announce our next free stock hacker demonstration. Find out for yourself what so many real estate investors are doing to diversify and increase our cash flow. And if you can’t tell I love teaching and sharing this stuff.

 

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Erwin  

Hello everyone welcome to another episode The Truth About Real Estate investing Show. My name is Erwin Szeto and this episode is brought to you by Cherry and I’s wealth hacker conference the all day in person no zoom option conference this November 12 2022 as well as this year. It’s been three years in the making since we hosted over 1500 investors and entrepreneurs to the conference of the year headlined by Grant Cardone back in 2019. This year our keynote speaker is to see us sir, and he will be sharing his secrets on how to build a life resume to be proud of think of it is when your time on this planet is up. You look back, are you proud of the accomplishments and relationships that are most important to you? We’ve learned about Jesse Itzler and I actually attended the 10x growth conference in Miami. We were actually there to scout it with Grant Cardone before we hired him for our collarbone conference. And Jesse was one of the speakers that day, he gave a fantastic talk about a lot of wild stuff he’s done. He’s a Jewish guy from New York. He’s written Emmy award winning rap song. He’s been a successful transporter, and that’s how he’s made all his hundreds of millions of dollars in funding businesses. For example, one of them was he’s co founder and basically the Uber of private jets private jet sharing, and he later sold that company to Warren Buffett’s net jets. He also spotted a trend in energy drinks being more naturalised so he partnered with Zico, coconut water, if you’re a Costco shopper like Guy, you’ve probably hadn’t been bought it before. This company is eco water. He later sold it to Coca Cola. He’s courted and married Sara Blakely, Jessie and I have something in common that we have very famous spouses. Sara Blakely being the founder and billionaires of Spanx. Together, they have four kids, and they are a family to be admired in terms of the experiences that they share. And as Jesse is highly present in his kids lives, he has a lot of freedom in his life. Thanks to his business ventures and investments in music great parent. Jesse’s also happens to be in New York Times bestselling author of one of my favourite books, living with a seal. That seal happened to be the incredible David Goggins and the story of David living with and trading Jesse for 31 days. Jesse being a middle aged band, father of young kids, he’s a vegan and a marathon runner. The story is absolutely insane. I won’t want to give away too much, but I personally found the book hilarious, inspiring and educational. Again, one of my favourite books ever, I can’t recommend it enough. My opinion, my experience, the audio book is even better, because Jesse reads the book himself. And even better to see Jessie speak in live and in person on November 12 2022. 

 

Erwin  

On to this week’s show, we have a veteran investor with us who has been investing for over a decade and has accumulated 25 properties, including several joint venture JV for short joint venture with friends and family. Justin is one of our longtime clients. And as time in real estate, you know, that term, time in the markets more important than timing the market? Well, Justin done quite well, again, he’s been investing for over 10 years, and that type of served as well. He’s invested largely in cash flowing properties in places like Edmonton, Alberta, Waterloo, Ontario, and Hamilton, Ontario. My business my team and I, we helped him out in Hamilton, of course, and those Hamilton properties alone have allowed Justin to join our exclusive seven figure club. Now with seven figure Club. Well, there’s stages to being an investor. Owning a million dollars in real estate isn’t too hard these days, earning a million dollars in return million dollars or more is pretty significant. And Justin has done that, along with many more clients. On today’s episode Justin’s shares how he got started, we dig into the numbers of some of his properties, including the first his first property student rental of Waterloo. What motivated him to invest what got that fire going, and what got him was to start a podcast for parents to teach kids about money. Justin will also be part of a panel of joint venture experts on June Saturday 18th that the morning event starts at 9am to 12pm. At our next iWIN real estate meetup live and in person only, there will be no online option. There’ll be no recording either. Justin will be joined by longtime friend of Iwin, Jules McKenzie who has done over 50 joint venture properties in his three years as a police officer. Also Gillian Irving, an expert in joint ventures, student rentals and mortgage professional from Lend city mortgages will round down in our panel. So there’s a link to register in the show notes. And for those of you on our email list, you’ll get that as well. You’re likely already getting emails to register for the event. Again, link is available in the show notes that you want to attend. For non clients. It’s only like 20 bucks, and that all the profits go to charity. So yeah, hope to see you there. June 18. And more importantly, November 12, for the wealth hacker conference, wealth hacker.ca. For details, please enjoy the show. 

 

Erwin  

Hey, Justin

 

Justin  

Erwin, how you doing?

 

Erwin  

I’m excellent. What’s keeping you busy these days?

 

Justin  

Well, I would say my podcast is keeping busy so I was on launched that back in on April the 12th. It’s podcast, it’s called Money dad podcast, and it’s dedicated to helping parents raise money smart kids. So I’ve released eight episodes now. And that’s that’s keeping me busy.

 

Erwin  

Right. I’m going to share with where we’re recording it. So let’s share it now where she hosting. Spirit of math has a money education partner. So we actually heard them privately in case you want to bring on one. Okay to join us. I think it’s in the summer. But yeah, but we got half price because we provide the facility. Yeah, we’ll talk about it after. Yeah. So our kids are doing it and a bunch of other kids are doing it from the office. Cool. We get nothing for just sharing. What am I trying to do? Me want to sit in? Maybe? Yeah, cool. Yeah, that’s cool. The podcast? 

 

Justin  

Yeah, it’s one of those things where I started it, I thought about, I’ve been thinking about it for a while in terms of starting it, and it took your finger for a while. Yeah. For me, it’s like, I’ve always wanted to, I mean, for me, financial education is so important, right? Like, I think back to when I was a kid, and I didn’t necessarily get any formal financial education. But my dad, you know, talked about, we talked about money all the time, in terms of a lot of times the lack of it, or how to hustle for it. And so that’s sort of ingrained in me from the time that I was young. And what I found was, you know, as I was thinking about how I can serve, or better help people today, I thought, okay, what can I talk about? And what do I want to do. And so starting a podcast, helping parents raise money, smart kids, so that they have a better shot, or their financial future just seemed to resonate with me. And I think that’s something like right now, there’s just not a lot of resources, I think, that are dedicated to helping kids be more financially literate. And so I just want to put something out there and be a resource to people to help further their education.

 

Erwin  

I just finished reading the psychology of money. And I brought up a good point, it’s American, so like, whatever they’re called down on their 401 K, I meant to look it up. So I don’t even know how old RSPs are, for example, but they’re not that old. They’ve only haven’t been around that long. So savings hasn’t really been something that it’s been around for multiple generations, right? Yes. So it’s a really it’s a newer subject. Yeah. Like your experience is very similar to many of my clients. And many people who are listening to this was that maybe their parents knew a little bit about money, but likely the generation before, like, knew even less around savings and investing.

 

Justin  

Well, if you think about the generation before our parents, that was I guess, the Great Depression, and back then were, you know, it was they saw a lot of their savings go away. It’s like money was scarce. I mean, it’s it was scarce, probably for a lot of people. So I would say like, you know, our parents generation, like my parents were immigrants coming into the country, they came to Canada with like, nothing, right, like very little education. Like my mom, I think my mom finished, or she Yeah, she was in high school. I think she finished high school. My dad was, I think he almost fell or he finished elementary school. So they didn’t really have a lot of education itself. But they had the desire. And I give him a lot of credit, like being able to like pick up and go to another country and start from scratch, basically, not speak the language. Yeah, not Well, yeah. I mean, they spoke the language like my, my mom, her primary language is Chinese, Cantonese. She spoke some English. And then my dad, he spoke English. He was so he was from Jamaica, and came to Canada. And you know, in search of a better life, like he, his dad was basically the owner of a general store in Jamaica. And that’s what my dad helped him run. And so my dad told me stories of, you know, when they were sleeping at night, they would lock up the shop, and there will be people that would be breaking in to the store to try to, you know, get things and he was like, You know what, I don’t want to live like this. I don’t want to live here. And so he met my mom, and they decided to come to Canada. I think it was my mom’s aunt or someone that lived in Montreal. And so that’s where we ultimately ended up settling. That’s where I was born. And then we we moved around to Toronto and other places growing up, but um, yeah, I think it was one of those things where I just saw how hard my parents worked. And especially my dad, like, he didn’t have a steady job. You know, he was a realtor, residential, real estate realtor, and he would, you know, he would take me with him and my brother, while he was on business, taking a look at houses and previewing them. And he did that he did a wholesaling business for a while, like so importing, you know, whatever, dry goods and then delivering them to people. He was a big talker, he was hustling, like, he was basically trying to figure out a way to put food on the table for the family. And so my mom was helping take care of my brother and I and, and then later on, she, you know, she ended up working like, I think she worked at a travel agency for a little bit or a retail store. But, you know, it was really up to my dad to sort of, you know, he’s the main breadwinner and just bring make money to survive, really.

 

Erwin  

Their survival was the thing. It wasn’t about saving. 

 

Justin  

It wasn’t a savings investment. It was really about surviving. So it definitely was not about investing. It wasn’t until actually probably when he was a little bit when I was a little bit older. That’s when he started to, I think focus on investing where we were more grown up and he would, he would hone in on me and say, Look, you gotta get an investment property, you gotta get investment property. And so at the time, I think I was I wasn’t necessarily that receptive to it. I didn’t really brush it off, but I wasn’t keen on it. And it wasn’t until Oh, so the year before I got married, so I proposed to my wife or girlfriend now wife, wife, and it was like, Okay, there’s gonna be this big to me, in my mind, like this big wedding expense coming up. So I’m like, okay, you know what that motivated me to say, before I spend all this money on a wedding, I need to put money into an investment property. And so that was when it clicked in like, Okay, I should get an investment property and divert some resources to it, I didn’t even necessarily have money at the time. But it focused my attention to getting an investment property. And so I ended up buying a student rental property in Waterloo, off market. And I bought Yeah, so I bought it, you know, and I borrowed money from my dad, my dad lent me $40,000 to use as the down payment, charge me, you know, interest rate market rate of interest on it. And I managed properly myself for the year. And what happened for me was like in terms of when it all clicked, and in terms of real estate like and what you could do with it, and how you can use it as a wealth creation vehicle, was in that the end of that first year, I ended up, refinancing it and buying a second student rental property from the same person that I bought, the first one, he was actually a university professor who was looking to retire. And so I ended up reaching back out to him again, off market and saying, Look, I’m interested in buying more property, you know, are you still interested in potentially selling some of your other ones that you’re looking to get rid of before you retire? And he, he said yes. And you know, we negotiated the deal. But again, I didn’t even have a down payment, I broke the mortgage refinance, didn’t pull the additional proceeds from the first student rental and use it to buy the second one. And so for me, like, that’s when the light bulb clicked on for me, and it was like, Oh, you can actually buy real estate, without any of your own cash, you can add and grow your grow your portfolio and your net worth that way. So that was, yeah, that’s, that’s when it started. For me.

 

Erwin  

That’s pretty cool. Did your parents really invest in property before? 

 

Justin  

You know what my parents owned, when we live, there’s a time where he lived in Etobicoke, near Humber College. And actually, we ended up renting a room in our basement out to a person from who went to Humber College. And so that was part of I mean, that, you know, they earned some rental income that way, they also had a rental property. I mean, this is back in the 80s, though, when the interest rates are so high, and I think they actually lost money on that deal, to be honest with you. So they bought the property, I think they ended up taking, yeah, they bought it, they were renting it for a while, and then they ended up selling it. And when they sold it, there was a VTB on it, that they had to take back vendor take back mortgage. So I don’t know if that necessarily that deal was profitable for them. But I know always like my dad, especially like from high school onward. He was always, you know, I think he just harped on getting an investment property, getting investment property. And I should have done it. In hindsight, I wanted to do it when I was in university, like it was crazy, because I would see, you’d rent for whatever, X amount per room with your friends. And I remember hearing about one landlord who owned a number of properties on a certain street in Waterloo. And I was like, he must have had, like, he must have so many different properties here. But it never clicked into me that, oh, maybe I should try to get a property and then live in it with my friends while I was in university. Because then I mean, whatever. In hindsight, everyone’s like, Oh, I wish I bought more.

 

Erwin  

Right. But most people are listening. So they don’t see me rolling my eyes. But sorry, how long ago was this first property you bought?

 

Justin  

So the first property that bought in terms of a rental property was 2007.

 

Erwin  

Okay, so good time to buy. Okay, so I always harp on that folks are going to listen and learn from someone they should learn from someone who has what you want. Right. So you have a sizable portfolio. Can you share about that?

 

Justin  

Yeah. So yeah, I have, I mean, so between myself and other joint venture partners that I’ve brought on, you know, I have an ownership interest in 25, mainly single family residential properties, some student rentals, some single family, some small, like Maltese. And I’ve been doing it, you know, so I started actually, the first one I bought was not even a rental was actually my own condo that I bought after I graduated from university. So that was back in 2002. That was pre construction. 2002 And then I, you know, it took them two years to build it, and, and I moved in 2004 So I’ve been investing in real estate since 2004. And just, you know, in the beginning, it was more like buying a property a year. So, you know, my first rental was 2007 and then I bought another one 2008 That same one from that same professor, and then I bought another one 2009 And then it wasn’t until I guess, 2011 when I met you actually, as well, but I joined rain, which is a great, great group at the time in terms of the Real Estate Investment Network and, and it was really a way to For me to like level up, and I wanted to get more focused on real estate, and I wanted to be around people who were doing what I wanted to do in terms of investing in growing their portfolio. And so that’s when I joined rain. In 2011. I met you. And that’s when it sort of took off. Like I think I bought, yeah, so I bought another one. It was a single family and Hamilton in 2011. And then what happened was, so my mom, she passed away, basically, in 2012, January of 2012. And up until that point, I guess, you know, so it’s really not until you lose someone that you really realise, like how precious like life is and how short and how not guaranteed it is. And so, when she died, it was really like it hit me hard. And that basically, like I was angry at the fact that, you know, she she passed, and the fact that I wasn’t able to spend as much time with her as I wanted to while she was in the hospital. So she had an illness. And she had to have surgery to basically remove some stuff in her spine, which ended up which they got out, but in a paralysing her from the waist down. So it was tough, it was hard, it was really tough time. And then when she passed, it sort of basically unleashed all this fuel in me that I said, Okay, you know, what, I’m not guaranteed to have you know, a life long into the future, who knows, when my time is up, I want to make sure that I get to a point where I’m, you know, I can make a decision in terms of my time, and I don’t have to like work, I can basically build a real estate portfolio that generates, you know, cash flow and passive income and, and do all the things that we love about real estate in terms of appreciation, so that I can get to a point where I don’t need to work, if I don’t want to, and then I can spend the time the way I want to do it. And so that really hurt, I would say her passing just provided the fuel to grow my portfolio from that point on. So I bought a bunch of property in 2012 and 2013 a lot in Hamilton, you know, with your help and, and then I started to move out to Alberta and bought a bunch there as well, again, not just with myself, but for myself and other joint venture partners who had brought on, you know, a lot of family and friends that I just, you know, they saw what I was doing, they were interested in what I was doing, and they wanted to get involved in the real estate market. And so, you know, I thought, Okay, I’m doing this, I enjoy real estate, love buying real estate, and so I ended up buying as well for them as well, in conjunction with myself, so

 

Erwin  

I laughingly enjoy buying because I showed you some scary stuff. Here,

 

Justin  

I remember there was stuff we would see. I was it was I mean, I loved the the West harbour area. Hamilton near the GO train station, and you know, Jane Street North and all the great things happening around the harbour as well. And I, there’s some stuff that you took me through, I remember there’s one on John Street 100 of you remember, but it was like, The floors were uneven, like it was tilted. So that it was like a bowling alley pretty much. But it was one of those places where, you know, there was a lot of work to be done, or it was a fixer upper.

 

Erwin  

There were lots of those in the area. There were lots of most.

 

Justin  

Like I bought, you know, so the first property that you helped me buy.

 

Erwin  

Okay, this is do this is whiteboard it. I do want to actually, can we start with the first the first Waterloo Student rental? All right, so we’re doing this for the first time, I’m going to whiteboard. Right? I want the lesson listeners to know, I think numbers are good. I think it’s just healthy that I keep telling people, everything’s relative. Right? But if you have no data, no context, and you don’t even know relative to what Yeah, right. And also just a bit of a history lesson. Okay, so we’re talking…

 

Justin  

And I would say like, yeah, so we can go through these numbers. And, you know, a lot of people are gonna listen, say, Oh, I can’t get those numbers these days, obviously, because I bought 15 years ago. But the main thing for me was, you know, in today’s context, you can look at today’s numbers, they’re gonna be a lot higher than obviously 10 or 15 years ago, but you can still make the numbers work in terms of positive cash flow. So you know, so we can definitely go through these numbers. They’re gonna they’re gonna sound like ridiculous, because they’re so low in terms of how much I bought it for but, but this is what that’s about real estate. But keep that in mind for like today’s dollars. It still works.

 

Erwin  

All right. Waterloo, and you’ve lived in Toronto. 

 

Justin  

I lived in Toronto.

 

Erwin  

You drove closer an hour? Yeah.

 

Justin  

Yeah, it’s been a little over an hour hour and yeah, or 15 minutes or 15. Yeah, that’s important. Yeah. And the reason why so I started off when I was, you know, so again, before I bought that first one, I was super motivated to buy something and I started looking initially in Toronto, but what I found was, so at the time, Toronto was IX, quote, unquote, X Red zip. And I couldn’t make the numbers work. So I decided okay, you know what? I know Waterloo I lived there for four years while I was in school. So invest in what’s new. Yeah. And so I ended up buying a student rentals. And this is back in 2007. I bought it for, I think it was like 240,000. Something like that.

 

Erwin  

What do you think it’s worth today? You can ask me that because I don’t.

 

Justin  

Well, you know what happened? I so I ended up selling that one. Back in 20. Oh, it must have been 2016. I think 2016 2017 Where what happened was sort of the where the location was, it was on a major street close to university, like within a walking distance to both Waterloo and Laurier. And the person who approached me about buying it was a developer who had been basically assembling land part like land parcels because he wants to build a big guy. Yeah. So I ended up sitting down at a coffee shop with him. And we negotiated or hammered out a deal. Yeah, so I sold it. I’ve sold it, but I sold it for basically, at the time, I wanted more than a million dollars. So I sold it for like, 1.1 2017. Yeah, because for me, it was like I knew at the time that…

 

Erwin  

We didn’t even talk about this. This was 1.1. Yeah. This is appropriately.

 

Justin  

So he I knew at the time that so he had already picked up other properties. And it was actually the planner. So the city planner that got in touch with me saying, oh, like basically there’s this planning application going through. And you know, you may want to think about selling because this developer basically is looking for land. And I know he needed it because if he didn’t get it, he would have had to build an underground underground parking. Oh, love is really expensive, which is super expensive at the time. Yeah. So. So for me, it was like, Okay, I knew that, you know, in terms of leverage I had, and I saw I had in my mind what I wanted, in terms of a price and he met that price. So you know, back when I bought it for 240. Like I put down I put down $48,000.

 

Erwin  

And then renovations?

 

Justin  

Renovations wise, I didn’t have to do much. It was like it was basically a five bedroom student rental property. There was no upfront renovations. I inherited the tenants. And then, you know, over the years, I remember spending some money to renovate. You know, do some put some new flooring in the kitchen. I mean, think I did work in a bathroom really like in terms of a major renovation at the time. It was it was more money necessarily. Yeah, it was maintenance. Okay.

 

Erwin  

And what did you rent it for? 

 

Justin  

Well, back then. I mean, this is probably I probably rent it was like, I don’t know how to save 400 a month. 350 a month. Okay, back. five bedrooms.

 

Erwin  

So four times 400, 2 grand. So it’s two grand rent, and then curiosity market rent today.

 

Justin  

Well, so I still Yeah, I own other rental properties, still rentals in Waterloo. And I would say like the last one that I rented. So I bought a place last year off market as well. And I rented it for 620 room. That’s really good. Yeah.

 

Erwin  

Even with all the competition.

 

Justin  

Yeah. You know what I found? I found that. So in Waterloo for exam, for example, there was a lot of people building these multiplexes. And so there’s the big ones. Big ones. Yeah. Big ones. Huge high rise. High Rise.

 

Erwin  

Yeah, like 30 Storey, how big are they?

 

Justin  

I don’t really, I’d say like 15 stories, maybe 10-15 stories. So big water supply? Yeah, lots of supply. And there was a time where I was like, oh, you know what, like, are people going to want to be in houses. But what I found was that a lot of people that live students, they actually still love houses, they want houses, because if you live in these big multiplexes, you know you’re sharing your space really with like, a tonne of other people, you don’t really get there smaller as well, like in terms of the size. So you don’t really get as far as the bedrooms are smaller the bedrooms, and even the units themselves, right, the units are still probably again, for five people, but the units are smaller than on the backyard. Really. It’s just really not a space that they can call home home. So I found that the demand for houses was still quite strong, even when all these most

 

Erwin  

of them are very strong. Yep. Fascinating. All right. What do you think you cashfloat When you originally there’s a fantastic rents for this purchase price?

 

Justin  

Yeah. So what did I cashflow? I couldn’t I mean, it’s been a while and I sold it. 

 

Erwin  

Ballpark. So 100 bucksa month, or just how much trouble 100 bucks a month? Maybe. 

 

Justin  

It’s probably more than that. It’s probably one that based on like, and that’s one of the reasons why I decided to just do rentals as well, because of the better cash flow. And I mean, yes, you know, a lot of people are gonna say, Well, this, it’s definitely more maintenance. And it can be in terms of like, more wear and tear on the property right? Students are not going to necessarily take care of their property, as well as let’s say, a family or a couple or whatever. But, and what I’ve learned over the years is that I think it’s super important to obviously screen and make sure that you put in a group that you think is going to be responsible. And so I would say, I’ve gotten better at that. We Yeah, like at the time. I mean, you have there probably was more maintenance wise, like it was like five guys living in this house. So we probably cashed a lot about three to 500 a month. 

 

Erwin  

What do you think it’s worth today? If it still existed, and it wasn’t a development property?

 

Justin  

Today, in today’s dollars, I would say, like, so I have another five bedroom student rental, not too far from it. And I think the value on that one’s about, you know, I’d say like, 657 Easy,

 

Erwin  

And you’re dealing with rental licencing, or you’re not? 

 

Justin  

Yeah, and Waterloo, thereis a rental licencing programme that kicked in, I can’t remember how long ago but yeah, there is. So it’s basically, you need to go through a couple of different hoops every year to get that renewed. It’s not that big of a deal. You know, there’s it’s to me, it’s like it’s a it’s a cost of doing business, the city. I mean, they don’t even it’s funny, like they don’t even it used to be before the current licencing requirements, you would have to get a whole bunch of other things done, including, let’s say, your so yeah, and this sorry, as part of the current rental licencing requirements, they you know, they want you to do so like your gas fueled appliances, they want you to get that check your furnace and your I guess your hot water tank, fair. Fair, fair. Obviously, they want to make sure that are you attest to doing smoke detector checks every year, which I do things like that. So it’s it’s really to me it’s it’s a way for the municipality, I guess to control the lace, like what housing is going in, but I just see it as its cost of doing business.

 

Erwin  

It’s coming to Hamilton. And already through the pandemic, a lot of people already sold law landlords already sold or they rented out to families. And then you know how families are they don’t they stay there, they lease the renting under a year or two year old rent, they’re probably stay, I don’t know how long, they’re gonna stay for a while. And then what I’m seeing in Hamilton is that’s causing a lot of pressure, because the demand is back to pre pandemic level supply is way down of housing. And then licencing is being rolled out in Hamilton around the student areas, and they’ll cause more landlords to sell. So that like, I’ll be the only game in town, not the only but yeah, and then I maybe I can see 620 rents per room, which would be like more than a 10% increase substitute students.

 

Justin  

But it’s still relatively cheap compared to what even some of the condos or multiplexes around the university are charging, like, on the newer stuff they’re getting, they’re easily, you know, charging 750 $800 a room. And a lot of that I think is tailored towards, let’s say international students that are coming in, and you know, and, and they have like international parents, they’ve got money, they’re sending their kids to school, or whatever. But so I would say like, you know, I’ve been trying to keep it as close to there as possible. But at the same time, there’s a bit of a gap, because it’s not as luxurious, let’s say as, as a high res.

 

Erwin  

So if you’re a cashier three to 500, a month before, you would increase by 1100 or so. Based if you kept the house yeah, if I kept the cash flow would be ridiculous. Yeah. Right. And then just some quick math, you know, assume you sold it today for market value. Let’s use 650. Let’s be conservative, I like being conservative with all my numbers, you paid 240 for it. That’s a gain of a capital gain of 410. You only put down 48,000. Yeah, that’s eight and a half times on your money. Eight and a half times return on your money. Nothing was a good idea to buy this one. Alright, so let’s do another one. Let’s talk about a Hamilton property share. Which one do you want to REIN or…

 

Justin  

Do you wanna talk about? Awesome? Sure. Or yeah, why don’t we talk about showing the auto railway if you want.

 

Erwin  

I like them all, but just kind of funny because you and I met at rain. And then we went looking for properties. And actually, I don’t even know how we came to the decision that we would look at West Harbour.

 

Justin  

Well, you know what I remember. So when we started looking together, you were showing me stuff on the mountain. And then I mean, in hindsight, that would have probably been goodbye as well, because of, well, they’re all good. They’re all good. But I mean, at the time, I It’s funny, like I wanted, I didn’t even at the time. I wasn’t necessarily convinced that, you know, suburbs family. Yeah, the suburbs was the way to go. So I was more focused on downtown. That’s why we decided to look downtown where like the West harbour area. And there’s a lot of different things that were

 

Erwin  

Very up and coming is very up and coming. Had a long way to go though. Leslie fair.

 

Justin  

Gentrifying

 

Erwin  

Gentrifying, which means it was pretty ghetto.

 

Justin  

It was like it was like you can see there’s pockets of like, I don’t know is yeah, there’s good. There’s good and bad area. But you could tell us on the rise. We’re talking to 2011 this is 2011

 

Erwin  

And this is Hamilton West Harbour. Yeah, that’s So for those who don’t know what, Hamilton West harbour, we’re just northwest of downtown along the shoreline, which probably want to talk about to talk about railway or race Street. 

 

Justin  

Sure. Yeah. Yeah. So let’s talk about Ray,

 

Erwin  

Because that is the first one I helped you with. Yes. The very first one. So let’s let’s paint a picture. It was a power sale. Yes, it was a power of sale. That means so for the listeners benefit, the bank is selling it. Yeah. So someone failed on a mortgage. The bank is selling it. We don’t see those many. We don’t see that much these days. With such a strong economy and housing prices so strong. So yeah, in the house was rough. I swear there were bugs during the inspection.

 

Justin  

I don’t remember the bugs. I wouldn’t be surprised. I remember in the basement, there was some water. There are some water issues in terms of like getting up the drywall and so we had to replace you know, rip that out. But it was rough. Like it needed some work. So I bought it for around 150. Yeah, it was about 1/5 the 156. And then I had to spend Kohut about 25,000 to get it ready. So I think part of it was doing some electrical work. I think it had some knob and tube. It was doing some work on the kitchen. It was doing some work in the basement where like, basically created like, put it down your flooring, framed out the bedroom, I think.

 

Erwin  

In the basement, I believe so. Yeah. You haven’t been back in a while. I don’t know. downpayment 20%. Yeah, that’s been 20%. Now what were you thinking? Like, how did this compare to the other stuff you bought? Because this was not like a condition property at all. And I know what 25,000 doesn’t sound like much today. We were joking before we were recording. That’s a kitchen as a rental kitchen. Not even nice kitchen. Right? Well, this rental today would be a while ago. Electrical alone is usually around 10,000 In these days alone. Yeah. And you’d have flooring pulling out or five. You put up some walls pulling over five. Did you do some bathrooms and kitchens this whole nother place neither work.

 

Justin  

You know what the main the main bathroom, which was on the second floor? needed? You know, it was okay. It was not bad. I didn’t have to do I didn’t have to do too much in there in the main bathroom. In the basement bathroom. It was it was in the basement bathroom. It was I had to do a little bit of work. Not much again.

 

Erwin  

Your two bathrooms not common for this area. 

 

Justin  

Not very common. No. I mean, the basement bathroom was wasn’t the greatest. But it was a bit it was a second bathroom. Which again, was not very common. Like I’ve got which is a big bonus, which is huge bonus.

 

Erwin  

And then what’s your rent for? What do you remember your original run?

 

Justin  

I don’t remember the rent

 

Erwin  

1300. I’m gonna guess. 1300?

 

Justin  

Yeah, I would say the original rent. I can’t remember. Like it’s up to call it 1700. Now. Oh, which is still in the market?

 

Erwin  

What do you think market is?

 

Justin  

I don’t know. I just know it’s under market.

 

Erwin  

It’s over two, three, markets should be over too great. For the listeners benefit because because the rental housing markets cooled with interest rates going up the rental markets heating up. So yeah, so that’s current rent. And you could probably get three $400 more. How long’s the tenant been there?

 

Justin  

There was a turnover, probably in the last like five years.

 

Erwin  

Five Year Old rent. Right. And we think it’s worth today.

 

Justin  

I think it’s probably worth about two we talked about this, I think before, but I think it’s probably worth about at least probably similar. Probably similar. Yeah. 650.

 

Erwin  

That’s just that’s similar. It’s not even similar. Very similar last year. Waterloo property. Yeah, 650 in the spring and target and a lot more. Yeah. But you’re not going to cry if you sell for 650. And so sorry, I’m laughing because I look at these numbers. So you have a 650. You paid 156. You also paid for a Renault? 25,000. Right. So you return on your. So we add together? Sorry, 650, less 156. That’s almost four. That’s almost 500,000. All right. I don’t need to go much further to notice there’s a rocking investment. Add together your Reno plus your down payment is 56,000. Your return is 8.8 times.

 

Justin  

Well, you know, and that’s the thing. Like I think that’s the beauty of real estate, right? Like, what if you think about how, if you imagine, you know, house prices, at least doubling over a 10 year period, let’s say so, it’s not a matter of necessarily trying to time the market of Oh, like, it’s really, you know, yeah, that’s the phrase, right? It’s not timing the market. It’s time in the market. So putting your money to work for you, so that you can allow allow the market to do what it’s done. And you know, if you think about what’s happened recently, over the last couple years, I mean, it’s kind of it’s stupid, it’s unsustainable, how much prices have gone up, and things are going to correct a bit. But that’s okay. I mean, if you hold it for the long term, and for me, it’s like, it’s always been a long term hold. Like, I wasn’t necessarily interested in flipping houses. 

 

Erwin  

Thats a lot of work. It’s this is already a lot of work. Yeah, yeah.

 

Justin  

It’s a lot of work. And I would say like, for me, it’s like, it’s so hard to buy. Right? All right. So why am I selling? You’re never gonna find this again? No, you’re not. And I think even today, like even the stuff, you know, I get, like, if you’re trying to create income, that you you flip, so I get that if you need the income. But for me, it’s like at the time, like I, you know, I was working full time job, I didn’t necessarily need to liquidate or sell these properties to get cash flow. But it’s there when I went in. If I ever want to sell I can I can sell it. And whenever lock in the gains.

 

Erwin  

What do you think your parents would think about all these properties we got now? 

 

Justin  

I think they would probably I mean, I think my dad, would, I think you’d be happy. Obviously, I think he feel he was a big influence in it. And when he was in terms of developing that mindset to getting property and building it, so I think they’d be I’d be happy to see it. They probably they probably think like, Well, okay, like, how are you doing all this? But But I think they’d be happy.

 

Erwin  

Or we probably want to invest some more money with you. Oh, another property? I was talking about Balsom.

 

Justin  

Sure. Yeah. So that one is 

 

Erwin  

This is the truth about real estate investing its not all sunshine and rainbows.

 

Justin  

Like anything, these are the types of properties where it can scare a lot of people away. So this property is a triplex that they helped me buy it so we bought it in and I bought it with a partner, JV partner, so a friend or family or family. Yep. So I bought that it was a we bought that in 2012 for

 

Erwin  

Legal Triplex.

 

Justin  

We got legal while legal nonconforming trademark before we try blogs. Bar for 243,000. Oh, no, this is not in the West Harbour. This is away from us harbour but

 

Erwin  

This is east. Lower city east end. Yeah. 

 

Justin  

And so I spent about 35,000. To do but do a bunch of work.

 

Erwin  

It was a triplex. Yeah. Three kitchens, three bathrooms. Yeah.

 

Justin  

And so I think I mean, I don’t know if we necessarily want to run through all the numbers, but like, the this is a property I would say, was probably in terms of terms of like horror stories of like, what could go wrong? This was one of them. So, you know, when I bought it, it was it’s fine, it’s good. But there’s a period of time where probably about five years after I bought it, I thought about selling it, because there’s so many different things going on at the property at will. And it sort of all hit at once. That it’s like, I just thought that this property is just a big headache. But so what happened was, you know, in 2017, and I had a property manager, you know, manage managing these properties and Hamilton

 

Erwin  

Over all your property history. Yeah. Even your Waterloo ones?

 

Justin  

Waterloo ones I still I still take on myself. But at Hamilton yet, there’s an I’ve got a fantastic property manager and Hamilton who deals with that now. But what happened was in 2017, I had another previous property manager. So this particular property, like there’s so much stuff going on, like where what happened was, I think the tenant in the first ground floor unit, stopped paying rent, we had to evict them, they ended up and I and that took a while to do that. While we were trying to do that the and so this is a tenant actually where they had like, so we found that after the fact once they were eventually evicted, they had like 15 cats in the place. So we you know, whatever, department manager to call him like SPCA, there’s so much like crap and junk left at the property. It’s funny, I was looking back at some pictures that were sent to me from my property manager. And it was like, this place is like it was their hoarders. hoarder. They had a tonne of cats, right. Was this inherited tenants or? No, these are tenants that were put in? Oh, crap. So I would say, you know that. 

 

Erwin  

Sorry, how long were they there for?

 

Justin  

How long were the tenancy for in terms of before we got them out?

 

Erwin  

Yeah. Or even before they started causing problems.

 

Justin  

I mean, it’s been a while but like they were there for? It’s been too long, but it probably like a number of months before they start causing problems.

 

Erwin  

Okay, so you can didn’t have much notice that they were hoarders and cat people. 

 

Justin  

And then what happened was, once we got them out, there was so apparently, there were these unauthorised occupants that were also living in the place at the time with so they were not with them. They were not on the lease. And so again, it was a process of trying to get those people out even though they were not on board. He’s, no one is paying rent, obviously. Then when we eventually got those people out, there were some squatters that broke into the place, and damaged windows and damaged things. And they started living there for a while as well. The same people are, this is a new group, I can’t remember it was the same people like the same unauthorised people or if it was just I think people who just broke in a garden. So that was all going on in the ground floor.

 

Erwin  

This is the east side of the lower city.

 

Justin  

The second, there’s a period of time where I think what happened was the unit became vacant. I don’t know if it was issues with the ground floor because people were not getting along, or they decide to move out. I can’t remember, but…

 

Erwin  

 They were dog people not cat people.

 

Justin  

Maybe. And so that was vacant, and there was a bedbug issue. So there was a bedbug issue that was trying to, you know, that we’re trying to get resolved. So while the you know, this is all going on the ground floor, the second floor was vacant as well. And there was only one other tenant living on the attic, I guess, the third floor. So that was all going on, we eventually did get rid of the you know, the people on the ground floor. And then there had to be some work done to renovate the place to get it up into like, cleared all the junk, renovate the kitchen, kitchen, in the bathroom, as well. And what happened was through the towards the end of that year, I got sued at the same property because what happened was there was some sort of incident where I guess someone fell off like this, the staircase, the exterior staircase, and they got injured. But what happened was I got served this, whatever Statement of Claim, but it was for an incident that happened like two years prior to that. And so they sued me. And so like all this was happening around the same time. And so what happened was I eventually ended up terminating the property manager and took over the property, basically, during the Christmas holidays in 2017. Get over yourself, I took it over myself home, because I wanted to really deal with it myself and just see I mean, so I’m not I’m not a person that is scared away from kind of this stuff. Like, I just see this as it’s an opportunity to grow. And so I was I took it over with the whole intent to just try to stabilise the property myself, before transitioning it to another property manager who like my current current property manager, who takes great care of it now.

 

Erwin  

So who’s your current pm? Just the first name because we don’t share.

 

Justin  

The current one is the same one. I think it’s a former police officer.

 

Erwin  

Yeah, let’s stop there. Because we don’t want anything to get out. We save it for ourselves and for our clients. Right, we need to prioritise. Yeah.

 

Justin  

So yeah, so to stabilise the property, wash, you know, so what happened was I ended up finding a tenant to rent out the second floor, they were actually an issue. So I even though I screwed up, did everything like that, but they ended up moving out, I think within six months after the fact because they eventually stopped paying, but my current property manager dealt with all that. Anyways, so that was I would say like, stuff like this happens when you buy rental properties and and things can go wrong. It’s not all unicorns and rainbows like people think, oh, yeah, like, you see, like great appreciation or great cash flow? Well, that’s the good part of it, there can be the bad parts of it. And so there was a period of time where I thought about selling. I’m glad I didn’t, because I look at the value of the property today. And the fact that, you know, has great tenants in place today. And it’s very stable property. But it made me realise like, I think until you go through it, there’s that inclination people get the urge to like when things start to go wrong. Like your first instinct could be to Oh, my God, like, I want to exit get rid of this, right? Because you kind of want to get rid of the pain. It’s painful, like you’re not bringing it in come the property, you’re still carrying it with a mortgage, you’re still having to deal with issues in terms of like, whatever can pop up. And yeah, so but ultimately ended up staying the course and resisted my urge to sell. And yeah, thankfully I did.

 

Erwin  

I remember you telling me you’re getting sued and stuff. We talked about this, right? And I’m imagining I made the introduction to yes to the property manager. Yeah. Yep. Got it. So as soon as the game ahead, should we sell the property? Should it be listed? Or should we be listing it it would be all sunshine and rainbows? Because at the ask, what is it rented for now? What is your rent paid to 43 you rent out for 35,000 And then so what are the current rents?

 

Justin  

Yeah, current rents today our current say are three $300.

 

Erwin  

How old is that rent?

 

Justin  

That is Yeah, so what’s which pay for Good lord? Yeah, so I would say the know the person on the third floor. So they are way under market moving original. They’re the original 

 

Erwin  

Your inherited them? Oh, who’ve been there forever.

 

Justin  

Yeah. They’re just what they gave notice to their move again. Oh, no way. And so I’m going to be spending some money to renovate the place.

 

Erwin  

Like 35,000 to the original budget. I laugh because the inflation on renovations is just insane. Right? What was the attic paying?

 

Justin  

What were they paying? So it was a bachelor suite they’re paying is like six or $700?

 

Erwin  

Oh my god would charge for a bedroom. And then what do you think that market will be after that?

 

Justin  

I think it’ll be about 1400. Or sorry, no, you don’t know. It’s a bit less than that. It’s a bachelor suites not very large. I think I’m expecting 12 1200.

 

Erwin  

Double. Are you glad you didn’t sell? Yeah. Yeah. I don’t remember that. The conversation we had at a time. But usually my conversation is not not to sell. Right. Tenants are temporary. Even though it feels like it’s forever. The property is nearly forever. It’ll burn down at some point. Nothing lasts forever. But it’s sold break. It’s century home and last for a while. Yeah. Hello, lieutenants. It’ll likely outlive us. 

 

Justin  

Yeah, yeah, I think that’s the thing like and especially for me anyway, like, my mindset is always been more long term in terms of real estate investing. So I was able to see past those current troubles, but I’ll admit, like, there was times where I was just like, I just want to throw in the towel and just get rid of it. I just want to get rid of this problem.

 

Erwin  

What do you think this house is worth? Now? Let’s legal nonconforming triplex.

 

Justin  

I think it’s probably about 650s. That’s it. Although we did talk about this, like a few months ago, maybe a little bit more.

 

Erwin  

Maybe a little more duplexes, sulphur, a million these days, legal duplexes. But this is the centre, it’s a fair amount of income. Yeah, but Yeah, but you’re in no hurry to sell. So you’re onto it for a while.

 

Justin  

Yeah. And that’s the thing, like I think, you know, especially with the market where it’s going, yeah, there’s a bit of softening. But now, but it’s going to, in the long term, the long term fundamentals of the market are strong, right? There’s still tonnes of immigration into, you know, not only Canada, but into the GTA area. And people need a place to live in, they’re not building enough supply. They’re not, there’s not enough homes to support the amount of the people population growing in the immigration coming into the country. And so I just think like, that just bodes well for the long term fundamentals of the market in the GTA. And so yeah, expected to continue to grow with belly.

 

Erwin  

And you’re not just like a regular Kool Aid drinker, like your work actually gives you access to a lot of data, does it not? In terms of like, what the community economy is like?

 

Justin  

Yeah, like we? Yeah, I’d say we see a lot of, I would say data, I would say data in terms of rents, like we see strengthening of rents across the country, like, in different provinces. You know, there’s some pockets that were things are not as strong.

 

Erwin  

Can you share that where that’s not strong? 

 

Justin  

Yeah. So I would say like parts of, you know, let’s say Edmonton downtown is not as strong but like, so I have property out in Alberta, myself, where in suburbs, like things are going really well, like, we’ve been able to

 

Erwin  

Sorry summarise with which city? Oh, sorry. Sorry, sorry. I cut you off. Sorry.

 

Justin  

Yeah, it debited. So what we’re seeing is that, I mean, I would say in the Alberta economy can go up and down. I mean, it’s, it’s still tied to resources, oil and gas. And what we’re seeing is that in, let’s say, in Calgary, things are very strong there. And we know that there’s typically a lag 12 to 18 month lag between what we see in Calgary to what we see in Edmonton, but at the same time, we’re seeing, you know, some growth in Edmonton suburbs, in terms of rents, like on some my properties, while on properties, where we’ve been able to on renewals, increase the rents by, you know, between 50 and 75 bucks. And we haven’t seen that years, like it’s been relatively flat. So it’s a nice thing to see. And the good thing about, let’s say, Alberta, in general, is that, in contrast, Ontario, Alberta doesn’t have rent control. So you can rent, raise the rents, you know, to anything you want, basically, once every 12 months. Whereas the material you’re capped at your read guideline, increase, The urge is puny,

 

Erwin  

Just need the government to maintain because before we’re recording, we’re talking about New Brunswick, for example, where their government implemented rent control for the first time for 12 months, and then my money is they’re gonna extend it. That’s, that’s what that’s how I bet.

 

Justin  

Well, I think, I think in general, like a lot of, I mean, a lot of governments are succumbing. But like, there’s a lot of pressure, I think, you know, you think about all the headlines these days in terms of real estate, like how housing is unaffordable, and a lot of people a lot of politicians think that the way to solve that is to on the demand side, not necessarily the supply side, they’re not really to me, in my mind, like addressing real issues on the supply side fast enough. You know, they make all these promises, but, you know, in reality, it’s not happening. And so you know, One easy way to appease to your voters is to say, oh, yeah, we’re gonna put in rent control, because we’re going to keep a cap on what we can, you know what landlords can raise their rents for. But in the end that ends up happening, like hurting your supply side, because then you’re not even, you know, let’s say even developers are not even as motivated, they still have to make their numbers work, they still have to make their performance work. And so by putting that in place, you are artificially suppressing the returns and therefore causing supply, like to decrease to decrease like you’re not adding to new supply. So it’s just shorts.

 

Erwin  

Because at a minimum landlords want spend on maintenance, they’re gonna look to work, they can cut costs, if they can’t raise rents. So because the Yeah, inflation is not real, right?

 

Justin  

Yeah. It’s only like six or 7%, right?

 

Erwin  

Walmart, Walmart, in their earnings report, they reported that their food costs, Walmart’s looking, you know, even like, largest retailer in the world, I believe, at least in the States for sure. Like their food costs are up 10%. Right. 

 

Justin  

Yeah. And I wouldn’t be surprised to see, like, in terms of food inflation, like you’re gonna see that continue, because I think I mean, what’s happening with, let’s say, in Ukraine and Russia, that’s gonna create an issue with, you know, the fact that I think Ukraine is a huge exporter of let’s say, wheat and other other commodities. So that’s going to work its way through the system. The thing gas prices like so gas prices are at I have an electric car. So I don’t even feel that pain. But it’s, you know, gas prices are through the roof. And that’s going to feed its way through the system in terms of, you know, it’s it costs more for trucks to transport goods across the country. So that’s going to work its way through this.

 

Erwin  

Our very farming equipment. It’s an everything. And then in India, recently, they stopped exporting their own meat. So I will work its way through this system. Can you tell us more about the Edmonton properties? What year did you buy?

 

Justin  

Yeah, so I started I bought basically, some of those I mentioned properties in 2012 and 2013. That’s when the bulk of it happened. Oh, you’re busy. Beaver. I told you. Yeah. 2012 is basically, you know, after my mom passed, it was just it unleashed the theory.

 

Erwin  

What did you buy? What kind of properties were these?

 

Justin  

You know, what I found? So my strategy in Edmonton was really, it was different than it wasn’t Hamilton, let’s say. So in Edmonton and surrounding areas. Basically, what I did was I went to pick up newer properties, not necessarily the ones that are older, like in Hamilton. Yeah, there’s century homes, there’s a lot more in terms of maintenance. So in Edmonton and Leduc, and other surrounding areas, what I did was I wanted, like, cookie cutter, like starter homes, so that were newer, that basically were built within the last, you know, five to 10 years. So very, not as much maintenance from that perspective. So at the time, yes, I would have bought a lot of them, basically, they were like 2017 to 2020 10, like year builds, or sorry, 2007 to 2010 year builds, then they would be the semi detached homes that I would pick up for less than 300,000. And that I would, right, I mean, this was before the oil crash, but I would rent for anywhere from, you know, 1600 to 1900. That was sort of the feel of how they were one. That’s that’s how I did it. I just said, Okay, I bought the first one. And I remember so the first one, I ended up flying out to visit Edmonton on civic, it was a civic holiday weekend. And so I ended up meeting up with a realtor who helped me in buying a lot of these places out there. But I met with a number of Realtors at the time, met with a number of property managers, so I could try to get comfortable with the market and the rents and you know, the areas to go the neighbourhoods that I want to be in. And, you know, I bought, I think I ended up putting up offer pretty much not too long after that visit, and then ended up just buying more from there. Because that was pretty much I wanted to replicate a system that I felt comfortable with. And so it was like, okay, semi detached, less than $300,000 rent for you know, 1600 to $1,900 it cash flow well. So the cash flow is probably anywhere from 100 to 300 hours after you know, your operating expenses and after your financing. And, again, yeah, I did this either on my own or with JV partners.

 

Erwin  

And then fast forward today. What would be semies be worth and what’s the rent today?

 

Justin  

So the thing is, I would say a lot of these semis haven’t even appreciated too much from the time that I bought them. Oh, so the good thing in Ontario is that we’ve seen like all this run up in prices, and the values just take off in Alberta or Edmonton. Let’s say I’d say you know, we went through when I bought 2012 2013 It was like pre oil crash.

 

Erwin  

So you’re bought just before a previous crash though. I bought before a financial crisis you bought before starting the financial crisis.

 

Justin  

But I would say like knowing the lead up to the oil when oil was like 100 dollars barrel like prices were had gone up. And then I bought, and then they kind of came down after the oil crash. And then I think they were working with its way back up. And then the pandemic hit. And then it’s, you know, it came back down. And then now so I would say like they’re not, you know, what I would estimate these places to be? They’re not even more they’re marginally up from what I bought them for. So maybe they’re high, two hundreds to low three, hundreds, nothing.

 

Erwin  

So almost even, it’s almost enough. So after with all this inflation.

 

Justin  

Yeah, which so that’s, I would say in terms of, I wish things took off there the way it did hear. So that’s the one thing I would say in Alberta. It hasn’t been like from, you know, the reality is like, appreciation has not been the way it has in Ontario. And so even though cash was good mortgage pay downs, good. Depreciation hasn’t been there. But that’s fine. Again, because I’m not looking to sell these, or I’m looking to hold these long term. And even if it doesn’t, even if it doesn’t appreciate, it’s fine. At the end of the day.

 

Erwin  

Do you know if builders are selling for around the same price now?

 

Justin  

I don’t that I don’t know. I don’t know. I would I would think you know, it’d be one of those. It’s funny because like, I find inadvertent like when a ver like just these new like subdivision just pop up like anything like they’re like mushrooms, they’re just all around the Ring Road area. And it’s always because it almost doesn’t seem as though like in the GTA here, we’re kind of land constrained in that we’ve got the greenbelt and protected areas. In evident. It’s just, it just proliferates like it just there’s more housing that just grows and grows. And there’s nothing to really constrain it interesting, which is maybe one of the reasons why.

 

Erwin  

They had to still do infrastructure, infrastructure restraints. Yeah, they do. But it’s just roads, hospitals, schools. sewer.

 

Justin  

But we just haven’t seen I don’t think that like you look at it just doesn’t have doesn’t seem to have the same land constraints that maybe would support or higher growth,

 

Erwin  

But just kind of magic product magic here in the GTA, or Golden Horseshoe. Yeah, we’re also the lake on the west side we can’t build on Right. Right. Those are fascinating stuff. Justin, thank you for being so open. Anything I’m leaving out that you want to that we want to cover? Oh, yes. To talk about the R word. We’ve had discussions around not needing to work anymore.

 

Justin  

Well, I think you know what, for me, it’s always been one of those things where, like, yes, starting 10-15 years ago, my view has always been, I want to build a real estate portfolio that generates, you know, passive income. And we all know that real estate,

 

Erwin  

Not completely, not necessarily passive, but it was a great story to show it’s not.

 

Justin  

It’s not, but at the same time is generating cash flow, or an appreciation, appreciating in value. So that my whole thing was like I want to be able to at a point in time, be able to be financially free that I can make the decision of if I want to continue working or not. And so, you know, I can’t see myself like in terms of like attritional retirement, where it’s like, oh, you’re gonna sit around and do nothing all day, and, you know, the lounge on a beach or whatever. But I’ve always made sure that my long term mindset was okay, I want to get to a point where I can make that decision. And, and I have the freedom and choice to make that decision. And think that’s ultimately where I see. I mean, even the young people today, it’s funny, like, I’ve talked to a number of young people where recently, like, they’re looking to get their, their first investment properties, right. And I say to them, like, you just have to get started with one. And even though prices are like where they are today, compared to where they were, like, 1015 years ago, you can’t even look at that, that’s, it’s all relative, right? If you can make the numbers work today, you get it, and then you, you know, 10 years from now, you’re gonna look back, you’re gonna be like, Oh, I wish I bought more or that was cheap at the time. So it’s ultimately trying to put yourself in a position where you can have full control over your time, which is our most valuable resource. Like, it doesn’t matter. Like, you know, everyone’s hung up on like chasing dollars or money. Time is your most valuable resource. And you can’t get that back. So, you know, in terms of the R word, I think it’s really getting myself to position which I think I’m, I am in where I can choose to continue doing what I do. And as long as I love what I’m doing, I’m gonna keep doing it. And that’s ultimately what you should be doing, like people. I’ve always found, like, you meet people where they’re in their jobs or roles where they don’t enjoy what they’re doing, and they’re doing it. You know, if you’re working somewhere where you’re not enjoying what you’re doing, like why do something that you love to do, and find if you have to make sacrifices along the way where you’re not necessarily enjoying what you’re doing. Make sure you get like hard assets or income producing assets where you can generate, you know, that additional stream of income and build that up so that one day you can, you know, walk away from that job that you don’t like or whatever so, but as long as I continue to love, you know, to love what I’m doing, I’m gonna keep doing it and and ultimately that’s That’s my goal

 

Erwin  

in your corporate job. How’s, Are you working from home more now?

 

Justin  

It’s a hybrid model. Yeah. So I’m working from home three days a week and working in the office twice a week. And what was it before the pandemic? pre pre pandemic? is full time in the office?

 

Erwin  

Oh, yeah. So you actually have way more freedom than you had before?

 

Justin  

Yeah, I would say in terms of light, and I love it. Like, I love the fact I think the hybrid model is the way things are gonna go for a lot of different industries. I mean, it’s not gonna work for everything, but the flexibility, I think, it’s funny pre pandemic, you know, the expectation was, like, you know, it has to be in the offence, like, that’s where it’s all done, the pandemic forced people to pivot immediately. And, or for a moment, it still works, like, and so I think, you know, more and more businesses are going to continue using this hybrid model want to, you know, retain their people and, or to, to attract their people, because I think a lot of people are going to be expecting, you know, these hybrid type of arrangements. And I think it makes sense. Like, I love you know, there’s times of the office where yeah, there’s absolutely a need to have like face to face conversations and, and be the office I think, there’s definitely a place for that. But there’s also definitely a place to, you know, it’s okay to work from home, you can still get you know, all you need to get done at home. And this thing is you can I love the fact that you know, I’m home for there’s no commute that I can be home for dinner with my kids and, and family. It’s nice. It’s nice.

 

Erwin  

Yeah, you can almost argue work is life is better than ever. There is a virus out there that’s trying to kill us all. But I’m joking, and it’s not trying to kill us off kills doesn’t feel that many people these days. But yeah, even your triplex you were probably talking about eight times return on your money, maybe worth all the trouble. Now after I got past it, yeah. At the time. Justin, thanks so much for doing this. Any final words? where can folks on the podcast?

 

Justin  

Yeah, so I would encourage parents who are listening who are looking for a resource to raise money, smart kids, they can go to money, dad, podcast.com. And they can find me there. Basically, the podcast is really meant to help you have those conversations with your kids, I bring on different guests every week, whether they’re educators, authors, small business owners, people that are that are out there really trying to have conversations about money with their kids. So whether that’s normalising conversations, I think a lot of people are not necessarily having enough conversations with their kids about it, whether or not it’s because money is still a taboo subject in the home, or they don’t feel comfortable talking about money with their kids. It’s one of those things where, you know, the sooner that you have those conversations, the better. So I think first level is really having or developing that financial literacy amongst kids. And the best time to start is when they’re young, right? Like, there’s a tonne of adults and people that are just getting to it once they graduate, or once they’re starting to work or whatever. And to be I mean, I think that’s good. But I think the better option is to start them when they’re young, when they have time on their hands when they you know, learn the power of compound interest and what you can do in terms of records of time and time to mark its time in the market. Right. And so I think the other thing is, like, even just from a compounding perspective, if you teach kids early about whether that’s, let’s say investing, they that changes also their outlook on consumption, like if they think about, okay, I can invest my money and earn a return on my money, then the, you know, maybe consumption or having the toys and all this stuff is not that dissimilar that important to that, right. So I think building habits at an early ages is super important. And you know, that’s one thing that I’m trying to do with my kids. And one thing that I’m just trying to help other parents do for their kids as well. So So yeah, so people can look me up on money, dad, podcast.com. And, you know, encourage everyone to subscribe to the podcast, spread the word talk, you know, if you like you enjoy the episodes, talk to your friends and share with them and just get the word out. I think, you know, people, kids will be in a better place and set up for a better financial future by having those conversations and learning about money.

 

Erwin  

Amazing. Probably stop it there. Thank you, Justin. Thanks for coming on the show. For coming out. 

 

Justin  

Thanks for having me. And yeah, it’s fun.

 

Erwin  

Before you go if you’re interested in learning more about an alternative means of cash flowing like hundreds of other real estate investors have already, then sign up for my newsletter and you’ll learn of the next free demonstration webinar I’ll be delivering on the subject of stock hacking. It’s much improved demonstration over the one that I gave to my cousin chubby at Thanksgiving dinner in 2019. He now averages 1% cash flow per week, and he’s a musician by trade. As a real estate investor myself, I got into real estate for the cash flow, but with the rising costs to operate a rental business, it’s just not the same as it was five to 10 years ago when I started there were forget the cash flow reduces your risk. The more you have, the more lumps you can absorb. And if you have none are limited cash flow you’re going to be paying out your pocket like I did on a recent basement flood at my student rental in St. Catharines. Ontario. If you’re interested in learning more about secure for free for my newsletter at www dot truth about real estate investing.ca Enter your name and email address on the right side. We’ll include in the newsletter when we announce our next free stock hacker demonstration. Find out for yourself but so many real estate investors are doing to diversify and increase our cash flow. And if you can’t tell I love teaching and sharing this stuff.

 

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Youtube: https://youtu.be/inEsfIsAWzc

 

Erwin  

Greetings, everyone. Welcome to the Truth About Real Estate Investing show. This intro is a little bit different in Vancouver, British Columbia right now and Have you travelled yet? I’m writing this from, like I said, thank Hoover. We’re just packing up our hotel, getting ready to board a plane with the kids to go back to lovely Toronto. This is our first camping trip since March 2020. Somehow we miraculously we were in Florida for our wedding in Florida. Lovely wedding. We were at Disney. And we flew home in March 2020. Before COVID shut everything down. It was absolutely crazy. Because back then when we flew into the airport, like when we arrived, like the border staff, me be 30% or more mass, Bob more gloves. There was no plastic barriers or nothing. That didn’t even save any of a COVID. There’s no pamphlets and nothing. There’s no like screaming. It was crazy. They asked if we were from China, or if we came from China or Hong Kong. How does that? Little did they know that most of the cases came from the US or across the US borders. We have a pile of unused Aeroplan miles since there’s no travelling to be done, so if not for points, I don’t know if we would have chosen to do this vacation with gas prices the way they are. Anyway, the plan was we executed on the plan was to explore the city. The kids have shorter legs so we didn’t do anything crazy. I guess a couple of days or days I did my Apple Watch Tilbury walk 10,000 steps, so nothing too crazy. Yep, be the last sushi. We hosted a meetup of real estate investors and stock investors. Shout out to Kenny from Interactive Brokers, who came along as well should address Wescott who made the hour long trip show to call him who took an hour long flight, an hour long flight into visit us in downtown Vancouver, showing several competitors that was really cool to meet up with some investors from the west coast. A lot of them are investors love and morpc investors, almost all of them are talking to us just as cool. So it’s super cool to be chatting with them. And just, you know, get to know people meeting some new people brought my kids along. So thanks for everyone who was cool with me having my kids along. Yeah, when this inflation thing going on. Just to provide some context is I think context is so important. Everyone talks about supply chain issues. So a neighbour might do work for a large multinational consumer products company. And I asked him about the challenges his company faces. And he shared that part of the problem is just the massive swings in the game, in terms of what products people are buying during the pandemic. So this is what he’s taught me. During the pandemic pregnancy tests were in heavy demand. And now the pendulum has swung the other way. So what’s the opposite of pregnancy test? He tells me condoms are now in high demand as people are travelling, people are socialising, again, in anti nausea drugs, because again, people are you know, they’re travelling, so they need anti nausea pills, such as gravel, for air, sea sickness, travel, travel sickness. Yeah, because the world’s opening up again. And so you know, if you’ve never run a business like this, I’m sure you can imagine this, how it’s not easy to be planning for these sorts of things when manufacturing decisions have to be made, like six, nine months in advance. And this is on top of, you know, COVID, shutting down manufacturing facilities like China, the war in Ukraine, and fingers crossed that things move on the real estate side, income property is a potential income properties are still moving. If you have a quality property, for example, all legal duplexes are still selling all of cheryan is properties fit in quality income properties by design. For example, I shared with my buddies, there was a house that sold for $4 million in Toronto, it was a three storey semi gorgeous looking house. So $5 million 5.1 by 5.1, in September last year, and then just recently sold for just just over $4 million, so over four over 20% loss in value. And that could have very well been that person’s down payment, right? If someone potentially 5% Well, that’s the amount they would have lost on that property. So that’s why this isn’t stuff with the very best. And we’ll talk more about that down meeting how largely law this was, I predicted how we could potentially see something similar to 2017. So price action that we’re seeing right now is not that dissimilar to 2017. When we recover, I don’t know, in a nutshell, for our investment strategy is that we’ve optimised all our properties for rental income. So we either switch to the basement, or we did student rental. And these properties often have gardens with potential and even if you don’t rent these properties out, say my student rentals for example, they’re very great locations for other demographics for families for see in yours, because we chosen properties that have fantastic location, right? I love properties with options, had their prices declined from the peak of like February of 2020. Absolutely. But we have no plans to sell our properties, cash flow, and instead of actually trying to refinance right now, things are gonna slow at the bank. Our appraisals were ordered completed months ago, hopefully not too long ago. The appraisals are still good. But for example, we bought two properties, we bought them in mid 2017. so late 2017. So after the prices were coming down, we probably didn’t catch the bottom, we caught them on the way down on the way to the bottom. But you know what, no one can time the market. Those properties cash flow nicely, I’ve converted both into duplexes, and they doubled in value in just the last five years. Our plan is possibly divided up again, we’ll see how things go. Lately further refinance. And for those who are like my professional investor, friends, like I’m a developer client, he’s bought three properties in just this month alone. These are properties that were all listed listed on MLS, so anyone could have bought them, the plan for those are to be severed. So these are the white lots divided in half. And we’re going to build on the half that has no property on it. So for professional investors out there, this is like Christmas. And while some others are sitting on the sidelines, totally cool. It’s just used to make that choice, because no one knows what’s going to happen. Everyone’s asking, Will this market keep going down, likely, as I predict to more interest rate increases, at least. But as I shared with one knops investor, if your plan is to buy more than one property during this day, you may want to book something soon before the market starts rocking. And everyone starts rushing back to back in and booking contractors because contractors are on stream short supply these days with the hiring difficulties. And the great resignation. Also, when the market goes up is largely determined by the date the data is the question that I asked them, many people are asking is how much of the load sacrifice the economy versus controlling inflation? No one really has any answer. How bad will job losses be? I don’t know. But what I do know is that interest rates will fall again, when some of the supply chain in over demand issues work themselves out. Many economists Kevin O’Leary even thinks a lobby that will be q4 of this year. So we’re talking about October, November, December. And then the bigger challenge for governments and central banks is they need to control their interest expenses on their debts, because they’re all running on really deficits, and it’s the only way to grow exports is to keep the dollar cheap. 

 

Erwin  

Anyways, onto this week’s show. We have Emily, I’m not sure if I’m supposed to share her last name but she goes by red glasses Emily and we have coach DiTomaso on the show as well. Tammy coaches Emily on my team. Emily is a newer investor. She already has three properties under her belt in just under two years. Emily’s early journey includes more involved renovations, pretty fair sized renovations all six figure renovation she inherited a tenant who was in jail for adult, and this the show is the truth about real estate investing. So yes, it’s not all sunshine and rainbows. We talked about rent arbitrage, which is a strategies that she’s pulling off in her newer property. The first property is a new middle term rental. And more importantly, she’s experienced a lot of things. As even with this downturn market, she’s doing very well. So that’s why we’re glad to have her on to share that story. My policy is always there for people who are successful to learn from people who are consistently losing money. FYI, middle term rentals fall between short term and long term rentals. So it’s not a few it’s very common, it would be a couple of weeks or 30 days or more. But these are not long term rentals. So this particular strategy works well in markets where short term rentals are paid, such as vacation areas, that kind of Hornell certain condo buildings. And we happen to also have a very nice job at one of the big Canadian banks in HR. So I asked her to share about what skills what the markets like for jobs. What positions that are megabucks, including pensions benefits, work from home that it is working from home is huge for real estate investors. Some of my most successful clients have a lot of flexibility in the work schedule and I’m talking about years ago, right because they can get to do lists faster, and therefore they’re easier to offer and win more deals. As mentioned on the show is also Tammy coaches, Emily, she has been online team of investor focused realtors, we are the fourth time Realtors of the year since 2015. She’s also known as the duplex queen so she’s helped a couple of dozen investors renovate rent, buy hold more duplexes with the GTA than likely anyone and her knowledge of local zoning is second to none. Please enjoy this show. 

 

Erwin  

Hi Emily, Hi Tammy!

 

Tammy  

Hi!

 

Emily  

Hello, how’s it going?

 

Erwin  

Great. Let’s start with you Emily. 

 

Emily  

Sure. 

 

Erwin  

What’s keeping you busy these days?

 

Emily  

What’s keeping me busy? Life? Yeah, I’m, I’m busier than I have been ever in my life right now. Okay, but, but I like it. So, yeah, I think I’m doing the good busy stuff versus the not good busy stuff.

 

Erwin  

Because you mentioned that you had burnout not that long ago, is usually a function of being busy.

 

Emily  

You know what that kind of, I think the I was busying myself with things that weren’t filling the void that I realised that I had. So I was filling it with stuff. And I was keeping myself busy, but it was just, you know, nonsensical, just regular stuff that wasn’t adding to my life. 

 

Erwin  

So it was the good stuff and was the bad stuff.

 

Emily  

Good stuff, man. Good stuff. So I was at the family things like I have two young kids. You know, I had a great job. We were renovating our house. I love renovating. I’m in real estate now. Yeah, what was I doing? I don’t know what I was doing. Actually, when I look back, like, I wasn’t really that busy comparatively. Like, I’m busy now. Like, I feel very busy now. But back then, like, I don’t know what I was doing. Just yeah, I don’t know. Not a good answer. Yeah. And I feel more fulfilled now than I was and, and what I realise now looking back, and I was just kind of, I was just spinning my wheels on things. You know, I had anxiety, I still have anxiety, but it’s more managed now. And yeah, just not not spending the time doing things that really propelled me or grew me or developed me. But now I’m spending a lot more time doing those things. And I’m getting a lot more out of it. And I’m feeling a lot more fulfilled because of it.

 

Tammy  

 I don’t know you before but no, no, you now you’re so focused. So even if you’re busy, but your focus were before you knew you want to go but like you said, spin your wheels. Yeah, got that goal in mind. So you’re just knowing this where I want that we’re gonna go what do we do? Try and try and try and trying and then once you, you know, yeah, and it’s like, busy, but then more focused.

 

Emily  

Yeah. And that’s what it is like, I’m more I’m more mindful about what I’m spending my time with these days. Whereas before it was just, you know, I didn’t like sitting down I didn’t like having nothing to do on a weekend or didn’t like having nothing to do on a on a weeknight and I would just, you know, go shopping, or I would, I would start to paint things that didn’t need painting. Or your, you know, research things on Pinterest. Hey, maybe we should rip our basement out just for fun, like, like, stuff like that, like that was just, it was just I think me just kind of run away from things or trying to find things to do that kept my mind off why I was miserable, to be honest. So yeah, if that makes sense. 

 

Erwin  

You can comment on my phone number one real estate investors is you know, when people go to like, you know, Mexico and do like the resort vacation, and I find almost every real estate real estate investor says I can’t sit there for that long. Yeah, yeah. Yeah. And that this is

 

Emily  

definitely me. Yeah, I’m gonna go go go person, you know, but I’m finding I’m better at I hopefully better with how I’m I’m doing those gogogo things and what I’m doing with those things than I was before. All right, so she found

 

Erwin  

something that was productive. Yes. Droid. Yeah. Are you just enjoy being productive?

 

Emily  

Yeah, I definitely like being productive. For sure. Yeah, I found more of a purpose. I think that’s kind of what I was really struggling with for a long, long time. You know, I did all the things that someone was supposed to do, right? I fit I went to school. I did. I did some travelling I you know, I lived in South Korea for a year, I got a got a job, I got a husband. You know, I planned a wedding for you know, a year and a half, you know, had had two kids like I was doing all the things that you’re quote unquote, supposed to do with your life, right. But once those things were all done, then I just was like, so bored with my life. Like, I just wasn’t really, I wasn’t happy, even though I had all the things right, had all the things that someone could possibly want, right? But I was just miserable. Like, there was something inside me that I wanted more out of my life. What am I doing with my life? What am I doing with my time, and that’s why it’s because, and I was and that’s why I think I was just kind of filling my time with all these random things that made no difference in my life. It’s just kind of keeping me busy and keeping my mind busy. But like, at the end of the day, if I would ever sit still, I’d be like, none of this is working. This is not working for me anywhere like I what am I doing? And you know, and work was really stressful at the time. Like I was not enjoying work at all and very stressed. And I think during the pandemic as well, like I you know, we just weren’t seeing people as much my health, like, I was gaining a lot of weight, like I wasn’t eating properly. I wasn’t taking care of myself, like things were just going downhill, you know, and I was very unhappy.

 

Erwin  

That’s interesting, because I only know you from recently and I mean, never normally are unhealthy.

 

Emily  

Yeah, and I’m still struggling with that. So yeah, and you know, it got to the point where I just, there’s a picture of myself that I took, we went to a park, I think it was like, middle of February in 2021. And we were taking selfies and I just I knew at that moment that I had to change, or else things were gonna get way worse for me. And if I didn’t change things, something bad was gonna happen. So that was really the the week that I talked to a doctor and we’re like, I need a break, I need to just kind of reset, I need to figure out what the heck I’m supposed to do with myself. And, yeah, so she put me on leave. And then I went on leave for about 10 weeks from work. It was such an amazing time for me, I had to just stop everything, like stop the madness, stop all these busy things that I was that was filling my void with, you know, just reset. And then I sought out a coach and, and she was amazing. And she kind of just helped me sort of just put everything on the table like what you know, what’s wrong? What’s going on? What do you want to do? What makes you happy? What makes you tick? What do you like about yourself? How do we find more about that person? So that was really helpful to kind of dig into that. And the first time you did an exercise? Yes, it was the first time is first time I did any kind of mindset work. First time that I really slowed myself down enough to actually start to listen to myself. And I think that was what I was missing for a long, long time. I was not listening to myself and not really even know what I was trying to listen for either. Right? Like I didn’t have any idea what I was listening for. 

 

Erwin  

And yeah, despise your family. Yeah. Because listen to you some young, can you share how old you were when you when you did this mindset work? 3830 years old, took 30 years to do? Yeah. No, sorry. Ask yourself, what do you like to do? Exactly.

 

Emily  

Exactly. Exactly. And yeah, man, I wish I had started that way before. Right. But I just couldn’t I guess there that that question wasn’t there, you know, and they were maybe I didn’t give myself the space or the opportunity to ask myself until that point. Yeah,

 

Erwin  

I think we’re all guilty of it. Doing what we think we’re supposed to do. Yeah, I did a lot of what my think my parents would be make them happy. Yeah. But I’ve been I’ve been partly selfish, too, and doing a lot of things I enjoy. So do you share what you do for a living? Or how long you’ve had the previous job?

 

Emily  

Yeah. So yeah, so I worked at, so I’ve been to HR for about 16 years, at a major FYI, in Toronto.

 

Erwin  

But everybody knows.

 

Emily  

Everybody knows. Yep. Yeah. And that was really my first job at a university. And I have a geography degree. And somehow, I’m an HR at a bank. So that that right there new almost tells you, I don’t really know why I work at a bank, you know, if I have a geography degree, but that’s what happens, right? You just kind of get a job and hope for the best and then it just sort of just moves on from there.

 

Erwin  

When did the job thing get bad? Um, is it always bad or it’s more, you know, it’s,

 

Emily  

it’s funny, because like, me and my husband, he’s very stable, stable guy, right? He, you know, he’s very content with his job. He and I met at work, right. So we, we met there, and we’ve had similar jobs. And he and I function very differently in those jobs. You know, he’s able to do a nine to five and shut up and just, you know, shut it off at five, no problem, I’m not able to do that. I, yeah. He’s able to do that he’s able to just compartmentalise and just, you know, segregate his his work and his personal life, I am just mentally not, I can’t do that, like, I will think about work forever, you know, I will break I will bring it home with me, I will stress about it at night, I will lose sleep over it. Like I’m just, that’s just how I function. Right. So, and I think that’s just how I am in these roles. So these these are some of the roles I’ve had or have been very, very difficult. They’ve been very stressful, you know, I, I’ve managed a lot of money during my jobs, and it take on a lot personally, even though I should just really shut off. It’s just a job, you know, this is not your life. But for some reason, it started to define me, and defined how I thought about myself, you know, so if I, if I had made a mistake, that means that I am a mistake, just myself, I’m you know, or it just became me, right. And there was no separation between work and who I was as a person so that those lines got really blurred pretty early on. And I think that’s where things started to kind of get really hard for me. Yeah, I don’t want to blame the job. But I think is just me how I reacted and how I functioned in those roles. And I was a high achiever, like, I want awards at work, and I’ve got lots of great bonuses, but it’s just what I’ve maybe allowed work to do to me, 

 

Erwin  

Or you saying that you’re dropping your husband.

 

Emily  

You know, at one point I thought I was and you know, maybe he’s Yeah, he’s he’s actually who’s more senior than I am, you know, he gets paid a lot more than I do. And and he’s very, he’s very stable with it. So I think, you know, he’s calm, cool and collected or as I can just, you know, fly off the handle and freak out and get really stressed out and so like, I don’t know, I don’t know, I don’t know what’s better, but from a mental and mental health perspective. He’s, he’s much healthier than I am that standpoint. So yeah.

 

Erwin  

So the point of the show is not just talk about real estate, which we’ll get to our poor listener. Sorry, guys. Part of the show is also understanding, easier, faster, better paths to making money. Yeah. So you have HR experience. Yeah. So I’m picking on you specifically compensation. Yeah. So I’m picking on you because because I find this fascinating before we were recording actually wish we recorded a bunch of it, because I’m probably gonna miss some of the questions. But you mentioned something that caught my attention was that multiple offers on people, on people you’re trying to hire is a problem in your industry? Yes. Does it get better or worse? In the last few years,

 

Emily  

I’ve seen it get worse for sure. Like, there are some critical roles and skills that are an hot hot demand. And those seem to be getting more apparent. So technology is such a huge, huge skill set, you know, specific skills, and then Technology Operations, diverse employees, you know, 

 

Erwin  

if you’re diverse, you get a unit pay bomb.

 

Emily  

Well, you’re you’re you are, you’re on the list. But companies are looking for this. So yeah, I mean, like a candidate who is who has the skill set that a company is looking for, you will likely be in a multiple offer positions and why? Well, there are two houses. Yeah. And you can literally choose your employer, whoever has the best offer whoever’s the best culture, whatever, whatever you’re looking for in an employer is, and you’re in a position to, you know, and play them off one another. Hey, you know, this company is offering me you know, a $50,000 signing bonus. What are you offering me?

 

Erwin  

This is fine. I find this fascinating. Like, Tim, you know, as we’ve talked about, we’ve talked about all the time investing yourself. Yeah. Never really thought as an individual as an investment. I always thought of people as like a business because, you know, people are the CEO of themselves. And, you know, are you a good CEO? Because if you’re a good CEO, you’re like, you’re gonna make more money and stuff like that, but never thought of in the job. Yeah, job. Yeah. Oh, yeah. Yeah. That’s wild. Because again, I don’t care what it is, if you can make money efficiently, morally, ethically repeatable, yeah, then I think I’m all for it. And with many things that are falling off, like, I’ve seen lots of issues with private lending market collapses, African lions, for example. You know, in this market, I don’t think anyone really wants to be private lending in it. Generally, I’m sure there’s lots of good private lending deals that are out there. But generally, this is playing out the market getting into, and I see all these people getting out of E commerce, which is selling on Amazon as an example. We see stocks Shopify student killed, and that’s a reflection of something Amazon’s getting killed, as well as the stock price. So then, what are people’s avenues to make money? Right, real estate stocks, whatever. Yeah. Right. And I find myself saying job more often than not, more often than ever before. Yeah. Because isn’t that to me? It seems like, I don’t I’m not nearly as close to this as you are. But and what I feel, in my opinion, is that this is the best time ever to be looking for a job. Yeah, yeah. Is this the best time ever?

 

Emily  

I think it is. Yeah, there’s a war on talent. We say it all the time in the biz. Do you want to call it that, but we were talking about it all the time? You know, people are flagged as flight risk. Yes. Yes. That’s on your profile? And yeah, and then we have to put retention strategies around you. And that could be a million different things. Sorry.

 

Erwin  

Okay. Okay. How does someone passively make themselves get flagged as a flight risk? I’m trying to help the listener here. Because, you know, potentially, you know, be offered more niceties, you’re probably

 

Emily  

going to be, you’re probably going to be going to your people manager and be like, Hey, let’s talk about my salary. Hey, let’s talk about some benefits that I hear my friends have down the street. Hey, let’s talk about work life balance. You know, I want to be you know, you in a couple years, how can that, you know, how can we get there? Oh, well, this company seems to be offering me this, oh, hey, this company just called me the other day. And they’re offering me this when you guys can offer me to stay.

 

Erwin  

So in the old days, like, I worked in corporate long time ago, some of those things would be seen as because there’s different market then. Because if you look like you’re a flight risk to like jump to someone else, then you might be a come a target of getting asked if when when layoffs came knock now. I mean, if sorry, was my was my observation correct back then. Or didn’t really matter? I don’t know. I mean, showing ambition is completely different. I can Yeah, I think that’s the best thing you can do. Yeah.

 

Tammy  

I think it depends how you’re, you know,

 

Erwin  

I want to be manager, I want to be great. They

 

Emily  

love to see that. If you have capabilities for that. If they also see you with that potential, then yeah, you’re on you’re on a great track. They’ll want to keep you they love you, you know, especially if you want to stay with the company and they can see you as someone in a leadership position and helpful years. Yeah, they’re gonna do everything they can to keep you

 

Erwin  

and just to clarify, leadership is a valuable job skill is compensated. Yes, it is. Yes. Just make sure if leadership capabilities So, yes, make sure everyone understands that.

 

Emily  

Yes, yes. Right. Yeah, that is a skill, a capability. You can have it. You’re someone who’s just born with it. Sometimes you can actually you can grow and you can learn it, you know if necessary, but some people just have it as a hard skill to find, especially in the in the higher echelons of of a company. And you can use it right.

 

Erwin  

All right. Any books you recommend? I’d like to I’d like the Simon cynics leaders eat last

 

Emily  

called no bucks. Really? I don’t know. Persuasion. I thought that was kind of neat. Oh, she’ll be Yeah. Yeah, there’s that. Yeah. There’s some really neat things out there. Yeah.

 

Erwin  

Good. Great. I think they were great was great. Yep. Yeah.

 

Emily  

I’m reading who not how I know people talk about all the time. But it’s one of the books that we’re chatting about now. Tomic habits. We’re all talking about at work, actually, to both those were talking about at work. And it was really, it was really popular. People always talk about those wins. But we’ve had a couple of speakers at my new company talk about both of those. Kind of neat, so

 

Erwin  

yeah. Cool. And then can you talk about pensions? I know very

 

Emily  

little about pensions. But I have one. I know.

 

Erwin  

Crazy. So just to clarify, you have a pension? You don’t work for government? Correct? Which is yes. not common. Oh,

 

Emily  

yeah. Because I mean, I’ve been in the corporate world, really just two companies at this point. But yeah, pension such a huge, huge thing. And that’s always something that new recruits will always ask about. So in the FIA World, being a pension, or having a pension is is something that we always were very aware of. We know what the forecast is, when we retire. We know you know, the consequences if we retire early. So we’re always we’re always kind of up to speed with, with what a pension looks like. So that’s it’s a very common thing for everyone to know and understand.

 

Erwin  

So you’re pretty financially secure. Yeah. You still want to be a landlord.

 

Tammy  

Yeah, why? Why did was wrong with me? I’m pretty manager. I’ll take care of

 

Emily  

Yeah, I do a property manager. Yeah, I do try to outsource literally everything I can. Yeah. Who

 

Erwin  

the hell? Yes,

 

Emily  

exactly. Exactly. So

 

Erwin  

yeah. Dave. We won’t share his full name. No, I

 

Emily  

use my contractors company. Oh, actually. Yeah. So that’s worked out? Pretty well. Awesome. Yeah.

 

Tammy  

I think he only does his clients. Yes. Properties for property.

 

Erwin  

Management. Correct. Yeah. Understand? You bought a lot of property recently. You bought a lot? A couple million dollars.

 

Emily  

I want it to be more.

 

Erwin  

What’s your mind value?

 

Emily  

after repair value?

 

Erwin  

Sure. Gosh, over 3 million.

 

Emily  

Um, yeah. Were you ever probably close to 3 million? Yeah.

 

Erwin  

It’s been not even a year. Seven months? Yeah. Seven months. $3 million in property. They’re all done in terms of they’re all after reporting.

 

Emily  

What is done? What is done? One is almost done. Two are almost done. We just had some hiccups. But yeah, we’re almost up. And what’s the strategy? Couple different strategies. So the strategies kind of have kind of changed. Also, just as time has passed, I’ve I’ve gotten more ideas and talk to people. So the first one, what is or what is I guess it duplex conversion on the Hamilton mountain? So that was the first one that was in September 2021. And, yeah, that was that one was fun. So we finished that one contractor that we have, he wanted to do something a bit special, just to kind of showcase his skills and use it more of a showcase for his company to kind of show other investors in the neighbourhood. And you know, what they can do and stuff like that. So he threw in a bunch of free things. So that worked out in my favour, obviously. And so the upper unit

 

Tammy  

for him versus to me, he did it for us. You wanted to be part of our team

 

Emily  

know exactly what he did. Exactly. So he wanted to show it off for you guys and impress you guys. So this is Lee. Yeah. Yeah. So yeah, so

 

Erwin  

great. Just to pause you there. We intentionally don’t share full names. Because we’re not sure not sharing we keep we keep the best for our clients. So

 

Emily  

yes, yeah. So he he went all out in the upper unit just all out. We did vaulted ceilings. We did feature Well, it was

 

Erwin  

it wasn’t a vaulted ceiling before No Oh, yeah, it was a solid vaulted ceiling. Oh, yeah. Actually, they’re already there. We find out

 

Emily  

that was part of this renovation. Okay. So all of obviously you know, wainscotting trim work all sorts of cool stuff. So yeah, so that was upper unit lower unit you know, basic to two bedroom one bath, you know, legal of course illegal unit. Really nice. You know, it’s yeah, it’s good looking. It’s actually a really spacious quite, you know, giant, giant bedrooms. We separated almost everything we could so I have two hot water heaters have two water metres. Split the hydro, obviously Yeah, yeah. So we did have a plans upstairs change, and then the plans upstairs change. So, you know, obviously the going in strategy was to just do you know, to long term tenants on in each unit. But there was just something not something but it was just in my gut, I was like, why, you know, this upper unit deserves more long term investment long term is bad, but, but like it just, I was not going to get the returns from it with just a long term. And so, you know, I talked a few people about this whole idea of midterm rentals. And I was like, Yeah, that’s it. That’s cool idea. Like that could this could work, you know, and but I’d have to furnish it. You know, something like, oh, man, I have time for that.

 

Tammy  

It’s really tough on your head. I want to be busy personnel. Yes,

 

Emily  

it did. And, and of course, my, my family was like, You’re crazy. What are you doing? But I loved it and got connected with a great designer. And she, you know, she met me on a Saturday, we had the thing furnished and designed within four weeks. And it was it was awesome. So she did really the whole thing. I did all the kitchen stuff on the bathroom stuff, but she did. Living room, all the bedrooms, and just the look and feel of the place. Yeah, so then I and then I put it on Airbnb, myself really had no idea what I was doing, to be honest. But I muddled through it. And within 24 hours, I had two bookings until mid July. Like it was craziness I hadn’t I just did not. I had no really sorry.

 

Erwin  

timelines, when you put it on what was roughly what was the date when you put it on Airbnb? Why

 

Emily  

did he put it probably mid March? I think mid March, I put on Airbnb. And then end of April. Yeah. And then my first guests wanted to come in April 23. It was still not totally finished. Like I put it on Airbnb before it was finished. Like I knew that I still had some work to do, but I wanted to just see what the demand was like and any questions stuff. So like, I knew that, you know, I blocked the the calendar for Airbnb, because can do that can block dates and stuff. So I blocked it until like, early, early April. And yeah, she messaged me, and she’s like, Can I come in for a month and a half? I was like, Sure. Yeah, let’s do it. So she, she just moved in on the weekend on April 23. So and she’s gonna be there until June 18.

 

Erwin  

How did you advertise it on Airbnb when it wasn’t done.

 

Emily  

I had I had some pictures like I had some of the rooms finished so so my designer had finished the living room. And I had finished the kitchen and the bathroom was was pretty much finished. So we just didn’t have the bedrooms finished. So I had kind of just showed her like the the unfurnished bedrooms, just the sizes of it all. I’d also put it up for a fairly good price too. So when she had messaged me, she’s like, she’s like, you know, I usually don’t message anyone with no reviews. Me. And you know, your price just seems too good to be true. And that was like, in my head. I was like, really? Sure. Like, I’m making a lot of money doing this. And and you know, yes. That was high. Yeah.

 

Erwin  

And when you say your price, I thought high. And then we said no, that was giving.

 

Emily  

I know so got me thinking I’m like, maybe I don’t know what I’m doing here. But, you know, she obviously wanted to pounce on it, because obviously, it was a crazy deal, which I now know. And now no more now. And so she was a bit sketched out. She’s like, you know, I’ve been burned in the past, you know, can we maybe do maybe a virtual tour just to make sure you’re not lying. And these aren’t fake pictures. And so and so I showed her some more pictures and things and and she’s like, Hey, let’s just do it. Let’s get booked. I’m like, Cool. So so she booked it for a month and a half through Airbnb to Airbnb. Yep. Okay. Yep.

 

Erwin  

All right. Awesome. detailed questions. Oh, yeah. Can you share what you’re charging?

 

Emily  

Yeah, um, it’s changed since then. So I have to remember what I so for her stay for a month and a half. I got $5,200

 

Erwin  

Sounds good. Yeah, I’d be good. You’re good. Not her good.

 

Tammy  

But apparently to her that was like good. So yeah, okay,

 

Erwin  

let’s work it then. Well,

 

Emily  

this is what I’m learning now. I’ve actually now passed over the my Airbnb management to Airbnb property management because when I did

 

Erwin  

Yes, your share or should we keep a secret I

 

Emily  

could share there on Instagram. Crumpton, Crompton elite property so I think that’s what they call themselves I can I can we can put on the show notes later. But yeah, so I chatted with them because I you know, it was it was a good experience to kind of go through the whole Airbnb setup. Like I learned a lot during that, you know, it was good for me to had a lot of inquiries too. So she’s the one who who booked first but I had a bunch of people just messaged me, hey, you know, can we book for a month can we book for three days can we book for you know, that kind of thing? And I was like I didn’t I didn’t really want to do the short stay didn’t I just wasn’t prepared for that. I didn’t have my system set up yet. I I didn’t have a cleaner. I didn’t have a handyman. I didn’t have any of that. But in my head. I was like, what if I had a longer term? Room guest for like a month and a half a midterm idea, I can kind of work on that, as you know, get prepared for that a bit more and a little faster. And so that’s kind of what I had in my head. So I was like, I’m going to just figure this out as I as I kind of go through this. So that’s why I spent more attention with her and kind of answered her questions. And I kind of, you know, I talked to the other guests coming in with the increase, but you know, they didn’t work out for for whatever reason, but she worked out and she liked it. But, ya know, so back to the, I guess the property manager question, I think, yeah, it was good experience. But I but it’s just so much work. It’s just an incredible, incredible amount of work, you know? Yes, exactly. And, and I think you’ll appreciate how

 

Erwin  

many inquiries many? Yeah, and they’re all random,

 

Emily  

random questions about the room? Yeah, like, I see the room. I have four dogs, and I have four. I have four cars. And I’m like, Oh, well, that’s not gonna work. Thanks for coming. But here’s this is what I’m offering. I don’t think it’s maybe gonna work out.

 

Erwin  

It’s been a long read, you know, they

 

Emily  

spent hours with this. Like, oh, please read the listing. I spent a lot of time doing this.

 

Erwin  

Are you in Kitchener? For a question.

 

Emily  

I know, just random stuff. So it was just taking up a lot of my time. And that’s, you know, it’s good experience. And I learned a lot doing it. But I’m like, I don’t want to do this anymore. I don’t want to manage these people. I don’t, I don’t have restaurant suggestions. Like, I’m like, oh, there’s a piece of pizza down the street. You know, like, that’s not what they’re looking for. Right? And so I’m just what I just wasn’t,

 

Erwin  

yeah. Did you like the cost of everything?

 

Emily  

Once the Jazz Festival, I have no idea. Is there a jazz festival? Like there’s exactly, exactly. So I’m like, I’m just not meant for this. Like, I’m just not doing I’m good. But like design, I love designing it. I love setting it up. I love all that kind of stuff. But I’m like, I just don’t have that the rest of it. I just, I just not get it. So. So then I outsource that. And I talked to them about it. We did I took them on a tour of the property and showed them my listing. They’re just like, whoa, you were undercharging girl. So it was just you know, from my experience with my first

 

Erwin  

pay that even though the pay them? Yes, they raised your price.

 

Emily  

Yes, exactly. Exactly. They’re gonna market it better. They’re gonna do better photos. They’re gonna do pricing strategies that I’ve never even thought were a thing. So teachers pay them for their when they book Yes. Yeah, exactly. So they so we do an 8020 split. I think that’s negotiated. So you know, that might not be the case for everybody. But that’s that’s what we had agreed upon.

 

Erwin  

And that’s off the top. That’s sorry, is that after earpiece? But after every one Airbnb gets?

 

Emily  

Yeah, it would be after. I don’t actually to be honest. But that’s, I think the revenue we’ve decided that’s an 8020 split for the revenue. So that helps.

 

Erwin  

No, I love the I love the Airbnb model, because you have their credit card. Yeah, even if they want to stay like you’re still collecting a good rate.

 

Emily  

Yeah, so I mean, yeah, so this is just my my first venture into it. I have my my guests seeing right now. So she’s there until June. And then they have another guest coming right after her for about for about 10 days. And that one snuck in because I was I was I was messing around with the settings, you know, on Airbnb, and somehow it went live. And then of course, this guy comes in, and you can’t cancel an Airbnb, right? That’s like a thing you cannot do, right? Because you can lose, you can lose your super host status, you can even get penalties like Bill is just an awful consequence. So this guy snuck in and he’s in he’s there over the July 1 weekend. Like me, you gotta get you got a good rate, they got a crazy rate. So anyway, so then, and then that was really what sold me on that I’m not I’m not good at this. This is not my thing. So I blocked the rest of the summer into I think I’ve blocked until October actually. And so between, between my two guests, there’s a week gap. And that’s when my property manager is going to come in, do their reset, figure out what else I need. And then they’re going to start turning on my Airbnb bookings with their management in place. So

 

Erwin  

yeah, the property managers split does that include like housekeeping for example? Or is that on top

 

Emily  

that’d be on top? Well sometimes you can charge the guest housekeeping slightly so um, that’s one things that I have learned you can you can charge extra things you can charge for extra guests you can charge for pets you can charge a cleaning fee so that’s all true

 

Erwin  

pets of course we can as long term

 

Emily  

people can do pretty much whatever you want you know obviously they have to agree to it but that’s what you’re offering as the price and they see and that’s in the book it or they don’t book it that’s that’s how it works.

 

Erwin  

That it’s an operating a puppy mill in my back condition from my other tenant nuts, of course, por tener Nice.

 

Emily  

Yeah, so um, yeah, but anything, you know, repairs, anything, you know, obviously, you know, product maintenance, that’s all on top, that’d be Debbie obviously paying for all that. They would just bill me for all that kind of stuff. Is the basement rent base but is rented yes to a long term tenant a couple actually 1850 Plus utilities ticket number. Yep.

 

Erwin  

Is it bigger? How come you got so much?

 

Emily  

It’s a good size. It’s really good size.

 

Tammy  

Usually we’re seeing about 1800. So it’s West mountain plus mountain a little bit more, maybe. We’re starting to see between 18 to 19. So she, you know, she just beat the numbers there. But that’s gonna be pretty normal. What you’re to see now. You’re just getting, you’re just getting it first.

 

Emily  

Yeah, I had higher expectations. So, of course, I was like, 15 Tommy’s, like, Uh, huh. Yeah. Okay, good luck.

 

Tammy  

Did you try starting at 93?

 

Emily  

We tried 9095 which is actually to listen and it was crickets. So yeah. Which, which is fine. Even so my, my property manager for that one who threw the contractor? You know, she’s like, Okay, we’ll try it. Obviously. Sure. See anyone bites. You know, we’ll see what happens. But she’s like, Emily, no one’s no one’s messaged me. It’s been a couple of weeks. Some like

 

Erwin  

000 inquiries. Yeah, not even weird one. Nope. I’ve got four dogs and four cars.

 

Emily  

To be honest, there might have been he just didn’t necessarily. She probably just filter them out immediately. Yeah. Well, you

 

Erwin  

take 1000 Well,

 

Emily  

we had we had Tim Yeah, right. Yeah. And on our team, we did have some lowball offers to actually we had a couple of guys wanted 1800. And I was like, you know, no, I’m gonna say no to that guy. You know? They’re like, Yeah, your best friends wouldn’t get other parents house for the first time. I was like, Oh, this is gonna be cute. Do this be so fun. And then last, and they tried to lowball me. So I’m like, No, yeah, sorry. So yeah, 1850. We got a couple of really great tenants. So

 

Erwin  

tell us about the tenants that you’re getting that you’re attracting for middle term? What is their motivation?

 

Emily  

Yeah. And that was interesting, because that’s, that was one of the first questions I had with you know, if I, you know, if I do this short term midterm idea, who exactly is my profile here, it was my avatar, you know, I guess it’s a new name for it. And so when I chatted with people who have done midterm and are doing midterm, you know, there was a woman that I talked to she does midterms in Burlington, and and that she’s helped a couple of people also do midterms and other I think Niagara area, and she said, you know, typically the demographic, you’re you’re looking for our travelling professionals, people that are between houses, for whatever reason, you know, the closing dates. Yeah. closing dates or closing dates Exactly. sold their home. Exactly. Yeah.

 

Tammy  

Divorced. Yeah, please feel they. Yep. Very true. Very sure. Yep.

 

Erwin  

I’m pretty sure everyone knows that, like a lot of construction things are being delayed. Yeah, exactly. It’s, for example, they’ve already sold their home section

 

Tammy  

stays, they don’t want to live in the dust insurance stays there. Their house burned down. There’s a flood. You know, there’s there’s many different reasons that my guests that came in, because my guest, her son is going to McMaster I guess for some kind of summer course or something. So she wanted to she’s from Sioux Sainte Marie, I think she told me, so she’s coming down to help them with that. I don’t know. There’s some kind of story there. So he’s with her. He I think is with her. Yeah, there’s the two of them. There’s a family of four. Okay, from what I understand the bedroom. Yeah, exactly. Three bedrooms that are six beds. So

 

Erwin  

yeah. So it’s a segment of the market that’s not addressed. Well, correct. Yeah.

 

Emily  

And they need, like the fact that I had had it up on Airbnb for 24 hours, and I had her instantly come in, I had five inquiries of just random questions like, hey, you know, we’re, we’re travelling Canada, and we need to stay somewhere and Hamilton is on our list. Can we stay there for a month? Like, there’s just random things right that people need, they don’t want to stay in hotel. They? This is a cool option for

 

Erwin  

doing the math like 5200 divided by 45 days. Yeah, that’s 115. And 115. is not usually like, two three star hotel at best. Yeah, right. Right. Versus you get right.

 

Emily  

And that’s, that’s me way under charge. So apparently should have been closer to do under various because we’re doing the math are 175 a day at minimum, apparently,

 

Tammy  

because we’re comparing it to if you were to rent it to a family. Yeah, for a month. Yeah, they would be paying 2000 Yeah. 2100 to rent that floor. Exactly. And

 

Emily  

that’s what I then that’s what I was using, like, that was my, that was my basis for this. And maybe that’s that’s just a that was a wrong way of kind of looking at it. Like I was like, you know, if I was getting a long term tenant in my upper unit, I’d be like, you know, I think Max I probably get 20 to 23 Max, you know, plus utilities, but I was like if I can get more than that. Hey, cool. Like that was that was my mentality going through it? Right? And that’s maybe why I was just under charging. I was like, if I could make a couple $100 You know, cash flow in a month cool. Like I’m in the money but that was just like the wrong way of thinking about and I can I could have just made way more money on this. So yeah, cuz I

 

Erwin  

think I’m 185 for two bedroom two bath in Ottawa. quick plug. I’m going to be in Ottawa June 7 for a meet up for anyone who’s Ottawa, Ottawa anyways, but yeah, see at 185 versus you’re charging 115 Right place looks a lot nicer Right? Exactly. One bathroom.

 

Emily  

Yeah, one bath. Yeah, it’s gorgeous. Yeah. And so yeah, I did the whole air DNA thing I looked at my competitors you know and I just even on on Airbnb and VRBO like I, I looked as as a guest Hey, like, you know if I can you know, punch in my day today I want to I want to stay for 45 days or whatever, what am I? What are my options? And then I looked at mine looked at all the competitors. I’d like

 

Erwin  

to introduce you to Betty. I think I think she has three of the top 10 VRBO isn’t on in Hamilton. Oh, whatever properties usually competes for one or two.

 

Emily  

Use my competitor then. So, so yeah, that’s cool.

 

Erwin  

She’s not in your area though, either. It wasn’t a big city, right. Can you share some numbers? Well, what the house cost you? Yeah.

 

Emily  

721 on the buy.

 

Erwin  

Oh my god.

 

Tammy  

Okay, can I just add that that was not an OH MY GOD, though. At the moment. Well, we paid market

 

Erwin  

that’s cheap. It is market was cheaper. Back?

 

Emily  

Yeah. At the time. I was like, oh, man, it’s a lot of money. You know, but that’s just what it was.

 

Erwin  

It’s 75 Branford. Cheap. Okay. You got cheap on the market. Fine. Okay.

 

Emily  

It was 10 offers. I won.

 

Erwin  

Well, majors when the winning offer

 

Emily  

price, I wrote a letter. I wrote a letter to my delight on the letter. But yeah, letter.

 

Tammy  

I had nothing to do with that. That was all my idea. But yeah, if you wrote a letter it was

 

Erwin  

well, the individual can do whatever they want. As licenced professionals can’t do everybody.

 

Emily  

Yeah, that was I was only those things

 

Tammy  

change. That’s change. But yeah, no letter. Was this the house that had the pencil sharpener? Yeah. And the two we often talk about yes, indeed, Korean talks about that when you see a house that has one of those pencil sharpeners that are on the wall. Yeah. So Susan Sandler like our pencil sharpener.

 

Emily  

And it’s that means that it’s in good condition, because the the owner took care of it. And that was very evident. The place was in such great shape. And it was,

 

Tammy  

it’s actually pretty an accurate, accurate and straight. Yes. Yeah, it’s amazing. Like a workshop must

 

Tammy  

have been a working person that truly care. And they took the time to have the pencil sharpener. Exactly. Yeah,

 

Erwin  

exactly. Sorry. Because when I think pencil sharpener, I think of elementary school.

 

Emily  

Is one of those. Yeah, one of those brown ones from the 80s or whatever. Yeah. And then profile

 

Erwin  

who has that is someone who’s usually good with their hands? Exactly.

 

Emily  

Like they’re, they’re a handyman, they’re a woodworker. Whatever. Yeah, their skill is but there and that was evident. I mean, the house was in such amazing shape. So

 

Erwin  

yeah, how about cosmetically because something’s gonna deal

 

Tammy  

old old everything old

 

Erwin  

bones just cosmetic Correct. Cosmetics needed?

 

Tammy  

Yeah, just outdated. Yeah.

 

Erwin  

Okay, so what would the retail value of the renovation be to bring this up to date and this week the basement without the deal? I mean, sure. Yes, but that the deal would retail because I need to set real expectations because that drives me bonkers for example, if like there’s certain TV shows they give you heavily discounted prices Yeah, but you their price that’s not reality. You can’t do it yourself. You can’t scale it

 

Emily  

Yeah, cuz I had to do the full conversion rates I had to do the and the upper so I really wasn’t going to do too much in the upper unit. I clearly was not going to do a vaulted ceiling or feature film or a feature wall early or any kind of you know, woodwork or anything like that like I was I was trying to keep the floors you know, I was trying to keep all the trim like I was trying to keep as much as they possibly could come

 

Tammy  

in they’re like we gotta change the trend like we don’t have to do this or like I’m always on it because I don’t need a contractor coming in and saying you have to change yeah, when there’s certain things I know aren’t going to change your rent because that was offensive but I was like an architect

 

Erwin  

comes and looks at our properties like you should do this. Yeah, I’m quiet bay window that won’t get me any more round Exactly.

 

Emily  

Of course like that. And that was that was my mindset going in it was just going to be long term up long term debt like nothing special, which is going to be cool duplex conversion project, you know, in and out, whatever kind of simple thing but but it morphed into something different, obviously, because of various decisions, whatever. So

 

Erwin  

just to clarify, your future was very different than my future walls. It might just be a different paint colour. Woodworking to custom woodwork, very different features, very different feature walls.

 

Emily  

Very different. But I think like, you know, as the renovation when what actually happened. We probably should have been closer to 30. Probably. Right. But I only paid actually no more than that. It would probably illegal duplex. Yeah. Yeah, it’d be closer to 250 I think probably if I actually paid 250 Yeah, but it didn’t pay that. I paid. I paid my legislator. But I think all in with all the taxes with all I did to run a bunch of Free, not free stuff, but a bunch of extra things that I wanted to do. I think I paid close to two to, I think, yeah to say probably about $50,000 with other deals that I got.

 

Erwin  

Yeah, even if you paid for retail, you’re still under a million. And everything’s even appraisers for reifies are appraising duplexes for a million. Can you share your appraisal?

 

Emily  

Yeah, that’s a story. So yeah, so I was working with directly with a bank. I wasn’t working with a broker at this point. So I was working directly with your employer or my employer, yeah, at the time, and just a mortgage broker that I had been familiar with, because he had helped us with our primary residence. So I just went back to him. And because we’re getting we’re getting deals, because we’re gonna get an employee discounts.

 

Erwin  

Can you share what the employee discount is? Um,

 

Emily  

I don’t know what the what the what the discount is. But like we was our rate on that one. I think we got 1.31. Was there? What was their interest rate when we when we bought it? Variable? 30 years? Five year term? Yeah, I think was 1.31.

 

Erwin  

Did anyone get anything less than 1.6? Ever? I don’t think so. Okay, then what your rate is now?

 

Emily  

Yeah, it’s got a couple times, hasn’t it?

 

Erwin  

Yeah. So in other words, you should start with this house. Trying to save you, Emily.

 

Emily  

Right. Right. Right. What are we now? Yeah, it’s gone up about point seven, five. Right. Since then. Just under two, I think we’re at 1.9. Something I think last time it looked. Yeah.

 

Erwin  

Further plugs for working for the bank. Exactly. Process imagined easier to they know your employer and they have all your files is that Oh, yeah. No,

 

Emily  

it definitely helped. Because like, all of our investments are there, you know that that helps. Because they have access to everything, right? They just pull it by name. And they’re there and all this right. So it’s a lot easier

 

Erwin  

to do that easily. Yeah, there’s no privacy. I’m sure you sign something, I’m sure you signed some

 

Emily  

stuff. And I sign anything. I don’t know, if they didn’t send anything. I mean, it just I did send them some other things. Like we have an employee share ownership programme, I decided that I’d send them that kind of stuff, because they don’t have access to that stuff. But like any of my like, my end of my account, or maybe my investment accounts, all my you know, loan products, credit cards, they had access to all of that stuff. So that was just, they just pull up my name. There it all is. Yeah. So that that part was quite easy. Actually.

 

Erwin  

Everything was easy, even though it was like we’re talking about refired talking about talking about

 

Emily  

it was not that easy. So from from that standpoint, it was easy, just like the the information but what I what I really struggled with with them is that they weren’t investors. Like, and they were like, speaking Greek to them. Yeah, totally. And I, man, and that was I was just, I was upskilling, my mortgage broker, like, like, as the process, you know, went on, right. And, you know, he had some exposure with with investing. He’s like, you know, you know, for friends, you know, it was my group of five friends and I, we invested in a property and I think it was, I think it was actually Hamilton, it was like, we had the worst tenants, we had to sell that place. It was an awful experience. So like, Are you sure you want to do this? Like, you know, this is what you want to do? And he was like, Yes, this is what I want to do. This is this is my thing now. And he was like, you know, that’s a lot of debt you’re taking on, you know? Really? Yeah. Oh, yeah. And this is, this is mortgage

 

Erwin  

brokers,

 

Emily  

Keystone, financial, financial advisor who has who can do mortgage stuff. So that’s, that’s what but I, I consider him a mortgage broker, but he was more of a financial advisor. advisor

 

Erwin  

doesn’t like debt, that funds investment. Yes. It’s hard. I

 

Emily  

didn’t see that as good debt. He saw it as just bad debt.

 

Erwin  

At least he believes in whatever you’re selling it, you

 

Emily  

know, he was repealed. He was looking out for me. He’s like, Are you sure you want to do this? You know, I’m like, Uh, huh. Yep. And he said, Okay, so what are you doing with the property? And I’m like, Well, I’m converting it into two units. It’s like, okay, okay. How much is that going to cost us? Like, yeah, we got it covered. Like, that’s, that’s just how it works. This is the process, but you know, I’ve crunched the numbers, I know what I’m likely going to get for the, the rents and you know, what we’re expecting the refi is going to be at that point, the refi we thought was going to be close to like, high eights, maybe like low nines. We wait. Yeah,

 

Tammy  

we do the math to cover, you know, a procedure that’s going to be covering the renovations. Yeah. And, you know, knowing what we’re seeing for refi numbers then the purchase place. So inefficiencies,

 

Emily  

like I went in knowing that I was probably going to leave quite a bit of money in the deal. And that’s just that was just what we knew was gonna happen. Yeah. And then at some point, we would refi maybe five, you know, four years down the road, five years, maybe refi that out, but I knew that I was gonna probably carry it a fairly good balance and I was using my HELOC for all of this too. Anyway, so yeah, so I really had to kind of just push forward even though he was you know, just he was just waving the red flags everywhere. You know, it’s just like are you sure you want to do this and this is a lot of money and you’re using your HELOC guy, you know, and but I was very confident and because I was like, No, I’ve listened to that podcast. I’ve talked to a lot of people like I have an investor focus realtor like I, this is what people do. And I’m going to also do it. So my,

 

Erwin  

your financial advisor would not like me, you’re probably not. I’ve mentioned it on this podcast of our 17 listeners, none of them was taking me up on this challenge. If you’re an A financial advisor, I would gladly stack my client performance against yours. Yeah. And I tell people, I’m not an expert, and our financial advisor actually got offended once when someone called me a financial advisor. Score and they’re not all bad, like, you know, like, yeah, like, my friend Kathleen’s, a financial advisor. She’s an excellent financial advisor. But, you know, please Don’t compare me to someone at the bank. Yeah, right. Selling mutual funds. Right. Exactly. That’s exactly what they do actually make my clients a lot of money.

 

Emily  

Yeah. Mine. Yeah, mine doesn’t. He tries to not make me any money, or just very stable, very safe. Nothing wrong with it, you retire when you’re 65. And you make, you know, whatever you make,

 

Tammy  

kind of might be based on his own experiences. It’s cool. Right?

 

Emily  

That is what happened. So yeah. But yeah, the the refi process was a nightmare with my bank. Oh, my gosh, it’s horrible. So, you know, like, we hear all these regular process to get an appraisal? Yes, I know. I know. And it took them. It’s a

 

Erwin  

third party appraiser that you blindly picked, like, not blindly but the bank has approved users. Yes. Right. That they trust. Yes. Right. They choose randomly. Which one? Yes, exactly. Most controls in place, which I agree with,

 

Emily  

and the process works right for them. From the bank’s standpoint. Yeah, that process works. And I get it, I work at a bank, I get processes, I get what needs to happen. Like,

 

Erwin  

I get this from financial collapse, like the Americans. It’s very

 

Emily  

safe, it’s very secure, whatever. But, you know, I had in the market and has just exploded at this point, right? We, you know, we’re we’re seeing I was refiling. February, right. So like, the, the numbers, the numbers are just like, ludicrous. Right? And, and so, you know, every, every week I would chat with Tani be like, hey, like, what are people getting? At this point? What are things selling for, and we would just see these listings coming in, like 1.2, like, 1.1, where we’re just like, you know, and my, my expected refi was close to more like, when we were doing this, you know, back in November and December, I like high eights, you know, you know, low nines, cool. And then we’re just seeing all these crazy numbers coming in. And we’re like, and I, you know, I was like, holy moly, this can really work out for me, right. And so, of course, that and so, I decided to put together a five page appraisal packet for my appraiser. So I put together prepared this, this whole Canva thing you did

 

Erwin  

on Canva. To see Yeah,

 

Emily  

yeah. So I had a really fun time with it. I really enjoyed doing it. So yeah, I did the whole thing.

 

Erwin  

We see it. Of course, they produce for them.

 

Emily  

I put a video of it on Instagram. Yes. But I can as

 

Tammy  

it shared the team, or when I guess

 

Erwin  

Instagram, so just just simply mentioning, red glasses. Rei. Glasses are Yeah. Okay. So continue. Yeah.

 

Emily  

And so and then I was I was so I put in, you know, in the last page, I put in what my expected rents were going to be and I had put in comparables in the neighbourhood. And then I put what I expected, the refi should be, it was like, This is what I want. So I put in 1.15 was my goal. And I know that it was a delicious and I know it was a bit crazy. But I’m like, I’m going to try, you know, what’s the worst that can happen? And then they came back at 925. And I was like, man, I was just so disappointed. And I’d waited. It took them forever to do it. Like my big. They just couldn’t get their act together the appraiser. Like you didn’t like me to didn’t they didn’t want to listen to me. Like I had emailed them this thing. I was very nice to them. And I tried to give them everything they could possibly want. You know, they had the place themselves. There’s there was no one there. Like it was just an empty property. And it was so I mean, I mean, I tried to make it super simple as possible. Whatever, and I get their processes to like I get I get the whole works. But yeah, mine 25. I was just like, Oh, I’m like no, like, there’s just no way it’s 925. There’s no way it’s February at this point. It’s just like, what are you going? What do you be comparing it to like, it would just be it like an unrenovated single family home? What this is a legal duplex. It’s stunning. You sometimes. Yeah, like so just really disappointed. So then I’m like, Nope, we’re appealing this immediately. Wrong person. Yeah, yeah, I need a new person. And just the wrong person a mess with me. Yeah. I was like, no, no, it’s not happening. And I just wouldn’t there was just no way I was gonna accept that and I was I was then done now talking to other other financial institutions at this point. I was like, Maybe I should talk to and I was getting and then I had I was starting not know starting to talk to other mortgage brokers. Maybe I should talk to Scotia about this. Maybe I should talk to you know, maybe I don’t be lender, like, you know, I need my I need this refi like, there’s no way I’m gonna accept when I’m 25. So I was just I was, you know, maybe a bit French.

 

Erwin  

Point is end of the day. It’s still human being that does that does that? Yeah. Oh, yeah. My experience. I literally had someone from Mississauga come to Hamilton. He knew everything. And he’s talking to me about how to invest in Hamilton. And he was telling me that I forget, please. He didn’t recognise that I had a zoning verification from the city to indicate my properties were illegal. He said that was not good enough. What I know Yeah, but he’s in Mississauga. He knows everything. He knows everything. So I think he pays my duplexes at 600 in the sixes, right. And that was just a year ago. Oh, and ever since then, he has been taken off the list or the bank. Yeah. Because I have no one. No one. But the bank respects me, and it took them off their list. So it’s really gonna hurt that guy’s business. Really smart. No

 

Tammy  

problem. We had an appraiser to where he didn’t know he did ask for the zoning for K verification. He wanted that that great. But his comps were against other duplexes and a second he walked in the door. He said, I hate these duplexes. Oh, like, yeah, you’re just gonna go grey? Yeah. Yeah. That’s exactly what he said. I

 

Erwin  

was so easy to find them though. Your search criteria

 

Tammy  

sounded jealous to me. But yeah, yeah, there’s something there. That’s for sure. Beard.

 

Tammy  

And it affected the number that came in. Yeah. So we did another one in Quebec. But what so you go on? Yeah,

 

Emily  

same I do. And so so that came in? And they’re like, Okay, yeah, 925? Are you? Are you good with that? I was like, no, like, did you not read my appraisal packet? Like, I’m not good at this. This is very low. And I’m like, No, I’m not gonna accept it. Let’s appeal it immediately. And they’re like, Okay, so I’m not entirely sure what happened behind the scenes, but it took, but apparently what the story that I got was that it was a junior appraiser at the company that had handled that first appraisal. And my appeal was heard, I resent the the candidate documents and, and apparently it was hit, it was handed to a more senior appraiser at about the same company. And I got 1.13 4.1.

 

Erwin  

So almost a million dollar Delta. A million, almost a million dollar delta between the appraisal prices 100 100 to 200. Sorry, yeah, that’s how good my math is.

 

Emily  

Like your wife is, uh,

 

Erwin  

yeah, that’s why she does that.

 

Emily  

Let me do the math quickly. Here.

 

Erwin  

Also, I have I’ve seen another appraiser appraisal 209,000. That’s a lot more. Yep. I’ve seen another appraisal on one of my clients that had that property in the Maritimes. And the appraiser actually use an oceanfront property to compare against an interior property. Great. And then so her appraisal was completely over inflated and she overpaid for it. So yeah. Wow. Trust no one.

 

Tammy  

Trust no one. trust

 

Tammy  

their own homework verify, please, at least fair surround yourself, people I know they’re doing.

 

Erwin  

Here’s part of the challenge, though, is that we even though we pay for the appraisal, we don’t often see the comparables used. Yeah, this was only found out because there was a lawsuit.

 

Emily  

Oh, interesting. Yeah. Yeah. Yeah. So like, I don’t know what they use. But hopefully they used I mean, they clearly use something more comparable than the first I use

 

Erwin  

Junior than they probably use the wrong comparables. They probably just use regular single family home. Yeah, exactly. Yeah. But I made a lot mistake. So even those

 

Tammy  

those are selling single family homes with two kitchens.

 

Emily  

It makes no sense. It makes no sense. I don’t know what the guy was.

 

Erwin  

February, we saw we were seeing stuff for like, 1.3.

 

Tammy  

Yeah, we’ve seen 1.1 1.2 1.3 for legal duplexes

 

Erwin  

for actual transactions. We’re not gonna see that for appraisal. Yeah, yes. Sorry. Yeah, exactly. So

 

Tammy  

we weren’t there. People get coming in around that million dollar mark on an appraisal. Yeah. So when you just came back at that, it was like, There’s no way did you not see the feature? Why not?

 

Tammy  

Look at the property. What exactly?

 

Erwin  

You know, what a vaulted ceiling is?

 

Emily  

engineer do this. Yeah.

 

Erwin  

So then how much of your money were you able to take out?

 

Emily  

So I only I think I have about 85,000 left in the property. So I think I calculated at I pulled out 80% of my capital. I think that’s what the my spreadsheet told me or told me.

 

Erwin  

And then what are your projected rents?

 

Emily  

For Airbnb?

 

Erwin  

What was it on the Canva? Was it an honest,

 

Emily  

what did I put on my camera? That’s good question. I think I had a good question. Actually. I can remember what it probably a little higher. Yeah, it’s probably I probably put in like 2400 Plus utilities for the upper unit and they probably put in like 1900 Probably for the lower unit. I think that’s what I what I put

 

Tammy  

Yeah, maybe you put 2000 You were trying for 2000 GG or wherever.

 

Erwin  

Yeah. Oh, and then who’s insuring your Airbnb? Because we don’t have any clients doing this.

 

Emily  

Yeah. But it’s just my so I told them that I was doing an Airbnb. I told them the strategy for both I’m doing the long term in the basement and then an Airbnb in the in the upper unit. And my insurance was actually the same, like they really wasn’t that different at all. So as deja Den is my insurance company, I have a great contract. I’ve sent many people to her. She’s great. So yeah, they didn’t seem to have any issues with it.

 

Erwin  

So what is market rent? Then? What would I know?

 

Emily  

What’s the upper unit?

 

Erwin  

Sure. Let’s try that.

 

Emily  

I don’t know. I don’t know. I never tried. So 2022. So yeah.

 

Erwin  

22 If it was a regular rental,

 

Tammy  

so we’re pretty much running our numbers right now at 22. Up. We have started to see higher than that. And 18 down for sure. Right. But you got 1850 Yeah, we start to see a little higher on that, too. So

 

Erwin  

for Kieran Yeah. And then what do you think you’re gonna get? For the upstairs as Yeah. As a midterm? Yeah.

 

Emily  

It’s so now I’m worried converting it into an actual short term. No longer midterm anymore? Oh, yeah. So because? Because I’ve hired this property management company. Yeah. I think we’ll still maybe accept the long term, like more mid term, but they have to pay

 

Erwin  

the price. It’s just harder for them to book isn’t it? The navigate all the weekends and holidays? Yeah, exactly. It’s

 

Emily  

exactly. And we want to make sure that we’re that we’re strategically pricing those weekends, especially those long, those long weekend weekends. And that’s really that’s what’s key. So, yeah, I mean, we’re looking like, we should be closer to $200 a night at this point. So sure, lower tenant

 

Tammy  

know your what you’re doing upstairs, was there any issues with

 

Emily  

so this is the other thing that’s so funny. It was actually the reverse, but I was worried about to be honest, I was worried about my my Airbnb not being happy with my lower unit. Because the lower unit has two dogs. Oh, exactly. And when they first moved in, the dogs were unsettled, unsettled, as we say. So quite noisy. And you know, it’s older home, their age back, it was just like the dogs were sitting beside you, when you were sitting in the upper unit, I was that loud. And so that’s what I was really worried about. I’m like, if I’m reading this short term upstairs, this people are paying a lot of money, you know, per night, and they’re going to be listening to these review dogs. I was quite stressed. So we’ve dealt with that. The lower unit tenants do understand that, you know, there might be an issue there and but but apparently is because you know that dogs just moved into a brand new home there. You know, they were alone. During those couple of times that I was there and they were they were unhappy so they’re working on it. And I think the dogs are happier now and and ourselves.

 

Erwin  

So any tips is I have a situation where my properties? Yeah.

 

Emily  

the only the only thing that I heard is that they were trying CBD oil with the with the dogs for anxiety, dog version of that.

 

Erwin  

I don’t know. We’re not that’s folks. We’re not recommending.

 

Tammy  

That’s what I was told. So I don’t know if that’s working. But that is what I was told was happening there.

 

Erwin  

So yeah. Why are you doing all this?

 

Emily  

Real estate you mean?

 

Erwin  

Sure anything?

 

Emily  

Um,

 

Erwin  

get yourself a promotion as well. Like, I’m sure all these things kind of tie together. Yeah.

 

Emily  

Yeah, I know. It’s funny. Um,

 

Tammy  

she likes working with me. Do you like Right? Yeah.

 

Emily  

I talked to Tammy where that I talked to my mom. So you know,

 

Erwin  

oh, another person to call you, Mom?

 

Emily  

Oh, boy. I want to be work optional, I think. Yeah. I think it’s what I want. I want more control of my life.

 

Erwin  

All right. You pheromone too. Because before we were recording, we’re talking about working from home, pre pandemic, how much were you allowed to work from home?

 

Emily  

Maybe once a week, and that had to be approved.

 

Erwin  

So that in reality half injection work from home then you have two kids like

 

Emily  

I was working. I was I got I got the one approved one day approved before pandemic so

 

Erwin  

so like flat approval every week. I can work from home one day. Yeah. Yeah, exactly.

 

Emily  

And then now and then now. Now the question is like, I have to get approved even go into the office now. Just very strange.

 

Erwin  

That’s weird.

 

Emily  

Yeah, there’s just yeah, there’s timing. Long story. There’s a lot of red tape. But June is when they expect us to go. Well, I shouldn’t say that. They invite us to go back starting June. And they would like to see us twice a week wording

 

Erwin  

because I remember I remember Tim Ferriss, she wrote about that and four hour workweek was to try to negotiate working from home. So that you could do you could have more time to you know, so you don’t have to commute. You have other things so you can actually have time to focus on whatever it is you’re interested in. Yeah. And Rui, one of our longtime clients. What made him successful was because he was he was mobile it and most of his work didn’t start till after 5pm Because you just wait for the company to employees to be gone so they can mess with it. Yeah. So he was always free during the day to go look at properties with us. So he was always there first thing, right? Yeah, he had that advantage over everyone else when a nine to five he was was there first when a property was listed and we get properties? Oh, wow. Right, because we were the first offer and then back then like the rule that rule old rule of thumb was first offers your best offer. Here’s your first offer. We’re here. And then we got so many properties that way. I remember one agent said on the on the following Monday, she said, I wish to take your offer and so many showings. So many so many people trying to book showings this

 

Tammy  

when they stopped holding offers were like vultures, vultures. 

 

Emily

That’s how I got the St. Catharines. Property.

 

Erwin  

Yeah, got it. So but my point is that, you know, again, there’s always been all this rhetoric out there, like Be your own boss, be your own boss. Yeah. Now you have all this flexibility now?

 

Emily  

Yeah, I certainly do have flexibility, historic levels of flexibility, flexibility 

 

Erwin  

100% and all invited back.

 

Emily  

Back. Exactly. But you know, yeah, it’s one of those things. It’s like, you know, I don’t I don’t want to fail at everything kind of thing. Like, like, I really I do have to budget my time properly, you know, to for me to do a good job at work. I have to I have to be mentally there. I can’t I can’t be on the phone. I can’t be looking at properties. Like I’ll try to really compartmentalise my time and structure my time where I’m you know, you know, at lunch, I tried to go to the gym now, you know, you know, maybe we’ll take one or two calls, you know, very quick calls for contractors or talk to Tammy or whatever, but I, but for me, to, for me to do what I feel I need to do at work, I really have to be mentally at work. You know, regardless of where my physical body is, like, I have to, you know, whether it’s I’m at home, or I’m at the work, I have to mentally be there. So, yes, I have flexibility. But I still have to have rules for myself, I guess. 

 

Erwin  

Yeah, I did a little bit differently. Because we had core hours at work. You had to be you’re supposed to be in the office 10 to three. So and then if again, if I didn’t have an appointment, a meeting or something like that, I would do real estate stuff, but I track my time. And then I’d make up that time later in the day or during that week. Yep. All right. To me, again, morally and ethically. You’re paying for my time I’m here. Yeah, right. Right. I will use your fax machine. Yeah, and print some stuff on your printer.

 

Emily  

I had to buy a printer during the pandemic, sadly. So I never, that was my real adult moment.

 

Erwin  

I worked in paper.

 

Emily  

No, we were not allowed to print anything at home from work. 

 

Erwin  

That makes sense. 

 

Emily  

Yeah. Yeah, it’s payment, but it’s a huge pain. Oh, yeah. Everything? No, there is our paper bill has I mean, it’s almost non existent now at work. Because no one prints anything. Which is great. 

 

Erwin  

Actually, it’s great for the trees, from the eyes, talks about the other investment properties, and we’re close to running out of time.

 

Emily  

Okay, so the second property that we bought after that the big one was another duplex, right. That wasn’t text seven or something like that. No, no. Yeah. Yeah. So we did a another bought another conversion. single family home on Hamilton. 

 

Tammy  

And that street actually. Same Street. Mountain ones West Street, second Mohawk project. Yes.

 

Erwin  

And two minute drive to each other.

 

Tammy  

Well, yeah. It’s just funny that yeah, we got to keep her property straight since we’re on the same Yeah.

 

Emily  

Really quick Mohawk. Oh, yeah. That’s the last one. Yeah. You know, it’s tough problem to have been. That one I actually said problem. Yeah, exactly. It’s not first world problem. Yeah, you’re right. Yeah, it’s not preserved. Exactly. But that one, I actually got my parents to buy. So I’m the active partner. So we’re kind of doing a JV although we haven’t signed any JV papers X. I have to figure that out. But, but I got them in the game. And I’m very happy that we did. So I so yeah, they’re the they’re the money partners. And they’re 100% they 100% mortgage 100%, Reno, 100%. Everything. And I have just managed the entire thing. Right? So another conversion project. But we had this one. And this one was just sitting on the market. It was sitting there for like 20 days. 25 days off. Sorry, that’s an eternity. Hey, no, especially for a very beautiful, beautiful home. Huge lot. 50 by 150. 

 

Tammy  

Whichyou know why it was sitting? Yeah, because they had the bedrooms, the way they had it all set up. We’re all in the basement. So I think that was part of Yeah, see, when you went in there was the living room and a dining room and a kitchen, a bathroom and an office. Yeah, it could have been a bedroom. 

 

Erwin  

Okay, but let’s that didn’t stage it properly.

 

Emily  

No. No. Because they had renovated it that way. 

 

Tammy  

It was slipped like that. They remember we thought it was so nice.

 

Erwin  

Especially renovated for maximum sold price. Yeah. 

 

Tammy  

All in the basement. So four bedrooms in the basement and bathroom. And I we think that maybe people can wrap their head around for some reason. Yeah. 

 

Erwin  

So that they are on them. Usually I would have bought that all day. So dummies.

 

Emily  

So so that so not investor looked at that. And we’re just like, that’s, you know, but I actually know

 

Tammy  

some investors that looked at it. Yeah, that’s true. I don’t know. 

 

Emily  

Why didn’t you? Oh, yeah. I did that. And yeah, so some people looked at it, and we looked at it and went like, cool, it’s a beautiful, beautiful home. I mean, it was like turnkey. It’s stunning, right giant property. Garden suite potential. We’re putting in a one inch waterline actually just for future garden suite.

 

Tammy  

I drool over turnkey. Yeah. It was funny with this one. And we didn’t know at the time, but when they were ready to start the renovation, we found out that the basement ceiling was all fire rated drywall or like what what? Yes, it was like they knew that. They didn’t, we didn’t know. 

 

Emily  

And it was insulated to So Japan fire rated very well and insulated.

 

Erwin  

We didn’t even tell you that when they were selling the house.

 

Tammy  

No, I don’t know if they knew

 

Emily  

they didn’t think that that was important. Before. Terrible marketers. Yeah, it’s not good. Yeah. So we pounce on that one. So we paid 784 for that one. Deal. Yep. And so it’s going to be to have that wasn’t

 

Tammy  

that was yeah, we’ve got it down in price a bit. Yeah, we did. And yeah. You have to imagine that’s when the prices will start to go up. Sorry.

 

Emily  

About that in November. 

 

Erwin  

I think well, you’re the only offer. It’s 20 days on market at that point. Yeah. Yeah. Really? Yep. This is what month is this? November? Yep. November. And there’s no other offers no. Weird. Yep. So if people can’t find deals on the room,

 

Emily  

Some people can’t. So yeah, so that’s another conversion. We’re almost done that one. We had a couple of delays. Alexa, can I say yeah, Elektra, Elektra has kind of pushed us out a bit. And then we’re trying to get the city has has cause a bit of delay, because we’re trying to get the one inch water service, because we want to do a garden suite in the future. So that has caused a bit of delay as well. And then the window the egress window. Hopefully that they do, I think that was supposed to be in this week. So hopefully, that I had to check in with supply chain issue. I do labour issues. All of the above the above, probably. So there’s there’s a few delays with that one, but we’re arbitraging that one. So that’s the kind of cool thing with this. So my same Airbnb company that I’m using for my faux hawk. To manage my my Airbnb, we’re going to rent these two units out to them at market rents. And then they’re going to put Airbnbs and both of the units. Oh, cool. Yeah. So it’s pretty neat.

 

Erwin  

So they go there. They’re going to pay market rent. Yes. For the duplex. Yes. Free individual units. Yes. And they’re going to rent them out. Correct? Yep. And they’re gonna cover the maintenance.

 

Emily  

Correct. Everything that covers snow, grass, there’s no property management fee. There’s no tenant placement fee. 

 

Erwin  

They pay all the utilities can be posted up. This goes. Yeah. That’s exciting. Interesting. It’s really cool. 

 

Emily  

That’s a cool model. Yeah. So my parents love the idea of it. They’re like, ooh, this sounds great. And the place gets cleaned all the time. Right, which is really cool. 

 

Tammy  

So, third one sounds boring. Now. I know. Third one. Yeah. 

 

Tammy  

My think happens when that was a cool story really is very interesting story. Yeah, that’s cool story.

 

Emily  

So tell the quick, but yes, yes. So super quick. had been on the market on an offer for a little while. The upper unit? Sorry. So at St. Catharines. It’s illegal duplex in St. Catharines. It was owner tenant occupied. So the tenant, we found out was in jail.

 

Tammy  

And currently at that moment when we were looking at the house,

 

Emily  

yeah, currently in jail. The owner, the tenant, tenant was in jail. He had signed in and 11 though. And so so the owner was okay, great time to sell. And I think I think there might have been a split slash divorce I think also happening just from what I some things that I gathered, so great opportunity, CSI. Yeah, I did some investigating. And anyways, so that that scared some people off that this whole jail concept. Right. You know, who knows that this comes back? Yeah. In case comes back, he doesn’t move out and kiss you. Because so we had bought it also November. Remember? It was pretty close. Yep. Yeah. So his, an 11 said his his move date was December 31. And that’s when he was supposed to, that’s when his tendency was supposed to end. And so this is a serious criminal or I looked him up, also. And I think it was, I shouldn’t say just a DUI, but it was a DUI. That’s it? Well, I think it was a multiple offence. So situation. 

 

Erwin  

So this isn’t like violent criminal or so. Well, exactly.

 

Emily  

But I had to google that. And the terrible thing is terrible thing. And but that malicious people and the property was in the property wasn’t involved, which is what my main concern was, you know, if there was some kind of crime on the property, you know, that’s a different strategy. I’ve just noticed volved DUI. Well, yeah, but I didn’t know what it was DUI until the until that point, but you know, it’s but that’s when I found out as DUI I was like, Okay, this guy’s he made some poor choices, obviously. But you know, he signed it an 11 It was cool. We’re good. I think I’m gonna I think there’s no issue here. So we we bought it with a condition I wanted to do an inspection to so heat the so we offered about five grand over asking it Put in the condition to put it financing. I think we had all conditions we had financing we had only offer there was someone coming in, but there they were scared away by the jail thing. 

 

Erwin  

So we looked like bloody gloves around the property

 

Emily  

Or some property was the property was in rough shape to I’ll say that too. So I needed a lot of work. And it was. So yeah, so we Yeah, had the inspector in Spectre found a few things that weren’t weren’t super duper. 

Tammy  

And then during that conditional period, you were talking a lot with the paralegal. Yes, I was talking to apparently because we that was our that was our opportunity to do some extra. Yeah, homework.

 

Emily  

Exactly. And I just wanted to double check, like, what do I need to do here? Do we need to file the n 11? You know, what we actually found actually, with an 11 was done, incorrectly incorrectly. So we hadn’t we had a wrong and 11 when they put the wrong unit number on the 11, which I’m like, how is that even possible? But they did the owner did it? Yes. And maybe the paralegal they used I don’t know what happened. And so we identified that during due diligence, were like, you know, we can’t accept this. Obviously, we don’t have we don’t have a valid and 11. So they went back to the jail and got a new and 11 with the right unit number. Right? Yep, yep. 

 

Tammy  

And then we changed our when we were going to firm up and remove our conditions, got a price reduction and decided we wanted to just make it fake it. So we locked it in originally, that we were going to take the tenant that was never going to actually be there, because they were going to be out of jail and have moved out. But we were taking that on.

 

Emily  

Yeah, because they originally wanted like at any a November close or December close. And this was, you know, and then so I’m like, okay, you know, I could probably deal with that, you know, if I want I wanted the deal, right? And like, I can probably take that on he mean, he’s in jail, we have an n 11. He’s probably not gonna be a problem. But then because we had the N 11 issue that we found. And we had some of the issues that came up on the inspection. We’re like, no, and we’re in a power position at this point, because I had accepted our offer. And I was like, No, we shaved off 15,000 offer off our price that we had offered. And we pushed out the offer the closing date to June 6, which is when he was supposed to be

 

Tammy  

We were gone that he was going to meet they were going to come back and say maybe he signed that under duress when he was in jail too. So we didn’t want to have any issues. So yeah, so we gotta

 

Erwin  

Wait. You got you haven’t tied up. You haven’t closed yet?

 

Emily  

No, no, close and close. June January. Sorry. They say June. Jan six. Sorry, John. I’m sorry.

 

Erwin  

Yeah. They stopped.

 

Emily  

And it was theirs. So we were just in a position of power there. And and clearly this guy this owner wanted out of this property. Yep. So here 9490. Haley. So he accepted that 490 Yeah, with illegal duplex and St. Catharines. Which is, you know, work. We made it work.

 

Erwin  

And we want one of these 490.

 

Emily  

And so we’re actually just basically gutting it this probably spent a bit more than I should have maybe the renovations to be honest now that I kind of think about it. I think it’d be probably kept should have kept some of it. But the stuff I said to keep this stuff you said the tapes, I should have listened to me. And so I am likely going to flip it. I think at this point, I think so we are little 

 

Tammy  

Selfish plugs.

 

Emily  

Yeah, that’s a listing on Yeah. Yeah. So we’re gonna

 

Tammy  

It’s gonna be beautiful. Yeah. Also maybe musical duplex and St. Catharines with newly renovated

 

Erwin  

Not convict tenants,

 

Emily  

Ya know? And yeah, and we all knew plumbing all New electrical, like the thing is like, I mean, the mic is just awesome. It’s a really good unit get commitment property. So we’re going to be probably doing that maybe exclusively. Maybe we’ll think about it. The best strategies for that one.

 

Erwin  

Yeah. So we friends of ours. Steel,

 

Tammy  

Maybe these podcast listeners,

 

Emily  

If you want it. It’s gonna come in about a month or so. Well, it depends when this airs, but nobody listens to this. Nobody listens. I might listen to my accent. I won’t listen to this. No, no way.

 

Erwin  

So Emily, you jumped in with two feet? Yeah. $12 million. With the properties. Massive renovations? Yeah. That’s not easy for any people. I have trouble convincing lots of people to invest in anything. Anything even like investing $25,000 into like a into a into a passive land development deal. You’ve been pouring in. Can I add some money for renovations?

 

Tammy  

When I first had our conversation, our first conversation she had reached out to Mike Ferreira said I see Tammy on your Instagram. What’s it like working with her? So she called me

 

Erwin  

And she was actually did you know Mike at this time? No,

 

Emily  

No, I just on Instagram. I don’t know how I found him. But I just found him through the network. I think he squeezes way. He’s everywhere.

 

Tammy  

And you had called me and we had the best conversation. I love talking to you. She was so driven, so focused, so ready your energy. She’s like I’ve been pre approved. I went to this broker. I’m all ready to go on They’re super excited to go out. But she was currently out looking and talking with another realtor. So we had to cut her ties in a sense. And I said, you know, that’s good for you to explore that and so on and went out and then when you you ended up you actually didn’t call me at first you ended up just breaking those ties with her all the rage channels then called Zed kit that’s completely done so we can move forward. And I remember when I found out your person was so just because I’m like, You’re exactly who I was. I your energy just made me so excited. You were ready and focused right from the beginning and you have not stopped since continue to sleep in like that. So super excited to work with you too. Yeah.

 

Erwin  

Well, I have a realtor. They’re so so sad for them. You’re Homewrecker to me.

 

Emily  

They were also investor focused, but not not the focus. I needed.

 

Erwin  

Everyone’s investor focus these days. Yeah. When I started in 2010, there was no one investor focus.

 

Tammy  

But some people just connect and you know, because I’m not, you know, maybe I’m not well connect with everybody there, you know, and it just me, but it was you. So when you were talking about how she is. That’s how I knew right from the very beginning. The connections

 

Erwin  

Are nice and all, but I’m a pragmatic purpose person. I want talent on my team. Yeah. All right. Well, you you work in HR. No, no, you don’t work in HR. But you know, you find looking for talented people on my team. I don’t care if we don’t jive on religion or something or politics. I could care less. Yeah. If you’re talented, and you can help me make money. We’re best friends.

 

Emily  

People are your biggest asset. You know, for an employer, your people are people will run your business. If you don’t have the right people. Your business is not is going to suffer.

 

Erwin  

That’s a good place to end it. My stomach growling the client? Yeah, so yeah,

 

Emily  

We have how many properties? Five? Yeah,

 

Tammy  

I’m gonna go check that smaller properties. Yeah.

 

Erwin  

What are the chances? Any good ones? I’ll dumpers.

 

Emily  

There’s one. Interesting one.

 

Erwin  

Five to see.

 

Tammy  

I hope they’re bad. We’ll go.

 

Erwin  

These are different companies are finding excited. Yeah. So different is a actually it gives some context. Today’s April 29. Yeah. And, you know, three months ago, were there 3.5 properties to see No,

 

Tammy  

No. Yeah. beginning of this year. Yeah, there were, I think four to choose from in one of my searches. And two of them, and I’m looking at them for duplex conversions. And two of them one work. Yeah, right. Well, these two are Yeah, so there was two

 

Erwin  

Wow, five properties of Il for that could be duplex conversions.

 

Tammy  

There was four at the time and two of them weren’t good. Now what I mean, by properties,

 

Emily  

Changed my strategy. I think a little I’m not looking for duplex conversions anymore. I need I need more units to make money. Looking at Maltese. Now we’re looking at Maltese,

 

Erwin  

How big three.

 

Emily  

I eventually eventually we’ll get to the higher ones. But at this point, I want to try to test out the three and the four if we can.

 

Erwin  

Fabulous. Okay, I’m gonna keep you from it. Thank you Emily, thank you Tammy.

 

Tammy 

Thanks. 

 

Erwin

Thanks for coming on.

 

Emily

Thanks for having me. 

 

Erwin 

Before you go if you’re interested in learning more about an alternative means of cash flowing like hundreds of other real estate investors have already, then sign up for my newsletter and you’ll learn of the next free demonstration webinar I’ll be delivering on the subject of stock hacking. It’s much improved demonstration over the one that I gave to my cousin chubby at Thanksgiving dinner in 2019. He now averages 1% cash flow per week, and he’s a musician by trade. As a real estate investor myself, I got into real estate for the cash flow. But with the rising costs to operate a rental business, it’s just not the same as it was five to 10 years ago when I started there. Forget the cash flow reduces your risk. The more you have, the more lumps you can absorb. And if you have none, or limited cash flow, you’re going to be paying out of your pocket like I did on a recent basement flood at my student rental in St. Catharines. Ontario. If you’re interested in learning more, but stir for free for my newsletter at www dot truth about real estate investing.ca. Enter your name and email address on the right side. We’ll include in the newsletter when we announce our next free stock hacker demonstration. Find out for yourself what so many real estate investors are doing to diversify and increase our cash flow. And if you can’t tell I love teaching and sharing this stuff.

 

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Youtube: https://youtu.be/FuSD3OIDwNw

 

Erwin  

Hello, everyone. Welcome to the truth about real estate investing show. I hope you all had a great weekend. My name is Erwin Szeto for those who don’t know, I guess some people didn’t know. I hope you all had a great weekend. I know I did assess Seth Ferguson’s multifamily conference. And it was a huge ordeal for him being the first big real estate Conference coming out of the pandemic, that was live and in person only get nothing out of this. But I’d recommend you buy the recordings. If you missed it. The speakers are great, every one of them. I took notes from pretty much all of them. I did miss some speakers because I was just enjoying myself so much in the hallway. A lot of people I haven’t seen this since 2019. So literally some people I haven’t seen since my own conference in 2019 at the wealth hacker conference, so it was great to just see people and teenagers hugs and smiles and no mas. Kevin O’Leary was was especially excellent. I thought, I know he rubs some people the wrong way, he actually led off and explained it, that something his mother taught him to never tell lies. So you don’t have to track what lie you told who then Kevin takes a step further, he actually tells people what he thinks, even if they don’t want to hear it. And see gives people his opinion on their business or investment, whether they’re good or bad, right versus other sharks or dragons will only just say they’re not interested in investing. And let’s leave it at that. Versus Kevin will tell you if he thinks you have a bad business and you should stop, stop investing in it. So a share some Kevin’s values. My journey is a little bit different. The show’s entirely been about true seeking. In the real estate investment space, we do make mistakes. And we course correct when we do have taken down at least two episodes maybe more when we had a bad sponsor, or we mentioned a company that didn’t do good things. A Paramount’s the name of that company, but I was years ago. That’s quite a while ago now. Yeah, the founders can’t be found and the cops can’t find them. And so terrible, terrible things. Anyways. So along that line, as you’d expect with capitalism, there are many bad investments or many bad people out there. Just this week, just as last week, I’ve been chatting with investors, I chat with investors all the time, that’s chatting with one who had invested quite a bit of money into a growth tech stock that uses artificial intelligence, you’ve asked a bit of money on that another investor with three private mortgages, from just a couple of years back from a company that most of us know the name of only one only on one of those private mortgages, has the capital been returned, getting the rest back is unlikely. I’m hearing from sources that some REITs out there are in trouble, newer, REITs, newer REITs None that I’ve invested in and no one I’ve had on this show. Thankfully, my due diligence has kept me out of trouble. And I’ve developed my screening process from just simply reviewing what makes deals go bad, even pre pandemic. You know, anytime a condo, a big condo development goes bad. I read into it, I want to understand what went wrong so that I can avoid problems like this going forward. So quick, Coles notes, I’ve noticed some commonalities among field developers, and some of them are, they’re paying interest to practice or debt financed, as in the acquisition of the land is that financed. So just imagine if you’re like a condo developer, for example, it’s yours, it’s gonna be years before you actually have any money coming in. So if you’re paying interest on that piece of property that doesn’t have money coming in, that’s a risk. And another big risk is if it’s a less experienced developer, again, a commonality was, often it was the developers first big project that then you throw in a pandemic historical inflation on labour materials, and you just have a formula for failure. And I don’t fault people for deals going bad, but it’s not something I’m gonna put my money into. Dielectric, let’s start with crypto crypto investors like myself, I only have a small amount. When I learned about one. I like to call myself educated. When I started reading more about it and talking to more people about Bitcoin and ethereum. For example, they’re both way down. But when I started looking into it and putting some money in, I knew the prices were high. So I was looking for a dip to get in. So yeah, we’re dipping now. I spoke to a successful apartment building investor just on the weekend. We’ve known each other for quite a while. I know he made a killing on Boeing shares Boeing, you know, they make planes jets, and they have lots of government defence contracts. He made a killing after the pandemic crash, just owning that stock. And he managed to give it all back on cryptocurrency I do believe in Kryptos I don’t know that much. Hence, I’m focused mainly on just on Bitcoin and Ethereum mining even a large amount. My theory is that Bitcoin will likely to come back. But that’s hardly a guarantee year to date. as I record this, we’re about mid May, mid late May, year to date 2022. As I speak, almost everything is down including real estate, from what I’m seeing in real estate that I follow, like I personally invest in, we’re back to the summer prices at least maybe even November from last year. So therefore we are down on the year, even though February in January, just tremendous months, again, grateful for my clients who took action on that information and sold at the peak. The only things that are up this year in 2022 so far is oil and the US dollar. Even gold is down on the year, gold down or even last I checked it was down just barely, just barely down. So basically it’s even in this inflationary environment. Who would have imagined that what’s working though is boring investing investment properties with positive cash flow, as in like, you know, tenants are paying your rent. That’s performed extremely well. And they’ve not gone down unlike Well, the investors can hang on to them. Unlike people who speculatively bought single family detached homes in the GTA, for example, that will never cash flow, or like a pre construction condo. On the bridge construction condo side I’m hearing some are having trouble qualifying for financing. I’m hearing this from mortgage people and from lawyer friends of mine. So yeah, some people are out there are having trouble qualifying for financing. I’m not even sure if they ever planned on closing, there’s got to be some people whose exit plan was to assign it had no intention of ever closing, which would include getting financing, let alone becoming a landlord and rent up the apartment. So I’m sure we’ll see some softness in the areas that have the greatest speculation without cash flow, kinda like we saw in the stock market. On the stock side, generally, stocks that pay dividends have fared significantly better than their speculative counterparts, like high flying tech companies that don’t actually make any money. For those who understand stock options. A disciplined approach to selling far from the money in using insurance has performed better than those who were who are less conservative, slow and steady wins the race, like Warren Buffett has, hence will continue to teach defensive investing both in my real estate business and our stock hacker Academy. Anyways, that’s what I’m trying to say. What I’m trying to say is that gains are easy to make, keeping it as another matter slow and steady like economically, fundamentally sound assets like that cashflow has time and time again, are proven to be a winning strategy. Add to that time in the market. That’s why Warren Buffett is the most successful investor out there. Yeah, I’m a value investor myself, I’ll be looking to buy this dip. But to focus on quality, speaking quality. I mentioned earlier Kevin O’Leary’s presentation, and especially his q&a revealed a tonne of great information. Unfortunately, Kevin wasn’t allowed to do any sort of fan interaction, I was supposed to have my picture taken with him as part of as part of being a VIP for the event, as disappointed. But then after seeing the q&a, I was like, that’s awesome.

 

Erwin  

I got way more value from Kevin’s thoughts during the q&a than I would from getting a picture with him. And I’ll share my takeaways at Cherry and I’s real estate meetup, as Kevin shared his thoughts on the crypto market, on the economy, if there’s gonna be a recession, all those sorts of things I took notes, took lots of notes, I’d record a part of it. And I need all this sort of information form part of my presentation on investing through a recession. And also at that meeting, my team will award winning coaches will be sharing on the latest they’re seeing on the streets in terms of real estate rental prices and resale prices. And our keynote, our long presentation will be around garden suites garden Suites is for most folks returning what was a single family home now into a triplex. And it’s what I consider the final major value add strategy for the vast majority of real estate investors. So it’s something you don’t want to miss. If you’re in it for the long term. We’ll talk about renovation strategies to maximise rent return on investment, of course, financing and building codes zoning, this is a very new strategy. So we’re going to give you an update on where we are in each of those areas. Because you need to know if you want to get on on this on the ground floor. So you don’t want to miss it. Saturday, May 28, same time place 8:30am offices that I have in real estate, if you’re on my email list, you get all the information to register already, we’re doing in person only that way there’s tonnes of great networking to be done. I don’t know how folks network over zoom, you know, when only one person can talk at a time, this is much better. And yeah, I’m really enjoying the in person events again. And again, only for those who feel safe to do so. You’re more than welcome to attend. Oh, yeah. And then of course, the networking has been fantastic in my events. We’re not like we’re not like other events out there. Because naturally, many of my clients attend and they’ve done really well. They’re really nice people. We’re having more than more, more and more folks retire. And my policy has always to be to learn from people who have what I want. So we’ll have some for recent retirees from real estate investing in the room, so you don’t want to miss it. 

 

Erwin  

So onto this week’s show, Yes, Christian, give me a second Szpilfogel. He’s one smart guy with a difficult to say last name. He’s a former tech executive who worked closely with Canadian tech billionaire Sir Terry Matthews. For those who don’t know, Sir Terry, I believe he’s still a top 10 richest Canadian. Anyways, Christian has implemented several uses a highly analytical approach it technology based strategies to maximise returns on his multifamily investments. Christian detailed the top 10 like apps and devices for ROI on a past podcast, so check that out if you haven’t already, the water metre monitor cuts alone can save you 1000s of dollars via early detection of water leak. Christians smart on the EQ side as well as his ability to communicate his renovation and develop plans with the neighbours has enabled him to obtain their assigned to support that he can go to the city and get his variances and permits approved. He shares how he’s finding deals getting offers accepted and multiple offer situations and even having sellers call him directly. Terry and I will be videoing in Turin will be touring and videoing some Christians properties in early June as part of our audible tour. We’re in town just for tonight’s we’re even hosting a casual meetup in centre town on June 7 at 6pm. And on June 8 is the day after Sherry will be the guest speaker at Oreo. The big Ottawa networking group at the Infinity convention centre, there’s a link to register in the show notes on our website at truth about real estate investing.ca. If you’re on the email, you get the show notes, it’s wise to be on our email list, you get some quality information in a timely manner. And it’s all free goes right to your inbox. Just go to my website, www dot truth about real estate investing.ca. Put in your name and email on the right side. And you’ll start getting notifications on when we’re hosting events when we have new podcast episodes. And of course, the show notes. So you can register for great events like Oreo on June 8, because charity will be there speaking. Christian is a good guy. And he’s not here to sell anything this projects or he sell funds his own projects with his own capital. And please enjoy the show. 

 

Erwin  

Hello, Christian. 

 

Christian  

Hey, Erwin. Good to see again.

 

Erwin  

What’s keeping you busy these days? 

 

Christian  

You always love that question. So and you know me, I’m always really busy. 

 

Erwin  

So it’s we’ve had a busier from what we discussed before we start recording, but go ahead.

 

Christian  

It has been busy in our portfolio continues to grow. We’re still doing acquisitions. You know, it’s interesting, I was having a discussion with a local realtor yesterday over lunch. And he was saying, you know that the housing market, there’s a lot of people starting to put listings on I think they’re they’re kind of worried that they’re going to miss the cycle, the boom cycle for sellers. And so he’s seeing a lot of people putting listings on getting off the fence about it. So I thought that was interesting. But the other thing we talked about was that, you know, I’ve always said that just because the markets hot doesn’t mean you don’t buy right you stick to your principles, and your decision criteria for purchase. And then figure out well, you want to have certain certain criteria, but you can find what you need to find even in a hot market. It’s just that when the markets hot, they’re just harder to find when the market is soft. They’re just a lot easier to find and meet your criteria. And so we have done acquisitions, even over the past year since we last talked, we bought another building that’s going to be a repositioning project in downtown Ottawa in the centre of town area. We bought a portfolio in a town called Elmont, right, which is literally just outside the Ottawa border, the City of Ottawa border, very near Carleton Place, which everybody bought in there about five years ago. And now everybody recognises that it’s really doing very well. It’s a very interesting town that’s really growing Elmont, I think is going to be probably the next one. It’s just five minutes away from Carleton Place. So we bought a portfolio there. I was talking to just before we went on air that one, you know, people say you can’t find cash flow properties in a market like this. Well, this was a portfolio of mixed use buildings that I ended up buying at six cap. That’s what it worked out to. And that’s with full conservative underwriting so that as soon as for example 5% 5% 5%. So property management, maintenance, as well as capital reserves are built into that underwriting. And then the the other key piece in there is the rents are about 35% under market. So it’s there’s lots of upside in this property as well. So yeah, it’s still possible to turn over the right stones. So were the stones on ice axe, or were they were these stones that you’re turning over? How do you find the deal? So that’s a really good one. So so this one we found, let’s say the deal found us? No, so I didn’t go looking for this deal. The deal came to us mainly because we’re really very active in certain markets. And so we were known and a realtor actually had this under contract for himself. He had done a decent job of underwriting not perfect, so we cleaned it up and adjusted the price accordingly. But he had it for himself but he wasn’t confident in being able to execute on the long term project. So he called us up and said, Would you be interested in this? And we were literally his first call. And I did. So sure. Send me the numbers, I’ll take a look at what you’ve got. I did a quick Proform on it. I was like, Yeah, we need to take a look at this, right? Because if the numbers are right, this is either an amazing deal, or this is a disaster of, you know, of a portfolio. So we arranged to see it, the next day went out met, the seller met the realtor. And the buildings were in great shape, I say, but half the units were already bought, actually three quarters of the units were reasonably recently renovated. And then a quarter were in really rough shape, like they’re going to be total renovations break back to the studs, renovations for those units. And then they had good quality commercial tenants on the in the commercial units, with decent, triple net leases, properly structured, the leases was weird, but you know, because the seller was a bit naive and kind of new to this stuff. But he hadn’t done a bad job of structuring the financials with it. And then a number of those commercial leases are coming up shortly as well. So there’s chance to reset those prices have already done one actually. So that’s kind of how the deal came to us. And then the whole process of the acquisition was interesting, there was a bit challenging because the seller, this is the only portfolio he’s ever owned, and he’s only owned it for five years. He, I think, in hindsight, he got in over his head. And I think he just needed stress relief, which was the reason he was fundamentally selling it. And so because he was naive, of course, a lot of the normal due diligence process was was difficult, you know, simple things. Like, I need to instal balls for the commercial tenants, I need acknowledgement, the tenant from the residential tenant that he said, you know, and I was just getting tonnes and tonnes of pushback on this stuff. And I had to keep explaining to him why we were doing the things that we were doing through the due diligence process. So that was a bit painful.

 

Erwin  

However, the seller on this building, they inherited, like

 

Christian  

he was an engineer who had some money and thought real estate would be a good thing to own. And he picked up three of these buildings, you know, on his own. He’s a clever guy, in reality, but I think the stress of managing tenants was too much for him the human aspect or what, because they there was like tenant issues, like, can pay rent or something like that, or there’s always tenant issues, right? You know, in a portfolio that says there’s going to be dealing with tenant issues.

 

Erwin  

Let’s back that up. How many tenants are there? 

 

Christian  

Oh, there’s total of 27 units in the portfolio. And it’s about there six commercial, and then the rest are sort of 21 residentials.

 

Erwin  

That’s a lot of relationships. It is just trying to remember that many names.

 

Christian  

Well, for a new person, that it’s a bit overwhelming, right. So fortunately, we’ve got processes to handle this. He also had some challenging tenants that he’s worked through. There’s still a couple of challenging tenants in the building. But he did a lot of the cleanup to be fair, but I think it really picked the stuffing out of them.

 

Erwin  

Right. Gentleman, the three quarter of the units that were renovated that was this gentleman?

 

Christian  

No, he did a little bit, but most of it was done just prior to his acquisition of the buildings.

 

Erwin  

And how long ago was that was the sellers acquisition.

 

Christian  

We bought it about five years ago. So no doubt he was selling it as soon as his fixed rate mortgages were coming up.

 

Erwin  

That’s tough, too. Because do you know what what their financing was? Like? Because this is mix? This is mixed use?

 

Christian  

Yeah, no, it is mixed use. But the commercial space is literally just under the 30%. Mark, I think it works out to about 27% On average of the gross leasable area, which gives you a lot of flexibility. So I was able to finance this with CMHC backing it. And that’s a whole other thing to CMHC it seems to have turned a corner. So let me put it to you this way. Or when I’m going to ask it. If you’re doing CMHC on a commercial building, how long does it normally take for them to get back to you on that underwriting? How much do you have to provision for in your agreement of purchase and sale?

 

Erwin  

I haven’t personally done commercial with CMHC. We’ve been doing our deals with BDC. And at least two months.

 

Christian  

Yeah, that’s right. So most people if you’re doing CMHC on a commercial, multifamily.

 

Erwin  

This is back there for the listener. You don’t know if you have financing until that time has passed. You’re in limbo for that long for financing. Alright, sorry, Krishna continue. 

 

Christian  

Well, so with commercial residential buildings, so that’s anything five units or more for residential, and you can include mixed use as long as the commercial space is less than 30% of the The total gross leasable area, so CMHC. So just for our newbie friends listening, and when you have CMHC financing, it does a few things. One, it technically allows you to buy it at a higher loan to value then you could get up to 85% loan to value if CMHC is insuring your mortgage, it almost always results in at least a full point discount on the interest rate versus not having an insured and you can get longer amortisations. I’ve had one building, for example, where it’s a 40 year amortisation insured by CMHC. But the downside with CMHC, historically has been the very long lead time, typically 10 weeks is what we would budget for in our purchase and sale right to put in place. I heard somebody had CMHC funding or not funding the CMHC approval in about a week. Somebody mentioned that. Yeah, somebody that Kingston mentioned that to me in December, I was like, Okay, I went back to the lender, I challenged them, right. So hey, let’s see if we can do this in a week. Let’s get all the paperwork lined up everything done. So that we put it in in the way that we expected CMHC wanted to see it, you know how fast the approval was? four business days?

 

Erwin  

No way.

 

Christian  

I have never never seen this in my life.

 

Erwin  

Consumers See, allocate some resources to the LTB.

 

Christian  

There’s hope maybe on that side, but I do believe CMHC increased the size of their underwriting team, which I think is part of it. Or are we just lucky? 

 

Erwin  

Can we have some of them for like adjudicators to cross train these people? Sorry, Krishna, just a backup for folks not familiar with commercial financing. So you mentioned that you had 10 weeks that you allocate 10 weeks for financing approval? Is that in your offer, as in like your conditional period? Yes.

 

Christian  

Yeah. So that’s actually quite normal for commercial processes, if especially doing CMHC even. So we did a building a year ago, and I had a short conditional period, even though there was 15 offers on the building that I ultimately bought. Yeah, multifamily is are in rare supply. And that’s a whole other discussion outside but in that when I still put a conditional period, but I had the advantage of being a highly credible investor, right, so I had enough of a reputation with the real estate agents that they knew that I was going to be able to execute on this deal. And my conditions were really very simple for that one, it wasn’t inspection and insurance. So and really, that was just a buy a couple of weeks to make sure we had some time from a due diligence period. And on that one, I knew I didn’t need CMHC underwriting. But even if I did, all it happens in the deal is if you underwrite it with the assumption, you don’t need CMHC. So you’re going to just do conventional financing 75% loan to value with prevailing bond rates, which is how the the interest rates are set in a standard amortisation, then the CMHC is simply upside. Right. So in a competitive situation, I’ll put it in with a lender, right on the assumption that I’m not going to get CMHC. And I could make assumptions about that, right. But I don’t want to I don’t want my business case to rely on it. So then you’ll still go ahead with the CMHC application and everything your business case just gets better if you have it. So it was four days to on that. So we advanced our clothes on that purchase by about two months. And I wanted it because it was a creative, as I said it was it was effectively a six cap based on rents that were 35% below market. So it was a creative to the portfolio and I didn’t want to wait. So we moved up the close by about two months. And then the big issue we had prior to close was was insurance. So the age of the buildings. This again, this is on the main street of Alma. And for people who don’t know, Elmont, you’ll know it for one of two reasons. The founder of basketball James Naismith, right, that’s his hometown, and actually his statues right in front of one of these buildings, which is kind of cool. And then the other reason people might know it is anybody who’s a Hallmark movie fan. A lot of Hallmark movies, especially Christmas movies are shot in Elmont on Mill Street because it’s very picturesque. And these buildings are featured prominently in the backdrop.

 

Erwin  

How far is is Alma sort of like a suburb for Ottawa? Is that how it works economically, fundamentally, as an investment town,

 

Christian  

It pretty pretty much I mean, Ahmad is a power generating town. There’s a power station there right on the Mississippi River. And it’s beautiful, very picturesque in that area with the waterfalls and so on. But it is fundamentally a suburb of Ottawa at this stage just like Carleton places. So as you know, I live in downtown Ottawa. The Glebe To be precise, which is inside the canal limits, and I can get from my house to these properties in downtown Elmont in about 35 minutes. Is there a close?

 

Erwin  

Or what doesn’t seem like everything seems pretty close. Like what’s downtown to the airport drive? So I am jealous.

 

Christian  

Yeah, it will. You’ll be jealous because you live in Toronto, right? Yeah, ridiculousness. So, so Metro Ottawa, if you will. So I’m going to include Gatineau. That’s about one and a half million people. The Ottawa side is just over a million people. But the way the city is structured is it’s structured along the river, that’s the primary growth area east and west. So you can go you know, edge to edge in Ottawa, we take you just over an hour of driving with no traffic. North South is a lot faster. So the city is kind of long and skinny. So if you’re downtown Ottawa out to the Ottawa airport, it’s about 20 minutes, 20 minute drive, and it’s a very scenic drive to you’ll just go up if you’re in downtown Ottawa, you’ll just follow the the Rideau Canal all the way up till you get to the airport Parkway.

 

Erwin  

So we just stay in the Glebe when we come visit,

 

Christian  

There’s no hotels in the Glebe. You have to stay in Senator town. Closest and still be nice.

 

Erwin  

So you live somewhat close to where the protests were somewhat close. Oh, we could hear them. Yeah. Oh, well, you hear what I heard was peaceful. Yeah, sure. Did you hear I have a bail said it was peaceful.

 

Christian  

Yeah. Bunch of buildings in centre town. Right. So I had to go and check my tenants down there. Were a bit concerned. I’d say they were very close to it. Okay. Oh, yeah. Yeah, my mill is so the, you’ve got the parliament district, right with the Parlin precinct which is very narrow set of streets, and then you have centre town. And then you have the Glebe. So that’s the communities between Parliament and the canal. And these protests were primarily on Wellington Street. And to be fair, it was reasonably peaceful on Wellington Street. I think everybody, it was just a big party that was going on. And that’s like, the issues that we’re seeing, we’re mostly off of Wellington Street. The and the biggest issue? Well, there’s two issues, I say, one was, there are people that had air horns on their truck, and some of them were like, effectively, like a Via Rail train, you know, horn going off. And that was really disruptive, you could hear that for many, many kilometres. But for the people that were literally living, you know, within a block or two of that, those horns were going off regularly, like for about 20 minutes of every hour at all times of the day, in the night. So that was, you know, really problematic. And I think that was one of the key things that really upset people downtown. And then you get sort of secondary people, people who use any protest as cover and it doesn’t matter whether it’s a, you know, the trucker protest, or any other type of protest

 

Erwin  

G seven D 20. They’re, they’re just BLM, they’re there to hide in the crowd and cause damage.

 

Christian  

Yep, that’s exactly right. So you had people who were certainly doing that, right, people were trying to set fire to buildings and stuff like that. But you know, and then there was a little bit of harassment as well, which really didn’t, didn’t help. So for example, there were people that be walking with masks on so waiters, for example, going to do their shift might have their masks on as they’re walking to work right and be harassed about wearing their masks. And I think they were just intimidated more than anything. I’m not sure that there were many there were some assaults that certainly made the news, but I don’t think there was a tonne of it going on. But it was just the whole environment just wasn’t felt very peaceful. And I think a lot of people just didn’t feel safe. But the air horns were the worst, honestly.

 

Erwin  

But they’re peaceful. I’m sure you know, it’s funny because I associate indentify for attendant and there’s no quiet enjoyment of property. So I know what my tenants opinion is of quiet enjoyment is, it seems all these people don’t they believe that air horns are still considered peaceful?

 

Christian  

Well, you know, I was fantasising about maybe taking an air horn on a vehicle parked outside of one of their houses and just blasting the air horn 1am 2am 3am et cetera. We’ll see how peaceful they think I am at that point.

 

Erwin  

And get it I don’t get it the whole peaceful thing I just I’ll drop it after this point. But if that was my tenant was hearing that they’d call me and say this is not peaceful. Alright, so it’s not just me.

 

Christian  

We were dealing with that. I mean, we were getting calls most most of it though, is they recognise there’s nothing we could do about it per se. Totally but the we had tenants just making sure that security in our buildings was good, right and making sure doors properly latched that our intercom systems were working properly. And we have cameras on a lot of our buildings, right? So the tenants were thankful about that, as well. I had so many queries of saying these cameras work, right.

 

Erwin  

That’s funny, they waited for this moment to actually ask and think work. We were talking about this before, before we started recording, how to prepare for inflation.

 

Christian  

No boy.

 

Erwin  

And you’re smart. So like, like, I like asking you because I’m crazy. I have all these crazy ideas. You know, I dabble in some bitcoin.

 

Christian  

You know, it’s funny, because, you know, as I was saying to some people, when it comes to predictions around anything in the economy, you know, even the best of us, I think, are only a little more accurate than random chance. The economy is just so complicated. There’s so many moving parts. And for us to oversimplify it, I think it’s just a mistake. You know, we can see the effects of supply chain, we know what that’s doing in terms of driving inflation right now, which, which is interesting. You know, because I think most economists will tell you that in a real GDP sense, the economy is probably going to grow by about 2% this year, and we’re running at about 2%. But I don’t think they’ve taken into account all the inflation that we’re actually seeing, because you can see, we’re completely blowing the doors off of the actual inflation rate versus what the predictions were, which leads you to believe that the real GDP may actually be in a contraction period, we may not actually see 2% growth this year, we might actually see a contraction.

 

Erwin  

It’s so weird, though. Anyone who wants a job has a job, it seems, or anyone who wants

 

Christian  

but on the demand side of it, you know, and that’s always the thing, right? When we’re talking about inflation, it’s what’s driving it. Classically, in the past, it was demand side, inflation. And that results, certainly in wage increases, etc. Back in the 70s. It was it was averaging, what about 5% inflation over that, that period of time? Now we’re seeing it’s more like about in terms of GDP growth. Sorry, that wasn’t inflation to 5%. That was GDP growth. So now our GDP growth is nominally 2%. But our inflation rate is really very high.

 

Erwin  

I think March was 6.7%. And that was the biggest factor was gas prices.

 

Christian  

Yeah, absolutely. But it points to the fact that inflation is supply chain driven, right. And it’s supply side as opposed to demand side. This is why a lot of people and a lot of economists think it’s going to be transient in nature. And I really hope it will. And my suspicion is it probably will. And then I think we’re going to get a very confused state with the Bank of Canada. And, you know, in the US central bank, as well, Bank of England, because they’re going to have this quandary, you’ve got inflation going in one direction, which they feel they have to address. And they’ve already announced, you know, lots of rate increases. And we’ve seen the bond market respond over the last month and a half as well, where you see rates anywheres, up to five years went up very quickly. So you’ve got that on that side. But if the real GDP is actually contracting, then the government is going to start to think carefully about, Well, are we moving into a recession? Right, and this is sort of a classic stagflation, stagflation type situation. So now, you’ve got to think, Okay, what’s the central bank going to be doing in this type of environment? Are they going to prioritise inflation? Or are they gonna prioritise economic growth? Right, and I think in the end, they’re going to cave and they’re going to support economic growth, which means then that interest rates would be probably coming back down towards the end of the year. And we were talking about the supply chain issues earlier, you’ve pinned one, which is oil, right? That everything is driven by energy. Energy is an input to just about everything that we do. So if energy costs go up, it doesn’t matter. What part of the economy you’re looking at, it’s dependent on energy, right? Even food is a big issue, right? Because energy goes into the production of food, everything from fertiliser to harvesting, and we’ve seen lots of increases on that side of it. You and I were talking a little bit before before our session here and one thing that I just came to realise more recently was the dominance that Canada has in potash we have probably about 40% of the world’s supply of gas. It’s about 15 million metric tonnes, but the second biggest producer of potash in the world Is Russia with Bella routes. And that’s about sorry. So Canada is about 14 million metric tonnes, Russia is about 15 million metric tonnes, right, Russia and Belarus. And of course with the sanctions that supplies kind of held off and put it into context, the third largest producer of potash is China with about 5 million metric tonnes. So we’re effectively cutting off about 40% of the potash supply. And that is going to have secondary effects, I think towards the back end of this year. So you’ve got energy on one side, right, and then we get the sanctions that are happening in Russia in the Ukraine. And if those don’t lift in a reasonable amount of time, then we’re going to start to see impacts on on food supply as well. So all this stuff is just going to make for some really turbulent times coming up over the next couple of years, at least, you know, where the bank is going to be a bit confused about which way to do things. But I think at the end of the day, they’re going to double down on getting the economy, you know, right and stable, even at the risk that inflation

 

Erwin  

And with all this new spending that’s in the federal budget in our provincial budget, I need cheap interest rates.

 

Christian  

Well, yeah, but you know, some would argue that the federal government should have backed off and a lot of that stimulus, you know, as early as the middle of 2021. And I would tend to agree with that. And it’s kind of weird, because you’ve got the Bank of Canada, of course, increasing inflation, right. But then at the same time, you’ve got the federal government in particular, putting more money into the economy, which of course, helps to fuel inflation. So they’re kind of fighting a little bit against each other. And then you saw to, right, everybody thinks about the Bank of Canada and the overnight rate, and how that’s gonna affect the variable rate. But the other thing that the Bank of Canada did, at the same time at that announcement, is they shifted from quantitative easing to quantitative tightening. And that basically means, you know, where the quantitative easing, you know, some people would just think of it as printing money, right, which it sorta is, but really isn’t. Quantitative tightening is effectively not renewing the bonds that they did buy at that period of time, which means that there’s going to be some upward pressure on the bond market, it is an indirect effect of, you know, affecting the fixed rates, if you will, because it affects the bond markets, the yields go up. And that’s one of the reasons that I think we saw the short term yields go up and why fixed rates went up recently.

 

Erwin  

Probably seeing I see it on Twitter, I think we’re probably going to see like 4.5, soon on five year fixed,

 

Christian  

it wouldn’t surprise me. So I locked in that portfolio that I bought in Elmont, I was actually getting a bit nervous about it, because my underwriting at the time with CMHC required me to have a total interest rate of no higher than 3.45. And when I first started this, I, it wasn’t really much of a risk, I think my interest was gonna end up being around two and a half percent. And then when Russia invaded the Ukraine, there was actually a demand in the bond market, which resulted in a drop in the yield. So my interest rates actually drop by a quarter point. And I thought, Okay, well, at least I might be able to get, you know, some advantage out of this situation, but then within about a week or two, it went the other way, right. And then people got nervous and the, you know, in terms of what it was going to do in terms of inflation in the economy, and then the yields started going up. And then when the Bank of Canada added fuel to the fire, it didn’t help. So ended up having to do a buy down on the interest rate, in order to guarantee the interest rate of 3.45. But I had to put money into it at the close. 

 

Erwin  

In order toget that done. As a percentage, how much mortgage have to put in?

 

Christian  

It wasn’t much, it was about 1%, right, of the total loan value. You know, that was where the spread difference was about point one, two, right between what I was contracted with with CMHC versus what the bond yields actually were. So for people who aren’t familiar with this, when you get an underwriting with, say, CMHC, and they say that they’re going to guarantee the underwriting or the insurance for your loan up until you get to a certain interest rates. But when you’re doing a commercial fixed rate, it’s not something you can pre negotiate, you can negotiate the spread, but it is completely dependent on when you buy the bond in the bond market. And so if the bond yields are going up, then that affects what your interest rates are going to be. So usually about a week ahead, or even sometimes a day or two ahead of the actual close on the purchase. You have to do what’s called a rate lock. And the rate lock is basically where the lender goes to the bond market buys the underlying bond. And then you’ve got that particular yield. And if anybody’s ever been through this, it’s about The seven to 10 minute window. So they literally say you have to be on standby. So what they’re going to do is go to the bond market, they get a quote that’s live for 10 minutes. So you have to confirm whether you’re going to accept that particular interest rate. And you’ve got, you know, by the time it gets to you, you literally have five to seven minutes to make that final decision. So it’s, it’s an interesting process, and then that once that rate lock is in, you’re done.

 

Erwin  

So is this like a zoom call? Like, what are you actually you’re together on the floor? The trading floor?

 

Christian  

It’s done via email, right? But yeah, it’s literally done by email, but you’re on standby. You’re sitting there there, say, Look, we’re gonna go to the bond market at 10:30am. Make sure because we’re going to have probably about seven minutes for you to confirm in total, fascinating. 

 

Erwin  

Wow, what was it like the first time you did this? It doesn’t have to be a little, like, I don’t like that word, throw it back there catching on?

 

Christian  

Well, you can do that, actually. So you can go and you said, No, I don’t want that. Right. But most of the time, things are not so volatile, what you’re getting is the rate for the day, right. And it might go up through the afternoon. But if you don’t like that, when they’re probably just go back to the market the next day. But usually, what you’re you’re hard pressed against is your close date. So your close date, you don’t really it’s hard to move in a lot of cases. And then you have at most in most cases, 10 days before the close date where you can do your rate lock. But you don’t want to heat up that buffer because there’s the other side of it, which is let’s say I do a rate lock 10 days before my clothes, I have to now close on that date. If I don’t close on that date, I have to start doing buy downs on that that bond. So it costs me like it costs a lot of money. Think of like 1% per day kind of penalties associated with that.

 

Erwin  

So who walked you through this process the first time?

 

Christian  

Oh, I was totally naive the first time.

 

Erwin  

That’s the best way to do it. Right? 

 

Christian  

That’s just just on a roller coaster ride. But first, I had no idea what was going on.

 

Erwin  

By your email, okay.

 

Christian  

Yeah, it’d be fair, the lenders are really very good at managing all of this. So it’s not like I’m trying to work as straight the lenders just tell me what’s happening. And like I said, the bond yield rates, they don’t fluctuate that much in a day. Recently, I’ve seen them fluctuate by a full quarter point. But most times, they don’t, most of the times, they’re really pretty stable and that fluctuate by, you know, maybe five or 10 basis points at the very, very most. So it’s not normally it’s not that unnerving. But it wasn’t nerving this time only because the bond yields were actually fluctuating. Well, when I say fluctuate, they were going up, and they were going up fast. And you’d see like quarter jumps easily each day. Right? Yeah, so it’s not a pretty process when the markets are really volatile. But you know, the vast majority of situations that because I really don’t want to scare people either, right? It’s just the vast majority of situations, I would say, literally every other deal besides this one, it’s a very simple normal process, you’ll do your rate lock, everything’s gonna go fine, and really not going to worry about it. But this time, it was a bit harrowing, just because the yields had gone up by almost two full points, right? 

 

Erwin  

In the span of a few weeks, and then crashing, you just like us, like piles of cash waiting around for foreign deals are available. 

 

Christian  

So what I did in this case was I was starting to stockpile cash because I’ve got a major repositioning project that I’m doing. So I’ve set aside credit, I’ve set aside cash, I’ve got refinances that are happening all the time. So all this cash was just kind of coming in. But you’re you have other partners involved or No, no, no, this is just our money. We don’t take external investors. So we don’t take any external equity investors at all. But we’ve got enough of a portfolio now that there’s always a refinance going on in some property. So we’re extracting new capital, all the time that we can use towards new projects. So a good chunk of this was capital that was going towards a repositioning project that I have, but this deal was just too too good to pass up. It was highly accretive that portfolio. I mean, we advanced the clothes I think I mentioned by two months. And the reason was that it adds cash flow to our portfolio as soon as we close and it was substantial cash flow. So you don’t want to pass those things up. And the so I didn’t and but we have probably three or four other reifies coming up at the back end of this year, where we’ll be able to take them to more cash for projects that we have to go. So we kind of entered this discussion. I think a little bit about what’s happening with the economy. 

 

Erwin  

And more specific more about what are you planning to do with inflation? Oh, I actually had to add a comment to that totally agree with your point. No one really knows that idea about the economy. He’s going, one thing we can predict is the central banks will in generally they will, there will, there will be more money supply. So that’s what I predicted. 

 

Christian  

I think you’re absolutely right. And that’s kind of where I was going before, when if the bank decides to prioritise the economy, over fighting inflation, we’re gonna see loosening things like quantitative easing is going to start to happen again, which kind of increases the money supply, interest rates will probably come back down, or at least be moderated. So that stuff can all happen. But what I don’t do is rely on that, right? Because I just don’t know what’s going to happen. There might be another war, there might be, God forbid, another pandemic, right? It’s, anything can happen. And we just don’t know. So I really look at things on a risk management basis. So I take look, so I look at things on a risk managed basis. And when I take a look at things like interest rates, inflation is something that I kind of like, you know, in the context of it makes my debt cheaper. Right, and that’s the way I look at it, I don’t think about it, as you know, it makes my assets worth more, because there’s nothing that’s fundamentally changed about the assets, their intrinsic value is the same, you don’t think that change was the value of the currency that you use to buy it, but my debt is tied to that currency. So with rapid inflation, so for example, 6.7%, you know, year over year inflation you were talking about earlier? Well, my debt just got cheaper by probably about 6% as a result. So that’s great. Right now, the side effect, of course, is interest rates. And that’s where you need to decide, how are you going to mitigate that particular risk. So a lot of people are in variable rates, I have no issue with variable rates. And if you believe that you can weather and you know, when interest rates storm, right, in that the variable rates probably make the most sense for a lot of reasons. But in my business, you know, there’s such a huge debt and asset value that a significant fluctuation in the interest rates could affect my operational budget. So I like to have predictability on that. And so for me, I look more at fixed rates that match the duration of a particular project or objective. And it’s not unusual for even my larger competitors, if you will, some of the bigger companies like hazel view, or Memento or homestead, they won’t even look at just a five year lock, they’ll be looking at a seven or even a 10, depending on how much they need to weather a particular storm, you know, so in my view, predictability of cash flow trumps any potential gain I might have from a variable rate. Now, there is the other thing too, that when you’re dealing with commercial loans, you know, almost every product is a fixed rate because it goes to the bond market. So it’s not like, you know, I have to make a lot of these hard decisions. But some of my smaller mortgages have a choice of being between variable and fixed. So I run it at about a ratio of, I would say, 75% of my mortgages are fixed products, and then the rest are some form of variable, whether it’s line of credit, or traditional, very tight mortgages.

 

Erwin  

And then how do you hedge for like, all the renovations that you have planned, because that’s like, I was talking my handyman just on Friday. And he was telling me, he couldn’t find any ABS plumbing materials, you went to like six different retail stores like Home Depot, Lowe’s, no ABS,

 

Christian  

you have to, you have to buy, you have to buy well ahead and a lot of these things. So we’ve always had a process when we’re doing our renovation projects, or reposition more specifically in the repositioning projects, we know the timeline that that’s going to work to and then what we’ve typically done is buy the supplies when they’re discounted. So if we know that we’re going to be doing, you know, full electrical overhaul of the building, or we’re doing a lot of plumbing work, or we’re going to be buying, you know, doing hardware floors, or H vac systems, then when there’s a price break, we’ll buy it, then we’ll store it. So that’s that’s the way we typically deal with it. And certainly for retail stuff, you just watch for discounts everyone else, everybody’s got a discount, maybe once a quarter, once every six months, where you might be able to get like a 20 or 30% discount on something. And they’re storing it. Yeah, we store it. So we’ll we’ll pay for the storage cost, right. But that’s, you know, it’s a lot less than if we have to buy it on demand. But right now, like if we’re, I’m looking at heat pumps on a repositioning project. That’s a 12 unit building that we’re doing. That’s a conversion of a seven unit to a 12 unit building and my age back guys told me that they need about six to seven months lead time to guarantee that they’ll have the equipment.

 

Erwin  

So is that timeline work for you? Oh, yeah,

 

Christian  

no, it’s because I mean site plan, control and re train. And you know, the city, alright, it’ll probably take six or seven months. So as soon as my site plan, I get it, I get a thumbs up that it’s going to go through the process. So I’m just waiting for feedback on that. As soon as I get the thumbs up on that, we’ll put the order in for the equipment, so we’ll have to pre buy all that stuff.

 

Erwin  

What about the properties in Elmont? Like, don’t those renters need to be done sooner than later? 

 

Christian  

Well, we have to wait for tenant turnover, right. So we store so sorry,

 

Erwin  

apologies, because you mentioned like after about a quarter of them need to go back to the stud. There’s people living there.

 

Christian  

Okay, got it. But I don’t want the tenants are going to move out. But we some of the harder things to get or appliances, for example. So we just we’ve been hoarding appliances, we usually buy them on a secondhand market anyway. So when we see stuff that we think we might need, we we literally just go buy it, pick it up, and we store it, right. So literally, when somebody needs a new stove or a new fridge, right, we get one to them the same day, we don’t go out and try to source it and buy it. We usually have them on hand.

 

Erwin  

Christian for the for the novice, can you explain like, do you have staff or you and your wife are going out with a truck and picking up stoves and washers.

 

Christian  

I’m getting too old for this shift. My wife still tries to get me to try and move the stove and I will in a pinch. Right. But you know, I didn’t want to be lugging these things upstairs. I’m just not built for this. And you know, so we have people that will do that. And we do have some amount of staff, although it’s been a bit more challenging through the pandemic, but then we also have subs as well. So we’ve got we’ve got a team of people that will do stuff like that for us.

 

Erwin  

Can you share how many staff you have?

 

Christian  

Yeah, sure. We have five people all told combination of T four and T four A’s. Got it? And then we can as well. 

 

Erwin  

So again, for the more novice like what would you recommend me first hire a bookkeeper, bookkeeper. And then after that, when you say bookkeeper or the T four, they have a sub contract. 

 

Christian  

Now, there’s especially when you’re first starting out, right. But that’s a mistake I think a lot of people make right off the bat is, is you really do need a bookkeeper to keep your book straight. Because most people really don’t know how to do their books properly. I think I know what I’m doing with the books, but even I won’t touch them, right? My bookkeeper is still 10 times better than I’ll ever be, and much more efficient. And it sure makes tax time a lot less expensive. 

 

Erwin  

My wife appreciates those things. And then can Sorry, could you go through what positions do you hire for versus which ones do you sell out?

 

Christian  

That’s what you’re doing really. But I would definitely get a somebody who can do some basic maintenance, right? Not necessarily a full handyman, but you’re going to need yard work done, you’re going to need someone to take out the garbage, you’re going to need somebody who can do some basic painting and drywall repairs. So we have a maintenance guy that does all of that stuff for us. And then we also have a column. We kind of refer to him as a man, but he’s really a builder, right? So he’s a builder. He does framing he can basically do everything is a bit of a jack of all trades. And he literally moves from renovation project to renovation project, and then they supplement so when we’re doing full repositioning that we’re going to hire out, the crew will supervise the crew, right, but we’ll have somebody who acts as a foreman. They’ll be under contract for that period of time. And we’ll bring in people that we need. Our plumber is a contractor. They’re always handy to have. I can do plumbing, I can do a lot of things right. But I don’t really want to do it.

 

Erwin  

Any job. So yeah,

 

Christian  

literally the times. But it’s funny to our plumber, he only does work for us. And his main gig is actually real estate. So he’s a real estate entrepreneur. Now. He also has a an appliance rental business. And he’s he’s just a natural entrepreneur, but he still likes to do the plumbing and he only does the plumbing for himself and for us. And he can fix appliances. Now he doesn’t fix the appliance now. Okay. He has a an appliance rental business. So in Quebec, it’s typical that you get an apartment that doesn’t have appliances. That’s the norm. And so it’s quite an industry on that side where there’s rent appliance rental business. So tenants can either buy their appliance or they can rent their appliances. And so he has a business that literally just does that. But for the rental appliance business, his MO on that is he’ll buy new appliances, he’ll put them in and then when they come off rental, he just sell them on the US market. He doesn’t try and redeploy them at all. And then he just buys more new stuff. Cool. Good. Yeah, the markets are all really dynamic, right?

 

Erwin  

Christian Did you share? Well, at what point do you go to outsourcing to a crew? Again, you know, not everyone forget that the term you use was does the positioning and repositioning yeah Oh, okay. 

 

Christian  

Yeah, so it’ll completely depend on the nature of the project, right. So normally, what you want is for tea for staff, it’s where you’ve got a very steady amount of work, right. So if you’ve got work, it’s just routine. Again, you know, for the next few years, you’re always going to have this kind of work, you might as well hire them on as T for, right if you’ve got work that can fluctuate, right, so you might have demand in one year, but it may not be there the next year, then you want temporary staff that fall under a T for it, there’s still contractors, if you will, but they really just work for you or predominantly for you. And so you’re supposed to give them a effectively a T for a, so it gives you a bit of flex. And then you’ll have also subcontractors, which are job specific contractors, and, you know, they’re invoicing you that kind of thing. So that’s sort of a third tier. So when it comes to that third tier, it’s literally project by project for me. So we don’t do secondary suites, but a lot of your listeners will do secondary suites. And if you’re doing a second, the single secondary suite, you’re gonna go, you’re gonna get a bunch of quotes from a bunch of different contractors in terms of how it’s going to get done. And then you’re going to pay them a contracted price. Or you could go time and materials as well. But it’s, it’s going to be for a fixed period of time, and the project’s done, and they move on, and they go do another job somewhere else. So our projects are similar to just Baker. Right, so we’re doing a 12 unit repositioning project. So in that case, we’re going to have to hire a crew of people, right to do the work. And it’s always an interesting discussion with my accountant, right? Because on one side, you could just say they’re regular contractors and other cases, you do have the issue of default rates, depending on the nature of the relationship, right. And, you know, Terry would be a better better person to speak to that than me. But depending on the nature of the relationship, right again, and almost irrespective of the nature of the relationship, it just allows you to flex so I’m not constantly doing repositioning projects, you know, I have them, they get it done, right. And then I might have another one like a year later, right? Or six months later, or two years later. So I’ll just take a crude one specifically do that. And then when they’re done, they move on to their other projects.

 

Erwin  

I don’t know Krishnan sounds like you’re pretty busy.

 

Christian  

That’s why That’s why we have a builder on staff. Right. 

 

Erwin  

So we can keep in one builder. But your projects you’ve taken on a couple disaster projects,

 

Christian  

you but like I said a lot of those disaster projects. 

 

Erwin  

So the builder bases, their disaster before you set foot on them, that you created the disaster. 

 

Christian  

To clarify, maybe we could do like an HGTV show on this kind of stuff. But in and I’ve certainly talked about them before, so we won’t recap them here.

 

Erwin  

For folks who have been listening Christian when he was on previous episodes. The last one in September some crazy stories with break ins and cops and cameras and yeah, yeah, cops the leading to evictions. And it’s actually a great argument for why you need tech in your in your buildings. 

 

Christian  

Sorry, there’s a continued podcast to go with it. We talked about one of my buildings had, you know, had all kinds of problems. I had a, it was an acquisition where it was basically a 10 unit building where we had two hoarders we had a drug dealer, we had a guy that just liked to beat other people up, we have one good tenant and three vacant units. And that building is beautiful. Now it’s performing incredibly well. But the reason we have a builder and staff is he’s typically doing all the turnovers. Right? So he’s isn’t more of a jack of all trades, he can do everything, right. So when we have a unit that needs refreshing, he’ll do that it’ll take it all the way back to the studs if that’s what’s required. And then when we’re doing a repositioning project, that’s typically a different crew that we’ll hire out. So he’s not tied to that. Or if we have peak demand work, then we’ll just add contractors into the mix. Right. So we did one of our office buildings with you know, there’s obviously issues with respect to renting out larger square footage of space for office use during the pandemic. So we’ve completely reconfigured them into individual offices and rented those out, increase the revenue by about worked out to roughly 50% increase in the revenue per square foot for the same space. But in order to do that, we have to hire a crew and to come in and rebuild all this stuff. So you’re often flexing up and down on on these types of projects.

 

Erwin  

And then you need before recording you’re even though you’re restoring you’re improving these properties a lot. Some of that doesn’t. So you have three vacant units in a very, I’m sure you’ve had he’s been cases in Ottawa just as well. And you’re saying he had a building with three vacant units. I’m guessing there was something wrong with the building.

 

Christian  

That was we talked about that in a former podcast. I think but it was we did that acquisition back in 2017.

 

Erwin  

All right, but even your current your current downtown property that you bought, that’s hard to track all these things.

 

Christian  

So we bought a seven unit, roughly a year ago, that project we’re repositioning the building into a 12 unit building.

 

Erwin  

Do you try to paint us a picture with the seven unit building is like, is it like a three story or four stories that purpose built? What does it look like?

 

Christian  

Yeah, it’s, it’s in centre town. So it’s it’s right downtown Ottawa. It’s in a, you know, Premier area, if you will. But this building was built in 1901. Secure home. Yeah, exactly. Now, interestingly, it’s just outside the Heritage Overlay district. So I don’t have heritage requirements. But I’m making it as part of my proposition for site plan control, that we’re going to beautify the building and preserve the heritage nonetheless. And well, I’m doing that because I need a favour, right. I need some concessions from them.

 

Erwin  

They’ll play ball they will like this is they will negotiate on stuff like this.

 

Christian  

Yeah, yeah, they’re not unreasonable. You know, I think the city gets a bad rap at that time, I usually find that they are willing to be reasonable about things like this. But on something like this. So another building, which I never told you about, we have another centre town building. I was at Heritage Committee a few weeks ago, it pleasantly surprised as part of the heritage strategy, as you know, as a secondary effect of the new official plan. They feature two of our properties as examples of what developers should be doing to preserve heritage within the centre town district. And we had two counsellors, including a counsellor I’m going to need support from for my new project, she was on the call, as well. So it was kind of a you know, at call it out. And as well, I really, thank you very much, I appreciate the fact that you’ve featured a couple of our buildings. So in the site plan control, I’m just referring back to that as well. Right. And so my, you know, going in compromise, if you will, is to look, I’m going to do this because we like beautiful buildings, okay, I’ll be perfectly honest. So we’re not beautifying these buildings, because the city is making us do it. Right, the city will give us incentives to do it. But we like to be proud of the buildings that we own. So with this building, the one that I’m talking about the seventh unit that we’re going to convert to 12, it has a lot of heritage value, and can add a lot of character and the rest of the street has beautiful homes, there period homes, but the owners of all lovingly restored most of them, right, so it’s really very nice. So that’s what we’re going to do with this building. So it is three storey building, it’s in what’s called an R four UD zone, which gives us an awful lot of latitude in terms of what we can do even including height. So you have to respect things like transition between houses or between buildings. You need to respect what’s called massing as well. So how much of a presence it has on the street. And in the city, you basically asked us to do other things. They say, Well, can you do something to prevent tenants from parking on the front lawn? Right? So yeah, we’ll put that design feature in, that’s fine.

 

Erwin  

But that’d be like rocks or like a fence or

 

Christian  

No, what we typically do in our properties is we’ll put some sort of artwork in the front. So we’ll we’ll create some sort of stonework from a perimeter and will create sort of a nicely landscaped interior to it. And then we put some some amount of artwork in the front as well.

 

Erwin  

Is there an address you can share as I can do a Google Streetview? 

 

Christian  

Sure, I’ll give you two addresses if you want to take a look at that. So one of the properties that was featured in the centre town heritage plan is 314 Frank Street, in in Ottawa. And even if you do a Street View, I think it’s fairly current in terms of what it looks like. And then an example of our work that we also did was, this was a project we did back a few years ago, on 442 McLeod Street, and that’s a six Plex. So it’s a little one, but you’ll get an idea of the kind of artwork that that we might put there.

 

Erwin  

Right, Frank shooting looks a little overgrown, even while you’re transitioning it. That’s a nice like a building.

 

Christian  

It’s beautiful that you’ll take a look at the all of the detailing on the front, we will restore all of that millwork.

 

Erwin  

Wow, that’s doesn’t look cheap, and I don’t really see much of this stuff. 

 

Christian  

I’ll send you some pictures of what the gardens look like because the gardens are absolutely beautiful. Now they’re on your Instagram, they’re on our Instagram and they’ll also be on on our Facebook page. If people go to a live first group on Facebook. You’ll certainly see all the pictures there we post them regularly.

 

Erwin  

So did the city people like you? They don’t like more landlords? Oh, not in my experience.

 

Christian  

Like is a relative term?

 

Erwin  

Oh. Oh, McLeod, look at that. Oh, wow. Yeah. Hopefully no one parks on that. No, it would be painful for their vehicle if they did. Oh, yeah, that’s, that’s by design. Right.

 

Christian  

Exactly. So that’s the kind of stuff that that they asked us to do. So So yeah, that’s no problem. So we put that into into our design. So we kind of show that we’re compromising. So what ends up happening behind the scenes in a site plan controller later on in the committee of adjustments, if anybody’s ever been to a committee of adjustments, is basically set up where the committee is an elected committee. And then you go in to put your case forward. And if somebody wants to oppose, they can come and give a counterpoint to the committee to say why you shouldn’t get those variances. But before all that happens, they also look to city staff to say, You know what their opinion is. And so if you work well with the city staff, and you’ve shown that you’re willing to accommodate what they want, and you’re not trying to just bully everything the way you want, then the city staff will say, Look, we support what they’re doing, they’ve done everything they can in order to not ask for these kinds of variances, and they’ve made concessions and other areas in order to enable this, then you’ve got the backing of city staff, which helps. And then the other thing we do with things like committee of adjustment is I’ll shop these plants to the neighbours, you know, the 10 closest neighbours, I’ll just shop it with them. And, and I will also shop it to key influencers on the street, and tell them what the project is about why it’s going to enhance the neighbourhood. And I’ll ask them to sign off on a letter of support. And then I submit those letters of support with my application in a committee of adjustments, and it usually turns into a non event. And I kind of in one scenario, we had someone who was objecting. Right. And that took a little bit more time in the committee of adjustments. But in that scenario, because we had overwhelming support, the Committee of adjustments went in our favour without having to go with appeal.

 

Erwin  

In Hamilton, we have overwhelming on support of our garden suites.

 

Christian  

Different projects have different acceptance by the community to look at it as a as a democracy, if you will. So if I’m putting in a project into a neighbourhood that doesn’t really fit the character of the neighbourhood and isn’t going to garner support of the neighbours, then, you know, I probably wouldn’t go ahead with it anyway.

 

Erwin  

Right. Well, look what Frank street McCloskey for example, did you reposition them? Did you add suites? Did you add stories, additions, anything like that?

 

Christian  

You have Frank Street was easy. So Frank Street, that was a it was a six unit building early.

 

Erwin  

 And telephone. It was sorry, Frank. Sure. You can tell you. 

 

Christian  

Right Street was a six unit building that we converted tonight. Okay. And we did that back probably about seven years ago.

 

Erwin  

Okay, what were the extra units come from? Walls?

 

Christian  

Kinda, yeah. So, on the second floor, there was a very large three bedroom unit, it had two bathrooms in it already. And it was the previous owner was living there. So it was very spacious. And renting out three bedroom apartments is actually pretty tough. Meaning it is so you know, uncommon, well, the city would say they’d like to have families move in there. But in our experience, you know, I’d say 25% of the time it was families. And then the other times, it was people who, you know, usually students who wanted to rent an apartment, and then each of them would use a bedroom. So we didn’t really want to do it as student housing. And then the other issue was that the revenue per square foot of a three bedroom is a lot less than the revenue per square foot of a one bedroom. So what we did was we took that unit, and we split it in half created two very nice luxury one bedroom units. But even on you know, as is basis, the revenue per square foot went up by about 50%. Right off the bat for that same floor space. And then there was unused room in the basement. So we expanded there and we added two new basement micro suites in there. 

 

Erwin  

So the previous owner just left unused space.

 

Christian  

He did because there’s another problem in Ontario. If you go above six units, then you get into the the MER tax rate, the nil rate there in the mill rate in Ottawa. So residential mill rate is about 1.0 1.05, somewhere around there. But as soon as you go above six units into your seventh unit, you’re now in the MER class network class has a nil rate of about 1.4. So your time taxes go up about 40% of your property taxes go up by 40% by adding a seventh unit. So that’s where I say, Look, if you’re going to redevelop or reposition, you know a product like that, and you’re going to take it above six units, unit seven, and eight is kind of the valley of death. Right? Like, there’s literally no point to do it, because you have that seventh unit, and all the revenue you get from it just goes to pay property taxes. So and then the city wonders, why don’t we have more people doing seven and adding a couple more units on the six plexes you guys taught, you know, basically, you’re telling us through the tax system not to do it. So that’s why you need to really jump to about 10 units before the business case starts to hold together and some would suggest up to 12 units. And so the McLeod Street property that I showed you there that one was originally a triplex and we did talk about this in a previous show, so I won’t get into into the details on that one. But that was a troubled building, but it had a lot of square footage space on it and we turned it from a triplex with one illegal unit and converted it to a six Plex. A modern six Plex that’s a beautiful building.

 

Erwin  

And it was time to see some of these places when I when I come visit you.

 

Christian  

Yeah, for sure. Yeah, we’ll we’ll do that we’ll do we’ll go take a look. At least the Ottawa some of the Ottawa properties for sure. 

 

Erwin  

Alright, so to talk about that, actually, no, yeah, so June 8. When we come in to visit you I can share charitably speaking and Oreo.

 

Christian  

We’re gonna have June 8, that Oreo 7pm. So we’re going to have both cherry Chan and that’s Irwin’s better half. And Elizabeth Kelly, will be there as well. So we’re gonna have both of them speaking that evening.

 

Erwin  

Fantastic. And Oreos, the largest real estate organisation in Ottawa and not

 

Christian  

Yeah, we refer to it as a club. Yeah, it’s the largest, the organisations and the most active, certainly within the city, we have about 400 full time members, and they don’t all show up all meetings, but they’re always there. And we’ve also done an association with Eastern Ontario’s landlord organisation, which represents all landlords. And what we did, there was a an alliance where they do our lobbying. So particularly with the municipal governments, we’ve had some great outcomes on that side, which we can certainly talk about as well.

 

Erwin  

So we’re running out of time on that part.

 

Christian  

On the boreal piece, though, we went back to live and hybrid two meetings ago starting in March so we do our meetings in person at the Infinity centre, and then we also remote members or members that aren’t quite comfortable coming in person yet come in through zoom, and it’s an interactive discussion so people on Zoom can still participate with what’s going on on stage as well and q&a still work etc. And members that are presenting while they’re on Zoom calls, it’s all seen from within the Infinity centre so it’s a real cool setup that we’ve got on the go. So we’re still going through a few teething pains on it, but it’s pretty neat.

 

Erwin  

Where can people find out more about Oreo and I want to attend the event is to…

 

Christian  

Go to our website oreo.org So let’s spell the Ottawa real estate investors organisation so our e io.org. And they can always reach out to me if they get lost and where can they reach you can reach me any number of ways Christians still Szpilfogel on Facebook is an easy way or via email Christian at

 

Erwin  

All positive there this is internet this is for life, you should wash your email well if your website and the contact us page

 

Christian  

i don’t know i don’t get too much spam. The most spam I get these days is purely from people trying to tell me why I shouldn’t be trading Bitcoin.

 

Erwin  

Trading Bitcoin. Do you do any bitcoin any gold, silver Bitcoin?

 

Christian  

I don’t I focus on real estate. And you know, that discussion we had earlier we were talking about the economy is that the punch line through that whole thing is the smart money right now is putting their money in hard assets, right? Whether it’s real estate, whether it’s certain precious metals, I’ve seen Bitcoin now described as a hard asset, although I’m still struggling to get my head around that. And trust me, I’m a technology guy. Okay, so I’m not shying away from Bitcoin because I don’t fully understand it. And I think it’s an interesting area to investigate. Right? But it’s not the technology that scares me.

 

Erwin  

Well, what are your friends from the tech world thing? Are they divided?

 

Christian  

Yeah, I say that tech investors, so people who are technology background, and our investors, most of them, I would say have thought about Bitcoin more in the context of experimental hobby and not necessary really as a serious investment vehicle, and I’ll admit, I do get worried when everybody is talking about any specific investment class when I go and get my hair cut, right, and the barber is talking to me about bitcoin and how he’s trading, when the Uber driver starts talking to me about bitcoin trading, when I get approached endlessly on Facebook with people who want to be my friends, but only really just want to sell me bitcoin trading stuff, I get nervous about that, it makes me think that there’s something not quite right.

 

Erwin  

Right. They’re all trading, none of them are holding. 

 

Christian  

No other trading, people are trading. That’s what I’m typically seeing. People aren’t necessarily holding your trading. Even my 86 year old father was asking me, How do I get into Bitcoin? It’s always Dad, is this just for play money, right? Or are you doing serious investing? Because I think you really need to do a lot of studying on this. But if you just want to, if it’s play money, and you don’t mind losing it, that’s fine. Right? I can help you with it. But that’s kind of where it stops.

 

Erwin  

You remember me time people talked about trading gold?

 

Christian  

Well, exactly. And I think that’s because a lot of people don’t fundamentally understand what crypto really is. And when we take a look at something like Bitcoin, to me, the equivalency is gold. You know, it’s a storage of value, right. But what a lot of people are doing? Well, no, that’s right. Yeah, there’s a lot of speculation as to where they think it can go. But it’s just that speculation. But what a lot of people are doing is trading on the volatility, right, and just like people do in the stock market, their technical traders, so there’s that piece going on Ethereum is really kind of interesting, because it’s more of a platform, where other things can be built on top. So I’m kind of curious to see the companies and the business opportunities that emerge on that platform, because that could be interesting. But personally, I prefer assets that generate some form of a dividend, right? Real estate is a great way to do it. And when we talked about earlier, it’s effectively a storage of value in an inflationary times. It’s one of your best hedges, for sure. Because regardless of what the market does, you’re still getting an income stream out of it. 

 

Erwin  

Yeah, the price of two by fours go up. I got lots of two by fours in my house. So my house is actually worth more. Right. So hopefully, no one goes breaks into my house and steals by two by fours.

 

Christian  

Just go back one podcast to hear about those stories.

 

Erwin  

And you can’t, it’s not the two by fours.

 

Christian  

 It’s the copper.

 

Erwin  

That’s not enough copper, my property steel, hopefully knock on wood.

 

Christian  

Don’t go into the walls.

 

Erwin  

Thankfully, we’re only places all tenanted so hopefully they’ll defend my copper. Garage, Christian, this has been a blast. I know we could go on for another hour or three. Thank you so much for your time. Any any final words you want to share? Could you imagine if people are still not convinced to own art assets?

 

Christian  

No. I mean, it’s become so obvious after a while, right. And sometimes I think it takes wisdom of time, right to kind of be able to see the history for yourself, right? I got into real estate in 2005. And in terms of, you know, picking up rental assets, if you will, right, obviously, I had my house, I had done some land stuff before that, but it was never really serious. And now I look back and think I really should have started a lot earlier. Because at the end of the day, they’re not making any more land, you know, cities are still continuously growing rural to urban migration is a real thing. And then even if you’re not in the high growth area, at the very least, it’s a storage of value that generates cash for you. So it’s an asset class that I think everybody needs to hold. And the only recommendation beyond that is that I think people shouldn’t just buy willy nilly, I think people really do need to get some level of training, some level of education, maybe some level of coaching or mentoring to make sure that they go about it in the right way. But it’s one of those asset classes that even if you do the wrong thing, time will forgive it. Right. Time cures a lot of mistakes. Yeah, real estate time for the central banks to create more money, because they create more money. Again, I will say it again, when they start printing money, your debt fundamentally gets cheaper, protect yourself against the interest rate hikes, you know, if that’s what you feel you need to do, but your debt gets cheaper relative to the asset itself.

 

Erwin  

And that same time your savings go down in value. That’s right, your cash savings.

 

Christian  

Yeah, only hold the cash you need for reserves. Right. And if you can hold it as credit, that’s better. But yeah, I mean, just think about the price of the house that your parents bought, right? What did they pay? What was their loan value? Right then if you just did it as an interest only loan from that period of time, so we’ll talk about the cumulative carrying costs. But if You had to pay off that mortgage now you’d be whipping out your Visa card. That’s ridiculous. Well, I don’t know my parents bought in the 60s. So they would be whipping out a Visa card.

 

Erwin  

Yeah, mine might have three mark, my parents had three mortgages on their first house. Visa card, maybe all my credit cards. But yeah. That’s pretty insane thing to think about. And then you’d own a house free and clear from my parents would be Scarborough and that house is probably worth I can’t imagine it can’t be worth 900 grand.

 

Christian  

So just just one other mentioned, I guess is for contact. So we, you know, I’m on Facebook. I’m on Instagram as well. Our company Liveris, right, Al, I F, E R O U. S, we have a presence on Facebook Live first group, we’re on Instagram. And then of course, there’s our website live for us.ca. And I have a bunch of resources there for investors as well. We call it the investor hub. And that’s where I write my articles. And they’re practical things. So I tend to write things that are going to be useful to people. It’s not market speak, it’s not, you know, market fluff. I have nothing to gain by that. Because I’m not really trying to attract people to my website, unless your tenants but for really, it’s just a resource that I like to create and share.

 

Erwin  

You share a lot. Is it just for fun?

 

Christian  

Yeah, yeah, I just I like to I like to help others. I like to give back to the community. You know, I don’t really have any commercial interest in in the sharing that I do. It’s really more about educating and helping others. I just want them I like people, and I like to see them be successful, quite frankly. But no, I mean, I don’t take external investors. So I’m not doing that. Right. And my target market is primarily tenants. But helping landlords doesn’t necessarily get more tenants.

 

Erwin  

There’s plenty of tenants. So it’s not something we need to necessarily repeat over. But you also volunteers, the Vice President of Oreo. That’s right. Yeah. That take much of your time.

 

Christian  

More than my wife would like me to contribute Sure. Right. Yeah, it’s a little bit of time. But it’s it’s hard commitments. Two evenings a month. And then there’s some work in between. But myself, Victor Menashe, Michael Chan, but that Turner, Jacob Homer and Brad car K, we just volunteer our time to do this. Unpaid? Volunteer? Yeah, it’s absolutely volunteer. And we do it. It’s just, you know, our obligations. Were just members of the club that volunteer our time to do it. And then eventually, we’ll tire out and somebody else will want to come in and basically do it. So, you know, people within the Oriole club, each case, you know, a lot of them have taken a turn to running the club. So this isn’t my club. It’s not Victor’s club. It’s the club, right? And we each volunteer for these positions and get elected in. Cool. So we had an election in May, actually. So when you do come down in June, right, we’ll see if I still have a board position. Cool. See, if we’re still invited. You won’t change a thing, right? So it’s all locked in there.

 

Erwin  

Christian great catching up with you. I’m impressed how much you’re up to. I don’t know how you do it. And still, like, make the time to volunteer and talk to all your neighbours.

 

Christian  

It’s fun. That’s why amazing in the new tech job. 

 

Erwin  

Yeah, you know, more fun than your tech job. 

 

Christian  

Oh, I had a lot of fun in tech. I really did. And in anything I do, it’s not a job, right? It’s focused. It’s a hobby. It’s what I live in, breathe. So I can’t do stuff halfway. It’s just not the way I’m wired. in tech, you know, I was one of these people that work all the hours of the day, it really didn’t matter. But I enjoyed it. And we built some really cool stuff over the years. And now that I’m full time in real estate, and I’ve been full time in real estate since 2017. And it’s it’s the same way and I think I mentioned to you my younger daughter joined our business almost two years ago, and she’s coming up through the ropes and you know, that excites me as well. I kind of want to see her eventually take over the reins. That would be wonderful. Cool. I could stop now. Honestly, I could stop that could have stopped maybe two years ago but I just have fun with this all the time. And as long as I have fun we’ll keep doing it.

 

Erwin  

Amazing. All right graduation tradition on all your success and I’ll see you June 8

 

Christian  

Yeah, hopefully in your nice shiny new Tesla

 

Erwin  

And we’ll see you no idea when it’s showing up that just like oh just like to say goodbye to these gas bills. Like your brain like crack the crazy this morning and I need to fill my car like you know that’s one of the use cases for having an electric vehicle. You know, when I leave the driveway, it’ll be full. The fuel tank will be full. I don’t pump gas in the cold or rain ever again.

 

Christian  

Well, there’s definitely not I mean, there’s no need to charge up unless you’re doing a long haul trip. Right. But I think so electric. And I know we should probably wrap this up, but I’ll tell you electrical vehicles, electric vehicles are going to be really interesting in terms of not just what they do, including the autonomous vehicle. So but think about the innovation, that’s going to start to happen related to the electrical grid. Right? Because you’ve got all these cars that are there, and their batteries are all full, I think about what happens when you’ve got, you know, basically load sharing that has to happen, you’re not relying completely on the generating site. So you know, to spin up a, you know, a nuclear station in terms of turning the the electricity up on that is, you know, takes a long time. That’s why they still have some natural gas generating stations. And then when you’re taking a look at wind or solar, right, there’s fluctuations and variance that happens there. But if you’ve got these batteries spread out all over the grid, you know, if you’re an electrical engineer, you’d understand the concept of click capacitance. But basically, what happens is, you’re basically buffering all this electricity. But if you need to, you can kind of feed back to the grid, all right, at times where there’s a bit more demand on the grid. So it actually will be an interesting enhancement to the electrical grid over time. Now, this is going to take probably 20 years, at least for this job, because you gotta get smart technology to do it. Right, because the system is largely wired to feed demand, as opposed to being able to go back the other way. But with the feed in tariff programmes, you know, with the people doing local solar generation, people already have the constant being able to feed back to the grid, this just adds another interesting dynamic to the overall next, it’ll be fun.

 

Erwin  

I haven’t really interested in seeing what happens with full self drive, which I think will happen before 20 years. And you can essentially, have your car be its own Uber taxi, you can basically have a built in designated driver, think about what that’s going to do to public transit, or smoke it.

 

Christian  

Yeah, I’ve seen some towns already, instead of getting their own buses, right. They’re literally just contracted with Uber to be their their public transportation. I think Ingersoll Ontario was is one city that did this probably four or five years ago. And there’s a few other cities, I have to confirm that right, because I’m just doing this from memory. But I thought that was an interesting shift. Now if you go to autonomous vehicles, then that becomes much more feasible even in larger, larger urban centres think about it as a feed into a main transit. So if you’ve got light rail that is part of your main corridor, where you could have these autonomous vehicles bring people to those stations, or at least main transit points, it gets really interesting.

 

Erwin  

And it gets cheap. Transportation gets really cheap. When you don’t have humans involved, we get to see this in

 

Christian  

Ottawa. Irwin, right? Because Ottawa is one of the few level five self driving tracks test tracks in the world because of our climate. So auto was a hub for, you know, the illusion of autonomous vehicles

 

Erwin  

On the streets of Ottawa

 

Christian  

There’s a track you mean, some of the streets in Canada north, so in the major tech park there, so on a Hertzberg, and like it drive, and Terry Fox drive, that area, that loop, if you just stand there are some days you’ll see some autonomous vehicles driving around. So that’s cool. It’s becoming more and more common. Originally, it was a special event, and everybody would come out to see it, but you’ll still see them testing. And then they’ve got even the traffic lights, and so on have special transmitters in order to enhance some of the autonomous vehicle. Things that we’re working on, that our test track is actually not far from the Infinity centre, it’s probably about a 10 minute drive from there. And it’s a really neat little track there. But autonomous vehicles, you know, you talked about within 20 years, I think most people are predicting it’ll probably be about 20 years before the technology is really in what’s called level five, full automation. And then there’s going to be another period of 10 years where there’s a transition of those vehicles as well into the marketplace. That’s a long time. Yeah, I’ll send you an article that kind of describes the timeframe in the evolution app. Okay. Crazy. Yeah.

 

Erwin  

Cool. All right. I’ll make sure not to buy FSD for my Tesla. Did you buy it?

 

Christian  

Yeah, I did for sure. Absolutely. I did. Just love that feature. When you know, I was just imagining right I like to always tell my friends so think about when you’re in in a mall, right? It’s raining can’t Have some dogs, your arms are full of things that you just bought. And normally you’d have to try and run through the rain get to your car, put the stuff in, or you’d have to have somebody wait with your stuff while you go get the car. But with the full self driving, you can summon your car to come and pick you up. What’s not to love

 

Erwin  

This order all my stuff on Amazon and Costco delivery.

 

Christian  

Kit lineup, right. So the good thing is I paid it, you know, I’ve locked in a January of 2021 prices. Right? We’ll see when I actually get the car.

 

Erwin  

So there’s you still bought the full self drive? That’s awesome. Amazing. Yeah, that’d be a fun toy. That’s like a fun trick. Question again. Thanks so much for doing this. And I’ll see you June 8. Right.

 

Christian  

See, well, we’ll probably see you in May. Right at the multifamily.

 

Erwin  

Yeah, that’s right. less than less than a month. You’re crazy. But we’ll see you there. And then we’ll see you in June. Yeah.

 

Christian  

Amazing. All right.

 

Erwin  

Thank you, Christian. Well,

 

Christian  

Well, thank you for having the early season.

 

Erwin  

Before you go if you’re interested in learning more about an alternative means of cash flowing like hundreds of other real estate investors have already, then sign up for my newsletter and you’ll learn of the next free demonstration webinar I’ll be delivering on the subject of stock hacking. It’s much improved demonstration over the one that I gave to my cousin chubby at Thanksgiving dinner in 2019. He now averages 1% cash flow per week, and he’s a musician by trade. As a real estate investor myself, I got into real estate for the cash flow. But with the rising costs to operate a rental business, it’s just not the same as it was five to 10 years ago when I started there are forget the cash flow reduces your risk. The more you have, the more lumps you can absorb. And if you have none, or limited cash flow, you’re going to be paying out your pocket like it did on a recent basement flood at my student rental in St. Catharines. Ontario. If you’re interested in learning more but secure for free for my newsletter at www dot truth about real estate investing.ca. Enter your name and email address on the right side. We’ll include in the newsletter when we announce our next free stock hacker demonstration. Find out for yourself what so many real estate investors are doing to diversify and increase our cash flow. And if you can’t tell I love teaching and sharing this stuff.

 

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