**Transcripts are auto-generated.

Erwin  

Last weekend at the sold out I went mastermind tour and Hilton at lunch a total condo investor shared with me that he’s negative $1,200 per month on his condo. What makes it worse is he has a second condo. It’s not as bad, but it’s still negative $1,000 per month. That’s negative $2,200 per month. You know, I think golf is expensive, we’re gonna have to pay 80 $100 per round. This is serious stuff. Welcome to the truth about real estate investing show. My name is Robin Seto. And I like to reiterate my stance on condo investing and negative cash flow investing in general for the select few who are independently wealthy, or in the top one 2% of income earners are my good friend James moneybags banks who has a portfolio of income properties flush with cash flow. Sure your construction is gonna work for most Canadians, most of the times a pre construction condo or single family home and more than recent market the last few years, it’s not an ideal investment. And unfortunately, I’m hearing about it now a couple times per week from folks reaching out to me on what to do, by general view on selling is personally I only sell and that’s a better use of the money, I have many things I’d rather be doing with the 1200 or $2,200 per month, rather than writing checks to subsidy subsidised my tenants living. So add to that, that my team is finding amazing deals to invest in from Kingston to Niagara Falls taking advantage of Bill 23 Ontario’s Bill 23 to add density and income properties to improve cash flow and add value to property at that the smart money is expecting both Canada and US to raise rates at least one more time, the US has committed to two more times at the Bank of Canada, it seems committed to their 2% inflation target. So we’re looking at at least 12 more months at these high rates. That’s currently what the bond markets pricing interest rates. So it’s not my advice. This is literally what the smart money is predicting. Yeah, so this is hardly a market that many buyers want to be getting into. And summer is traditionally a low season for real estate. This could be a quiet time for buyers for quite some time, except for those who saved maintain their credit. And we’re ready to get greedy while others are fearful. And there’s lots of fear out there. So if it were me, I’d sell negative cashflow properties, especially if they’re four figure cashflow negative, and it’s a single family. There’s nothing I can do to it to improve it. Like for example, I was speaking to a gentleman who has a townhouse in a semi detached, but they have the option to suite the basement. I said that’s what I would do and hang on to it. It was a single family home that I had no option to upgrade to create more cash flow, then I’m moving on. Again, I have better things to do with that cash for the money and the capital again, and now we rotate that money into a quality small multifamily income property and a town with a diverse economy, a post secondary school where tenant demand is high. That generally excludes small towns pretty much anywhere, including a favourite of some everything we’ve got right now serious if you need help to invest like our 45 Plus self made investor millionaire clients. So again, just to clarify, they made those millions or multi millions by only income property. Yes, they made money in their homes. But I exclude that from my calculation. So if you need help, if you need help to be a successful real estate investor, please do reach out you can just reach out to our team at Iwan at infinity wealth.ca My team and I are licenced realtors and happy to consult with you on how to rebalance your investment portfolio, stop the bleeding and possibly set you up for better success. Again, email us at Iwan wi n at infinity wealth.ca on my coaches or myself we are licenced real estate agents one of us can assist again as I win at infinity wealth.ca Happy candidate everyone Happy birthday to the greatest country in the world. No Canada we’re not perfect, but generally we’re making progress. The people are honestly one of the best parts of Canada then the nature like you know, the scope is beautiful. It’s beautiful country but I just got back from Victoria. Victoria is beautiful and Tofino beautiful compared to other parts of the world, we Canadians are incredibly accepting multicultural, low crime, there’s just there’s a tonne of opportunity for those who make investing a priority, not just real estate, Jerry was just at the collision conference in Toronto. And there’s tonnes of young people who are going to make a crazy difference in the world create value and likely create a lot of money for themselves and their families. And that’s my that’s why I’m in real estate. That means a lot more to my family. Because my son was born just after candidate Day. On July 2. I literally watched fireworks from the hospital window eight years ago while Jerry was in labour in the hospital bed. So we have a weekend to look forward to. You’re listening to this after the weekend. But yes, at the time of recording I have weekend celebration look forward to I may even fibbed to my son. I make really bad dad jokes my turn all the time, but I will likely tell him that the fireworks that our neighbourhood association is putting on with about a ridiculous budget of life. $4,000 I contribute to as well. Anyways, speaking of multicultural, the organisers just happen to be my client and we all live in the same neighbourhood. Once Filipino, the other Indian, my family’s Chinese. We all love making money. We love our families, we cry when the leafs lose and we love this country. So for four consecutive days coming up and including today, I have people coming over for pool and birthday parties and to feed them I plan on smoking some chicken, the whole chicken chicken wings are gonna make a pull pork. I think that’ll be the first time I’ve ever smoked pork. But yeah, we’re gonna do that too. It tops her line cap, which is the beef cut. It’s called picanha by Brazilians. It’s their favourite kind of steak after the ribeye. But it’s a lot cheaper than a ribeye. That’s why I’m getting it. Anyways, after the success of my knife, our smoked brisket for Father’s Day, kind of smoke a 10 pound pecan ha in my pellet smoker, and we’re gonna see what happens for myself, I actually enjoy doing research Jerry said like don’t why you being so ambitious and putting all this effort into like a 510 hour, cook, smoke, whatever, I enjoy doing these things I enjoy like doing the research, I’ve watched several YouTubes on how to do this, and we’re gonna eat this. And oddly, this is fun for me. I’ll post pictures up to my social media afterwards. If you want to know how to get your own smoker recommend enough that you buy one as a gift to your spouse. We got ours as a housewarming gift for me to Cherry, and she loves it and tells me so in between I rolls on to this week’s show. Today we have tockman, an owner and founder of rent panda who has been helping our clients locate tenants for our clients investment properties. How good is rent panda heart tells me that they’ve had only a one non payment of rent issue among 900 to 1000 successful leases. The non payment was not that bad either, as the tenant quickly left, so damage was limited. A lot of successful leases were written by these guys. That’s amazing. So if you want to know how to be a successful landlord with paying tenants, you will want to listen to this episode. Rent piano also offers Property Management Services, and Hart shares on the show step by step how to create a rental ad and how to automate as much as possible how to handle the delusion of responses that no one forgets. We are in the middle of a housing crisis. And like small town, Trenton, Ontario, but so if you bought correctly, like our 350 clients, your property is in high demand. So you need to be ready for the dilution of responses to your rental ad. If it’s threatened. You find Rent panda at their website, Rent panda.ca that on Facebook, Rent panda and Instagram. Guess what’s called Rent panda. Please enjoy the show. Happy Canada Day, everyone. I heard what’s keeping you busy these days?

Hart  

Well, you know, Rent panda life having a baby in three weeks. My first dealing with the rental industry and the ups and downs.

Erwin  

Oh, so you’re not busy at all? No, not at all. Lots of free time. Not at all. So explain what’s Rent panda? is Rent panda. Is a play still considered a startup? Is it not?

Hart  

Technically, we wouldn’t be considered a startup. But we still do we still act and operate as a startup. So it’s still a baby. Still a baby? Yeah, we we operated for a long while bootstrapping. And we managed to do that for a while, which we were proud of it was about three and a half, four years of bootstrapping. So that probably pushed out our startup life a little bit longer than normal. But now we’re stable. We’re out across Ontario. And I guess to back it up Rent panda was a business that I started with my brother, after we experienced the underserved nature of renting and landlording in Ontario. So my brother was up in Thunder Bay. He was a newly graduated PhD, and he had a tough time finding a rental. There wasn’t really a rental platform out there that served tier two markets. And he was talking to me and I was working in advertising at the time. And in Toronto, there was new at.ca. You know, they were in the incumbent for a very, very long time. Yeah,

Erwin  

they dominated the commercial apartment space. Yeah, and

Hart  

small residential as well. But they were the incumbent, you know, they were what everyone used. And we thought, you know, view a dossier was 15 year old technology at the time, and there was nothing up in Thunder Bay. So there was an opportunity to build technology and prop tech for landlords and, and tenants in Ontario. So we built a prop tech for three or four years. And then we started to expand as landlords fed into what they needed. So a lot of people said, great technology, but I don’t want to do it myself. You know, can you just find my tenant? So we started into the leasing business? Then landlord said, great, you found me my tenant, can you now just manage? So we started into the property management business? You know, then people said, Hey, can you take on my problem property? And so we needed a paralegal. So we have in house paralegal services. And through that journey, we just realised that there was a need for a brand in rental housing. You can think about brands and every other element every other aspect of life. But when it comes to renting, there’s not a lot of big brands out there. No one

Erwin  

dominates that space in terms of rental space. Actually, that’s a good question for the listener. Like think about it. If you’re looking to rent a place with the first brand that comes to your mind. Only because I know your name comes up first. Yeah, because we’ve recently have our clients. But yeah, quick question what was the first iteration was More of a screening online application process.

Hart  

No. So funny story in that I was presenting at a conference about a year and a half ago. And the topic was how we built Rent panda wrong. We did we built Rent panda wrong, because my brother and I had experienced the rental industry a little bit. And we sat down. And I come from a brand and product world. And so we started to design the best product out there. We said, Where does the landlord start, usually with the purchase of a property and what is every step along the way that they could possibly utilise a tool for or service for, and we built out the entire rental journey. And then we started to build it. And so the first iteration was a marketplace because you bought a property, you’ve got it ready to go, you need to list it somewhere. So we thought, There’s got to be a better rental marketplace than v1 dot ca, or this website in Thunder Bay, which was called Home Sweet Homes, where you had to eat transfer someone 20 bucks to get a list of all the listings in town for I think that week or that month. So it was backwards, it was totally backwards and the marketplace was the opportunity. But as we started to progress, we thought, let’s build everything. Let’s build it perfect. And, you know, three years later, we realised we had this behemoth of a piece of technology that no one was really using. You know, people were using the marketplace, they were using some screening tools. But we had lease builders, and we had repair and notice notification systems, we had notice building systems, and no one was using it because people just needed a marketplace and a screening tool, right. And so we built Rent panda wrong. We spent a lot of money unnecessarily, and flushed it down the drain and built it wrong. But it allowed us to learn that we need to listen to our audience, we need to listen to our landlords. And you know, in the chicken and egg situation of landlords and tenants, landlords come first because they have the supply. I mean, with the supply comes the demand. So we listen to our landlords, we still listen to our landlords all the time we do surveys, we do one on one coffees with landlords just to understand what their pain points are. And to constantly keep abreast as to what people are experiencing and where the new pain points may lie. Because the industry has changed vastly. In the seven years we’ve been in business. You know, Facebook marketplace wasn’t really doing rental listings back then. So we’ve pivoted many, many times. But we started as a marketplace, essentially, you some pretty full service now. Yes. Yeah. So the idea is that as a small landlord and small landlords, our bread and butter, usually like one to 25 units, we deal with larger landlords, you know, 100 units, 200 units. Some of the big guys, but not really the big property management companies. That’s not we’re gearing our servers you

Erwin  

have an in house trust would have an in house.

Hart  

Yeah, exactly. But for those small landlords, there’s different types of landlords, right? You have the landlords that want to do it all themselves, you know, they want to learn or they’re running a small portfolio, and they’re doing it well themselves, but they may just need a little bit of software, a little bit of technology to make things more efficient. You know, some other systems. Yeah, exactly. systems for rental success, we call it so we have do it yourself tools, right? Primarily they’re free. They’re lead generators for us for other pieces of business. But those tools on Rent panda.ca People can use, they can upgrade to premium products like screening tools like promotion, we have syndication to Facebook marketplace, all the basics. And that’s kind of the first section of landlords that we want to service. Then we have those who are in the middle. You know, they’re not fully passive with property management yet, but they have that innate fear of unpaid rent and tenant caused damage, let’s say. And that’s the fear that everyone has. That’s why every tech product has existed in the rental space to lower the risk and reduce that fear of unpaid rent and tenant caused damage. So we have a leasing service. And we have leasing specialists on our team across the province, from Thunder Bay in the north to Niagara in the south, from Windsor in the west, to Ottawa in the East. And we have teams on the ground that can find in place the best tenants and we work just like a real estate agent would with someone throughout the entire journey stewarding the process. So we’re going to educate you along the way we’re going to find the tenant, take professional photos, make sure we do the pre screening, make sure that we do all the showings ourselves. So no one can come through unaccompanied. We’re going to do all the post screening and we can talk about scaling later build leases with our paralegal in house and so we we cater to leasing as a singular service. And then we hand over that perfect tenant, that’s the perfect fit for your property. And you can self manage. And then for those landlords that want to do a little bit more of that passive investing, we do full service property management now with a little bit of a different model. So we’ve scaled the model to be across the province now and we centralise everything. So we have a 24/7 365 call centre, that triage is all of the needs of all of our tenants across the province. And in that way, we don’t need property managers in every city, and we can lower the cost. So we have very low flat rates essentially for property management. So we’re not charging you a percentage of monthly rent like most other property management companies, it’s flat rates per unit and It’s the no frills of property management, you know, when things are going great, when there’s a good tenant in there, when you’ve put money into the property to make sure it runs smoothly, there’s very little property management costs. But then when things need to be, you know, enhanced when we need to call out those trades when we need to step in, then the costs, you know, escalate like they do with any other service offering. So yeah, it’s it’s full service, we’re talking about fun development. So that, you know, we can get the truly passive investor who doesn’t even want to deal with property management management, you know, really, for us, it’s about stewarding the entire small landlord process, because what we found as small landlords ourselves was that it’s the Wild West, right? There’s a lot of focus on the world of investing. And there’s not a lot of focus on the world of landlording or execution. Yeah, exactly. And, you know, investing is sexy, right? It gets people jazz, people are open to educating themselves on investing, because they can make a lot of money and it sounds sexy. But renting is kind of the ugly duckling right. It’s the garbage man of the real estate space. But it’s so so important because your asset is so important, right? It’s the product that you’re selling. And the tenant is the client. And a lot of people don’t think about it that way. And maybe I’m biassed because I come from a world of brand advertising. But ultimately, you have a product and you have a customer, and that’s the home and the tenant, and you need to think about that as a business. So that’s what we’re trying to

Erwin  

push. And I haven’t mentioned in a while, but the way I frame my tenants to my team, so like my contractors, for example, my handyman, whatnot, is I say to them, if you were spending over $10,000 at a restaurant every year, how would you expect to be treated? Yeah. Right. What do you think my tenant pays? Almost all of them pay over? 10,000? A year? Yeah, for sure. So like, I want them treated with respect? Yeah,

Hart  

for sure. Right. And I think that a lot of people have a stigma with landlording, right? It’s a negative word. Or it’s, it’s built up a stigma as a negative word. And if we think about it wrong

Erwin  

for so long, yeah, for sure. And I’ve shared it on the show, like, for example, I belong to a network of over 130 entrepreneurs, business owners with seven figure businesses. And what I find is a lot of them are really keen on what it is they do to create value to make a difference in the world. versus real estate investors. There’s a good number of glitches in it for themselves. Right? And they don’t really care on who they step on. Yep. So then, yeah, I can see why landlording has not the best name. Yeah. And, you know, I’ve been to tribunal, I’ve seen both sides, assuming the tenant is terrible, you know, where a gentleman like, I want to smoke. So it disconnects the fire alarm in a 30 unit building. So everyone’s at risk. Right? And I’ve seen the other side. We’re like, terrible, terrible landlords, right? You do nothing, you know, don’t deal with cockroach problems and whatnot. And like, so yeah, I can see why landlords get a bad name. Yeah.

Hart  

But I think if we, if we think about ourselves, in our community as housing providers, it helps. Yeah, for sure, for sure.

Erwin  

Like, before, we’re talking about recording, like my own portfolio and where to track my clients is we are targeting, our rents are priced in the top 20% of the market, to because I want the top 20% tenants, right? Alright, so you better operate that way. You better maintain your properties. That way, you better show them that way. You better treat your tenant that way that the top fifth in the market. Yeah.

Hart  

And to that point, all of the other stakeholders in your business and all of the associated services that you’re hiring, need to be in that top 20%, too. You can’t be hiring the bad plumber out there who doesn’t treat your tenant with respect, right? You know, that leasing agent needs to know what they’re doing. They need to be up on current trends, they need to be able to find that top 20% Or, and they need to be in that top 20%.

Erwin  

Especially good question for you as a service provider for landlords. What kind of landlord you want to work with? You’d like working with the bottom 20% folks who have buildings in like, you know, the bottom 20% of the market?

Hart  

Yeah, it’s it’s interesting question, because we have worked with every type of landlord under the sun, you know, we’ve done everything from sublets of rooms, all the way up to, you know, full lease ups of pre con buildings. And a lot of the times where a landlord starts, the building may be in that bottom 20%, right, but they have the intent to move it under it. And the intent is really what it’s all about. You know, we have a lot of buildings that are being rehabbed, and we’re trying to fill units as they become vacant. But there’s still that hoarder in the the apartment next door, and there’s the rat problem, or there’s the age old tenants that have been there for 30 years who are smoking outside and kind of giving the building a bad vibe. But as long as the landlord is investing in their business, we’re happy to work with them. And we’re also not shying away from landlords who are new, who may not have the landlording education that they should or will get over the course of years, because part of our service offering is that we do this day in day out. And so we’re not just doing it for you as a client. We’re bringing you through the process we’re stewarding your journey as a landlord. And so a lot of first time landlords come to us because they’re very afraid of bad tenants. Right? The stigma there for tenants is even worse, you know, the inflammatory nature of the media is terrible, but we steward that process and walk them through it. So they get a natural education. While they’re paying us to place a tenant, so many landlords in the lease building process will go through with us and learn the 45 clauses that you should have in your standard lease appendix, you know, frankly, it’s it’s value add right there, you can go out and buy lease packages for 234 $100. Or you can get someone to write one for you walk you through it and add that value. So we’re not opposed to working with any style of landlord, as long as they have the intent to move forward in their business to educate themselves, either through us or other means and to invest in their property. What we won’t do is take on a property that needs rehab, but won’t be rehabbed. So we know that people are pinching pennies these days, which is fair interest rates are going up, it’s harder to get things done these days. But again, as long as the property is moving in the right direction, and we’re not selling something that’s going to be an illusion to a tenant, we’re happy to do the work. So you you’ve come across many

Erwin  

investors, I’ve pitched enough on the show about a lot of terrible education that goes on out there. What do you see in terms of when investors come to you? Are they well versed? To be? Absolutely they get some crappy ass training? Are they good quality tech clients? Hopefully, like Yeah, well, I refer you.

Hart  

So there’s different buckets, I would say. There’s not a lot of variation. But there’s a few key buckets. There’s a lot of people who have been laying out all work backwards. So there’s a lot of people that have been landlords for a very long time and have run successful real estate businesses. But they are still doing things the old school way, essentially. Right. And so things that they have in their lease, appendices, ways that they screen tenants, they’ve worked for a very long time, they may not be aligned with human rights issues that have popped up these days, their leases may not be enforceable or legal at all. But they

Erwin  

always have us go go on Kijiji, and go read some of them. Because you know, exactly, and we people like choose like sexes, like religions, like colour skin, people will literally do that,

Hart  

oh, and people are opening themselves up to a lot of risk. You know, if tenants were more educated on their rights, there would be a lot more lawsuits and human rights tribunals that are in inaction. So we see a lot of landlords in that camp. But they’ve come to us for a reason, right? They’re scaling their portfolios, or they know that they need to shift their worth educating through that process, because they’re hiring an expert for a reason. And that’s what we’ve realised, you know, we are brought in as experts, because people realise that they need help to take that step. So there’s a lot of those landlords, there’s also a lot of landlords who are coming in and have never been landlords, you know, they bought their first rental property, or maybe they’re moving out of their primary residence, and the markets not great. So they don’t want to sell. And they feel like holding on to that property is really good. Those people coming to us are also good clients to work with, because they know that they don’t know anything. And they’re open to again, hiring an expert to do the job, right. So we love working with those people. Again, it may be more of a hands on approach where we have to educate them a little bit more and make them comfortable with the RTA with the Ontario standard lease, they may have heard a lot of things or they’re part of Facebook groups, unfortunately. And there’s a lot of things that they think they know, but we can, you know, we can break down that that idea of what landlording is to them pretty easily. And they’re they’re really good clients to work with. There’s a middle pack, that’s difficult. And that middle pack. We’ve seen a lot of it lately, and I think it was to do with I’ll call it the fad of real estate investing, where interest rates were low. rents were very high rents were projected to increase infinitely and very quickly. So the greedy bunch. Yeah. And, you know, not to speak badly of real estate agents. But a lot of people saw dollar signs flashing right, both the investors and those agents. And one issue with the rental market that we’re trying to solve is a lack of transparent data, and accurate data. And so a lot of people were provided rent assessments that were way out of left field, they were blue sky rent assessments with no bearing, or they were completely based on MLS listings, which typically are in the top 10% of all rentals out there in terms of price, and oftentimes real estate agents will up bid amongst themselves to push prices higher. So those types of homework, the price of the rental, right? Oh, so when we’ve got two real estate agents doing leasing, oftentimes what you’ll see is bidding wars, where in the world of non real estate agent leasing there’s very rarely bidding worse, because you have two agents representing their clients. The clients are talking right landlord and tenant never talk. It’s agent agent, and there’s a bidding war because maybe it’s a good way to get your tenant in the door. And but it’s not always the financially smart decision for that tenant, and for a landlord. It’s not necessarily the best decision on quality of tenant to place, you know, the person who’s going to pay the most isn’t necessarily the best tenant because they can’t afford it. They’re doing exactly. I’ve seen lots and lots of credit checks. In the five hundreds, I’ve seen people with bankruptcies and collections, and the inability to pay rent offering six months up front nine months up front, a year up front. And they’re borrowing and begging and stealing to get into this place, knowing very well that after six months, they have no intent on paying rent, we are always wary of anyone who offers rent upfront who offers more than asking rent. So anyways, there’s that middle of the market where I started,

Erwin  

just pleasure, especially, you’ve always been a red flag for me, anyone who’s really desperate, that’s a red flag, for sure. If they require more diligence,

Hart  

then you know, we see new immigrants coming in. And in order to get in the door, they’re willing to pay three months up front, you know, they’re coming in with some money. That makes sense. But someone who off the bat is messaging you on Facebook saying I really love your home, I can pay you six months up front, that is number one red flag, because there’s a reason why they’re doing that they think they need that in order to get the place or they just have no intent on paying rent after that fact. But a lot of landlords have been led astray, are expecting really high market rents, and also are chasing the game of investing and not long term landlording. And you know this, you’ve held a stable portfolio for a very long time. A lot of people buy that standard bungalow, you know, they renovate it to be an uptown duplex, they put all the top end fit and finish in they spend way too much on that property with this idea of what they can get in market rent led by, you know, realtors who may have had good intent, but are over inflating what the rents may be. And then they need a certain amount in order to make things work, right. And they’ve bought property in welland, and they’ve been told that well into the cash flowing region. And so they need this property to cashflow. And when they come to us, we can’t dictate market rent, right, we can work hard and marketing and advertising and bringing in the right tenant magician, yeah, we can’t make magic. So when the landlord comes to us and says I need this amount in market rent, it’s the same thing with real estate. And if my house was worth a million and a half, and I said I remember 2 million, you can’t do it. And it’ll sit there for two months, three months, four months. And what the landlords don’t realise is that vacancy cost is eating into their bottom line. So those are the toughest clients to deal with. We still work with them. But that education upfront to move their viewpoint from an investor into a landlord, making them see the tenants point of view, making them realise that they have a product, right, they’ve bought an asset. And that asset is now a product on the market for the customer, the tenant to purchase or to rent. And that shift is very, very hard for a lot of investors, who are now landlords.

Erwin  

And just to add to that, I have challenges explained to clients. Because they just have they have HGTV on the mind, I don’t know what it is. They want their houses to be gorgeous. And so I do find investors to often over renovate, like for example, a client that bought a house that was moving ready, really nice, completely renovated in 2017. Right, including the basement, they renovated the basement, I said leave the house alone, only rented the garage, only do the garage conversion. And they disagreed with me. So that to tear apart that already renovated basement to put it in a suite. Versus if it was mine, I would have had the house rented right away, I would have rent money coming in day one, basically. And then and then I did get to take my time with the garage while getting that done. And then also I would be able to hang on to more cash for another project. Right?

Hart  

When when my wife and I bought our first house, which we currently live in, and we still house hack, we said the rule to purchase was we needed a basement unit. And it needed to be existing where you put it in. It needed to be livable, but with the idea that we could improve that basement unit. And so when we bought all that needs to be done was put a door on and we used our to pre closing showings or walkthroughs to actually rent out the place. And so we had the place rented, whether it’s legal or not, or whatever. But we had the place rented and lease signed before we moved in. And that was crucial to us because cash flow was so important. We bought in Toronto, we had to have that mortgage, or half the mortgage paid for. And a lot of people don’t think like that anymore. They don’t think about that cash flow equation. They let ego get involved in they want the nicest rental. They think that the night

Erwin  

alone, yeah, they want the whole they want to themselves,

Hart  

but even if it’s a standalone income property, they think they have to have the nicest renovation and we were talking about this beforehand, but there is a massive problem with the missing middle in a lot of these small towns right or smaller markets or tier two markets as we call them, you know? Well in St Catharines. Even cities like London or Belleville are Nappanee all of the market for the standard renter the family who is renting who may be renting their whole life for young family Who’s gonna rent until they’re in their late 20s. They have good income for the region, they have sustainable income, they can’t rent anything anymore. The inventory of that middle is gone. Because every rental has to have beautiful quartz countertops. And most you know, amazing high end appliances, dishwashers, right? dishwashers are great. But I rented for 15 years and never had a dishwasher. And those rentals with not top of the line, everything are missing. And so me as an investor, I’m super excited about looking at that middle rental, right taking that rental and making it livable, making it nice enough. But having coin laundry for that triplex having no dishwashers in the unit, but not charging top end market rent. And so we can get very stable tenants, we can get tenants who will pay rent who will stay two to four years, and then we can bump up the rents to market rent after that. That’s an exciting opportunity, because it’s just so missing in this market. Right?

Erwin  

So are you saying this cohort of tenants is the largest percentage of that market?

Hart  

It’s the largest percentage of underserved people in the murder. So, you know, a lot of people have jumped on the bandwagon of mid term rentals. Right. And it’s very sexy to think about having a top of the line rental and having that visiting doctor who’s there for six months on placement, living in that place.

Erwin  

And be ready for that level. Yeah, right. Exactly. Right interview for the top 1%. Right.

Hart  

And how many cardiologists are in Kingston? Living on six month contracts? Right. And so everyone thinks there’s

Erwin  

probably more that could very well be more midterm rentals and cardiologists. Exactly.

Hart  

Yeah. And so there’s a reason why there aren’t 45 luxury car brands out there, right, you’ve got your Rolls Royce and Ferrari and Lamborghini. But there’s, there’s no market for a tonne of that. And the middle markets are where all the money is. And profits can still be had cash flow can still be had. But it just needs to be done strategically. And from a an existential perspective, there’s a need, right, the housing need is not in that top 2%. In that top 5%. The housing need is in that middle America, middle Canada, it’s those middle renters who need affordable places. And that’s not affordable housing, it’s just affordable rentals based on the income coming through. One thing that we looked at, from day one with our rent reports, and we produce them quarterly now is affordability metrics. Because as a landlord, you probably have heard the 30% rule, right? Don’t spend more than 30% of your monthly income on rent. And that’s what landlords look for. That number is a thing of the past, right? If we look at Toronto, even as a household, the average household affordability is at 53 56%. These days, you know, for an individual, it’s not affordable to rent anything,

Erwin  

unless you have a cardiologist unless you’re a cardiologist, which is bigger on trees. Exactly.

Hart  

It’s something where every other business, every other industry looks at business opportunity and got it right. But as an investor, a lot of people will look at what they want to own right, not where the opportunity is. And those really smart investors are chasing opportunity and going after the client who is under serviced. And for me, you know, we’re looking at rental trends on a daily basis. It’s fun and exciting to be an investor who is also running a rental business because I can push my investments into those opportunities.

Erwin  

So I’ll just say that I’ve been pleading clients not to over renovate, because I know how much kitchen costs, it costs way more than used to be. And it’s tough to pay it off. It’s tough to justify that payback. Also, because you’re me vacant for at least an extra month because you’re going to do it if you’re doing the Renew. Yeah, so I plead my clients all the time is leave it sorry, just be like I’m talking to my daughter. Yeah, I literally spoke to a client just this week who over renovated, and now they’ve asked for a flip and luckily they broke even not including their time. But again clients all the time, like like you said they want to renovate to their vision, rather than renovate to how I look at it as part of a portfolio investing portfolio for sure.

Hart  

at the dog park this morning, I was talking to a friend who has a number of buildings and one of his buildings. He was talking about tenant turnover. And sometimes you know, they need a full renovation even if the places been trashed. He looks to spend three to $5,000 on a kitchen, right? Because he is catering to the middle renter in Toronto or Mississauga, Scarborough, but in the GTA, and he’s only spending three to $5,000 on a kitchen. If you talk to the average investor. No one is spending that little on a kitchen that people that we talked to.

Erwin  

You talked to the ones the landlords end up in the LTV, they probably spent nothing. Right, exactly.

Hart  

Yeah, they’re going on the side of the road and picking up whatever is there. But there is a way to renovate strategically to make sure that properties make sense. And if you’re looking at a long term, portfolio hold, it has to make sense, right? It’s not about the instant refi it’s not about you know, having the best property on the block. It’s about stability and you Her entire portfolio

Erwin  

and the real pros are picking up used kitchens on Kijiji and putting it in storage until they need it. Yeah, straight up. That’s what the real pros are doing. Yeah. Instead of the amateur often gonna pay full retail. Yep. So, yeah, these are pro tips, folks. Hopefully you’re taking notes. So Adam had some questions. What are your top three five questions for screening a tenant?

Hart  

So I will say I wasn’t going to tell him this beforehand. But it’s probably the most loaded question to ask a leasing specialist, or someone who runs a team of 18 leasing specialists, because the process of screening starts from when you post your property. So yes, there are questions that you should be asking people who are coming through the property, asking people in messages on Facebook or wherever your your listing. But the first thing to know is from point A of advertising your unit, you are already screening your tenants, you should be advertising a unit to attract the tenant that you want not to avoid the tenants that you don’t want. And we see a lot of this all the time, you know, no smoking, no pets, no families, no kids, even though it’s completely against human rights ethics. So building your advertisement to attract the tenant that you want is key. And that’s things like you know, mentioning, say your property is a three bedroom townhouse in Guelph, right, and it’s a family friendly neighbourhood and you want a young new family coming in, talk about the schools in the area, talk about the parks in the area, talk about the convenience to grocery stores, get professional photography to showcase that nursery or that primary bedroom or the beautiful kitchen, make sure that you are designing your ad to attract the tenant that you want. And already you’re screening by doing that you are screening from step one. Then in step two, it’s making sure that you are catering to the the way that tenants search for property. So a lot of people will say I post on Facebook marketplace, I get overwhelmed with it still available messages. I get so frustrated that I don’t respond to any of them. Well, you’re now ignoring well over 80% of all the messages that come through on Facebook, and you’re likely ignoring 20 30% quality tenants. Yes, there are some tenants who are not worth your time, who are just clicking that Is it still available button. But Facebook has taught tenants that clicking a button is the appropriate way to outreach to a landlord. So we’re penalising tenants for doing the behaviour that Facebook has taught them. As opposed to saying, as a landlord, as someone who’s advertising a product, I’m going to understand that that is the user experience. And I’m going to cater my process to that user experience. So have a canned message that asks them some basic questions, or use a pre screening tool that kicks them out to that pre screening tool to fill out a form. But we’re realising to my point about building Rent panda wrong, we built a pre screening tool, we said every single has a syllable message is going to go out to that pre screening tool. And we’re not going to talk to anyone who doesn’t fill it out. But we realised that the barrier to entry was just too high. You know, we were losing too many people, the conversion was too low. And so we built a process where we can respond to those Is it still available messages with auto texts on our phone with bots that we’re building on Facebook? Now we can respond to them all and ask the basic questions. You know, when are you looking to move in? How many people are you looking to live in your home? How many parking spots do you need? What are you looking for in a home some of these open ended questions that will allow people to start a conversation. And essentially, regardless of the answer, anyone who’s engaged with us, we can then take further into a pre screening tool, and then into showings. But a lot of people don’t want to jump off of Facebook, because again, Facebook has encouraged them to stay on platform, you know, if you’re a tenant searching for a property, and it’s hard to find one these days, you’re going through hundreds of properties a night bleary eyed, hitting is still available, man buttons, just trying to, you know, spray and pray and find something that works for you. So if as a landlord, you remove that frustration and realise tenants are frustrated too, I need to build a process that works for them, engage them in a conversation, and then you can hear more of that story. And once they realise that you’re actually going to respond, which most landlords don’t. And you’re a person that cares about them. Already, you started a good relationship at the start, which is part of the screening process. And then they may be more likely to fill out the very long and onerous form, which is essentially a pre application.

Erwin  

Oh, what is the pre application come before the see the property? Or?

Hart  

Yes, so that’s where we’ve engaged with them on Facebook, we’ve asked them some basic questions that would qualify them for a property, you know, if they have three cars, and there’s only one parking spot, probably not going to work, if they want to live there with 10 people and it’s a three bedroom home probably not going to work. So it’s a very basic criteria. And then once you’ve engaged them, you send them to the pre screening form that pre screening form. And we have one single key has one people use Google Forms. There’s lots out there So that is just a way to then call down into the top tenants that you want to show the property to, you know, do the income levels make sense? Does someone have a good track record of renting? Or have they been bouncing around between properties, all of the basic information about employment, you know, they can upload documents, they can input their landlord references and living situations, or even talking with Barwell about an early partnership to have tenant pulled basic credit reports that we can then add on, you know, the full long form hard checks. So there’s ways to use technology to streamline it. But then you go to a showing, and the showing for us started before

Erwin  

you go to showing for sure you asked for quite a few questions before they before they come before the property. Yeah. Where’s that line? Where do you draw that line? Do you ask for some number, for example?

Hart  

No. So we want to make it a barrier to entry that removes those people who aren’t actually serious, but is not intrusive, you know, a little bit big brother hurry at the start. So you know, we’re not going to ask for application fees as they are illegal, we’re not going to ask for information that would make someone feel uncomfortable providing because again, from a tenant perspective, you’re probably providing that to 1020 3040 people in your search for a property. And so if it’s too onerous, you may just drop off. But it also depends, right? If you if you have a property in Toronto, that’s at market rent, you’re going to be getting four or 500 messages, you can board. Yeah, you can be super, super onerous. And say, I’m only going to take the top 1%. But if you have a property in Belleville, that’s slightly above market rent, because you’ve tried to push it a little bit, you’re not going to have a flood of messages coming in. So you need to be open to engaging people working a little bit harder to find that perfect tenant. And so you can’t use the same process as someone in Toronto. And even on our team, you know, we deal with thunderbay down to Niagara we deal with the GTA. The process is different in each region. And for each property to do if you’ve got a property again, that’s below market rent, because you just need to rent it out right away. You can be a little bit more scrupulous with with your screening process.

Erwin  

I always call it hurdles, higher hurdle in front of people. Exactly.

Hart  

And so all of that basic information that is enabling transparency, but not big brother transparency, that happens before the showing. And then

Erwin  

if we get to the show instead, what percentage of inquiries Do you think make it fill up the application? The pre screen application?

Hart  

So let’s use Facebook marketplace as an example, because they bring in about 85 90% of our traffic these days. Yeah, I mean, for anyone who’s not on Facebook marketplace, landlords out there need to realise that tenants are searching on Facebook. And Facebook is investing heavily in the real estate marketplace sector.

Erwin  

Yeah, like visual marketplace. I bought my abroad bought a golf club author recently. I like the fact that I can I can keep who that person is I can go keep their personal profile for sure. And if they’re if they’re like, they’re really hidden. I’m not interested. I won’t do business with them. Yeah.

Hart  

And the reality is, is what was via.ca 10 years ago, and is Zillow, or Zumper in the States is Facebook marketplace. In Ontario, at least landlords need to realise that that’s where tenants are. And so if you want to know those tenants, you need to be on Facebook marketplace, because those people that just say, I’m only going to list on Kijiji, but just know that your that’s foolish, right? You’re only tapping into 3% of the population. Right? The same thing with and then people are more faceless going to GG, right. Yeah. But I mean, either way, I would challenge that by saying our screening process will be so onerous at the end of the process, that the transparency that Facebook gives with a personal profile is almost meaningless. It may give you some early indications, but we do full social media scrapes where we look at Twitter, LinkedIn, Instagram, Facebook, tick tock like we can look at an entire social media entity and the Facebook side of things is minimal. But it is an early indication. Oh, yeah.

Erwin  

$100 Golf Club. Grave, gonna be pretty late. So

Hart  

we were talking about you know, I flipped furniture on the side just for fun. And, you know, I liked the fact that I have a good seller profile, right? That’s it’s a point of pride. And it allows me to move products faster, whether they are rental homes, or they are, you know, pieces of antique furniture, right?

Erwin  

So sorry, are using a personal profile or a business profile for Facebook marketplace.

Hart  

So that’s a whole rant to Facebook, but we use personal profiles, some are created for the business. Some are actual personal profiles of our leasing specialists. Facebook algorithms are something that we play with. And Facebook will gravitate towards serving up your ad for your product, whatever it is, whether it’s a golf club, or a rental home, to more stable Facebook profiles, to better seller profiles, and to products that get more engagement. So this is something that we tell all of our landlords, even if you’re in a condo that says no pets allowed and you can and actually say no pets, we still advertise our properties as pet friendly, every single one. Because about 50% of renters these days have pets with old, which is wild, you know with the feed. Yes. And if you look at like a city like Guelph, that’s upwards of 70 75%.

Erwin  

So people like Petsmart I feel Hamilton’s high to

Hart  

probably, but if you are a landlord says, I want no pets, by creating an ad that says a big cops, no pets at the start, you are automatically removing, let’s call it 50% of those people who would engage with your ad. Even if it’s just clicking that his it’s still available button to Facebook, that’s engagement. And a lot of people think about rental ads as the old school right, you know, it could GG, it’s on the first page, and then it drops down and you relist your ad to be on the first page. That’s not how Facebook works, right? Facebook, whether you’re Nike, or you are or when posting a rental property. Facebook wants to serve products that are engaging, because they want engagement, they want more people clicking More things.

Erwin  

They want them to spend more time on Facebook.

Hart  

Yeah, so if your product engages people, and you can engage 50% More people by saying pet friendly, we can screen out Pet Pet owners versus non pet owners very easily. But if you get that engagement from day one, your ad gets naturally boosted up in the list in the theoretical list, more people see it, you get more impressions. And so we can play algorithms by getting higher engagement from day one. Other things like a lot of landlords don’t put dollars against their Facebook ads, right? They think I’m going to post it on Facebook marketplace, and 510 $20 can get you massive impressions. And again, Facebook algorithms, defer to the first 24 to 48 hours of engagement. And so you’ll see if your listing doesn’t get much because you’ve priced it too high. And then you drop the price down, you will naturally get less engagement and less impressions than if you had posted it lower earlier. Because Facebook goes on this thing. Isn’t that great? And we’re going to kind of bump it down a little bit. All right. So we want to play those Facebook algorithms to get the maximum amount of traction. And then the job is screening, right. So we want to start with a massive pool. And we have tools to efficiently narrow down. But if we’re starting with a small pool because a landlord says I’m only open to elderly people without pets who have dual income, that niche is so small and cardiologists Exactly yeah, who are both cardiologists and cardiologists. That niche is so small that you will never get the engagement that you need to actually find that person. But even if you’re trying to find that person, if you go out there and look at everyone, you will naturally then be able to call down to maybe something close to what you want to find at the end of the day. Do you do any paid paid ads and every single ad that we post for our leasing clientele is paid? Yeah, and it’s boosted. So, you know, we’re gonna boost it on Facebook marketplace. We’re not gonna put out like a full ad campaign with like banner ads and things like that. But we’re gonna, yeah,

Erwin  

I was in crisis. Yeah. And I used

Hart  

to work in advertising, right, Facebook will gladly take your money, we’ll gladly take your money. It turned out I was worried. But boosting on Facebook marketplace is incredibly effective. The other thing that people don’t realise is that Facebook marketplace is just a single stream. Facebook groups and localised Facebook groups are a massive, massive stream that a lot of people forget about. So if you’re living in Hamilton, and you’ve got a property out in Belleville, you’re probably posting it on Facebook marketplace, and then leaving it maybe you’re being smart enough to change your location to Belleville. So it actually gets posted in Belleville on Facebook marketplace. But a lot of people aren’t taking the time to join the 12 Belleville rental groups, and then pushing out that Facebook marketplace ad to those groups. And we get about half of the traction on Facebook comes from the group’s not native marketplace. So it’s all of these tactics where if you’re just doing it once a year or twice a year, you’re never going to have the time to not only understand what the latest and greatest is, but to really hone those skills in those strategies. And that’s where hiring an expert makes sense. We have you know, 40 5060 listings active at any period of time. And we can see the data coming through and go, Hey, you know, we need to pivot this strategy a little bit or to your point about brands versus personal pages. Facebook had a pilot programme for a while that allowed brand pages to post on Facebook marketplace. They opened it up to a select number of companies in Canada, then closed it down, but it was opened in the States. And so randomly I fell into a Facebook rabbit hole, where when I went to LA for a week, my IP obviously was picking up LA and I’ve tried this with a VPN and it doesn’t work Facebook closed that loop or closed that rabbit hole. But for a week I was able to post as a business on Facebook marketplace, I got 1000s of messages where I would normally get hundreds I got 1000s and 1000s of messages because Facebook was artificially boosting all of that brand traffic to push engagement as a test. And so we are at the whim of the giants and we realised very on to my point about building Rent panda wrong A marketplace was needed 10 years ago, eight years ago, even maybe six years ago when we built it, but Facebook marketplace is now dominating. Right? And it says if you go to the states and someone just says, Oh, I’m I’m going to ignore Zillow, right? I don’t need to be on Zillow. I don’t need to look at Zillow. Zillow is the giant, they’re the behemoth and Facebook marketplaces, too, you need to understand the trends and what’s happening, lean into it. So, you know, we stopped investing in building out our marketplace, we have a basic one now. But then we built syndication tools, because we realised posting on Rent panda and allowing you to push out to Facebook marketplace is actually the value add that solves the pain point. It’s about being on top of all these trends. But for landlords out there that are ignoring Facebook marketplace that that’s the pro tip is you need to be there, test Facebook, and if you’re not willing to or uncomfortable with it, hire an expert who will do that for you.

Erwin  

So yes, pro tips. Yeah, for listener, I hope you’re taking lots of notes. And also understand for listener, we do have transcriptions on our website. So if you want to check us out their truth about real estate investing.ca. So you said mouthful, that makes sense that Facebook’s investing this much. And then you’re paying because generally Facebook gives attention to whoever pays. Yeah, that’s my own experience as well on Facebook for like just seeing my business page versus personal page interaction. Really, really different. Personal obvious, does a lot better. I’m sure there’s people saying like Facebook’s dead, it’s for all people. You’re still seeing it working for across demographic. Yep. For ages. Yeah, 20 Somethings and you know, at some things, they’re all using Facebook. Yeah, it’s

Hart  

it’s not about Facebook as a social marketplace, right as social entity. It’s about Facebook marketplace as a rental marketplace. So we just have to realise that this is a marketplace that people are using. And a lot of to your point about keeping someone’s profiles, we see a lot of profiles that don’t have activity on there. Because people have joined Facebook again, or for the first time to get on marketplace. So

Erwin  

they never log in. Right. But they come in purposely for this

Hart  

exactly. And if you think about the cycle of a tenant, they may be very, very active on marketplace searching for a rental for a month, maybe two months. And then they don’t do anything that would require it for him to repeat it again. So very often we see people who you know, they’ve updated their profile picture once every two years. Because they’ve been using Facebook for marketplace and they’re

Erwin  

in their walls. It’s like all Happy Birthday friends messages, nothing else. But they didn’t post anything, no

Hart  

engagement whatsoever. But it’s just the nature of things. So yeah, we’re seeing everything from the 80 year old on Facebook or the 40 year old helping their 80 year olds get a rental unit on Facebook, down to 18 year old kids who are renting their first property

Erwin  

fascinating. I didn’t know Facebook with this dominant now I knew there are big but I remember when I started we were using forgetting everyone forget the name of the website was and then and then to Gigi was the big thing. And they’ve wiped out almost everybody. You’re telling me that I’ve could you just like what a small percentage of the market now?

Hart  

Yeah, from a rental perspective, Kijiji is a very, very small percentage of

Erwin  

pro tip folks. So if you’re if you need to spend on ads, you know where to spend because we used to spend a lot on Kijiji ads are at the top. Yep.

Hart  

And, you know, for those who don’t want to spend as much tailor your ad to the Facebook algorithms.

Erwin  

Okay. We were talking about students before all sorts of students, what are you seeing?

Hart  

The student rental market is one that for those who can stomach it is an amazing opportunity isn’t that bad? Sometimes it is bad. But there are a lot of student opportunities in a lot of these university and college markets, especially coming out of COVID. Universities are pushing enrollment, right. At the same time, the rental dynamics in the cities have changed, right prices have gone up, the supply has gone down, the demand is still there. And so it’s naturally harder for everyone to find rentals. And that’s exacerbated with students because a lot of people want to avoid the trouble of students, you know, managing students losing their keys coming home drunk and you know, stumbling and breaking the front step just the process of turnover is a little bit more onerous. Typically, you will have a little bit more in damage costs at turnover time. But students are willing to pay more. You know, when you look at rentals by the room or square footage, student rentals can demand a premium, because you have parents supporting them who are ready for their kid to get out of the house. And they are willing to pay for a good place to live that has good access to the university that’s safe that has a good landlord running it. Because there’s a lot of old school slumlord student rental landlords out there still, there’s been tonnes of them. Yeah, tonnes. And it’s the primary story that you hear. And a lot of landlords need to realise that when you rent to students, you’re not renting to first year frat boys, right? Everyone thinks about that frat house, and what it’s going to turn into?

Erwin  

Yes, this is not a Hollywood movie from Hollywood movies are not real.

Hart  

No. And these days, there are a lot of student populations that are there to work hard, study hard, you know, and you’re not looking at, again, the stereotypical Western Party City as a stigma. There’s a lot of markets that have very, very low sort of opportunities, and to provide good affordable housing for students. And we were talking about earlier, the international student population is absolutely massive. So we were talking to Lakehead, and Confederation College up in Thunder Bay, they were saying that a third of their new enrollment is from international students. And if you think about this as a business, like we like to think about landlording, universities went a few years with pretty bad revenues, right? They had low enrollment, they didn’t have students on campus. And now they’re trying to make up for those losses.

Erwin  

So people deferred, deferred their their year. Yeah, so they probably just play extra demand. And

Hart  

there’s a surplus for sure. But internationally, yes. But international students are typically paying up to 10 times the amount of a local student, right to go to U of T. As an international student. I don’t know the current numbers, but you’re probably paying between 30 and $40,000 a year, whereas a local student is paying six or six at most. So from a revenue perspective, universities are pushing international student programmes quite heavily. They’re advertising from places like India and China. Yeah, for sure. They’re recruiting you know, Confederation College in Thunder Bay has a good it programme. thunderbay student population is turning into students from India coming over and being in the tech sector, and then they migrate literally migrate down towards Toronto, we see people because we’re across the province, the same students graduating from conversion College, then moving down to Sioux Sainte Marie, then moving down to Sudbury, and then coming down to Toronto, they’re literally migrating from Northern Ontario south. And so as an investor being able to tap into that is a massive opportunity, because the student population, again, can provide lucrative cash flowing opportunities, especially in some of these secondary markets, if you can manage them appropriately. And you have the good systems in place are a really good property management system, or property manager who is versed in student rentals, you can make a very good business and provide much needed housing for the student or international student populations.

Erwin  

So can you give us an example let’s let’s use the golf duplex example. For context for listener. You rented out the main floor for 3000?

Hart  

Yeah, just over 3000 for a three bedroom main floor of a duplex

Erwin  

fully renovated. It was nice. Yep. It was the stuff that we talked about that people will renovate. Yes,

Hart  

these guys did it right. They over renovated a little bit, but the the numbers work, the property could handle it. And the basement was 2000 basements was about 1050 a room I believe. So just over 2000 for a two bedroom. There was also no living room in that basement

Erwin  

room, but small, right, because I needed a kitchen. And so it’s tough to find. Yeah, so we have common space when you have

Hart  

exactly so it was a kitchen with like a little Eden nook area. But these were smart investors and that they they built the basement specific to probably more mature students. The bedrooms are massive. Each bedroom had a beautiful big closet. And each bedroom had its own fully kitted washer, right. So you just stand up showers. Because if you think about a master’s students or PhD students, they don’t care about common spaces, they’re not having friends over, they’re working their butt off. And they want their own space that’s quiet. They want to be able to go to the bathroom at two o’clock in the morning when they’re pulling that all nighter and not bother their roommate who’s also working their tail off. And they want a nice little kitchen, parking, you know, a backyard to relax in. So these bathrooms did you have it was a two bedroom, two bathroom in the basement. Oh, the upstairs was again thought about. And it was a more typical three bedroom, one bathroom with a nice big living room and a nice big kitchen. Interesting. And the demographic hit right the upstairs was younger students. It was three girls that came in. We actually just turned them over this past month or two.

Erwin  

And we were designed for. So

Hart  

it was one sublet and one assignment of sorts. So there wasn’t a full switchover. And the landlord’s got good rent. And so they were like, You know what, let’s, let’s keep it we always say push that rent increase, but they wanted to keep it but the demographic of upstairs and downstairs was very different because of the way that they built it. So these were guys that were smart and said, I’m gonna build a product, knowing the type of customer that wants that product. And they weren’t crazy to think about. I’m just gonna go after that cardiologist. You know, they went after a student group that was large enough that could substantiate those rents. And we talked about

Erwin  

this but very unsexy, long term plan with enormous demand. Exactly.

Hart  

And they’ve got opportunity for it at you in the back. So there was a garage there that will likely be converted, and it’ll be a beautiful studio or one bedroom. That will probably bring in in Guelph. 14 1500. Easily.

Erwin  

At the time when we were talking about this back last fall. I think house would have been like 100 grand, yeah. And would have brought in five out over $5,100 in rent. Yeah.

Hart  

And they bought it even before that. So they were sitting on it for a little bit and I think they paid in the sixes for it.

Erwin  

So then what would this house run for? Two non students.

Hart  

So two non students if you look at the three bedroom upstairs It would probably go for, you know, maybe 2400 2500. And the downstairs is probably around like the 1600 mark 1700 Maybe. So it’s still a good opportunity. Yeah. But the student population will push that we didn’t push rents as much as we probably could have in a desperate moment. So I think we were talking about this way, but desperation time that when you rent it out, so we met a family that was commuting, driving their son to the University of Guelph from Collingwood every morning and afternoon. Oh, why, and, you know, as someone close to our wage way, and they were desperate to get their kid into school and have not be sitting in the car for four hours, that’s taxing to everyone? Student included, and it’s real money on gas. It’s real money. Yeah. And the depreciation on the car. Yeah. So, you know, you can feed off that desperation, and Jack rents even more, or you can make your numbers work as an investor and provide a desperate need. Get some goodwill out of it. Yeah, for sure. And get good tenants who appreciate where they’re at and are not, you know, feeling gouged for the entire time I live there.

Erwin  

Because I would tell my clients, like even if you don’t want to rent to students, I love the fact that they college or university creates rent supply pressure. Right. And that just pushes rents up. And also their major major employers for those areas. Yeah. So they have, they do have cardiologists that were typically work their teachers or whatever, for sure, they have lots of high paid people like university professors, whatnot and their families. And, again, they create pressure both on demand for both for for resale, and for rental, which I like, I like owning a product that has massive demand

Hart  

and demand for the foreseeable and non foreseeable future. I mean, it’s, it’s something that’s not going away, that soon population is not going to just disappear. And I think as a brand, we’re really excited about it. Because if we can be known as the brand for rentals, we already have partnerships with Lakehead University with Confederation College, we’ve worked on partnerships with the University of Guelph off campus divisions, we were looking at a project and getting like a seal of approval from Lakehead University, as designated, you know, non University run off campus student housing, which is incredibly valuable as a brand. And if we can leverage that brand and bring that value to our investors and our clientele, that’s massive. So there’s, there’s some really cool opportunities in student housing.

Erwin  

Do you do anything different for international students in terms of screening or rent requirements?

Hart  

Not really, obviously, we’re not going to pull credit checks, we’re not going to pull background checks, we typically do that directly. So we’ve seen way too many frauds and scams these days. So even if you pull your credit, so

Erwin  

Dave was right there, yeah, you kind of just glanced over the wealth of frauds out there. So listener, please understand, there’s lots of fraud going on. And I’ve mentioned before, you know, if you do not credit, check your tenant. To me that negligent?

Hart  

Yeah. And I think even to belabour, that point a little bit more, pull your own credit checks, if you see a credit check pulled by the tenant themselves, their realtor, their property manager, whatever it is, even if it’s a day old credit check, pull your own credit check today, because it is so easy these days with all of the digital tools out there for fraudulent documents. The same thing with employment information, like you have to do your due diligence, because there’s way too much like rent is so high, that fraud escalated exponentially. Same thing on the tenant side, there’s tonnes of scams out there. So for any tenants who are listening, you’ll never give anyone any money until you’ve met the landlord or property manager in person at the property. I like it’s the simplest thing and we see people day in day out providing deposits sight unseen to Reverend whoever who’s in the States taking care of his desperately ill family, and he’ll FedEx you the keys. Just don’t do it.

Erwin  

But remember to go to the house, but you need a locksmith forget him. Yeah,

Hart  

yeah. And it’s likely for sale because there’s real photos that they’ve pulled

Erwin  

or could be different. Because literally we’ve seen this happen. Yeah, for sure. Right? Someone’s just taking someone’s Kijiji pictures and put it up for rent for like a ridiculously cheap price, and dupes somebody into it. Yeah, I mean, we’re

Hart  

we stopped scammers still with our marketplace. We stopped scammers every single day, who try and post on the platform. So it’s just something that exists out there and people need to protect themselves. But for international students, the good thing is, is that very often, the university and government has almost pre screened them. So as an example, students from India coming over for specific programmes, they need to have $10,000 in a Canadian account in order to be able to enrol in that programme, and have stability with housing and paying that enrollment.

Erwin  

Is that the school’s requirement or is that part of the government’s

Hart  

visa requirement? Then these international students are on programmes. They’re paying a lot of money to be here. They’re working very hard. They’re typically working jobs as well as you know, having support from home and they don’t want to screw up and so I Having something like the ability to report non payment of rent to a credit bureau is incredible leverage for an international student who’s trying to build their future and most are moving towards PR status. So anything that gets in the way of that or risks it, they’re going to want to avoid, you know, astronomically. So they are a good cohort to rent to. But when screening them, you have to be realistic in the sense that, you know, a guarantor in India, or in China, or wherever they’re coming from is meaningless, right, you will never be able to go after that person, you need to be proactive about the way that you set up your rental property. And the way that you run your numbers knowing that, you know, typically, there are cultural differences, there may be more wear and tear on the home, maybe you want to have a full service operation where you provide fully furnished cleaning service cleaning services, yeah, you know, put your TVs in there, put your internet in there, have your cleaner come through every two weeks, build that into the cost, make it a premium, but know that that’s going to keep your property in better condition, or just build in the fact that every two years you will have a full repaint, you will have a full cleaning, you’ll have some floor damage, you’ll have some wall damage, and just build that into your numbers. So screening them is really about proving enrollment, proving those funds in that account, and making sure that you’ve met these people, because we didn’t talk about the showings and the qualitative, but meeting someone or having someone that you trust, get that gut check is so important. You know, we have all of our tools and all the the digital know how to get the quantitative, but the qualitative is really, really important. So meeting someone at the property and giving them a few pieces of instruction to follow, don’t park on the driveway, right? Call me when you get here, those things. So if someone parks on the driveway and comes whipping in, and then knocks on the door, those are two things that you’ve asked them to do that they haven’t done, right immediate yellow flag, I would say, you know, you walk in, you walk out to meet them, and you walk in the property and take off your shoes, don’t ask them to take off their shoes, watch to see if they take off their shoes based on your actions, right? People taking off their shoes in my books, when I when I was out, pounding pavement doing showings every single day, if someone didn’t take off their shoes, when I took off mine, that was almost an immediate, you are not getting this property in the back of my head. You know, maybe they could overcome it. But just those little elements of respect and qualitative feedback are so important. And then to Adams questions beforehand, we asked questions that are open ended at those showings, you know, where do you live? Now? Why are you looking to move to this area? What do you like, once they walk through the place, ask them what they like about the place, ask them you know how long they’ve been living at their last place. And if they like their landlord, you know, calling a pest landlord, whether they’re the actual reference or not, may give you some information. But open ended questions out of showing are so powerful to get, again, that qualitative nature of someone. And that’s how you really screen a lot of these students are international students, and separate them from each other. Because every international student is going to have that money in the bank, right? They’re not gonna have spent it yet. But you want to see whether there are going to be those people that spend it on the parties and the drugs and the alcohol and whatever, or they’re going to be spending it diligently. And maybe they all have part time jobs. And they’re going to treat your property with respect. So, you know, account for the worst case scenario, but screen for people who are going to treat your home like their home. Are you doing any reporting to the credit bureau, sometimes we do so we partner in a sense with front lobby, and we can kind of opt into their services for any of our leasing or property management clientele. Thankfully, we’ve never had to do that. Because we’ve talked about beforehand, but in about 900 to 1000 leases that we’ve done, we’ve had one non payment of rent. And thankfully we have a paralegal on staff so she swooped in and helped out on that front. But we can. We also have partnerships with people like single Ian Villar was here probably a few weeks ago talking but single, he has a really great rent guarantee programme, where for those landlords that want to pay into that, and have that extra insurance policy, we can provide that, you know, in partnership with single key so we focus more on the due diligence in placing a tenant to lower that risk profile. But some landlords just, you know, their risk tolerance is zero. And so for those those landlords that rent guarantee, is there. A common I’m guessing it’s not that common, but it is one where people have had bad experiences and they want to opt in to the insurance policy. And it’s an insurance policy like any other right, so it’s a smaller portion of the population that wants it. But it is there for those who do. And what we kind of promise is, no matter the tools that are coming to market and out there, we’ve built some of our own. But as a leasing team as a property management team. We’re always using the best out there. Right. And so we have, you know, screening providers with our credit checks and background checks. We do ID verification automatically with bass matching technology. We do income and expense verification through open bank checks, but we’re always on the hunt for the best screening tools out there so that we can bring that to our clientele. We don’t need to do ID verification on every single person, right, we can see their ID, we’ve met them in person, things match up. But you know, when you’re screening international students who haven’t come over yet, and you’re doing a video tour, you want to make sure that their visa documents are in order, we want to make sure that their ID is legitimate. So we have tools to screen, different subsets of the population. And we’re always gonna go out there and search the best one for our clientele.

Erwin  

Fabulous. So now I have a rental market question for you. So just like a quick pro tip for folks, I always ask property managers and leasing agents, what rents are, because often it’s their job to go get it. So I want them to tell me what it is. Because I’ve seen too many times where, like, honestly, commissioned salespeople have given incorrect information, often, usually it’s overstate is that whatever understated? Yeah, actually, okay. But generally, it’s their jersey on the over.

Hart  

It is, but we were actually doing an interesting analysis of our leasing jobs the other day. And we found that, like, the leases that we were writing, were two to 3%, over the initial impression of what our landlords could get for rent. So we were actually pushing rents above what they thought that was probably brought down by those landlords who thought that they had something that was worth a lot more, but yeah, most people are over inflating what they can get

Erwin  

both landlord and commission salespeople. Yeah, I’m licenced. So I can’t say certain things.

Hart  

Yes, for sure. For sure. I mean, there there have been people, unfortunately, that we’ve seen pushed into properties, that the numbers just didn’t make sense. But their numbers made sense when they put in that rent amount. Yeah.

Erwin  

So what are you seeing drotsky? paint some wide brush strokes on like, what are you seeing in terms of rental market? Like, for example, my team is saying that smaller markets, there’s there’s even more rental supply. So things are slower to rent, versus larger markets like a Toronto like a Hamilton, I don’t know, maybe even Kingston, we’re seeing much more demand also, because we we do a fair number of students as well. So it’s kind of a mixed bag in terms of demand. But so what are you seeing, like, does you cover quite a bit of geography? Yeah, negra to Ottawa, that the lobby up to Thunder Bay? Yeah,

Hart  

I’ll get the politician answer in that any broad stroke paintbrush that I that I use, is going to be inaccurate in the sense that even looking at a market like Sioux Sainte Marie, and painting it in the same light as Belleville or looking at you know, Thunder Bay in Guelph, right. They are the same population essentially, are what cow is that big? Yeah. And but they are light years apart in terms of rental market,

Erwin  

golf, proximity to Toronto is Yeah, tough to compete with for

Hart  

sure. Yeah. When blog to article came out two years ago, that’s, you know, Guelph was the best place to live outside of Toronto. And it blew up. It’s a pretty city. Yeah. But that broad stroke approach is difficult, because what we’ve seen is the nature of the investment education that happens primarily in southern Ontario and the Golden Horseshoe actually has a significant impact on some of the smaller markets. So yes, smaller markets have more supply. You know, Toronto, greatly skews big CMHC and census averages. And so if you look at CMHC data for purpose built apartments, obviously Toronto is going to skew those numbers Toronto, Vancouver, Montreal, and a market like welland is going to be forgotten about. And when people look at the rate of rent increases, you know, that skew, and that bias towards Toronto, and the GTA is going to negatively impact a wetland investor because rates aren’t growing as fast right supply is there, we saw in the last two quarters, a lot of markets actually had a drop in market rent. But all that being said is, even in Toronto, when you look at a certain product type, there can be micro challenges that are very real for landlords. And so one of the best examples is preconstruction, a group of investors will buy property in a building, let’s call it a 40 floor building in downtown Toronto, occupancy begins, and floors start opening up. And 80% of that building is investors. So those dozens and dozens and dozens of units hitting the market are going to depress rents in that specific building. And so a lot of these developers have contracts with leasing companies, and you know, as a buyer, you’re put into those contracts. And they’re gonna promise, let’s call it 3200 bucks for that two bedroom in Toronto. And all of the listings are going to start on MLS at 3200 bucks. And all of them are going to sit for a very long time, maybe one or two will be rented. And they’ll throw those up as you know hailing points of here’s what we got for that rent. And within two months, that rent price is down to 2500 bucks a month or 2550.

Erwin  

And a lot of investors pay occupancy exactly costs.

Hart  

So the developer is fine with that. The leasing company is fine with that because they’ve got their back pocket deals with the developer. And the people who are suffering are the ones who’ve been promised that rent and usually if you have like a guaranteed rent, it’s going to be down at the 2400 mark. cuz that’s more in line with what’s probably realistic. And we’ve actually taken over the leasing for a lot of these places. Because landlords are sitting on two months of vacancy. They’re bound by a contract. And they’re saying, Can you help me? What can we do to get out of this sorry,

Erwin  

hurt you, you’re saying you have inventory available for 2400 for two bedroom.

Hart  

So we recently rented out a very, very small two bedroom, but a two bedroom at the 401. And the Helen for 2450.

Erwin  

At this location, Yorkdale Mall? Yeah,

Hart  

right by the subway.

Erwin  

So if you’re looking for a rental call hard, I’ll put the cell phone number in the notes, donor, thank

Hart  

you. But there was equivalent units sitting still to this day, probably sitting on the market at 2900. And I would just want to go to all those investors and say, like, look at the the vacancy costs that you’re eating month after month after month, but it’s easy. Yeah. And

Erwin  

then how much do you think they paid for those units? Because I’m not sure 1600 grand for two bedroom? Yeah, we

Hart  

probably I mean, they were very small. You know, this two bedroom was 545 square feet. For a two bedroom, two bath air to the

Erwin  

golf property that was around the 100 Grand that generates 5100 in rent. Plus a lot of utilities to think I forgot that part. Yeah, they were covering all the patella it was covering all the utilities. Yeah. So condo fee.

Hart  

So when we look at markets, you know, if there’s a big investor event, and someone talks about Guelph, right, we will actually see movement in Guelph based on a small population of investors pumping money in there, you know, when Whelan got hot, a lot of money moved down to welland and we started to see, you know, the inventory get pushed towards that top 20% Because there was those rentals. So you have to look at those micro markets and that’s why we pride ourselves in having local leasing specialists. So we’re not hiring someone in Toronto, to go lease out a property in Kingston by posting on MLS and allowing your local agents to walk people through we’re hiring someone in Kingston to do the work the rent pan away, and they understand the Kingston market.

Erwin  

Alternatively as a pro forma for preconstruction James Street, Hamilton, condo, 350 square foot, the expected rent, according to this realtor from Toronto, was $2,036. Yeah, for 350 square feet. Good luck. Hey, they put it out there, though, yes,

Hart  

but it sounds good. And it’s got a little positive, they will get the investor who may eventually come to us and be disappointed by the rent assessment that we’re going to provide. But I will say like not to hawk our services, but we provide a rent assessment before starting any job. Because the worst jobs that we’ve done, are ones where we’ve naively said, Okay, let’s try and get that $2,000 for that 300 square foot studio in Hamilton. And we’ve convinced ourselves that we can do it right, we can make magic, and then a month and a half. We’re not magicians and so the clients disappointed, we’re disappointed. No one’s getting paid. And it’s uncomfortable.

Erwin  

So property is vacant. nesters bleeding money. Yeah, for sure. And

Hart  

we’re spending a tonne of time or like, if a property rents in a week or two. That’s good for us. That’s good for the investor business. Yeah, and everyone. Yeah, exactly. And you’re probably gonna go out and buy another property. It’s good for your realtor, too. So it really is good for everyone. But we always balanced this triangle of the time it takes to rent a property, the quality of the tenant and the price we can get. And you know, you can only have two or three, unless you’re willing to compromise and be somewhere right in the middle. And this, I mean, it came from my days of brand, you know, every client wants something good, cheap and fast. And you can only have two of those. So it’s the universal norm,

Erwin  

or way over time. So where can people find out more information about Rent panda, just go

Hart  

to Rent panda.ca. And you have some free tools available there. Yep. So all the DIY tools are free posts on the marketplace. You can message tenants book showings, you can get a basic profile. So like the pre screening is all free. You can build leases for free with basic lease addendum that are completely free. And then there’s some premium tools there. And if you fill out our form to contact us about any of the other services and not the digital products, you literally get a call from me every single time we pride ourselves on customer service and making sure that even in an introductory call, we’re still educating, we’re still being fully transparent with our process. And we’re going to help you at some point in your journey.

Erwin  

And it sounds like you have some cheap rentals available.

Hart  

Not necessarily cheap, but their market rent.

Erwin  

Sorry, what was that two bedroom North demo?

Hart  

Yeah. 2495 I rented for

Erwin  

let’s see, it was fantastic. Yeah. You’re still mobile or you’re on the subway. You’re there’s a GO train there to beat that location.

Hart  

Yeah. We’re seeing people when they were considering Vaughn or that location because now there’s a big development happening at the top of the line and in Vaughan. And places depends on where you work but yeah, but up in Vaughan it was the same price as down by Yorktown.

Erwin  

So you have access to cheap rental listings right now. For my market.

Hart  

Yeah, market rent.

Erwin  

That sounds cheap. Well, it’s

Hart  

what this place would rent for two good quality tenants, lots of people saying, I’ll give you six months upfront. And then we looked and they had, you know, 535 credit and seven things in collections. And they had 1490 day late payments, and they didn’t have any support systems. So it wasn’t the right fit, or right.

Erwin  

Because I felt like I heard lots of people getting that many, lots of people, lots of people are getting like 3200 for two bedrooms. Yeah,

Hart  

I mean, this was a small two bedroom I will say. So like that 3200 mark is probably closer to downtown and also upwards of 700 square foot two bedroom apartments, which to be fair is what a two bedroom apartment should be. But these were kind of little micro apartments. And, yeah, but great amenities. Right. You know, they had co working spaces, they had a great gym, it’s and we rented to young, international architecture students, all they want to do is work hard and have access to downtown. And you know, they were at Ryerson, right and then get there on the subway. Yeah, when’s working? Yeah. And the landlord was rational and great to work with. Yeah.

Erwin  

Any final thoughts? Because, for example, or coming out of a downturn, what would you tell a new new real estate investor,

Hart  

the one thing is, is everything that you’re investing in yourself from a investment, education perspective, and the time and money that you’re putting into investing in that asset. Make sure you invest in the latter half of your landlord experience, you’re doing it yourself, invest in your own education. Find your Power team that extends beyond your typical property manager or anything like that. And make sure you know what you’re doing and you consider it a business. So don’t go into any business uneducated. And if you don’t know what you’re doing, just call us or call someone that knows what they’re doing.

Erwin  

Yeah, but yeah, they can call you because we’re gonna give you about your cell phone number. Yeah, for sure. Oh, my God, Kingston in Belleville, what would you recommend? Yeah, I’m just hypothetical question for sure. Because, for example, the

Hart  

answer clearly, I liked although right now, but yeah,

Erwin  

yeah, we’re actually pushing people more towards Kingston because the rental demand is just as high especially because the university is their queens. They’re not personally not a fan of college rentals. Yeah. Awesome. Hart. Thanks so much for doing this. Thank you and goalies go.

Hart  

It’ll be a fun night.

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. 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.

To Listen:

**Transcripts are auto-generated.

Erwin  

Welcome to the 300th episode of The Truth about real estate investing show. I am shocked if you’re new to the show, that is one episode per week since March 2016, we posted our very first episode, which was part of a six episode experiment, which is very long time ago feels seven years ago. Each interview is about an hour long and if you were to go back and try and consume all 300 episodes, that works out to about 12 and a half days but I do not recommend to consume all 300 episodes. I personally listen to almost everything audio on usually at least one and a half times so you can probably get through it faster than 12 and a half days Greetings my fellow investors This is the truth about real estate investing show for Canadians are you bringing you the truth and nothing but the truth? We’re not interested in peddling get rich quick schemes or hyping up unrealistic dreams. Instead, we provide you authentic, successful real estate investors, leaders of industry with authentic insights, practical advice and invaluable lessons from experts who’ve been through the ups and downs of real estate investing. This week is no different. Our guests in Nicaragua who co founder and CO owns Rockstar real estate brokerage with his brother Tom kharadze. Unfortunately, Tom is feeling under the weather he’s losing his voice. So we’ll rebook Tom for a separate date, but the show must go on. Both Nick and Tom are mentors of AI to charity. Their business includes running a real estate brokerage specialising in real estate investing to service other businesses and also service other businesses, which is like the Rockstar inner circle, a real estate education business that offers amazing value to its members. I know because I’ve been a member since about 2010 ish. The monthly fee is only $50 per month after a small initiation fee of $500. However, my referrals do get 50% off the initiation fee using my discount code, all caps, er w i n all caps. Education is an investment. Good value is good value and all good investors comparison shop. gym memberships cost more than the Rockstar inner circle membership, let alone playing golf once a week or once a month. So get educated first, so you can learn how to get rich slowly, in a very safe manner in real estate so you can afford that golf membership. Remember that that is the dream that passive investing pays for the niceties of life and for living. I’ll never forget the first significant nice thing Sherry and I bought for ourselves, which was a hot tub paid for when we refinanced the duplex that we’d held for several years. As a frugal investor, we definitely don’t spend much on ourselves. And because we know what kind of returns we can make when we reinvest money into our real estate portfolio. I look back at what our clients purchased in May 2013, which is just 10 years ago, again may 2013 10 years ago paying an average or classroom paying an average of under $300,000 For detached properties, houses and on average those houses appreciated if you’re sitting down, be sitting down those houses appreciated on average at 260%. So assuming a 20% down payment, and for simplicity of math, we’ll exclude cashflow and mortgage pay down these properties did cashflow as the highest best for that time in period in neighbourhood and town the highest best use for those investment properties back in 2013 Western rentals and those houses again, assuming 20% down our clients averaged a return over those 10 years of 800%. Yes, again, this is data from properties our clients bought, so we know exactly what to pay for and the addresses and everything. And because we’re active, we have a pretty good idea what those hazards are worth today with all the international students, the colleges and universities are recruiting student rental business has never been better. Note that our college and universities need international students as their tuition has not kept on like domestic undergraduate students. So for anyone reading the news, funny enough, a lot. The liberal media, which is generally the media leaves out the fact that prices are capped on domestic students hence like Guelph was in the news just recently, but they’re having trouble balancing their budget, even though they have a good number of international students. You know, the government should have seen this coming. So international students and yeah, those folks who are making up a humongous percentage of the people that live in Canada, most recently in housing has not kept up. So our investors are benefiting from the complete imbalance of over demand and under supply. The benefit of being a longtime investor is, you know, the market is our friend. Same as cash flow, which allows our smart investors to weather times like today where we have elevated interest rates, so they can weather the storm. And unfortunately that there are many who are over leveraged or who speculated so we’ll be seeing more listings hit the market over the next 12 months until we see an interest rate cut, which is looking like mid to late 2024 next year. Once we see a cut that will be a signal to the market to get in and we’ll likely see a whole bunch of people who’ve been sitting on the sidelines, get back into the market. I’m talking about specifically for buyers and pushing us for have a balanced market to a seller’s market. And I only generally observed the markets that we invest in for target, but we invest in for target investments. So that’s generally well east of the GTA and wild west of the GTA, where we can actually cash flow on property. From what we’re seeing on the streets, good quality income property still draw multiple offers, for example, a property in Hamilton, Ontario that ticked every box, that property still drew five offers, unfortunately, we lost on that one, while smaller markets such as like Niagara Falls, or Belleville, Ontario, and especially small market, really small market like Trenton, Ontario, the showing traffic and offers is way off as an dropping low. Same thing with the tenant applications. And so and based on seasonality, they’ll trail off further as we head into summer. So what does that mean? If you have a property sell, that’s bleeding your money and no longer serving you. If it’s my client, I’d be suggesting to them not suggesting I’d be advising them to get aggressive on their pricing. As buyers are rightfully being picky, buyers who waited patiently and prepared for a fearful market, you probably have a better 12 month window before that breakout happens maybe a little bit longer. And then we flip back into a seller’s market. And that’s the long term trend. Because we are in a housing crisis, nothing has changed long term quality income properties will still be a winner. So make sure you only own winning investment properties. And if you’re unsure, reach out to us and we’ll let you know, let you know that is if you want to work with if you want excellence on your real estate investment Power team that delivers exceptional results in last year in 2022. Our clients properties sold for 90% higher than the average comparable properties. Specifically, there’s a client’s properties that are we listed for our clients. I believe that’s an indication of that our clients bought right they renovated for a return on investment. And honestly, we believe in being excellent at what we do. You heard earlier that our clients from 10 years ago achieved 800% return on investment over 10 years. Of course past does not predict the future. I do not think the next 10 years will be nearly as profitable, but I do not see a better investment. And there’s also a reason for that we’ve we have 55 star reviews on Google as we are here to set the standard for performance and client satisfaction here at Iwan real estate. If any of that interests you, let’s get on a call. Email us at Island Anthony wealth.ca. And let’s understand your goals determine a strategy get you where you want to be revealed the remarkable venture that is the world of real estate investing. And we’re only talking about truths here. But enough about our clients. On to our 300th interview with Nick corretta. Nick is a real estate investor who discovered the power of leveraging real estate through boot camps starting at age 21. That was a long time ago. Nick’s an old friend so he is older than I am. So yeah, so 21 When age 21 was a long time ago, he bought renovated flip properties for profit, but realise that wasn’t generating the desired cash flow to replace his job income and it was a lot of work. A lot of work. To flip a property with your own hands is a lot of work. Nick shifted to rental properties achieving monthly cash flow and recouping his investment. Nick founded Rockstar real estate brokerage Inc. and the Rockstar inner circle with his brother to assist real estate investors. Nick publishes a newsletter shares, online articles teaches classes, hosts events for their 1000 Plus Rockstar inner circle members. That’s a paid membership. And also Nick co hosts with his brother that your life turns podcast, I’ll have links in the show notes for all of this, of course, Nick remains an active real estate investor, he consumes an endless amount of economic news and collects some silver Gulf of gold. Wow, Freudian slip, not golf, gold, and Bitcoin. Please enjoy the show. Hey, Nick, what’s keeping you busy these days?

Nick  

Oh, man, everything. We’re in a world where you have to be an economist to understand what’s going on to try to figure out what your next moves in life are so it’s like constant studying of, you know, different markets. We’re always asked what’s going on in real estate. Hey, what do you see what’s what do you think’s happening with interest rates? What do you think you know what’s happening with this? So that’s what keeps me busy and tied to maybe my phone looking at different articles and stats more than I want to but yeah, I mean, outside of that. We got family. We got the gym, we got a little bit everything. Try to balance things as best possible.

Erwin  

Yeah, you’re actually a lot. So I think the listener knows I’ve been a part of rock stars in 2010.

Nick  

Was it 2010? I remember man, I respected you. You came into the office. We didn’t know each other.

Erwin  

No. I knew you because I read up on you. I read your book, I read through your blogs, did you

Nick  

because we didn’t even know how much stuff we had out of that time. But I guess because we started a few years before that. So there would have been some stuff that we’ve written online quite a bit. But yeah, you brought up a Napoleon Hill book. I think. second meeting.

Erwin  

That is a big one. Yeah, it’s another one of his big Yeah.

Nick  

Yeah, good conversation. I didn’t want to just go along with it. Yeah, I was just like, he seems like a good guy. back then. I mean, it’s a weird barometer to use, right? If you’re like, oh, we should do something with this person. Like, are they they seem or you know, whatever, quote, unquote, normal is to you, right? And they seem like a good person. And that’s like the barometer these days. For me. That’s how I’m making a lot of decisions. And I don’t know if that says something about me or The society in general that you sometimes it’s harder to find good people than you would think, if that makes sense. But anyways, yeah, worked out.

Erwin  

Yeah. Worked out. I didn’t bust by accident or my mark. So, to me, it was important. But my average for the Korea course is to become a realtor for listeners benefit, like, think my average was like 96

Nick  

Oh, mine was like, the second exam. Well, did you were you open book or did you have like multiple choice? Multiple choice here? Oh, yeah. Okay. Oh, yeah. So we had short answer open bucks. So the first the first one I studied, and I did pretty well, I forget what I got, you know. And then the second one, you know, I was supposed to open book I mean, I’m not gonna study well, why am I gonna set this up? I’m gonna take 21. At this time, I’m just just getting it to bind somewhere on properties, right? So why am I gonna study so I just showed up with a textbook to write the test. And this one was way more. She was all about the real estate law and that type of stuff. I’m like, I don’t know any of this stuff. So then I was like, flipping through the pages. I’m trying to write this long paragraphs as possible, trying to get part marks like I was the like, Excuse me. You had to write paragraphs? Well, yeah, it was a little short answer and stuff. So I had to do that. And I remember that second exam, I think, I think at that time, the pass was 75. If I remember correctly, yeah. And I got the 75. Right off. So yeah, I’m not gonna compare marks with you.

Erwin  

Oh, no, after I realised, like, none of it really mattered. When I got into my articling. It just just passed. I was busy. I was busy with doing business doing. Sure. Do the article, game articling tests. Yeah, just pass the law one.

Nick  

Those ones where it’s like just just random stuff. But I didn’t. I don’t even know what the full process is now. So I know a couple of people in the office actually going through it. So I could probably ask them, but I haven’t gotten a chance to actually someone today is in the course. Actually, some of the office right now.

Erwin  

It’s a lot harder than it used to be. But yeah, it worked out. I always refer back to this picture from my first team event at Rockstar. Rock climbing. Yeah.

Nick  

We have one of those on the wall, I think yeah, we do. We do. We do. Oh, the rock climbing gym,

Erwin  

the rock climbing gym, repelling, but

Nick  

the rock climbing gym was we built a pyramid. Yeah, he wouldn’t pyramid. Yeah. Because we’re the team was small enough to do it. Yeah. Did we fall on each other? At the end of it? I

Erwin  

think we did. Okay, I think we couldn’t get the person at the very top. Okay, that’s sketchy. It got sketchy. But yeah, you know, I think that picture is a great analogy for my career at Roxxor. Because my knee is in Toms lower back. Pain is back. I was smart, though. Because I’m like, I looked at everyone around like, people are pretty fit. And I don’t want to be on the bottom row. So I was on the second one, the bottom row.

Nick  

It’s funny, we still get some people that were that have been with us since then. They’re like, man, you know, was so nice when it was just really small team stuff. And, and I agree, you know, there is something to be said for that. It was nice, right? But it’s nice now as well in a different way. But yeah, so depending on who you are as a person and what you’re like, you know, might be better or worse, depending on but, you know, we’re still a pretty close knit group. For the most part, we’re fortunate in that way. Which has been, which has been nice. As part of the process. I feel like, you know, from the outside, maybe the people working with us Don’t you know, won’t see it the same way. I don’t know what you think. But we’ve tried our best to keep make it feel like a more of a, you know, a real team, liquid of a family versus just like a bunch of faces and people coming and going.

Erwin  

Yeah, a true team, family culture versus people slap those terms on anything. Yeah, obviously, it’s harder for like, 1000 person organisation. But something that I’ve always admired about you in in Tom was that you were always not afraid to scale up. But you did as controlled as you wanted. And also, for example, like, you could have had multiple franchises outside of the office, but you chose not. Yeah. So it should have been a lot bigger, but you chose not to.

Nick  

Yeah, I mean, there’s something there’s a good aspect to that for sure. Right. We’ve have we left opportunity on the table. Yeah, for sure. We’ve been asked open franchises in different parts of Canada and things like that. But part of that would require management of those. And with young kids at home, now the kids have gotten a little bit older. But with young kids at home, we want to make sure we had time for the family. And we had already been travelling a lot to different conferences for to just enhance, you know, our own skills and marketing or investing whatever it might be, but to then manage things in different time zones and different areas. I don’t know if we wanted to take away from our personal lives in that in that capacity. And we’ve got we know, we gave up some opportunities for that, but think we’re comfortable with it. You know, the the flip side of that, too, is yeah, we give some opportunities, but we’ve saved ourselves a lot of stress, because at the same time, we would have had to find people to operate those for us. And it’s really not easy to find. Well, I mean, you and Sherry are both business owners. You guys get this like to find good people. It’s not easy. And you know, very often in real estate or in other professions where there’s a big financial incentive on a sale insurance comes to mind about picking on insurance people, but I know for some life insurance policies, there’s a hefty commission to be paid on depending on the size of the policy, right. So sometimes those incentives will cause people to force a sale where there might not be a sale to be made there. And I know You know, everyone’s heard the stereotypical horror stories about realtors. But you know, some people in real estate and again, other professions will chase Commission’s and we would never want someone under our name chasing a commission, anyone that’s part of the company it would bring all of us down because that’s not how we operate. And I guess that would be a concern for us, you know, so you always got to find good people. And I know you like over time, you know, how many times have you talked to investor out of buying a property because you felt that you could find them something better? Right? So this, but there’s a lot of people that be like, Oh, you want this one? Okay, no problem. Let’s bring up the offer. They just, they’re they’re chasing that commission, versus saying, Hey, okay, like, I know, this one seems good. I know, you’re interested in Oh, that’s cool. Let’s like back up for a minute, let’s not buy this one, I can get you something better. And you’re putting your word and your effort on the line to do it for them. And I think that, you know, that makes a difference. And it’s what’s allowed you to build your business certain way into to have have your client base around you for so long and loyalty because you kind of watch out for them. So it’s a similar principles that way, I think if you remember

Erwin  

Margaret, longtime Rockstar member Yeah, I exactly that we’re looking at properties, or I’m gonna ask her Yeah, and you know, like, there’s a lot of properties that Okasha our dog’s breakfast. Yeah. But for someone who’s new to that market, they don’t know. For example, my original portfolio. You know, I had a house that was built in like, 9018 80s. Yeah, right. So the foundation was logs. That literally law really,

Nick  

I haven’t actually seen that before ours, we have one that stone, it’s like crushed stone all put together, but not locks.

Erwin  

I had logged, every time it rained water went to the basement, and therefore anyway, my point was that I didn’t have much context what a good deal look like. Yeah. So for example, once I became went to join Rockstar, I would, before I was working with clients, I’d go once a week to go look at everything that fit my client’s profile. Right? And so like, for example, once someone sees 100 houses, now you kind of know what the top 20% looks like. Yeah, you get it? Yeah, you get it. Right. And so like, like, That’s my strategy. I want to own a top 20% property rent to the top 20% of tenants. So exactly with Margaret, I have exactly that conversation, like, would she be interested in a property like, No, we can do better. Like 20 problems, veterans are small, incited, a lot of houses are cited, there’s hiding problems, right. So I wanted something more, you know, less old, their home construction. So like, at least three times out two or three times? I was like, No, we can do better.

Nick  

Yeah. Yeah, we learned that the hard way. One of our early properties that Tom and I bought was McMaster and we just looked at the numbers. And the numbers looked good. Remember the 1%? Rule? Yeah, time when that was like a rule that hey, you know, you’re a student? Yeah, for sure. So the numbers looked good. And we’re like, oh, we should proceed with this property, not taking into account a lot of these other factors. Or once these tenants left, what it would have taken to get it up to par with the other properties in the area to maintain though that revenue stream and things like that. And yeah, she’s an early lesson for us, like we were blinded by the numbers. This was literally, I think, our second or third property. So it was very, very early. And we were, you know, so focused on the numbers that we just didn’t take other things into account. And I mean, we own that property. Until today, still, so it’s worked out very well for us. But at the time, we just feel like, oh, we overpaid for that property, we could have got a better property for the same same amount of money. But you know, we made it work. But it’s an early lesson, right? And remember the year the year that we bought it? Yeah, I would have been if it’s probably about 20 years ago, something like that. Yeah, I don’t know exactly how long we’ve

Erwin  

had it pretty much paid for roughly yet

Nick  

to want to say 250. I don’t think it was two, three, I think we ended up paying 250. And we should have paid probably 220 or 234. And it’s, you know, knowing what I know now. And that lesson that we learned we needed, we should have paid a little bit less for it. But yeah, it might have been 250 or 230. But the guy that we bought it from get this, he had owned it for a number of years, a decent amount of time, I forget how long but he had only ever put an interest only mortgage on it. So he had bought it for I think it was like 50 or 60,000 bucks. And he had only ever put an interest only mortgage and renting all this time. And then he cashed out. That was his that was his process. So it sounds funny, but it went up. It must have been more 50 grand because we pay 250 Because what we laughed about it saying over 60 grand and we paid almost 250 Because we said okay, so if his multiple went up four times, or roughly four times in this amount of time, we were joking, we were calling it the million dollar student rental. So this property’s gonna be where it could be worth a million dollars one day like we know it sounds ridiculous, but with what was happening with, you know, with what’s happening with rates and the financial system and money printing, they’re gonna inflate things away. This could be a million dollar property. We kind of all laughed about it. We were talking about in a team meetings. I remember back in when we were in the Burlington office, we would be laughing about the million dollar student rental. That property is not worth a million dollars today. But it’s not that far off. And if the last tenants have been there for a number of years now, because always a couple stay. And so we can’t raise the rents back to market because they’re always one or two this thing because we just don’t usually rent. We don’t raise. I know you can’t raise much. We don’t even raise our student properties if they stay because they’re only usually there for two or three years, but they keep backfilling with people. It’s easier for us but Then we haven’t raised the rents again. So I’m gonna want to be worth today. But it’s not quite a million, but we’re on our way there, like the joke that we made all those years ago is actually coming to fruition now.

Erwin  

How much do you understand about economics 20 years ago, like money printing and not much debt that the government goes into?

Nick  

Yeah. 2008 is when when we got serious about that, right? Because after the financial crisis, we looked around, and we said, What the heck just happened? What’s going on? And why do we have like no idea how this stuff works. And that’s when we got serious about trying to understand that financial system, it was weird when that financial crisis hit in the fall, we were in the US at a mastermind meeting. And Americans up to that point, whenever we’re in this part of this group, they’re very aggressive, you know, with their moves in real estate at that time, they were just, you know, everyone was just almost all in huge portfolio. Yeah. Like, they were very, almost, they were all brash, I mean that in a bad way, but they were just like, very confident, very just outgoing. Like, yeah, we’re gonna crush this, like, you know, it was nothing to stop them. There was no no barriers for them. Good. Lord. That sounds familiar. And then And then yeah, when that financial crisis hit, we were at this meeting, and I’ll never forget what what went down that one morning, I was like, Did you see what happened? You see what happened? And it’s just like, you’re in their faces. And we’re just like, what, what’s going on here right now, you know, so and that that was the start of of all that stuff. So that’s when we got serious that we had to try it out a little bit, understand this, and, you know, kind of go deep because it was starting to really impact our everyday lives. And we’re like, if this impacts our everyday lives and everything we do, why do we not understand it at all? So that’s when we saw 2008 was when we really got into it

Erwin  

for the listeners benefit. What happened to your associates in the US, who had large portfolio built up a large portfolios in the run up to 2000, rather

Nick  

than walk to had to walk away from them? Yeah, a lot of them have to walk away from they were they were very, very highly leveraged, no focus on cash flow. Oh, yeah, wholly focused on on appreciation and just acquisition as much as possible that put them in some bad situations, we do know some, some people that started to do some what they call strategic defaults. So they would, they would even hold on to the property for a period of time at that time, because they knew the bank was going to take a while to come and foreclose on them. So they weren’t paying the bank, but they were collecting rent. So they were using that as a stream of income. And then they were walking away from the property afterwards, when the bank came to foreclose on them finally, so because they were just like, we’re finished anyway. So this is what they’re going to do. And then they’ve, you know, they’ve since I mean, one guy that comes to mind, particularly since rebuilt, his portfolio changed a little bit, definitely focused on income and cash flow versus just kind of acquisition and appreciation and, you know, has looked back and been like, wow, I really kind of didn’t see didn’t understand what I was doing before. Now, I’m really kind of, you know, got a narrow focus on what I’m trying to build. So it’s changed for them. But I think it woke a lot of people up there was a lot of a lot of them went through some turbulence there for sure. dark times is probably a better term. Yeah, I don’t want to say turbulent, dark times better than turbulence. That was rough for them, for

Erwin  

sure. Because even the mutual friends of ours like they had I know, we’ve been Florida, they had like, 100 property portfolio in Florida, during 2008. Like the investment, really unhappy.

Nick  

Yeah. Because the you know, when there’s no income associated with it at all, and you’re not taking that into account, it gets really tough. What was interesting that happened on the flip side is some of even the heart the hardest hit places, rents almost didn’t move. Even as as property prices came down, you know, a lot in some areas, rents almost didn’t move. And in fact, even though they might have adjusted downward slightly, initially, they then ended up turning upwards, because from the amount of people lose their homes, they needed rentals afterwards. So the demand for rentals increased. So anyone that bought with, you know, certain kind of fundamentals in mind actually didn’t end up doing too poorly through that they were able to hold on to their assets and continue forward. So that’s, that was interesting to me. And it’s something that it’s a lesson that I’ve always taken back to our area, because we’re in a rent controlled area. So we don’t have rent control, we because of our rent controls, our rents are held artificially low, right? Overall, I know when you when people move out, they can we can put it to market rents, but overall, as a rental market as a whole, because we have some people that are well under market rents, there’s downward pressure on our rental amounts. And we’ve seen this at least in the past as well, that the rental market has held strong, even during times when things have kind of not looked good for the real estate market. So COVID is a good example, people were still paying the rent because that was one of the first things they had to pay rent, actually, the percentage of rent increases for a lot of REITs actually increased for the rent payments. So it’s something that we look at and we’re like, Yeah, I think that if that lesson holds true and I don’t know if it ever would or not, but if history is an example and using them as an example that it’s good to know that if you buy a property now and you can rent it out for X number of dollars, the chances that you can rent it out for X amount of dollars in the future is very, very, very strong. And you know, that might be your worst case scenario for the income they can generate. You know, and there’s other variables to that for sure. But But it’s good to know that you know, if you believe that and then you can basic calculations of that.

Erwin  

So having like, personally, even though it wasn’t your own portfolios getting decimated in the US in 2008, like you kind of lived it, you kind of live vicariously through others to go through that.

Nick  

Yeah, but we, from afar, we were sheltered. Yeah,

Erwin  

I know, that’s kind of where I’m trying to go to is that you had property, you own property in 1008. And you had clients, what was that? Like? What was your experience? Like? is back here in the GTA?

Nick  

Yeah, well, our clients at that time, many of them were able to pick up their property legally, in hindsight. Now, looking back what they were doing at that time, they were, they were taking advantage of the opportunity to be able to negotiate with builders even and ask for extra things they weren’t getting before or negotiate different deals or better terms on deals. So they were using that to their advantage. But the majority of our clients and the investments that we do, there are long term. So that was then an opportunity for people that had a certain timeframe of investing. Whereas I find when the market really starts to overheat or get get really hot, or it’s just real estate’s talk spoken about everywhere, the short term prices or whatever and focuses on but that wasn’t the focus for anyone. So it was it turned into a really good opportunity for them, because they weren’t worried about if they bought in February, they weren’t worried about what the property was going to be worth in May, they were worried about what the property was going to be worth, or what the numbers would look like, in three, five or 10 years from now. And that’s what interested to them. And that’s why they were what they were buying the property. So I think it was just a different a different mindset for the majority of people that we work with, whenever there’s a little bit of question marks or fear in the market. There’s also a segment of people also that are just like, I’m going to hold off, and they put their hands in their pockets. And they’re like, I’m just gonna wait and see what happens. And that’s fine, too, which is two different approaches.

Erwin  

So I’ve been talking about how, because of what the work I do, I speak to people from all different schools of thought around real estate investing, for example. And I think that, for example, I like rock stars a first place that explained to me why gold was a good term investment but savings plan. I don’t know what the right term for it is to explain the hardness and heartless for gold, and also the business case, why it made sense to hold some hard assets. And then if you believe in gold, you shouldn’t theory believe in owning real estate. But I think a lot that was actually a lot of groups don’t discuss that at all. So where I’m trying to go to is that also, yes, you and Tom do a heck of a lot of research into economic like governments sort of what central bank policies are, how bad they are, you mean how bad they are? Like, like the thing was Tom that first that first mentioned, like, what the next currency might be like, holy shit, where am I? But you guys very much behave like you have fiduciary duty to your 1000 Plus client numbers.

Nick  

Right? Yeah, real estate has always been a means to an end for us. So it’s never

Erwin  

we don’t enjoy just a home. We don’t love being a landlord.

Nick  

Yes, but look, I have a friend that he wakes up every day. And he goes on the Toronto real estate board and we’ll look at listings, like immediately. He’s like, Yeah, hey, laundry, my coffee the morning. I’m just looking at listings. Like he just he loves it. He loves it. This was even but he recently got his licence. This was before he got his licence, you know, he would he would be on just to put the public websites where you can get access some sold data with new listings, and he’d be all over it. I’m like, it’s just, he just loves it that way. That’s never nothing’s really spoken to me that way to where I want to do that every morning all the time. But it’s up to you. Yeah. Yeah, yeah. But you I slowly got to drag my butt to the gym. I’m happy once I get there. But somewhere in the middle of the winter, man, I’m driving to the gym and it’s cold and it’s dark. And like, why am I doing this this time in the morning again, and I’m so

Erwin  

happy hour type of gym time. So

Nick  

once I get there, I’m happy for them and watching the

Erwin  

YouTube like we do folks about YouTube. You’ll see Oh, Nick looks like he enjoys going

Nick  

to the gym six days a week. I love it. I love that five year. Yeah, no anymore. I will do a little bit later. Because what happened is that that 6am class got so full that I don’t do the class right to my own stuff. So I kind of get into 630 to start doing a little bit warm up to about seven and I start working on that. So I do sleep in later now.

Erwin  

But back to like your friend is passionate like crazy.

Nick  

Yeah, so real. estate’s always been a means to an end, right? So like our whole thing, which you know, right? But our whole thing is the reason it’s called Rockstar with mistakes people when we started the electrical would call their company name, Rockstar, you know, like some other real estate companies were like, well, I don’t know if you know the history of your name. But that doesn’t make sense to us. The history of our name so you understand it is just that it’s we believe you invest in real estate to live your life on your terms of record your rockstar life and that is whatever it is you want it we want to do. And so that’s the means to an end is for some flexibility, some freedom, some freedom of choice, financially, whatever it is, is to live life on your terms. And because of that, we feel that there’s more to that than just real estate. Now real estate has played a very effective part in that for us and many people that we’ve worked with, it’s played a very important role. So I’m definitely biassed towards real estate because of that, but we feel that real estate does an OP rate in a vacuum, there’s all these other factors that impact it now, right now is a great example like the interest rate rises that we’re seeing. That’s a really great example of something that impacts us. And it’s a great example of something that impacted us for the last 10 1215 years or so, when rates went super low, it was fuel onto the fire of real estate, and people that own properties, or assets, in general really benefit from those low rates. Now, we’re in this contraction phase. And then, you know, we see what happens in the future, but we have to understand that type of stuff. So no different than when we’re talking about central banks, and the financial policies and their fiscal policies, is that when you understand what’s happening with the value of our currency, or our purchasing power, and I know, you know, this, but I mean, you just realise you’re like, you know, is it really the price of real estate that’s going up the way it is? Or is it the value of your dollar that’s going down. And when you think about any sort of understanding that you’re like, you know what, the real estate’s not really going up the real estate, the real estate, it’s actually the value of your dollars going down. A great analogy to Tom use one of his newsletters that he wrote, He took our parents house and our parents house, they bought it for just under 100,000 bucks, we call it 100,000 bucks, right? And they bought that now, probably about 40 years ago or so, say put the $100,000 on the front lot. In $100 bills put 100 grand there, they have the property. That was 40 years ago, you could fast forward to today, that property now they haven’t done too much work to it as a lot of some of its original, but they have a new kitchen some stuff, right? But they you know, there’s a pool, so you know, four bedroom, home and Mississauga. So that property is worth about 1.5 or something called, you know, somewhere in that range. Who knows, we have the $100,000 on the lawn still. And we have the property over the last 40 years, what changed, the property didn’t change. It’s the value of that $100,000 of real change. That’s why it’s worth $1.5 million. Right? And when you start understanding that type of thing. It’s just like, holy crap, this changes the equation. And that’s why there’s a lot of people that invest in real estate theory and understand the problem. Yeah, it’s a defensive move for them. Now you understand the problem? Now go find a solution. Yeah, but they shouldn’t have to because we have this crappy currency. So if you have 100, shouldn’t have to, but we have. Exactly, it’s defensive, because otherwise you get robbed of your purchasing power. Right? It’s this weird dynamic that happens. But so anyway, once we started to understand that we felt it was very important, and we’re like, we need to share this with people. So they have an understanding of what’s happening. So that’s why we went down that path and when we understood it, and that’s why we share that stuff. Because people might disagree, maybe it’s not important to them, and they might be 100%. Right, we will be way off. But for us, it’s very important. And that’s why we share it because we think it’s part of a bigger picture,

Erwin  

right? Again, I don’t think most people know this problem. If everything and understand this problem. There’ll be more protests, they’re gonna be pissed.

Nick  

It’s not spoken about, you know, can they tell us like, I mean, their official inflation rates, you know, up until recently is hovered around 2%. But that mean, that’s not the case. It’s not the case. If you look, if you look at the things very simple, well look at your Cassville like anything, I’m gonna take it just take away the last 12 months, or 15 months, when inflation started going up, take those ones away. And take the years that you’ve been told inflation is roughly hovers around two to two and a half percent, maybe dips below two, a little bit of your expenses only gone up 2% a year. Let’s know it now. It hasn’t happened. We took the average Toronto real estate price, we went back to 19. I think it’s 1969. And Kyle in the office, grab these numbers. And this was up until September 2022. So about a year ago. So since then, the property prices probably went down a little bit and probably have come back. So we’ll probably have pretty close price levels. So they’re pretty accurate. But anyways, it’s not gonna be skewed much anyways. Because going back to 69, the average price is I believe it’s 7.06% is the average yearly increase. I should go look at it again. But it’s just it’s about 7% So inflation they’re saying is 2% but houses are going up 7% Right? Do you think the cost of oil I don’t have all the numbers in front of you, but I’m telling you like, the things that you really want in life haven’t gone up 2% A year that’s not the way these things I’ve worked

Erwin  

cars I’m gonna like that cell phones. Laptops, well, the equation they

Nick  

used you know, they use this remove replacement equation. So to do it so like so if they were using a T bone steak as an example or any steak isn’t say well, you know, we have for groceries, we have to include some protein sources. So we’ll include the state well, once the steak gets too expensive direct Well, the steaks expensive now, so we don’t need to include the steak anymore in our calculation of what it costs. We’re going to replace the state with protein so we’ll just make it hamburger. Right so now it’s now it’s a hamburger.

Erwin  

Well, it’s still beef. Well, yeah, but not steak. It’s

Nick  

good because two different things. So now what like what’s next, you know, isn’t hotdogs next? Because I mean, are those beef or beef hot dogs? Are the beef though? I don’t actually know all beef hot dogs. I say they are but I don’t know if they you know, they don’t have a cow. They don’t look like beef to me when I look at them. But yeah, you know, so that’s the type of thing that happens and it just

Erwin  

but this is what you do if trying to manipulate inflation numbers. Yeah. Now,

Nick  

if you understand that you’re like, okay, okay, so that’s the game. So now we understand the rules of the game. So if we understand the rules, we’re playing this game It’s very unlikely we’re going to be able to change the rules in short time ourselves or whatever the case may be. Right?

Erwin  

We don’t have enough votes, we always been failing so

Nick  

well, and you know, I mean, our leaders don’t think about models like monetary policy, they come on, say that like when? Right? Yeah, so they’re not going to go downtown, right. But anyway, so, but you understand the rules of the game. So then play within those rules, like, are you playing the game to win or not, because if you’re playing the game to win, well, then you got to play within those rules, and you got to exceed that, at least play to defend yourself. Totally. If we call real inflation, I’m just gonna say 5%. Just, you know, just for a simple number. If over the last 10 years, inflation has been 5%, that means if you’re not earning 5%, on your money, you fall behind, so and everyone that earns a 10% yield, which think is like 10%, as decent investment return for that people look for right? So especially when it is low interest rate environment. So 10%, you think you’re doing well, but if 5% of that is inflation, your real returns only 5%. So your hurdle rate is 5%, for everything you do? And if the inflation number was higher, you know, where do you go. So I don’t know that stuff becomes super important. And I think if you it doesn’t have to make the decision for you. But I feel really strongly that it should be taken into account with whatever financial decisions you’re making, because it’s not going away. It’s there. And we got to do something about

Erwin  

1. I’m always looking for, like, how to take advantage of information. So for example, if real inflation is 5%, and for the longest time, we were able to borrow at two or 3%. That’s as bad. That just makes it makes sense. Yeah, to play the game of borrowing for cheap. And trying to make better returns.

Nick  

Yeah, until rates go up until rates go up. Right, that’s the downside. So you’re right one on 100%. Because they need negative rates to inflate away the debt. So negative real rates, which means that if inflation is five, and the boring cost is 2%, you take the two you minus five, you’re negative 3%. So that’s negative real rates. So you can arbitrage that. And that makes sense. But at the same time, when that flips like it has right now, carrying costs going up, you do need capital, you need enough liquid capital to get you through these times. Because if you over leverage, you’re in a bad situation.

Erwin  

Right? Which leads to something I was discussing before we were recording is, I feel I can be impartial on things. Like I observe many investors, like rock star members, or my own clients or rock star clients. Is it fair? Extremely well, in this downturn? Yeah. Overall,

Nick  

I mean, I mean, I don’t like the cashflow numbers have been really squeezed for some people. And it’s been harder for some people to carry the properties for sure. It’s hit them. But overall, it seems to have worked out quite well. I think one of the things is that there was different people to different things. But overall, overall, there was never a focus on any get rich, quick type strategies. And if you’re investing for, you know, that kind of principles, you’re taking some kind of core principles or fundamentals into account when you’re investing, it makes it easier to ride through some of these ways. Does it make it easy? No, I’m not saying makes it easy, because there’s some people that have, you know, a few properties, interest rates have spiked up variable rate mortgages with a bank that has adjust adjusting their payments, and their cash flow squeeze or their negative now where they were 1000s Positive before. So there you have to ride through these times. But it’d be far far cry if they didn’t have that cash flow early on. And they were just investing for appreciation or already negative thinking that real estate prices only go straight up and only go straight up forever. And then they’re in a much different situation. It also helps when you have assets that are relatively easy to liquidate, if you need to cash out. And we’re seeing some investors do that. They’re like, hey, look, the portfolio overall is doing pretty good. I just want some breathing room. So I’m going to take one of these properties, we’re going to cash this one out, gives me a little bit of profit, maybe that one was my least performing for a monthly cash flow standpoint. So it eases the burden there a little bit I can cash out some profit and I’m in a good spot. So received some investors that will just unload like a part of the portfolio usually it’s really just one property and then it gives them some breathing room so that they’re in a comfortable spot again, but I think that’s been the difference like it’s the quality of the asset matters. Yeah, some people like when the market of last few years was just kind of jumping you see people get into it investors and just regular homebuyers. They get FOMO and they’re just buying anything you know people will walk into a new home sales office and be like well here’s how many condos you got here give me three of these condos what are the closing I don’t know how we’re going to finance them I don’t know but are you just give me three because the price will go up I’ll flip them or something I’ll figure it out that and then they’re just in a bad situation after right it’s not uncommon

Erwin  

they’re probably in a lot of hurt right now.

Nick  

Yeah, well that whole market yeah, there’s there’s gonna be some pain I think there’s just challenges to close on properties like someone people are having problems with that right. also doesn’t help that some people are fed that like a guaranteed profit source. Well, I mean, the you know what happens? Right? So

Erwin  

it just never made sense to me buy a pre construction condo when I can buy the exact same thing used and pay a lot less. Never made sense to me. Yeah, unless that building exactly what you wanted no location. You want to 10 out of 10? Everything is up to you to pay for

Nick  

Yeah, but the difference is people always think it’s we joke that it’s like it’d be easier to sell people the magic code on the remote control that you can push into have money spinning on your TV than it is to, you know, teach them properly principle Based Investing, say this is like, this is the type of principle based stuff that’s worked for decades and decades, right? This is kind of like a path to follow. Yeah, there’s some work, there’s going to be work involved, there’s going to be some ups and downs to it. 100%, you know, but it’s, it’s believable, and it works, versus the remote control secret code doesn’t work. And it’s almost not believable. But I’m telling you, people will buy that, because that’s what they’re looking for. Everyone wants the easy button. They want the easy money, so they can get easily blinded by that message if they meet someone that they feel that they can trust that gives them that message. We’ve seen people do some really interesting things.

Erwin  

I know there’s lots of condo specialist investors who you know, have massive teams that this sell hundreds of condo is probably 30 condos or when the weekend whatnot. So I actually think there might be a glut of condo supply coming on the market

Nick  

thinks there’s going to be some challenges in closing, we’ll see how it gets absorbed. But yeah, there’s definitely that potential for sure. Yeah, I’m curious to see what happens

Erwin  

here. Like we have no skin in the game.

Nick  

I joke with everyone in my dorm was to account because I missed out on that Toronto condo boom for 10 years, 10 or 12 years that

Erwin  

existed, Madame trying to focus on cash flow. I know. I was so

Nick  

jaded. Like when I was young and Mississauga, they were growing, that’s when the square one area. While I mean, they’re they’re pumping buildings up there again. But initially, they had,

Erwin  

they have built a bunch of crazy, you have to keep pumping them out. So but

Nick  

that time when the market turned in the early 90s, there they some people that my family knew that own condos there, those prices didn’t rebound for a long, long time. And they weren’t in a good spot because of it. And I’ve just always been slightly jaded by condos, for whatever reason, I’m like, if the market turns, they get hit the hardest, usually the fastest, because you have the same unit as everyone else. So you know, it’s the same, you know, I mean, you can do small changes to it, but it’s just different floors is the primary differential. And so I’ve just always liked things that I control a little bit more. So if that’s why I’ve always kind of move towards that single family market on land on that, yeah, for sure. I didn’t, we didn’t see it at the time. But over time, it started to become very clear to us that buying these single family lots is kind of like a little bit of land grab now. No, because it’s a lot harder to get into grabbing land than it was 20 3040 years ago, because of the prices. When we had people coming here I remember I grew up in the Mississauga area. So a lot of European immigrants were coming in, and some of them ended up going up to these smaller areas at the time. So out to you know, the Georgetown, Milton, north of Milton or whatever. And they were buying land and they were kind of holding on to that land, because because they code at the time and it worked extremely well for them. Because now they’re developing on that land, things like that. So to buy those plots of land now is not nearly as easy a lot of institutional money, that’s, that’s buying that stuff up. So individual investors a lot of a way to land grab is that single family building lot because you can take a single family put the second suite in it, put the garden suite on it, all of a sudden, you’re now able to just increase the value of that thing. So we’re seeing kind of more of that. And then also like the single family. One thing that always stuck out with me is you know this, I don’t know if everyone knows this, but our family and was lost, like everything in that real estate crash in the kind of late 80s, early 90s. Our dad was flipping paper, he was literally getting a property out of the trailer theatre of these big fancy sales offices that they were selling the properties in like a trailer, and he was getting the contract and flipping in the parking lot. And he got stuck with the placement cyberwar, that container was the starter home. And at that time, it was a big luxury home in that area. And you got stuck with it for a long time couldn’t rent it out conventional for cash flow. Basically, the stress from that I think definitely contributed to our parents divorce, like it created a lot of a lot of problems with the family financially as well. It’s always stuck with us because we always thought that if we wanted assets, that would be important to have assets in real estate that are as liquid as possible. And in the starter home category, it doesn’t matter what the market if the market is super hot, if it’s cold, if it’s really expensive, it’s really cheap, whatever that entry level is in that market, that’s where the most amount of transactions are always happening. So it’s the the most people are looking to get in if you’re looking to get out. So it’s just the more illiquid market. So if I have an asset, if I’m building an asset base, just like the gold here, we’re talking about, there’s a demand for people to buy gold. I don’t want to build an asset base of glass balls because no one wants to buy my glass ball because they’re everywhere but I just know that if I if I have a liquid asset that people want in different markets, then that’s generally the ones that I want all so that’s why we’ve kind of always stuck with that market and gone down that path or it’s appealed to me a little bit more but at the same time like you said you missed on Macondo you’re crazy into I’ve missed out on it too. So take it with a grain of salt but I benefited from this one so you can have everything I’m okay with it.

Erwin  

Yeah, I’m okay yeah, okay. Yeah. So still still single family home. That’s the basis of your what you think investors should be going going forward? Because for example it before recording I know you don’t Keep tabs on social media when other people are promoting whatnot. But for example that’s probably why you’re mentally healthier than I am. I have more hair than I do. The more hair, I’m sure you guys have never really gone after any fad. Like, for example, apartment buildings are a really big fad right now. Airbnb, massive fad. Like Are any of these announcing their bad investments? I love staying Airbnb ease, or any of these you think core investments that you yourself would do or recommend to clients?

Nick  

Like I would 100%. You know, if I get the right property, what I do is on some short or medium term rental, yeah, probably we have that place up in Collingwood that we’ve got recently still got a big pile of dirt in the backyard, and there’s no grass or anything. So we couldn’t even really short term. I mean, we could short term renting, but it’s not very appealing, since he like just stay inside and don’t leave, because there’s dirt and mud everywhere. But we’ll be looking to do some midterm rental for that type of thing. During a season when we’re gone. Like the summer, we’re in Europe for a chunk of the summer, we’re not going to be here to use it when we look at that maybe we would. So I’m not opposed to it. But ultimately, to me, it’s the asset that matters the most. So I would look at the asset first. And then I would look at what strategy I can apply to that asset to make it successful. Whereas I think sometimes investors are looking to get into the market and they’re like, Well, I want to do Airbnb. So I’m just gonna go find a property that I can fit into that mould. And that’s great, that’s not a bad way to do it either. I just feel that if I get a good asset in a good place, then I can apply multiple different strategies to it. And that’s generally what I like with investing. So if you look at the solo, take one of the properties by the mountain Hamilton close to Mohawk, well, there’s a hospital up there. So you can rent it, you can rent it to some hospital stuff, right? So there’s, there’s always demand for that there’s a student, others Mohawk up there, so you can rent to the students that way, right now, it’s actually was a rent to own initially, then it turned into student property. Now it’s a long term rental, we’ve already used three different strategies on this property. You know, there’s we’re probably for that particular one, we’re not gonna use Airbnb, just location stuff, I don’t need to but I want the property first, I want the asset. And then I’ll look at strategy. So I think that’s really what’s appealed to us most. And maybe that’s why we’ve stayed in in that lane. And we’ve just never had a need to go and start using these other strategies. But if we had bought, decided to invest some vacation properties on lakes in the courses, well, obviously we’re gonna look at Airbnb as a much different strategy versus a long term rental, right, just because of the income that we can generate from it. So I’m not against that. You mentioned fads, you know, I’m not against them at all. It’s just, we’ve just had no need for them. But I still believe in the asset first is most important if I’m going to have to pay this thing off somehow. So if I’m boring to own it, and I’m going to rent it out, I want to make sure it’s the best possible asset that I can have that I have the most flexibility with.

Erwin  

Speaking of property first, when I first joined Rockstar, rent to own property first strategy was a massive strategy. And again, because you ignored everybody else, there’s a whole bunch of people saying, oh, tenant versus the beta go, yeah. And I think like a market like now is an example of why tenant firsts, for example of a tenant chose a property in a small market Ontario. And they left and now you’re dealing with a no,

Nick  

yeah, but I mean, see, I think, you know, as well as I do, like, there were some numbers were being thrown around early that the buyout rates on tenant first are very high and things like that. And I don’t know that that will ever came to fruition. I mean, I know what people told me, but then I also know this that realities, I was told a later time, that was never the case. And many people were left holding the bag on property.

Erwin  

Yeah, yeah. Well, the landlord, the tenant bailed exactly, they’re

Nick  

full of properties they didn’t want. So it’s the same thing. Like, you know, when we did that, we call them home hunters. You know, at the time, we did some of that it was a definitely a small fraction of versus the property first ones we did. But even when we did that, we told the tenant that we had to find a property that also fit the mould for the investor. And we couldn’t buy certain properties. But it goes back to what people are promised people were promised a solid return turnkey, no, you don’t have to do anything. You just buy this thing, you sit there, and they’re gonna buy it from you, and here’s all your return. And it becomes very appealing to people. Right? But then when they looked into it, or they got into a net, and lived through it, they’re like, oh, there’s a lot more to this than what we were told. Right? And I mean, I’m sure we’re not perfect for trying to explain all the ins and outs of investing but as best as possible through other classes and stuff, we try to give a real life situations like you know, here’s kind of what’s involved in it. It’s not buy a property, put someone in there, just sit on your couch and do nothing. Even if you have management even if you have a commercial properties with managers in place, you still need to manage those managers. You know, before we started where I was talking to you about the guy we know with 500,000 square feet commercial in Burlington, yeah, he’s gonna manage those properties. He’s looking for tenants, sometimes they have to do work, you know, upgrades to the properties. They’ll even have it not just for the tenants that are going in on new leases, but the common areas and things like that because when ticket To attract tenants, you got to make those things nice. So even that type of portfolio where you can look at him, him as like a full time investor, because really that is the business just owning and renting real estate. That is there’s work to be done, you know, so there is some effort to maintain all these properties. But it works out

Erwin  

just from knowing so many business owners, even though it does, it’s not completely passive, it takes some work. It’s been incredibly profitable, oh my God, because again, like, I know, lots of entrepreneurs, no different than yourself, you and Tom, you have to put in blood, sweat, and tears, yeah, seven days a week, how many hours you have to put into manage a portfolio,

Nick  

the number is so small, I don’t want to, I don’t even know. It’s once it’s up and running. And then there’s managers in place and the systems are in place. It’s a small number. But there are times that you’re doing some stuff that you don’t want to be doing like this sucks. And it’s like, you can let the emotions get the better of you. But I did do a one time it was the same property by chance it was the same property. The one by Mac that I mentioned earlier, I was sitting in that basement sucking up water, I had the vacuum between the bottom of the stairs and the laminate that was butted up against it because you know, there’s like a little seam there. So I could suck up the water there was underneath the laminate, I was just sitting there, I think dump out like, I don’t know, it’s probably like 10 buckets of a little a little wet vac. So I was going up and down sitting there running it. And I was like, am I sitting here on a Sunday afternoon, I just want to I was about to barbecue steak house, I just want to have that steak go home, you know, but while I was sitting there, I started doing math in my head about okay, what is this property worth? How much income is brought in? How many hours have really spent here. And I forget the numbers that I was running through my head. But at that time, I was like, holy cow. This is some of the most profitable time that I can be doing. Right? So I’m like, okay, I’d like I’m not so bad. So just sitting here holding this vacuum down here and walking up the stairs every now and again. You know, and I mean, usually it was Sunday afternoon. So I went down to handle that. But even during most things at that time, someone else can handle that stuff for you. Right. But it is it has been incredibly profitable. I’ve never looked at it on an hourly basis of for exactly that number. But on hourly basis, there’s it’s been quite profitable. Yeah.

Erwin  

Is there ever there was a period this before the pandemic where your typical house in Hamilton like was going up between $2,700 a month to $3,600 a month. So if that vacuuming costs you two hours, four hours, yeah, even at $2,700 an hour. Now I just buried myself because I’m not good at math. But that’s over $6 an hour. It’s not so bad.

Nick  

But it’s the emotional side. It’s the emotions, you’re feeling right at that moment. And that’s where it’s tough for investors, because you have to handle that emotional rollercoaster. Because the calls, there’s never a good time for a tenant to call you and say, Hey, like, you know, I just need this, this and this, you know, when do you ever want that call, you never want it? Right? But at the end of the day, it’s like such a minor issue. But if it comes at the wrong time, sometimes you can feel it’s a big issue. But that’s where systems and your systems guy, you get it. I mean, it’s all you know, you put the right systems in place, and things get handled. And it’s not, it’s not a big deal.

Erwin  

Also, the other way to just simply spin it like sucks. I’m gonna get called by a tenant. But thank God, I have tenants here new rent.

Nick  

Look, there’s no something to this day that I still like one thing from investing that I really kind of enjoy is when whenever I sign a new lease, and I’m just I’m driving home, and I’m just like, you know, I just feels good, because I just feel like, that’s just an income stream that I solidified for my family, whatever it is, oh my God, that’s, that’s pretty good. Like, that feels good. Sometimes during stream rental season, if you feel two or three properties in a day, which it has never really been hard to do. Now, during these days. It’s really not hard to do, right. But there’s been times when you know, if each one is bringing in, what’s that 40 to $50,000 a year call it or at least at that time, some of the ring and far more now. But that’s what if you just feel two or three or 100 $150,000 in income that you just kind of shored up for the year and that day, you’re like, Wow, that’s a pretty good feeling any salesperson be happy with that day? Yeah. And there’s expenses associated with that. That’s not all profit, of course, and that type of thing. But I mean, those are good days, you’ve earned them. You know, it’s over time that you earn those days as well. Right? I don’t know if someone listen to this just thinking it’s like, oh, yeah, it’s just greedy landlords. It’s not about that we’re providing a good place for people to be like, there’s a lot of not so good student properties that you were talking about earlier. They can be living out we’re providing a really good, safe, clean, large space for people to live in the market. Yeah, we’re giving them an opportunity. Right. So it’s, you deserve it.

Erwin  

So there’s some questions I need to get out of the way before we get going. What are you telling newer Rockstar members, clients of newer people to real estate investing? What should they be looking at right now? And it’s even now the right time to be buying?

Nick  

Yeah, I think it’s understand what they want. So what role is it that you think real estate is going to fill for you? You’re building a real estate portfolio for what objective? And once that objective is clear, then it makes sense to start looking at what type of investment strategies areas properties, whatever the case may be there then it makes sense to look at those and start building the portfolio that works for you specifically, this was again was an early lesson for me like I, one of my first, my very first investment property was a flip. I was investing, because I wanted enough passive income coming in, you know that time, you know that term passive was used loosely. But because that didn’t work. I wanted enough passive income coming in, by the time I was 30, to pay for my mortgage every month, that was my initial goal when I started investing. And then I went to flip the property. So the strategy I used got me 0%, closer to what I was actually trying to do, like 0%. So I’m like, why am I doing this? And that’s why I started looking at other strategies that aligned more. So there’s two things, there’s a financial side of things and understanding what your objectives are, and then going out and building the portfolio properly is going to match your objectives on the financial side, but there’s also the lifestyle component to it. Because what are you willing to commit to these properties, we have some people that come in, and they’re contractors, they’re like, hey, look, I want to be able to buy a property, I’ll give it a look, I want the lift I’m going to get by putting the second second suite in, and I’m gonna use that strategy. So I’ll get better cash flow and stuff. And but I’m gonna do the work, no problem. You know, I have the time I’m willing to do that if the context, there’s some other people that are like, look, I’m really busy. I’m not a contractor, you might have no skills in that regard, can’t do that stuff. I don’t want that I want a different strategy that doesn’t require that and they want something more turnkey, because they don’t want the time commitment. They’re so different people have, you know, a different amount of time, or a different lifestyle they want to lead and how their investments will fit into that where some people will self manage, versus some people will get management. And I think those are the important conversations to have when you’re starting out versus Well, I think real estate’s a good investment. So I just want a property, let’s go find one. What’s a good one? Right, I think that, you know, just a little bit of thought beforehand can kind of go a long way, when you’re building things out. And it makes a difference it like it almost that thought early on will compound the return over time. And when you look back in five or 10 years makes a big difference. Well, that’s

Erwin  

one market to look at some neighbourhoods or towns you like,

Nick  

I like any self sustaining area, I don’t like the bedroom communities as much. So usually the self sustaining areas, meaning there’s going to be like, you know, jobs in the area, and they don’t have to travel for everything they want good employment there. Obviously we like there’s other things like public transportation and infrastructure and population growth. There’s all that type of stuff too, but but in a nutshell, is a self sustaining area. So areas that have the employment, because that draws the other things generally. So, you know, for a long while, Milton was like, I’ve just a bedroom community of Mississauga, there is more jobs and things and more development stuff that has gone on there in recent years. But for that long while I would be less interested in investing in Milton versus a place like Mississauga, as I use the example or even like a Hamilton at that time Kitchener Waterloo, Kitchener Waterloo, Cambridge is right down the highway for one from their

Erwin  

way more jobs than Yeah, cuz they happen up in Melton,

Nick  

exactly. So those they’re self sustaining? will sometimes that gonna cost me more like, is it gonna cost me more to invest in Hamilton versus well, and yeah, I’m gonna pay a premium to invest in the Hamilton area. But I feel like I’m getting something for that premium. I’m not just paying more, because it’s in Hamilton, I’m buying every less risk. Yeah, I’m buying the economic activity of that area. So anything that really has a self sustaining what I consider ourselves thing, community that way, I’m more interested in having said that, I just might might, the one I have to close on in a few months is a is a new construction in Oakville that I don’t know what it’s like not the, you know, doesn’t really match that as well, you know, but that’s, that’s for my kid. That’s not for my kids to give to them. The idea with that was to buy this property close to home, because I’m going to drag my kids there to manage it, I want them there at the beginning picking blinds, I want them you know, meeting whatever other contract, we have to meet there for him to go meet the cable guy to set up the internet the first time I want them coming with me to see what’s involved with it, I want them meeting the tenants when we go to show the property. And the idea is that I just whether they decide to ever invest in real estate or not. I want them to understand the way it works. So they know how there’s just different opportunities in life. And then, the way I’m bribing them is I’m like guys, if you help me with this, and you’re involved in this process, they basically will get half that property. Because the way I look at that is that’s their foot in the market. So they’re nine and 12. So we’ve lots of time, but doesn’t matter if the market goes up, down or sideways. This is their foot in the market and then they can leverage that however they want. So if they have half a property that’s you know, pretty much paid off time they’re looking for their own property that property can they sell that take that half of their their cash and go and buy it on the property, they can leverage it keep it rented out by their own property, but that is their foot in the market today. That’s the way I’m looking at it. That’s how I’m trying to bribe them. I have no idea how it’s gonna go. It could be a disaster. It could be I could fall on my face with that one. But that’s it. That’s the idea sounded good at the time when I bought it. I’ve taken my kids to my Hamilton property. So yeah, I’ve taken my two but they just this one. I’m like, I want them there for everything. Oh, so that’s why I had to be close to home. So it’s like three blocks is less than is about a five minute drive. So there’s no real conditioning or no real complaints other than like, I just want to hang out with him. hands on with like your friends can wait for them to get there. To get there, meet someone and come back is like a 30 minute thing because there’s a Dairy Queen on the way. If I have to bother with Dairy Queen as well I can do that too. Whenever I whenever I need to do.

Erwin  

The funny thing is like if I have any listeners over the age of 30 they’re like I wish liquid adult me and make this my problem.

Nick  

Yeah. Oh, trust me, there’s other things that I don’t do so well, I’m sure.

Erwin  

Because you wouldn’t have mentioned this in our in our meetings long time ago, like I remember always you referenced like European cities, where anyone young, they don’t buy, they rent, there’s never an opportunity to buy unless you had family wealth flexing in the family wealth. And that’s kind of in a story here in the GTA Golden Horseshoe for the last decade or so. Yeah, especially now.

Nick  

Yeah. And then real estate is left to the family. Right. That’s, that’s how it works. And sometimes the family decides to sell it and they squander the money, or do you do something worthwhile with the money and then sometimes they decide to hold on to and they leverage it for future things. But I can’t find an argument that makes really good sense to not own assets in your life. Because I really feel strongly that I own the assets you’ve leveraged against the assets gives you much more opportunity. So you continue to build that asset base, versus cashing out. We’ve seen it time and time again, like that’s how you’re really able to, you know, you need a cash flow component, because you have to pay off that leverage. So you need cash flow to support the leverage that you’re getting on those assets. But if you have that data,

Erwin  

elaborate on where cash flow is coming from business, employment, yeah,

Nick  

anything, anything as long as you can pay for it. So like, so I won’t use a real estate example. But we’ll use a sock example. When I was actually Oracle this time to I was there just for a period of time, Tom spent more time there. But Larry Ellison was getting a big billionaire, right. And it was talking about his credit line that he was getting to do to do whatever he was doing. I don’t know if it was NetSuite and Salesforce at the time, wherever the case may be, why is this guy getting a credit line, like he’s got lots of capital, but he would use the stocks he had as collateral. And then instead of selling the stock and cashing out, he would then borrow against it, and then use it to generate other income, and then use that income to pay that that and now he had the new assets, any of the old assets sell. And I was like, holy cow, I think at that time, it was at that time was mind blowing to me. I’m like, Oh, my God, this is a guy that has bucket loads of money. But he doesn’t get rid of the asset, he keeps the asset, and you leverage the asset to do other stuff. And like, wow, that’s, to me, that was just mind blowing. I’m like, I get it. Like, I totally get it. And that’s why that’s the beautiful thing about any assets were this specifically because it’s very easy to leverage. But you need, whether it’s business income, rental income, employment income, you need that to pay back the leverage that you’re getting, right? So like, if you because of you over leverage, and you don’t have the income, then you’re in a bad situation. Right? So there is you got to be careful with that. I feel like it’s still gonna be a powerful strategy, even though rates are a little bit higher. They’re still low, historically. Right. So but but yeah, so that’s the way I look at things.

Erwin  

You mentioned the term we need, you need to be able to survive, you need the capital, cash, whatever to get through this. How long do you think this? Whatever in lasts until things change? Well, just for example, as a, Nick, things are rough on negative $200, on my on each of my five port properties, so I can weather it. Yeah, how long do I have to survive?

Nick  

Yeah, I mean, I don’t have a crystal. I feel really strongly that we’re in the eye of the storm, I think there’s going to be a little bit more pain to come not necessarily the risk to market in the economy. And I think that pain comes, I think comes this fall, I could be wrong, but I think it comes this fall early next year. And then I think there’s got to be a policy response to that, if they because of the amount of debt in the system. Now, if they allow that pain to be prolonged or too much for people, it’s not about your $200 a month and other people that are kind of having cash flow situations at home and more worried about going to the grocery store, they’re less worried about that more worship with the banks will have real problems, because the banks are so leveraged that if there’s real problems, paying back funds, or if real estate starts to change course, and in a large way, the government has to step in, because it just the whole system, basically is at risk. Because of the amount of debt. This isn’t a situation we were in in the past. Because some people will look at today’s mark and be like, Oh, it’s eerily similar to like, you know, the late 80s, early 90s. And the right in some ways, I don’t believe the right in some other ways. And some other ways are definitely not right, and the amount of debt that’s in the system. And I think that really impacts things with the amount of debt that’s been put in the system. So the amount of Felician that’s been happening has contributed to price levels as well hasn’t been really accounted for a lot of those arguments. So I think that that there’s a policy response that comes in and that’s where things get a little bit ridiculous. And I think a lot of that money that comes in to shore things up. I think it starts you start seeing asset prices. do strange things, I think he starts to see aggressive price moves upwards and asset prices, I’m not talking real estate I’m talking, there’s going to be like, there’s a lot of correlation with the amount of liquidity in the world. So that’s kind of like money creation and printing, there’s a lot of correlation with that, and asset prices. And when that those floodgates open, and that comes rushing in again, I think we see a spike. And then I think there’s got to be this policy response to start it tried to bring it back. And they try to draw that back down. And we kind of see things go up and down and teeter totter for a little bit. That’s kind of what I what I think based on some past history charts, and the different decades that we’ve seen environments like this shaping up, so but I really think there’s a little bit of pain coming. I know, I mean, it’s just want to prepare myself for because we’re trying, like, I’m just kind of staying more liquid, keeping more cash than would have typically got on the sidelines. So that if it needs to be deployed in certain places, it’s available, you have the business to worry about, we have payroll to worry about that, as a business owner, at least, I think you would feel the same way you feel some responsibility to that. So it can’t it’s not just us, like we have to kind of take the whole picture into account so we got to worry think about that stuff too. and plan accordingly.

Erwin  

Anything else besides being more liquid holding more cash? Gold, silver, Bitcoin? Aetherium Dogecoin whatever other

Nick  

look, I’m the worst trader in the world. So if you’re looking for anything, I’m assets, I’m the old school boring asset guy, buy a property, hold it for a long time and rent it out. ever buy another one? I like gold. I like Bitcoin, because you can own it. I know some people think that’s ridiculous. I’d like to find it

Erwin  

monotonous amount of bitcoin, no, nor gold, whatever you’re comfortable

Nick  

with, you know, whatever you’re comfortable with, I just think I would prefer to keep my savings in assets that I feel are an inflation hedge. So real estate has served it very well as an inflation hedge for me my life. Bitcoin has been far more volatile. Yes. But from when I got involved in in, you know, through some multiple purchases, it served very well as an inflation hedge. For me, gold has served well as an inflation hedge for me as well, you know, maybe not as exceeded it as much as like real estate has and things like that. But you know, is it getting ready for a movie, it could as well, but I just like those types of assets that I can hold. So anything that I feel is like that quality of an asset I’m willing to have. But yeah, I think you’ve just got to be a little bit more prudent. And maybe in the past, if you thought that you could invest for the shorter term, if you’re looking at shorter term things, because of what might happen in the economy, it might impact exit plans. So if we get liquidity events, meaning like when it dries up, so lending, it’s harder, and you think that you have a property that you’re going to be able to exit at a period of time, you might not be able to. So if you’re investing for the short term, you might want to also as a toddler, stay a little bit more liquid, expand your time horizon and case you can exit when or how you want to what’s the backup plan to that, I think it’s always important to have that backup plan and make sure that that’s suitable for you as well, during times when it’s like very likely that we’re going to be in a recessionary time. And, you know, there’ll be a little bit of fear, there’ll be less money sloshing around for a period of time.

Erwin  

And that would include getting into a different more difficult time in your finances than anything for sure.

Nick  

Yeah. 100%. Anything that applies to real estate really applies to a lot of stuff. I’m just a real estate guy, certainly well, but you can do that, like with other things as well. Like businesses are no different. Like you can buy business you can leverage against the income of business generates, buy another business, like there’s all sorts of things you can do. Just real estate seems to be the most accessible for people. And it’s it’s like a business in a box. Because you’re like, there very little marketing needed for the clientele to be attracted to the product that you have. Right? Especially, especially Yeah, for real estate, especially where we are right now. Right? Because we were like supply demand, something that

Erwin  

a whack. Throw up a Facebook marketplace ad and you’re flooded my gosh, it’s like unhealthy in its way. Right?

Nick  

Yeah, we don’t. I’m so sad for this generation. Yeah, we don’t we don’t want it there’s got to be a little more thought put into I’m not anti immigration at all. But I mean, at this point, like, there’s gotta be a little more thought into it like, hey, when you’re gonna do this immigration policies have what you think about roads and hospitals and housing? Don’t you think those should be part of the equation versus just some random number? It seems like you’re picking up out of the hat

Erwin  

in the international student number. But yeah, oh, yeah. Yeah. Yeah. The

Nick  

number of real numbers are are ridiculous. Ridiculous was basically that the universities if you think about it, and maybe we’ve already thought about like this, but the universities are dictating our immigration numbers. Right. So these are for profit universities, Kyle just did a chart you should see it. The average tuition, maybe he did it or share it. I don’t know if it was from someone else. But the average tuition for a Canadian student versus the international student, the international student has jumped by about over the last five or six years by 30 something percent, and the Canadian students have a state about level. Right, right. And not to mention the number. So we’re doing a little bit more research into the programmes they’re going into and stuff we’re gonna release a report about it. But the so the universities have their targets, they’re moving overseas. There’s no mandate for them to tell the government how many of these these nonprofit residents are bringing in, because there’s

Erwin  

no cap. They’re not regularly. We have many students, they can bring it over.

Nick  

They’re the ones dictating our immigration numbers. It’s not even the government. Those are just the permanent resident numbers. Like it just makes no sense at all. There’s no thought going by This at all?

Erwin  

Well, it was a provisional government that put the caps on to tuition for domestic students, though. Schools have no choice. Yeah, well, it’s worth it. Yeah. Then like, well, even just to survive, just like us, we’ve had rent caps implemented on us rent control. Yeah. How are we supposed to keep up?

Nick  

Yeah, you’re talking to an ex government worker that I saw, when you talk about the, the amount of budget being used and where it could be allocated? I’m a little bit jaded from my past life as a regional employee. Right? Because I think that, you know, through efficiencies, there’s there’s a lot of money that could be saved.

Erwin  

Good. So we can cap property taxes to the right,

Nick  

we could look, there’s a lot. I don’t know, find something the government got involved in this helped with prices and helped keep them down and there wasn’t a lot of waste put anywhere. It’s slippery slope, go down the slope, just trash them? No, I’m not saying there is no need to trash them. We all know what’s going on. But it’s nice when you think about it. Like it makes no sense.

Erwin  

It actually makes me really upset when you go down and like ask questions and dig and all that sort of stuff. It’s actually hard to maintain a healthy mindset.

Nick  

Have you seen the hiring chart? Over the last few years?

Erwin  

The Federal Yeah,

Nick  

let’s think about this. Right. So the central banks raising interest rates, one of the big things that they’re waiting for is the unemployment numbers go up. So first of all, just think about that this is your these are like, well, they’re not elected, but the elected officials kind of place them there. So this is like a kind of national institution that is saying that we want unemployment to go up. So just think if you’re someone that’s employed, you’re not gonna be great. So you’re looking for some of us to lose our jobs. Like that’s your stated goal. So if that’s not problematic enough, the federal government they’ve been on this hiring for they’re outpacing any anyone else and the Trudeau Government is far above any previous government and the number of people they’ve hired, right? So the Bank of Canada’s when you find employment, us to go up, but yet the federal government keeps hiring all these people keeping the unemployment number low. Like, isn’t this character like? It’s almost like they’re working against each

Erwin  

other? They’re stimulating the economy. It just makes no sense. That’s basic economics. You’re stimulating the economy by putting more money in the system. You’re trying to slow the economy down as you try to slow the economy with it by raising interest rates. It makes no sense. You’ve said it’ll but it’ll balance itself. Yeah, we’ll stay mentally healthier.

Nick  

I have more important things to think about in that arena. Okay. Did you remember to remember that that speech? You forgive me if I say that I’m not thinking about like monetary policy, I have more important things to think about. That was something like that. And I that wasn’t an exact quote, but it’s not far off at all.

Erwin  

We might be happier people if we accept that. So we’re not happy with what was great here because

Nick  

the prime minister can take the best selfie in the world. I’m convinced Okay,

Erwin  

damn it. I

Nick  

know. I know. So in look, at least we’re a global leaders in something. Are we ending on? I hope we’re not ending on No, we’re not even gonna say something. We gotta say something. Yes.

Erwin  

No, Kisan. Yeah, let’s get more upset. Nick, where can people follow along? Because I know you have a really popular podcast, I’ve been recommending the rock centre circle a while you know, like when I have like a novice investor that wants to learn about smart real estate, and evaluate just like I’m a value investor, I believe. I believe in only paying for valuable what I consider good value real estate training, for example. So I’ve recommended clients to Rockstar inner circle

Nick  

and we appreciate that for sure, but only if it’s a way for someone so if anyone just goes to Rockstar inner circle.com They can find all sorts of videos, articles or like anything they want there and podcasts is the your life your term show. So we cover real estate stuff and investing macro stuff. We just had a jeweller on the show today.

Erwin  

What do you say? What do you see?

Nick  

These are Kalani jewellers. You know, Kalani they do all the jewellery for a lot of the NBA guys and unless guys they’ve created like a kind of little like not little they’ve created pretty much like a global brand for themselves. A lot of the soccer guys fly to town to go see these guys. Very, very cool story. Very cool story. I mean, you see some of their pieces that I guess the point is sharing that as we do a variety of different things. It’s not just kind of we don’t just do real estate so we try to talk about a bunch of different stuff that just interests us in general so

Erwin  

I found with him with anything that anyone there’s something to learn from them also they deal with the high end market

Nick  

all these guys do their back room with all their custom pieces are just just outrageous. But a lot of the hip hop guys Raptors Blue Jays, a lot of NBA guys when they come into town, we’ll go there for their pieces. And some of the some of them they can share their names. Some of them they prefer to keep it quiet. But yeah, really cool story. Really cool. So but there’s always lessons. Yeah, I mean, these

Erwin  

are gonna guess they’re not really feeling a recession.

Nick  

So no, I mean, I think there’s everyone’s feeling it it just to different extents. So everyone’s feeling it a little bit. And then just the inflation numbers too, because they’re trying to open up other stores and different cities like don’t preface for my Okay, okay, there’s just just the same forces impact everyone

Erwin  

very, as business owners, I’m just more interested in like, how does your clientele feel at

Nick  

the very high end doesn’t feel that they’re not impacted? Right, but But I mean, when there’s more money in the system, there’s also more people going into a place like that, that’s they’re spending money that wouldn’t be spending money otherwise, they’re not buying the, you know, the 150,000 or $250,000 pieces, but they might be buying something worth, you know, five to 10,000 bucks that they wouldn’t be spending that five to 10,000 bucks. Now. Well,

Erwin  

again this like I always find there’s something to be learned from any right everyone versus I have a friend who works at spends time and maybe I should have named our jewellery company in square one. So I asked him his business and just to get a gauge for what the retail level was like, but it’s kind of funny still, because I remember him telling me like a one carat diamond rings a one carat diamond ring doesn’t matter what it costs the minute

Nick  

Yeah, if it’s an engagement ring. Yeah, I think

Erwin  

I think it’s fascinating human psychology. Yeah.

Nick  

Yeah. I don’t know if this is true or not. But I think the the other pieces if you’re looking to get married, you need an engagement ring. You’re gonna buy an engagement ring.

Erwin  

Doesn’t matter. That’s fascinating. But the other

Nick  

piece is, I don’t know. I think things might be like, maybe there’s less time. Branson’s gonna die.

Erwin  

I don’t know. That’s what he’s saying. The other pieces, there’s less less demand for Yeah, yeah. So just to give you again, I’m just looking for insight into how the market is for sure. I

Nick  

love talking. I’m always asking people in different industries, right. I haven’t spoken to a single person that isn’t saying on their everyday life. They’re seeing differences. Like the I feel like the recession has almost started already. It’s just we’re just seeing it on the on the streets. Now. We just lost the backwards looking data that the government’s looking for yet. You know, but everyone’s feeling I mean, how can you know, this is an historic pace of increase of interest rate increases? Never done this before. Everyone’s feeling it like there’s just no way not to.

Erwin  

Nick, thank you so much for doing this.

Nick  

I appreciate having me.

Erwin  

Thanks for so much for the honour. 300 episodes.

Nick  

Yeah, that’s something that’s consistency

Erwin  

that like you said, You always said it. You always said from the beginning back into 2010s beacons. But it’s the hardest thing to do. I think that’s I don’t think I’m just gonna start a podcast and start a podcast I forget the number is how many podcasts actually go beyond six episodes. Oh, I didn’t know. I didn’t know. But that is probably not a lot about your 80%. Don’t make it past six episodes. Well, we

Nick  

get a lot of people that will say like, Hey, I’m gonna start the weekly email, I’m gonna start the weekly, ama, hey, don’t start weekly, you can always ramp up to weekly because if you start we I mean, you can if you want, but when you start weekly, it’s it’s easy to fail, because the next week, it comes quick, you know? So you know, kudos to you, man. Congratulations on making it. Notice that really everything you’ve done to this point, you’ve always been an implementer you’ve always implemented a lot of different stuff. And you’ve always you know, so it’s kind of a testament to you for kind of doing all that stuff

Erwin  

haven’t been so good at sticking with CrossFit. Like you got me here, what you do. And I’d like to thank you and Dominic for the mentorship because you’ve given us a lot of great ideas that was backed by hard data. And so yeah, you know, without the coaching and mentorship would have gotten this Oh, cool,

Nick  

man, you ensure you’re awesome

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. 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.

To Listen:

**Transcripts are auto-generated.

Erwin  

Private loans go bad and bailing them out lessons for managing 150 million in a downturn with California that before we get to that Welcome to the truth better real estate investing show. Thank you too all the time listeners who leave five star reviews on any platform and shut up to all those listening on Spotify, emitting five star reviews, I’m just returning from a retreat with my mastermind group and entrepreneurs organisation conference in the lovely Victoria BC where I met several successful victim entrepreneur foreigners, including real estate investors. Some of them do midsize development projects, like for example of starting with a four Plex, and then they tear off the roof, and they add two more units on top and they dig and underpin the basement to add two more units to the basement. So they took what was a four Plex and made it an EIGHT Plex. So basically they’re gonna double the rent. They’re probably gonna do more than that though, another developer owned hundreds of acres in the Niagara region. And then they’ve since sold that off in pieces to builders. Another builder I met is happens to be from Mexico building develops in both Mexico and in Vancouver. He does midsize use large, not large but a mid size residential with commercial on the ground level in the symbols land. For example, he he shared how he bought a couple houses next to each other in Vancouver, which is going to develop another investor I met flipped hotels way back when he bought them distressed from a bank during a recession, paying very little pennies on the dollar. And then later turned them around and sold them off. And these were big brand hotels at the end product was a big brand new hotel that you’ve likely heard of before, likely stayed in before. One thing I really enjoy about being part of these events and entrepreneurs organisation is connecting with entrepreneurs and investors. And what’s great about them is is how honest they are we actually go to have to go through extensive training to belong to this group, which involves being vulnerable and speaking from experience. And yeah, we don’t small talk much. Instead, we go pretty quick. And because we’re all we all have many things in common, we cut most of the bullshit. And again, we go straight to the truth pretty often pretty quickly, which is what I enjoy. I enjoy learning and I enjoy hearing the truth. Also, there’s no solicitation rule and the network folks can’t do business together. But one party to a conversation must invite the other person to pitch there is no unsolicited pitching possible and members must meet a certain financial milestones and have be signed off by one’s accountant. So again, everyone at least has achieved a certain level of success to be part of the membership. It’s not like those weekends. You know, I’ve been to like those weekend real estate whatever’s and just the last one I was at as last by complete stranger. I was interested in investing in their development project, their second ever development project. Yeah.

Erwin  

Damian, I was originally from Mexico. He’s, again, he’s the Mexican Vancouver developer asked me if you would be a guest on this podcast. Naturally, he asked what podcast he’s obviously not one of our 17 listeners, like the vast majority of Canadians. So I tell him what’s called the truth about real estate investing show for Canadians. Damian then proceeds, he whips out his phone. And he asks, Are you on Spotify? So yeah, we’re on all major platforms. And I told the name of the show, we typed in the search. And to my pleasant surprise already on Spotify is 4.9 4.9 out of five with 49 Reviews. So there’s not nearly as many reviews compared to Apple podcasts. But the rating is higher. So all of a sudden, I’m feeling very confident in that Damien is honoured to be a featured guest of the show. So yeah, for all you listeners, I know we do have a lot of Ontario guests I know. And but you know, sit tight, we do have some folks coming from the west coast shortly. So thank you to all who have left a five star review on either Apple podcasts on Spotify, or wherever our platform releases on. It does help me book excellent guests of the show, you know, the more listeners we have, the more five star reviews we have, again, that helps me attract high quality talented people. And then by having better guests on the show that helps us improve that we all improve as a collective, and learning from how world class investors we will learn from their mistakes, their best practices, and what makes them tick. So that you make take it away, you may leverage the experience of others in order to bring you better success in your own business. And because who knows what the recession will bring. From talking to the big time ballers again, in the real estate side, I met several people who have made well over 2 million in real estate. So again, they’ve made over 10 million, write their own 10 million they made over 10 million. They got their eyes open for opportunities. No one really knows where things are going. But everyone’s got their these guys who are doing quite well for themselves. They get their eyes open and those who are leveraged. Well, those folks are not having any for sort of fun, but that’s just real estate stuff. There were other successful people outside of real estate investing. But before I get there, there should be no surprise. A lot of successful real estate entrepreneurs out there. That should come as no surprise but this wasn’t an entrepreneurs conference. So there are many other experts speaking including the owner of 100 got junk. I think I’m sure many of you have seen their trucks going around. I believe they are the largest junk removal company, at least in North America maybe the world, they do over $700 million in US revenues, some 100 million US and revenues a year. So he had some stories and lessons to share. I shared the sign an NDA. Before that speech, free speech was given after the we had the founder of HootSuite sharing his story, and what he’s doing with this venture capital fund. He’s ready $100,000 checks and mentoring young Canadian tech entrepreneurs. So very fascinating stuff. There’s many ways to make money, both morally and ethically. Well, yeah, again. So there was this mind blowing expert. My mind was mostly blown by the AI expert. This gentleman went viral as he was able to hack into his own bank account in five minutes using an AI tool to fake his own voice to beat the voice recognition protocol on his bank account, the CEO of the bank, called Nicholas has named the speakers named Nicholas, the CEO of that big column shortly after asking for advice. I’ll be inviting Nicholas onto the show. And I mentioned that we have many wonderful listeners who have given the show a five star review AI in the real estate context. However, Nicholas has shared how he designed and delivered a website, a very, very impressive website for real estate developers purposes. So it’s a gorgeous looking building, I think it might be Mason as a custom home builder. But anyways, the content so everything that went on the page, he said, It took him about 15 minutes to create using a number of AI tools. So he shared that this business model will dominate going forward, who can create a replicatable business model using AI to save time and money? The analogy he used this there is no staples, easy button, a human being will still need to put it all together and assemble it and review it for accuracy and quality. And whoever successful at this model will put the slower more expensive companies out of business. So you better believe me? I’m looking into all areas of our business, including property management, on how to better implement AI, then I’ll have I’ll do some later in the show. Actually. Personally, I’m always afraid of the future, which leads me to research and take action. Real Estate Investing makes a tonne of sense to build wealth. It’s it’s less difficult to do the most than most ventures, and it’s honestly the right solution for most Canadians most of the time, if done correctly. Speaking of being afraid of the future, I’m always worried about my kids. I am a hyper overprotective parent in particular, them being bullied from my experience of being bullied was not enjoyable at all. It really hurt my confidence growing up and self esteem and I wouldn’t wish it upon anyone. Hence I’m hacking my kids self defence by having them trained the most effective, efficient self defence martial art, which is Brazilian jujitsu. My kids got just last week, we’re finally promoted from wealthy white belt to grey slash white belt. I can’t expand on the belt system. But anyways, they got promoted, the delays were caused by the pandemic. And that wasn’t any fun, and I honestly couldn’t be more proud. My son being only seven. He shares almost everything to his classmates. He really has no filter, the happily shares a story of that time I tore the back of my shorts while trying to do what’s called a bomb drop on a trampoline in front of my kids and my family friends. Thankfully, I was wearing underwear my son even shared to the class bully. The class bully happens to take karate, and my son he takes Brazilian Jiu Jitsu, the bullies response, he has no interest in messing with my son. Mission accomplished proud dad moment check. Speaking a mission accomplished the head of the Bank of Canada raise rates again by point two 5% to further slow the economy and the real estate market just like they were slow to respond to all the government pandemic money flooding into the economy. inflation rates were well over 4% in 2021 debate, it looks to be overshooting on rates now, as we’re now at an overnight rate of 4.75%. While inflation over the last two months were 4.3 and 4.4. So yeah, we’ll see where things go. My prediction is inflation rates slow. So again, who knows what the candidate is gonna do. But to me, it is what it is I can control what the government does. I just read and react. The way I see things is the housing markets recovery. It’s been too fast in my opinion. After the downturn, the downturn went pretty quickly in terms of how aggressively it fell. And in my opinion, the recovery has been very aggressive and fast. And some of my rich friends out there, they’re having trouble getting their offers accepted in Toronto, and they’re they’re offering you know, hundreds of 1000s of dollars over asking, but yeah, these elevator rates should still the recovery as financing gets more expensive, which means more tenants for us existing landlords. Not that we need that much more help considering the hundreds of 1000s of international students coming each year. If you bought smart in a college or university town, just like our clients always do. Well. You’re laughing. Speaking of buying smart normally I wouldn’t be promoting one of our I would mastermind tours in Hamilton, which is coming up June 24. But it’s already sold out. So stay tuned for next time. Our next event is online, virtual and online. Via zoom. The iWin meeting is Tuesday, June 25. At 7:30pm. We will be sharing the highest and best use real estate investments for the beginner investor slash developer to maximise returns while helping society at the same time. Yes, you can make a great return and Do good for society, which includes creating more homes and density. Now, onto this week’s show, you know about the downturn, we just experienced, and like many of you has curious how the private mortgage companies fared. So I reached out to California whose company manages 150 million in private mortgages. That’s right. 150 million assets under management that they lend out to for alternative use. They’re not like a bank. Like the like the big banks. They are small 100 We’re dealing small compared to the big banks. It’s not small to me, though. Cow tells it like it is he shares how many mortgages went sideways during the downturn, what lessons we’re how Kyle and his staff put up time and money into taking over failed burr projects and flips, major renovation projects to finish projects and sell them off in order to make his clients whole. Why? Because it’s the right thing to do. Treat other people’s money better than you treat your own. If you want, invest your own money into your project, and you can pay people back when deals go bad, then don’t use other people’s money. If you don’t believe me, ask bankrupt investors, how they, you know, we’ve had bigger investors on the show, ask them how much other people hate their guts, people’s money, who they lost, and we can’t pay them back. So instead of using other people use debt pipelines, and I all use the deadly first mortgages, largely first mortgages and home equity lines. It’s cheap, and you don’t have to give up control the project. You don’t have to give up any equity in the project. And it should be everyone’s first option. If those things aren’t, were never available to you. I think you need to question let me move question. I think your priority is go make more money in your day job first, back to Carl’s interview, we journey back to when he was an alternative financing borrower because Carl was a was he was taking courses he’s doing value add projects, so he was buying, doing major renovations renting them out and then getting new mortgages. So he needed short term money to do those those sorts of projects. And then came 2017 When the more distressed has happened and Carl had limited financing options, but he needed mortgage money short term mortgage money in order to continue funding his value add real estate investment strategy in business as the saying goes necessity is the mother of all invention. Kyle found other sources of private capital then he started brokering his own deals. He comes from a financial planner background as well yada yada yada, I’ll I’ll explain. He now manages a fund. How’s that for yada yada? Chuck is going from a duplex triplex investor to managing $150 million fund in Cal limits just like we do on this show. It’s never all sunshine and rainbows as mentioned some borrowers of his went sideways and Cal shares how those deals went PostScript and how what happened when he had to take them over and also his lessons from the downturn. Child also has contrarian opinion of promissory notes as well. So you do not want to miss this episode about the truth about being a private lender. Now, as we are covering secured as investment here comes to the disclaimer. And I mentioned I looked at for you how to use AI more and more. So I used AI to write to write the disclaimer that’s coming up in a separate AI tool to voice the disclaimer and it’s did it all for free. So this also saves you all from having to hear me stumbling mumble. To reach out to Kyle and company website is cap gap and ft.com Again, it’s cap gap mft.com And his email is info at Kyle for mortgages.com. All of its in the show notes please enjoy the show.

AI  

Disclaimer. The Information and opinions expressed in this podcast are solely for educational and informational purposes and should not be considered as investment advice. The hosts and guests of this podcast are not licenced financial advisors brokers or registered investment advisors. And their comments should not be construed as recommendations or endorsements of any specific investment, security or strategy. investing involves risks, including the possible loss of principal. Before making any investment decision. You should conduct your own research and consult with a licenced financial advisor to determine the suitability of any investment for your specific financial situation and investment goals. The hosts and guests of this podcast make no representations or warranties as to the accuracy, completeness or timeliness of any information discussed in this podcast. The podcast is not responsible for any errors or omissions or for the results obtained from the use of this information. listeners are advised to use their own judgement and seek the advice of professionals before acting on any information provided in this podcast. The podcast shall not be liable for any damages, including but not limited to direct, indirect, special or consequential damages arising out of or related to the use or inability to use or reliance on any information provided in this podcast.

Erwin  

Hi, Kyle, what’s keeping you busy these days?

Kyle  

They are doing well keep him busy with real estate, the mortgage business, the new private mortgage fund and everything else. Family Friends, all that good stuff as well. So

Erwin  

I imagine you’re pretty busy like you do I have a good number of clients and a sizable team and you’re just starting new fund, which is probably a lot of money in it.

Kyle  

Yeah, it’s double digit number of corporations that I’m managing and operating right now. It’s all real estate base. But yeah, I feel like I’m pulled in a few directions. One of my goals in the new year is I’m trying to get a little more focused. Try not to, as you grow your real estate portfolio, some people, including myself, can be guilty of the shiny object syndrome. And I’ve heard that a little bit over the years pursuing different types of investments, but really trying to get focus. Now,

Erwin  

that’s actually an interesting point. Because like you’re at a scale that you’re quite large, and you push a weight around, including like, pretty large scale developments to how are you choosing to focus then going forward? You have lots of opportunity to look at the you know,

Kyle  

yeah, so you know, the personal stress is a big part of my new performance. What is this deal? What is my responsibility in the deal? What is my partner’s responsibility in the deal? How much investor capital do we have in the deal, and what’s the ultimate stress level that’s going to be put on the personal and the partnership in order to execute it, that’s a big factor that isn’t a normal line in a lot of people’s performance, but something that I take very seriously now. So we’ve done everything from small singles, triplexes, large, multi, large development, we’re definitely more focused on development deals, larger multifamily, and private lending. So those are kind of the three tiers. We are in the hospitality space with cottages and a hotel, and we’re gonna keep running with the hotel. But the cottage business is been great to us. I love it, we had over a dozen at our peak, but we’re definitely trying to lower that a little bit, just a handful of a couple of nice cottages that we liked, but not really trying to grow that business anymore.

Erwin  

So Kyle, when someone asks you to tell him about your business story. So for example, apartment building investors, real estate investors, they often talk about how many doors or may have properties they have. What do you tell people?

Kyle  

So a couple things. So first of all, I don’t talk in doors, I talk in AUM assets under management. So like between my private lending portfolio, the properties that I own, the properties I invest in, in terms of AUM, I’m well above 150 million in terms of assets under management. So that’s really the the language that I use, I stopped chasing doors a long time ago, when I do a deal. I’m more concerned about the lift, what am I buying it for? What am I spending on it? And what’s it worth when I’m done, I’m blessed to have a successful business that generates me lots of income. So I don’t need the cash flow from my properties to support my lifestyle. I’m not saying I don’t buy cash flow properties, because that’s, that’s still important. But I don’t actually need that money coming off the properties to support my lifestyle.

Erwin  

Right. So when then what do you do with the money within within the properties to continually

Kyle  

reinvest the cash flows coming in on those properties, reinvesting and buying more larger deals? Those type of things? Right, right. Right. Now, one of the things that I’m doing in my portfolio, when I talk about getting focused, is I’m selling a lot of the small stuff to allocate more towards my fun, which is private lending. So looking to get a little bit more passive. I’ve been in the grind for 10 plus years. And so it’s nice to try to direct a little bit of cash towards passive investments, we’ll get to

Erwin  

the fun in just a moment. But I want to say thank you for sharing that. That is your investment strategy in the apartment building space, because it always concerns me, I see a lot of marketing out there on like, current building multifamily about being a means to retire. Like to me, that means you only see a steady cash flow to retire. But you’re saying you’re reinvesting it all in versus like I fear for the novice that gets into it, if novice will often overpay, because that’s just the position they’re in, they don’t have those relationships to get a deal to come to them. And then the cash flow would not be sufficient to for them if they quit their job.

Kyle  

I see it all the time. And we use that novice example of they’re trying to find a money partner, and they’re gonna be like, the property is gonna cash for X amount every month. Yeah, but can we really take that out of the account? Can we really leave? I know, we have a repair maintenance budget, and we have vacancy budgeted and all those things. But can we really take that couple $1,000 a month out of the account and spend it in a lot of the deals that I’m looking at and I’m analysing the answer is no, that money needs to stay in that account unless both partners are prepared for cash calls later. But if we’re taking the money out to put it back in later, what’s the point? Right, yeah,

Erwin  

yeah. And then you see deals from both from your mortgage business and from your own whatever crosses your desk for your own portfolio, right? That’s right. So you see a lot. deal flow is not an issue. Right, right. Because your clients are bringing you deals as well to evaluate for them for financing purposes, right?

Kyle  

That’s right. Oftentimes asking if I know anyone who wants to put partners who are interested, we don’t broker partnerships. We broker private money, but people are often looking for partners looking around the deal by the coming to me saying how is this going to be Find out so I can project a performance to a partner, those type of questions.

Erwin  

So let’s talk about say someone brings you a deal and needs money. You said that you broker private money. What if you need a first mortgage on an apartment building? That’s not?

Kyle  

Yeah, of course. So we’re a full service mortgage team or brokerage. So we deal with the big banks, the big lenders, alternative credit unions mix, the entire spectrum of lenders, we deal with in other private so institutional privates, like mechs, we also have our own private money, we have our own fund money. So it’s based on what the client needs the best interest of the client, we can run them through the run them through the spectrum. What we’re seeing a lot now and this is I’ve been seeing this for a while, is a lot of the purchases aren’t being done with the eight rate lenders, they’re being done with an alternative lender to get in help stabilise the property. And then once the rents have been stabilised, utilities passed on, fixed up, etc, then the property’s more stabilised to go to a CMHC type lender to go to a big bank or credit union etc.

Erwin  

Interesting. What’s like the like the baseline for someone to go alternative versus a lender. Like, well, what point because I’m a novice to this area.

Kyle  

The biggest thing, the biggest thing that I see is, especially in today’s environment, with the higher interest rates, when they’re running an noi calculation, the amount of down payment required to go straight to a big bank right away on a multifamily type deal is pretty large. So and this is also going to go back to kind of the profile of who this person is and what they’re buying. If you’re buying a relatively turnkey apartment building. So maybe it’s not like top market rents and a beautiful condition, but the rents are decent, the income and expenses are okay. And you’re buying it on market, you’re probably looking at a 30 40% downpayment, just based on where the rates are today. That’s what we’re seeing on a on an average basis. Now, if you’re but what we specialise in is we finance a lot of the really dilapidated stuff. So buildings that are really low rents really rough condition are gonna go over a major overhaul,

Erwin  

right, evaluate strategy, the value

Kyle  

add strategy, so we’ll finance those at a higher loan to value because there’s going to be significant capital injected behind us. So those are the type of strategies we need more specialise in. But if you’re buying an A, the truth of the matter is, if you’re buying a a rate type deal and apartment building, that’s an eight rate deal, you’ve probably not got a great price on it, it’s probably been sold at a pretty fair market value. Most people who are going to sell a good building aren’t going to give it away. Most of the people who are giving selling an apartment building at a discount are because it’s in rough shape. So when you’re buying something at market rate, and you need traditional financing, it’s a pretty large down payment. So 30 40% Down payment that we’re seeing a lot, which is causing those borrowers to say, Hey, can I go with something a little bit more alternative to get into the deal, so I don’t have to put so much money down, it will impact my cash flow, but at least I have less money down upfront.

Erwin  

Because they need to preserve cash for the rent. Oh,

Kyle  

that’s right. So even though it’s good buildings that are in decent shape, there’s still some units that they want to try to turn over, there’s still certain things that they want to do so

Erwin  

right. So then in an alternative, I know that’s a broad topic, but then an alternative mortgage that alternative lenders situation, how much down does someone need them

Kyle  

alternative, so it really is gonna range they’re gonna consider an ROI, it can be as little as 20. Depending on the private deal we’re looking at, we fund private deals with as little as 15% down, that’s got to be a big value add though, we got to see a big lift on the property. But 20 25% in the alternative space, a lot of credit unions are still doing 25% Down 25 year rims. So the CMHC is the holy grail of this space. But the truth of the matter is a lot of deals aren’t actually going through a CMHC because it’s not quite working out the way it needs to to fit inside their box. So credit unions are picking up a lot of a lot of that slack. Right now. They’re doing a lot of 25 year AMS 25%, down a little bit higher rate, but gets you into those common sense type deals, and aren’t great cash flow to the gate, but it gets you into the property with a reasonable down payment and you can start doing improvements to management, expense reduction, turning over units when possible, getting rid of delinquent tenants, etc.

Erwin  

Fascinating and then much so bad and depends on the investor themselves on their ability to unbearable cities, their resume their background,

Kyle  

and that’s what I always call the investor profile. Is this a high net worth person just looking to park cash? Or is this a couple of who’s really trying to expedite their growth or a couple or an individual is really trying to expedite their growth and grow fast and use real estate as a means for retirement. So that high net worth Doctor Why are you just parking cash, they might not care. They’ll wait for the building to turn over that other profile might be looking for a more aggressive strategy to turn things over.

Erwin  

Right? Right, right. And imagine you met a lot of these hustlers. I’m sorry, I’ve worked on the word hustlers.

Kyle  

Yeah, I appreciate somebody with hustle. I appreciate with somebody who was willing to put their nose to the grindstone and get a deal done. Or I’m blessed to work on both sides of it, where I have, I have a lot of people who are willing to hustle and grow. And I have a lot of high net worth people who are just looking to park cash and deals. So it’s really been a blessing for me and growing my business. Right.

Erwin  

And then Colin, I want to talk about your private lending business. Can you start with where you started in the private lending business? And now where you are now? You’ve gone you’ve gone far?

Kyle  

Yeah, yeah, I’d love to. So I got my start. And I’ll tell you a little background. So some people might know me, some people may not. It’s 2023. Today, I started investing in 2013. So 10 years ago. Now, I feel like when I say I’ve been in the business for a decade, it makes me feel old. But I’ve been in the business for a decade. I started with my first couple of deals with pre construction condo, single family home, a triplex, and I came from the financial services space. So I was a financial advisor. So I was really into, you know, the cost savings and the the cost of the money. And for me, I started off with partners, so I partner with people, so we get a low cost mortgage. And in 2015, I went to a real estate education company, you know, an HGTV star from that is coming here town going to teach you about real estate. So I went to one of those and I learned a tonne. And I learned about the Burr and the flip to yourself strategies where you buy renovate, refinance, repeat. And I remember for the first three years after that, I would say all the time, I don’t know why anyone would do private money, just burn, just burn, just get your money back on. You don’t need private

Erwin  

parts of a lot cheaper back then though.

Kyle  

Well, 2018 happened in a hurry. And that was when the stress test came down the mortgage lending market tightened. And I still remember my first private deal the first time I’ve worked with private money, my lovely wife, and I Chelsea bought a property in 2017, right before the change, and she got the mortgage in her name. And we sold the property right into 2018. And we tried to port the mortgage and we had a new deal closing in a month. And they said no, sorry, miss you, you don’t qualify anymore. So we called her out. And we ended up finding our first private loan for a deal that we were going to do and we borrow that money

Erwin  

well from the subsidy.

Kyle  

And that’s when it kind of dawned on me, oh, maybe I can’t burr forever. And maybe I need to do something beyond the banks to accelerate. From there, a board a little bit more private money myself to fund my private, my own deals. And then about a year after that a lawyer that I work with still to this day, called me and said, Hey, Kyle, I know you have access to a lot of investors and stuff. Start telling people that you have access to private money. I said, Well, do I and who knows? Yeah, I have myself and my clients have a lot of capital. And we would love to finance the type of deals that we’ve been financing for you, your broker, your licence to talk about this stuff. Let people know that you have access to private money, we’re not guaranteeing anyone we’re financing their deal, just that we have access to him. Well, I would say that phone call pretty well changed my life, because I didn’t know any better. And I just started telling everybody. And what happens when you in this space start selling people that you have access to private money, and your phone rings, and it rings a lot. And we’ve been blessed to be able to develop over a relationship of a reputable private lender, we’re not the cheapest game in town. We’re not We’re not a discount private lender. But if I commit to a deal and say I can get it done I we get that deal done. So we’ve been a reliable source for a lot of investors to help grow and scale their portfolio. As I mentioned, I’m not the cheapest game in town. I’m not a discount private lender. We are a premium cost private lender. But when you need a deal done and you need a reliable lender you can count on and we commit to your deal. We’re gonna get that deal done. And the

Erwin  

industry has changed a lot because a friend of mine told me that privates are now have to be brokered, is that something that happened recently, last few years,

Kyle  

specifically with registered funds. So if you’re going to deal with the registered accounts, you have to have a broker and if you have more than five accounts, you need an administrator. So yeah, it’s absolutely it’s really best to have a broker involved. And I’m not, that’s not a broker bias. I will tell you, I deal with some of you in the real estate investor scene, if you will, the community of a lot of people that we see on social media doing with doing investing. I work with a lot of those people. And what a lot of them have discovered is our broker fee is 2%. We charge 2% to broker a deal. And what they realised is

Erwin  

just clarify, that’s the LEND amount of the total value of the property. My job as a realtor.

Kyle  

We’re like different 2% on a different amount. Exactly, yeah. So what a lot of these people found at first they they’re like, Well, it’s, you know, I could save that money if I raised some money myself. But what they realised quickly is if they don’t have to go through all the administration compliance, everything that we do to put the money together, they can focus on getting better deals, if they could do one or two more deals a year that make an X number of profit, paying me the 2%, to put the money together as a load off and actually more profitable for them. So as a newer investor, you have to learn how to raise money yourself, you have to be able to do it. But when you get to that pendulum of scale, it almost becomes less expensive to have a broker handle that side for you. And you just negotiate better deals. When you’re at the finish line of a deal negotiation. You’re like, I gotta get this 2% less, because I gotta cover paying Kyle on this deal. So that’s how a lot of the lookout,

Erwin  

I think many people need to understand like, how much stuff costs, like, for example, everything you need to do for your regulatory requirements. Yes, absolutely. We get to the fun and a bit, and you can tell me how much it costs you.

Kyle  

It’s a lot.

Erwin  

So this is awesome. So sorry, you mentioned that you’re working with a lawyer who had a tonne of money. Has the journey changed? Is that still the primary source of your capital? Your private money? Land? Yeah, no,

Kyle  

I like to call that my confidence was my confidence money. So it wasn’t out there. Just you know, I wasn’t full of it. Right? I was I was telling the truth, I did have access to private money. So it’s certainly a partner of mine and somebody that I still work a lot with to this day. But that also gave me the confidence to start talking to other private lenders, and start telling them that not only do I have other people who come to me to lend their money, but I now have borrowers coming to me because it got to the point where when I started telling everybody that that first layer couldn’t do all the deals anymore. So I saw that I call that my confidence conversation. That’s where I can put myself out there as a private lending broker. And not only did that attract a tonne of borrowers, it gave me the confidence to talk to other private lenders and say, hey, I can help you.

Erwin  

Okay, right. And you’ve raised a lot of money. You mentioned 150 assets under management, under 50 million, apparently is a lot of money out there. Is that your experience?

Kyle  

Yeah, there is. And you and I talked about this previously and one of the things that I’m really passionate about or it’s part of my core beliefs, there’s a lot of money out there, but there’s a lot of people that don’t respect the money and they treat OPM like a gimmick other people’s money yeah. Oh yeah. OPM, other people’s money like, Oh, I’m gonna get OPM, I’m gonna get OPM, they do big blurbs and videos, OPM, OPM, I don’t talk to people, I don’t talk to people about their OPM, I talk to people about their retirement account, about their children’s education fund, about their lifelong savings, about the equity that they’ve scraped together in their home. And when you start treating people like a gimmick, OPM, you’re going to struggle to raise money. But when you start treating people and their money and their hard earned savings with the respect it deserves, and bringing them secured lending opportunities, where they’re even owner in the property, or they have a registered mortgage position on title, you’re gonna find that the access to money expands very, very quickly, including referrals. People start telling, hey, I’m working with this guy, we lend your money. It’s a registered mortgage position. You know, this isn’t some fly by night operation. You’re lending your money as secured mortgage. Oh, really? What do you get a double digit return? Wow, tell me more. And they tell their friends and they tell their friends and high net worth people hanging out with high net worth people. And the high net worth communities. Talking about money is not a faux pas. It’s not bragging or boasting, it’s sharing and growing together. And so when you become a trusted source within those communities, your name travels fast.

Erwin  

So I’m naturally curious, who are your lenders have a high net worth individuals that are lending cash? Or are we even talking about like Mom and Pop who are lending like HELOC money?

Kyle  

Yeah, a little bit of everything, a little bit of everything. So certainly high net worth people with registered accounts. So RSP money TFSA money, definitely high net worth people into retirement. They paid off their house, they opened up a HELOC and they use that equity in their home to help service their retirement. And this isn’t a secret anymore. I give it I give it off pretty much every anytime somebody asked me about this, but I’ve got a great deal of capital from entrepreneurs who have holding companies and operating companies sitting on retained earnings. So maybe they own a manufacturing company. Maybe they’ll know windows and door companies. They’re our contractor. They were a plumber or a mechanic and they opened ran a business for years and retained a lot of money. In their corporations, they don’t know what to do with it. They don’t know what they can spend it on. And but people aren’t real estate investors, but they aren’t real estate investors. But they have invested in real estate, they have a shot that they own in some core area that’s worth a million bucks now and they paid 100 grand for it 20 years ago, the other house in the in the burbs that they paid 200 grand for, that’s worth 1.2 million. So they aren’t trained real estate investors, but they understand that real estate is a good investment, they made their money somewhere else, they don’t want to give you a landlord, and they’re sitting on these retained earnings. And that’s been a great source of capital for me, for those type of people who understand that real estate’s a good investment, their time is spent on their business, which is manufacturing or plastic park, but they want to put it into real estate without spending time or energy and private lending is a great spot for

Erwin  

them. Right? They want their net cash flow without putting the effort. That’s right. So Kyle, before we recording ends, we’re just gonna talk in general terms. So we’ve both done really well in real estate, a lot of people have done really well in real estate. Some people got it wrong, lost their shirts lost the other people’s money as well. So the loss of other people’s shirts, whereas private lending now and for example, before we were recording, I was gonna ask that I said someone’s gonna ask her opinion on promissory notes.

Kyle  

Yeah, so promissory note is a swear word to me, here’s, I’m gonna say about that. In terms of any type of scale business operations, promissory notes should not be part of that. Okay, so if you’re trying to be a serious real estate investor, and raise serious capital, and become an authority in the industry, and somebody that people can count on, as a place to invest in, and you’re doing promissory notes, I think there’s a shelf life on your business. Now, what I will say is, there can be a time and a place, if you have somebody you very much trust, and you have a long standing relationship. And there’s a small amount of money that you’re going to do for a very short term, 3060 days, clear exit strategy, and you really wanted to and you’re okay with doing that, I still would not condone that and think that’s a good investment. But that’s your call. But if you’re an investor, now, especially in today’s market, there was a time there a couple years ago, where the borrowers were almost calling the shots, there was almost more money than borrowers. So the borrowers were like, I don’t want to pay the legal fees to secure it. So the investors like, oh, I want to return, okay, I’ll do a promissory note. And it’s just crazy to me that people would spend more time researching their vacation than researching the security where they’re going to put hundreds of 1000s of dollars. So the answer is promissory notes. Don’t do them. It’s not a good investment for you, borrowers, your long term devaluing your brand. Lenders, you’re writing your money on a napkin, don’t do it. So secure your money, right, get a registered mortgage position, the way the market has changed recently. There’s a lot of demand for capital right now. Thanks, if lightened up mix and tightened up, the lenders have tightened up as a bond pa lender demand, demand, why not secure your money? Why not pay the lawyer to secure my money is my

Erwin  

money, it’s not that much money. That doesn’t cost much. It doesn’t cost?

Kyle  

And it’s funny, because I have people, some people will say to me, Hey, I saw that deal you just posted, Kyle. That’s a second word. I don’t know if I’m comfortable with that. And I would say didn’t you tell me you have $200,000 on a promissory note to somebody. I trust them. Okay, whether you trust them or not, register a second position charging charge the property. And I want to speak broadly about this. And this is specific about anything but in the event of a catastrophic failure of a company or business. The secured lenders get paid. First, the secured lenders can be released from the proceedings, and God the assets, take for them to deal with the unsecured lenders, sit and wait and wait for wires, professional fees, trustees, etc. All of these things, all of their fees come before your principal. And this is so important when everything’s rosy and happy and everything’s going well. And nobody thinks anything about a promissory note. But when crap hits the proverbial fan, the unsecured lenders are lucky to get pennies on the dollar. And that’s not an exaggeration are quote, pennies on the dollar. So secured lenders. However, if you’re a first position mortgage, what does that mean? You get paid first, you get paid first. If you’re a second position lender, after the first position lender, you get paid and you’re charged in that order. See You don’t have to wait for things to go through a big process. When the property is discharged, who’s in first they get paid first is their money leftover, you get paid second. So from a risk perspective, you want to be in first whenever possible. But if you have somebody you trusted, and you want to go along to them, say, Hey, I’m just gonna take your property with a second mortgage, just so I’m in line, just so there’s no question about where I am in line. If they say, Oh, well, can’t we just do it as an unsecured note? No, why is trying to flag that is a red flag. And why is it not important to you that my money is secured. And like I said, two years ago, there’s the market was in a weird spot where borrowers were calling the shots. If you’re a mon pa lender right now, and you got some money to put it into the market. This is my favourite line. And I’ve used this for years. It’s called the golden rule of lending. And the golden rule of lending is he or she, who has the gold makes the rules, they who have the gold, make the rules. So if you’re lending your money, and somebody says, I don’t want to do a promise, I want to do a promissory note. I want to pay legal fees. Thanks. Have a great day. Thank you in this market, secure money, get a registered position on property.

Erwin  

All right. I just wanna remind the listener, we had a lawyer on just like month or two ago, he’s a sole lawyer practice practice, and he’s working on 32 Power sales himself. So yeah, like, you can’t tell me it doesn’t hit the fan?

Kyle  

It does. It absolutely does. The people who are secured, but when shit hits the fan, the people who are secure, I’m not saying you’re not going to get have any stress in the scenario. But you’re going to be able to sleep at night. Your money is registered against something. There’s bricks and mortar tied to your money.

Erwin  

The reason why we invest in real estate, that’s why

Kyle  

your real estate, right, so if you’re unsecured, you’re not tied to anything. And I can assure you, you’re going to lose sleep at night.

Erwin  

That’s funny, like the promissory notes almost an analogy for fiat currency. When you’re out there hustling hard. Would you rather have something not secured by anything?

Kyle  

Yeah, I mean, I hear the odds are pretty good on blackjack and roulette. You know? And you laugh and everyone laughs when I say that. But that’s honestly what I believe when you’re doing a province or a no, go to the casino. Put it on block. Gamble. I don’t need either. I see all the time. I’m too financially literate to gamble. The odds don’t make sense. I can’t

Erwin  

I just don’t make sense. So Kyle, your name kept on coming up. So you can you can respond however you want. But your name kept coming up in the car like Thank you, Kyle, people are saying like, Thank God, Kyle should hit the fan. Thank God, Kyle was there to back it up. Can you elaborate on any any specific or general stories you want to share? Because shit does hit the fan, right? And then what?

Kyle  

In 2022, we were blessed to never have a default. Okay. In 2022, we had two different companies that went under, in total five properties. So three with one company and three with the other not going to get in any names or specifics or numbers or anything. But in my overall practice, we had five properties go into default over two companies. One of the value ads that I’ve always told my lenders is I’m an investor first. And if shit hits the fan, I will do whatever I can to, to help. And in these scenarios, the company’s the underlying companies that owned the properties that we lent money to went under. But the assets and the deals we lent on, were actually okay, like they were still decent deals. So the decision that I made along with my team, two agents on my team helped contributed some capital to me to help me get to recover these assets, we made the decision to buy all five properties from the power of sale process, we back paid our lenders the interest that they were owed for the months of the period, months of the power of sale period. So there was no loss, and they were out of the bankruptcy proceedings. And out of those five properties, it’s now this all happened in approximately September, we’re in April. Now, one of them has already sold, one of them is listed, and the other three are all being listed in the next two to six weeks. There’s some weather issues that we’ve been waiting on. For the exterior work to finish. In all five of those deals, all of my lenders will be receiving 100% of their capital back all interest, the only thing that they’ve had to do is had to stay in the deals a little bit longer than they want it to so I could get the construction done. But we were able to recover all the assets. And I’m not going to make any money on buying these properties. I should about breakeven, there’s two that I’m going to lose a little bit on two that I’m going to break even on and one that I should actually make a few bucks on to cover my other losses. So I hope to break even on the whole thing. And we made the decision as a team that if we You’re gonna take a loss by doing it, we wouldn’t have been able to do it. But we made the decision if we can at least break even to protect our lenders, I was willing to put the time and energy into doing that. And I will say this as a as a final thought on that, in no way is this a guarantee that I could do this every single time. But if I can, and if it makes financial sense for me to go in and step in and recover at the outset, I’m more than willing to do that, once again, we we earn a good income for what we do. And I want to make sure that I step up and take care of my people when a problem happens. So

Erwin  

that’s pretty impressive. Your own staff put in their own money, too.

Kyle  

So yes, they did. They lent the money to me to take secured off the properties just so that said, yeah, they put some money in, well, there were agents on my team, they had their clients and they wanted to make sure that they we want to step up, like I said, the companies that we lent to failed, the specific assets that we were secured to, were still decent deals, the companies went under for other factors, the specific deals that we were on weren’t the problem. So we made the decision, because of the properties in their condition at the time had we sold them, the lenders would have taken a hit. So for me to spend six months managing some construction projects. It’s been a lot of work, I’m not going to I shouldn’t sugarcoat it. It’s been a lot of work. But I said this earlier in the podcast, I didn’t know if you’re going to specifically bring this up. But this isn’t OPM. To me. This is people’s retirement, this is people’s children’s education funds. This is their home equity. And if something happens, it’s not like hey, sorry, new OPM, I’m gonna go get new money, we got to do whatever we can to help these people.

Erwin  

And to the novice investor, I think they should always whenever judge an investment or investor they’re partnering with, just simply ask yourself the question, will they shed a tear? If I lose my money? If the answer is no, Ron?

Kyle  

Ron, some of the criteria that I look at when I’m underwriting deals, is I want to know, if the deal goes bad, what will the Operator do? Will they go get a job at McDonald’s to help make this right? And by and large, I’m right, I when I when I underwrite a deal, and 2022, I missed on two. But in the grand scheme of my portfolio, that’s quite a small percentage. One other little tip of give people when it comes to lending money, and partnering with people, I don’t do this as much just for loans anymore. But I certainly do this with partners, if I’m going to partner with somebody. If we’re going to be a partner in a business, we’re going to go out for dinner. And we’re talking about religion and politics. And I hope we don’t agree. But can we have a cordial conversation? Can we agree to disagree? Because if you’re going to get into partnership with somebody for five or 10 years, you better be prepared to have difficult conversations. Yeah, right. So get marriage is a marriage. There’s benefits to a marriage that you don’t get in a real estate deal as well. So you better be able to have those tough conversations.

Erwin  

You’re getting married, you better talk politics and religion before you tie the knot.

Kyle  

And like I said, some people are like, Oh, well, what if? What if we don’t agree on it? Well, I hope we don’t. I hope we have a difference in opinion.

Erwin  

Let’s figure that out. Now, for later, before we have babies together. And

Kyle  

if there is a difference that we can overcome it, great, thank goodness, we had this conversation. And if you’re blue, and I’m red, or I’m red, your blue, or whatever that is, and we say, hey, that’s an interesting point. I’ve never heard somebody bring up that side. I’m gonna think about that more. I’m not gonna change my my votes. But I hear you, and thank you, or vice versa, Hey, I hear your side as well. That’s interesting. Maybe we’re not going to vote for the same team. But at least we’ve had a difficult conversation, and we’ve come to a reasonable understanding.

Erwin  

So just to add to that, you’re already going into a real estate relationship. So I’ll just throw in if you’re going to go into a personal relationship you should bring up real estate is about as well as the investor, I want to buy more real estate. Are you down with that, like me? I’m anti debt, and then like, you’re gonna have challenges.

Kyle  

I have a couple of things I want to say about that. Recently, a friend of mine posted on social media saying, What do I do if my spouse isn’t on board with real estate? And I responded with divorce. I’ve been in this business for a decade, and I’ve seen many people that I had a call with five years ago, call me back just recently saying I finally got rid of my spouse, I’m ready to buy real estate. And it sounds like a joke. But that became an issue for them. One person had this goal on this ambition, and the other one did. The other. The other thing I’ll say is you There can be boundaries that you put in if one person doesn’t want to sign debt, whatever. But

Erwin  

I have the clients too. I have those clients.

Kyle  

It’s a difference between not interested and not supportive. Right? If they’re just not interested, they don’t want to sign on all these mortgages. They don’t want to do the calls and evening and weekends, but Honey, do whatever you want, whatever you want to do whatever you want to sign for. Yeah. Don’t touch your house, don’t touch the house, do whatever else you want. So

Erwin  

alright, let’s talk about fund. Yeah. What are you thinking?

Kyle  

I’m thinking my lawyers and accountants did well, so far. We’re cheap. Yeah. We’re well into six figures and starting the fund and accounting and legal fees. It’s not for the faint of heart, guys. You’re gonna pay accountants and lawyers a lot of money and still be shocked at the amount of stuff they’re asking you.

Erwin  

Yeah. And ongoing fees, like ongoing Opportunity Fund exists, they’re gonna be ongoing fees.

Kyle  

That’s right. That’s right. And what I was shocked about, and I just want to say, because if they hear this, the team of people we hired were fantastic. They were amazing. I couldn’t have done it without them. But I was shocked at the amount of stuff that they still had to ask me, I get another bill for X amount of money. And I was like, but I still have to answer all this. So just be aware, if you’re going to do it that if you’re a newbie, don’t start a fund day one, you need to have some background and some stability underneath you before you start spending this level of capital on a phone. But I am a firm believer that the fund models are the future of investing in real estate. I think the classic JV splits, you go on title, you do the work, I think there’s a shelf life on that type of stuff, I think it needs to be done. And in the fund model in the future, for private lending, it makes life so much easier for not only the lenders, it’s much more passive for them, but also for the borrowers. When you’re dealing with an individual private lender, and something comes up on a deal, so you’re going to be 90 days delayed. Well, that private lender, even though they’re not supposed to, they’re not supposed to commit to anything until they get their money back. When buys a cottage and they need their money back instantly the terms up the borrower needed a 60 day extension, the lender needs their money, it just creates a lot of stress. So having the fun model eliminates a lot of that emotional and the trigger in that the fun can extend the fun can do more things without that individual emotion in the deal. Sorry,

Erwin  

because life happens to 100% Yeah, things happen. Like, you know, car accident injury, the big see things happen. Yeah, 100%. How does that change for the lender, or the borrower pick one place to start.

Kyle  

So for the lender, the benefit to the lender in investing in a fund is, first of all, there’s no more downtime between deals. So you don’t do a deal, get your money back, wait for a new deal, do a deal, get your money back. So it’s invested in a pool of mortgages, so it’s always out to work. It’s also more passive. In the current model, you have to go, you have to look at an eel ask your questions about the deal. I like to deal I sign the paperwork for the deal. I go to the bank and get the money for the deal. I go to the lawyers I signed for the deal. I wait for the deal to pay back. In the new model, you do your due diligence upfront, you ask your questions upfront, you deal with our end, you go through a declaration of trust and our om all upfront. Once that’s done, you put your money in the fund, set it and forget.

Erwin  

Right. So that’s the regular regulated under Ontario Securities Commission. Yeah, so it’s

Kyle  

getting as well. So and then you get a monthly distribution. So setting up again, if you’re lending with registered accounts, it’s substantially less fees to be doing a share purchase of a fun than doing self directed mortgages. It goes from about $500 a year to $75 one time, so it’s much less expensive to do the fun model. The other big benefit that this is gonna have for people is we can drip the returns now. So if you’re getting a monthly distribution, you don’t need that for lifestyle, you can reinvest in compound it, we have many clients who are sitting on a bunch of cash in registered accounts because they get their monthly payments. They can’t it’s too small to reinvest. So you have to wait for it to reinvest the other side of it too. And not that we’re still not attracting very high net worth people is the minimums are much less. So $10,000 is the minimum, we have an introductory rate of 3000 where people can get in a little bit less right now. But the standard minimum is 10,000. In the current private lending space, you really have to have like 50 to get in, but more realistically, it’s 100 to get in so much lower barrier to entry in the fund model.

Erwin  

Because I’ve heard even Some lenders don’t talk to you unless you have like 250. And my mom seems to keep going up.

Kyle  

In urban, it’s that I guess it’s the market, it’s real estate values. If you have a $500,000 deal, and you got 10 people putting in 50k apiece, have you ever tried to herd cats? I would say it’s easier than dealing with 10 lenders on a deal.

Erwin  

I think you should do an open house with novices and have them come into your offices and see how hard it is to do a raise. Good idea. Because I don’t think people don’t appreciate how much admin work goes into what you’re doing into brokering a deal. Because you have one side, you have the borrower and the other side to the lender. And then like you said, like there’s all these personal things always come into play, you know, I’m, I’m at the cottage, I can’t review documents until Monday, or all I’m going on vacation, I can read can this wait till Friday? borrower needs the money in 48 hours? Right. But I’m telling you, it’s it’s slowing me consolidated. So I have a quick question for the fund. And what kind of transparency do people have in terms of like, what they see going to what deals in terms of like, do they see anything about what kind of deal goes into into the fund,

Kyle  

or not lending on specific deals anymore. So we have a trustee model. So there’s four trustees in total, that oversee the lungs and the management of the money, we are bound by our om to only do secured lending. So whenever we lend money, there’s a registered mortgage position on the property. So no napkins, no IOUs handshakes, keynotes anything like that registered mortgage position, we are bound by certain loan to values depending on the tear of the or the share class that you invest in. But in terms of the specific deals, there is no say in terms of the lender perspective or the investor perspective. It’s a language I have to change job right now I deal with lenders in the fund I deal with investors. And there’s no saying what projects we’re investing in or lending on. Now, that being said, we are committed to a quarterly update, we’re probably going to do monthly, but we’re committing to a quarterly update of just what deals we’re currently and how are those deals are going more of a newsletter type model than a individual property thing. So and this is, and this is different strokes for different folks, we have some people who very much like knowing I’m lent on 123 Main Street, I’m in first position, I know what it’s worth, I drive by it every third Tuesday of the month. That’s okay. But we have many people who also more information isn’t necessarily a good thing for them. They get nervous when they get updates, they, they really do want something more passive, and where they’re incentive spread across a bunch of things. If there’s one problem at one property, they don’t know they don’t care, they’re not worried about it. So it can be a little bit different investor profile potentially.

Erwin  

So what’s gonna go into the fund in terms of deals that you’re gonna fund?

Kyle  

Yeah, so we are a income fund a mortgage trust. So I’ll give you a little little rundown on this are REITs. Many people are familiar with a REIT. A REIT is a real estate investment trust. So it’s basically a fund that buys real estate. The underlying legal structure of a REIT is an MFT, a mutual fund trust, that’s the legal structure they use underneath it, but it’s known as a REIT. It buys real estate. A mech is a mortgage investment corporation. So that’s what we started to build. That’s what we were going to do building MC, which likey REITs is a pool of investments. But instead of buying properties, you lend on mortgages. So the challenge with a MC though, is you can’t exceed 50% residential mortgages, which means a an apartment building a 10 Plex counts as a commercial mortgage. So we didn’t like that restriction. We love apartment buildings, we love lending our apartment buildings. So what we did is we created a, it’s almost a new class, there’s only a handful of other people in the country who are doing this. But it’s a mutual fund trust structure. But it’s designed to only lend on mortgages. So it’s designed to just lend on secured mortgages. Now the cool thing about our structure is in the event of either an individual disaster or a large scale disaster, like an economic downturn, our mortgage trust, because of the underlying structure that it’s built on, can own real estate. So we need to if a deal goes sideways, and we need to recover that asset and take it over, we can our structure allows us to do that. So we put a tonne of thought energy and accounting legal fees into building this structure that we believe is not only amazing for our investors in terms of lending and investing their money, but it allows us to protect the principal in the event Enter the disaster.

Erwin  

So you can take possession of the property and character you’ve done in the past is take possession, renovate it, whatever you need to do get ready for sale, maximise your exit price. Exactly. Why would you even do this? I know someone who did a sever and build on one, they had to take back and property. And it was like 50 foot lot, it actually made sense for them tear down the house and build build two semis. Yeah, that’s something you would do too. So complicated question.

Kyle  

I would say no, then this is what people have asked me many times. So our targeted returns within within the fund are 811 and 14. Disclaimer, you have to go through the EMD. It’s got to be suitable all of those things. But our targeted returns within the three funds are 811 and 14. Yeah, see SQL in Nevada legal advice, accounting advice? Absolutely. Should we expect more like are you going to exceed these returns? And the answer is we’re really, we’re not planning on it. We’re planning on consistently delivering them. And being a stable income fund. Right? We’re not an equity fund, we’re not going to do a deal that’s going to hit it out of the park and hit a way bigger return. Right. That’s not what we land, just above the rates that we’ve quoted, you apt to deliver those returns consistently. And we have a great stable of borrowers ready to do that. So to answer your question about what I sever and split and all those things, the answer is if we take over an asset within our plan is not to maximise the investment deal. It’s just to protect principle and get the money out. Now, if there’s ever an opportunity that comes into the fund that goes into recovery, on my answer is I would probably buy it outside of the fund. To get my make sure the principal within the fund is protected, the income has stabilised and if an opportunity came, I would look at purchasing outside of the fund. Because this is an Income Fund. This is about mortgages, or underlying structure on properties only to protect. It’s not a it’s not a way to generate higher returns within the fund,

Erwin  

I have spoken to some private lenders who had deals go bad, I’d imagine they someone would sleep better at night, if they’re in a fund that’s regulated under the Ontario Securities Commission versus having to go through the process of power of sale or whatever, or you taking control.

Kyle  

Then I mentioned this earlier, there’s many people who go through suitability and go through all of these things. And they come out as a very aggressive, you know, advanced investor, and that has a high risk tolerance. But when a deal goes bad, no matter how much how much you say you were comfortable with it, when it’s actually happening it, people get nervous, they get scared, it’s a lot. And all of the little updates can actually create some more stress for people. And in the fund model. They’re just they don’t see that stuff, as long as they’re getting their their return. Even if there’s challenges going on on specific loans within the fund. As long as we’re still able to maintain the yield. They don’t have to hear about all the nitty gritty little challenges that are causing the fund manager stress, as long as the yield is being delivered.

Erwin  

So Kyle, we always like to talk about what’s the worst case and the truth about real estate investing. We talked about earlier about what if someone just did individually, like one to one lender borrower? How bad can they get? So for example, a friend of mine lent a second mortgage on a house, she wanted to be passive. But of course, the borrower did not let the lender know that she was behind mortgage payments. And my friend and I find out until the bank had already started proceedings to take back the property. I believe the immediate cost to the homeowner and borrower was over $10,000 in legal fees that someone has to pay. Can you speak from your experience? Like what is it like for on if you’re on your own type thing? If someone’s trying to do a private land deal on their own? And then the deal goes sour? What’s the worst case? Yeah, because in my experience went to see with no different tenants, if they’re gonna miss rent, they usually don’t tell you not in front of the borrower, if they’re gonna miss them. If they’re gonna miss the payment, they usually won’t tell you. You’re already in trouble at that point, then,

Kyle  

yeah, as a second position lender, you are at risk of being fully wiped out and not getting any of your capital back. Okay, so that is a genuine risk that you have in second position, especially for the top of it, if you’re not on top of it, right. That’s interesting thing about deferred interest as well. If you have a deferred interest deal, you might not know that something’s going wrong, because you’re not getting paid until the end.

Erwin  

So you have even less chance of getting a red flag. Yeah.

Kyle  

So, in first position is very unlikely that you are going to take a major loss, is it possible that you take a 10 20% hit on principle in first position, it is possible, it’s possible to take more. But depending on your underwriting guidelines and what you’ve done, it’s possible that you take a 10 20% hit for his position, it is very unlikely that you lose a large portion of your principal lending a first position, you wouldn’t do what you brought up about lending a second position is absolutely true, you need to know who you’re behind. Because there’s a lot of MCs that won’t say anything to you. If you’re if you’re there in first position, and you’re in second. If that’s me, I just have a moral compass, if I’m in first position on a deal, and we’re going into power of sale or default, and I see that there’s a second position there, we’re going to do some work to find out who that person is, and let them know what’s going on. Whether I don’t have any obligation to that, but I’m going to do it, because I want them to know we’re taking action. So if you’re in second position, make sure you know who’s in first, if it’s some Joe Schmo, private and you don’t know them, you might want to do some due diligence on that, if it’s a bank, most banks are going to be pretty quick on it, and will serve notice to all charges. So if you’re charging, second position, they’ll serve notice, if you’re in first position, there’s a chance you’re not going to get your interest, there’s a chance you can take a small hit on principle, if you’re going to take a big hit on principle, either the markets completely crashed, or you’ve done something terribly wrong in your due diligence, there’s a good chance you shouldn’t take a big hit on principle, if you’re in second position. If you do your due diligence, you also shouldn’t take a big hit on principle. But it is possible. There is a chance though that you could be fully wiped out, there was a deal that one of the properties that I mentioned earlier, somebody was behind us, we tried to work with them. We tried to we offered let them buy it off us to get they didn’t want to, they said they were Tinker chances, I guess. And they were fully wiped out. Nothing we could do, we were in first position. My duty was to my first position lenders, my moral compass tried to, I tried to help the second person to they took their chances and they were right to zero.

Erwin  

So So in the case of stripe, my friend, she was looking for a passive investment. And then she had to buy the property. So automatically went from not passive at all. Having to pay the legal fee, having to discharge the first taking over the property property needed work. So people need to understand that with the worst case it does happen. And then you gotta have the ability to close on the property. If you have to lose all your money, or lose all your money,

Kyle  

your money, so good for her for stepping up and taking it over.

Erwin  

But not everyone’s capable of that she’s a high net worth individual.

Kyle  

And this is another example of I have heavily tightened up my lending area, because of what happened. We were lending all over Ontario, we’ve now tightened it up to within three to four hours in the GTA. And I got to recover this asset. I don’t need to go there every day, but I need to be able to go there. So if you’re going to lend money to people, and you are that high net worth person looking for passive investment, just in the back of your mind, where is the property, because if you need to protect your money and get involved more, you might need to go to it. So a lot of the gurus or gurus teach about investment where the return is best, which I am a believer of that, you know, investor, you get a great return, but invest close to home when possible. And understand the risk you’re taking by investing farther from all

Erwin  

aspect into a bankrupt investor that lived in London at properties and Muskoka and Hamilton. Like Good Lord, that would take you a long time to cover that kind of territory. So Kyle again. So back to that you are a mortgage professional. To give us a bit of the we partake in the current market. Are you seeing more buyers coming out? Or like are the things dead out there? What’s going on?

Kyle  

Yeah, so we’re end of April 2023 right now. So and I’d love your opinion on this too, or while we’re chatting. But I have seen a big uptick in consumer confidence here in southwestern Ontario. And looks like we’re getting a little bit of stability in the rates. The bond market has settled down. The BOC has settled down and it looks to be relatively at bay. When things were going up so quickly. What I noticed with a lot of people, it’s not that they couldn’t make their payments. They were okay. They were just holding back because they didn’t know how high it was gonna go. And now that that’s kind of settled in. A lot of people are like, okay, yeah, we’re good. Now we can make this payment. We locked it in a fix for two years. So we’re good now or we went to our boss and asked for a raise. So we’re going to know whatever that may be. So I’m definitely seeing the consumer confidence up to coming back. I’m seeing the pro investors that I deal with didn’t stop they were buying the entire time. I’ll call it semi pro, the three to five property owners. They definitely are inching back into the mark. Get looking for deals. Right now. The duplex triplex four Plex game is pretty tough to get cashflow. So I still think it’s a great start for a lot of people, but you’re not going to be getting big time cash flow coming from those. So you got to know your numbers. I think for people getting started in the business, they need to understand construction and value add, they need to understand how to appreciate properties, because that’s, that’s the major plane, I’m predicting a bit of a, you know, my crystal ball has never been that great. But I’m predicting a relatively flat market for a while I’m not expecting major appreciation, I’m not expecting a major decline, we have major immigration coming in to Canada. For anyone who’s opposed to that you’re wrong, we need it. Our labour force needs the immigration we need. We need people here to helping us grow our labour force, but we don’t have housing for them. That is a problem. And that’s something that needs to be addressed, which is going to create buoyancy in our market. So that’s, that’s my opinion on where I see things are going and what we need. So I’d love to hear what you’re seeing to her.

Erwin  

So what I’m seeing on the street is recoveries coming faster than I expected. A house very close to me sold not far from its peak price in one day. So I think because the baseline would be like what the peak was. So then there’s buyers out there who are capable of going somewhere between what I think is fair market, and what was peak. Because they as logical that believe that we’ll be back there within a few years. And we’re losing to lots of people who are buying for themselves. And those people are generally willing to punch harder than we are for pricing. In the end, it’s a broad spectrum in terms of like turnkey, and even disaster properties or having multiple offers that we operate most in the star category. The luxury market, I think is nice. I’ve heard some people say well, actually market never really slowed down, because a lot of those are cash buyers. So they don’t care about interest rates. But yeah, we’ll see where things go. I feel like, you know, my own pricing, you know, I’m thinking like one to 5% appreciation from here, not major, something along lines of inflation. Alright, because I’m not sure what you’re seeing in terms of construction costs, but my contractors not quoting me cheaper.

Kyle  

I’m right there with you. You know, I’ve been 3% guy on my performance forever. performers have always been at 3%. Because I thought that was a relatively inflation type number. So even when things were 20% on my performance, I was still three, because I knew at some point, if it was 2020 20, it was gonna have to be 10 minus 10. At some point, right. So I think that’s, and in terms of the construction costs, there, it has not gone down. I met with a couple of my contractors recently who give me good pricing. And they say they were reviewing things with their accountant, they really get into the bottom line of things and they have to charge more. Like they’re all their soft concert WSIB their their car insurance, their tools, their the equipment they,

Erwin  

like you mentioned, like people are asking for raises, asking for raises,

Kyle  

raises, they want benefits they want RSP matching, they want all of these things right?

Erwin  

In pension, even though they’re striking.

Kyle  

Is it stuck it into the irony of CRA striking tax season?

Erwin  

Yeah, you find you suspect the day, the government’s union instructed the remote workers to leave home and go to join the picket line. I thought that was hilarious. You may not virtually protest you must go protest in person. Wow. Kyle, thanks so much. This has been a blast. Any any final thoughts? Where can people follow along? Where can people learn more about your your, your mortgage fund working people? Yeah. You and your attorney? Yeah, cop

Kyle  

cop mft.com. info at COP cop mft.com for anything on the fun if you’re looking to get invested info at Kyle Ford mortgages if you’re looking for great mortgage brokers, full transparency with a lot of the viewers a lot of the mortgage brokering I have my team handling that now. I got incredible agents that will be available for you, Scott, Scott, Steve Oh, Chris lane, don’t eat Ariel ago. We have great great people on the team that can help with the mortgage side of things kept MFT for investing in the Fund and Kyle forwarded message on Instagram. I don’t really try to grow that but I should say I want to share more content there. So yeah, Google me I try to try to share my wealth whenever I can share my information whenever I can. So

Erwin  

I like the idea that you’re sharing your wealth but

Kyle  

share my information.

Erwin  

Kyle again, thanks so much for doing this. I had a blast. Hope you had fun. 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. 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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**Transcripts are auto-generated.

Erwin  

Welcome to the truth where real estate investing show for Canadians, which started back in 2016. We’re at somewhere over 300 episodes. Each is an hour long episode of hour long interviews of many of the best investors in Canada. We are one of the oldest podcasts, probably this is actually the second oldest podcast in the real estate space. We’re one of the most listened to and downloaded and highest rated podcast and we’ve kept it pretty real on the show. The show is named the truth about real estate investing, as it was inspired by my experience of being a full time real estate investor since 2010. So it was inspired by the number of unsavoury characters, there’s still many of them, and many of them are making news, rumours. All those things will be flushed out, probably in the near future, bankruptcies and lawsuits and whatnot. But yeah, again, unsavoury characters for investments being promoted securities laws, violations, abuse and other people’s money and credit courses out there. And we’re seeing many hardworking Canadians lose money and what in my experience, my journey has been very boring. In my experience, real estate is a pretty all but guarantee strategy of getting rich. I see all but guaranteed because it can be done wrong. Thankfully, in my my seeking of the truth about how to successfully invest, it’s worked out. So my strategy is worked out. My journey started with $3,000 in student debt when I graduated business school shortly after September 911. So the subsequent recession that followed in the.com bubble burst, so it was a terrible time to graduating. My wife and I now own and if your portfolio consisting mostly small multifamily and student rentals and be only have one partner on one of the properties, so it’s generally all my cherries, and plus the bay was a good portion of their own money in these deals. Cherry my wife cherry has around 300 Real Estate Investor clients, they have over over 500 Real Estate Investor clients, almost all of them with corporations, so they’re generally successful investors terminal and successful people financially, and I have over 350 Real Estate Investor clients, including 45, self made real estate investor millionaires and multimillionaires. The lessons are plenty between the investors I’ve masterminding with, including our today’s guests, and more my clients experiences, my own experiences and the 300 Plus successful guests we’ve had on the show, my wife Sherry and I have found a strategy that works for us with our busy schedule. We are I consider ourselves side hustling investors, because our businesses keep us busy, and our young kids and we have young kids as well. I hope you to find your own efficient path that makes sense for your situation with our resources, your skills, experience, your age, the time you have available with the help of this podcast, and the many education events that we have. And also we do coach one on one with action takers who want to work with us directly those who prefer to work with professional service providers. Unfortunately, we haven’t reached everyone and so even worse, many have lost money on get rich quick schemes involving high leverage or flips, or both. A listener of the show Jay sent me an article just yesterday titled house flipping influencer and life coach hit with hefty fines and bogus $400 million training programme. The programme costs 400 million it was the Alex payment the details mentioned in the article is Dean Grazioli who agreed to pay a fine of $1,250,000 as laid down by the Federal Trade Commission in the US. That is a massive, massive fine, one and a quarter million dollars a fine. I first learned to Dean while following Tony Robbins, Tony Robbins being the author of money mastering the game, Tony endorses Dean Grazioli, and Dean is the author of millionaire success habits. Dean was Tony’s Tony Robbins is go to, for investing in real estate. I remember watching Dean’s commercial watching across his property, which was a massive estate. I’m guessing it was in Florida, and he’s greeting his young girlfriend and hearing his pitch and remember exactly what the picture was about. And this was years ago. That’s why I don’t remember all the details. But I remember that his investment model was something I hadn’t seen done successfully. It was hyper aggressive. It was so aggressive that I immediately dismissed it as as being too good to be true. Now, according to the article, 7000 people attended a free introductory course, that was promoted by Dean Grazioli, 70,000 of them so 10% of them paid the $1,000 fee for a three day course. And then 30,000 of that 70,000 paid $40,000 more on courses and coaching. FTC investigators say that the courses did little beyond explain the basics of real estate investing, and were primarily designed to upsell students on more expensive classes. As a direct quote from the article. Again, the article link is in the show notes. As you Google it, I’m sure you’ll find it. Sadly, this all sounds too familiar to me. I spoke to an investor last week who paid 15,000 for courses in a coach and that investor bought a pre construction condo from a realtor that sponsors that club, a condo that will Lead her money that same sponsor sold the investor a non conforming duplex. So non legal non conforming duplex and did not disclose to the investor that the house was located in area within the rental housing licencing programme. So from what the investor explained to me about the property, it has zero chance of passing a licencing programme. Not only that, if there was a fire inspector, if a fire inspector went there today, that investor would have to evict tenants to the streets or face severe fines. I’ve seen investors find $1,000 A month pretty hard to cashflow and are being fined $1,000 a month, and I’m sure things escalate from there. And those are international students living in the property nonetheless, and they will have nowhere to go. So I don’t have 15,000 or 40,000 or courses or coaching to sell, but I will get a call on investors like this like this one who need help. And that’s what I did get on a call explained to her necessarily a couple of things. I met this semester actually one of our one of our tours. I invited her on another one of our tours so that they could see both husband and wife I invite them to so they could see how an actual small multifamily conversion is done properly. So we toured two properties one with my clients one was a conversion in the works. Anyways, I also introduced her to any train of sweet additions to get her on the right path to getting herself getting that property legally sweet it in the basement. Speaking of legal suites, we will be turning actual small multifamily income properties in and around the $400,000 mark this Saturday, June 3, east of the GTA where one can actually cash flow. So you want to if you want to learn how our successful clients invest for themselves to create generational wealth, no get rich quick schemes. But this is rather to us is rather boring, systematic, proven process. If you’d like those things systematic proven and located somewhere with high demand for both buyers and tenants. The side hustle side hustle investing at its best, so that you can go get back to living your life. The cost is a measly $20 plus fees and taxes. And All proceeds go to charity to provide impoverished children with warm winter clothing. For details you can go to our website truth about real estate investing.ca. There’s a link there for you to get more details and to register. Again this Saturday June 3 starts at 10am in the morning. And yeah, onto this week’s show. As mentioned, I have an old friend of mine air Morin on the show this week who is an extremely successful real estate investor, wholesaler and flipper. Aaron and I used to meet monthly to mastermind for about three years or so. So I know him well. I know him very well and can verify that he is a nice guy and I’m quite confident he’s much more successful than 98% of The Real Estate influencers on Instagram. Aaron is the only wholesaler I know who guarantees the purchase from the seller, including the time he got caught in the downturn. This most recent downturn, he knew he was gonna have to take a loss but he did it anyways, he followed through on the contract and his word that they would he would purchase the property from the seller at the stated price. Aaron takes us back to 2008 when he got when he got started delivering hundreds of flyers and hanging bandit signs. bandit signs are, you know their last professional looking signs that are hung on traffic lights that say like I buy houses and there’s a phone number to call soon after. He cracked the code on Google SEO and AdWords back in 2010. And yeah, it’s just been gangbusters for Matt since then, Aaron’s one of the best at generating leads off for off market properties. Hence he has successfully wholesaled 66 properties in the year Aaron walks us through how he grew his organisation, number of employees whose first hires were his journey from hardware. He used to do hardware deals. And now he’s looking for easier for his long term holds what he thinks of the current market have recovered, are we heading lower plus a whole bunch of several several pro tips. I hear novices making all sorts of mistakes out there. Honestly, if you listen to this podcast, I am purposely digging into our guests to extract those pro tips so that you can avoid mistakes and you know, trading real estate like professional like an errand more. And if you can believe in a scammer impersonated a seller, leaving Erin as the buyer. Well, Aaron is actually now in limbo. Because the seller, a seller wasn’t who they said they were. There’s a real seller out there who is not living in the country. The property is vacant. It’s a bit of a mess. Aaron will explain to you the story. And according to Aaron, these scams are becoming more common. So you do not want to miss this episode. And listen to it all the way to the end in order to become a good investor to follow Aaron his website for investors is WWW dot house deals gta.ca. And for people who want to sell off market, GTA host buyers.ca Please enjoy the show. Hi, Aaron.

Aaron  

Hello, everyone.

Erwin  

What’s keeping you busy these days?

Aaron  

Our business as usual growing my company so it’s all real estate related. So that’s what I do.

Erwin  

And I imagine it’s been busy. Has it ever been not been busy? Are you busier?

Aaron  

We get lots of phone calls. We get lots of problematic small sellers with challenges and problems. And since the downturn is certainly a lot of people calling us so it does keep us busy. Then there’s you know I’ve had certainly had some staff challenges Over the past year with the team people coming and going, so it’s sometimes it’s hard to match our capacity with the leads coming in and so,

Erwin  

so more leads more distressed people more people are wanting to sell.

Aaron  

We’ve seen some tough overleveraged challenges right now. So really with the the overleveraged house, it’s like, you know, second or third mortgages, it’s more than worth right now, because prices have dropped significantly over the last year. You know, I guess if they refinance back in early 2022, then there’s, you know, what’s the overleveraged we’re finding it and then there’s the you know, say the finding some older houses that need rentals. And if you look at you know, the rental needed where the the mortgages owing are and then the future value, that’s there’s just no room either so it’s, it’s kind of, they’re over leveraged, given the the rentals needed are finding these sort of problems. But in between, there’s still find enough people we can we can help out and buy their house and make it win win win for everyone.

Erwin  

Right. So I was wrong. I gladly admit when I’m wrong. Yeah, I was thinking that there be so many distressed sellers, the spring market. Yeah, we’re middle of April, right now, as we’re recording, I thought there’d be a lot of distressed sellers, that would actually bring down the average price of housing. And every market is different. But but I thought it’d be noticeable enough that we’d actually see it in the data when you’re shaking your head. Yeah,

Aaron  

no, I assume the major problem is still the demand and lack of supply. There’s my we both assume, but you’re you live, you both live in people with the problems, you know, there’s some, but a lot of them will just list on MLS, and then those houses will get eaten up. There’s just still not enough supply. Right now. There’s not a large enough basket of motivated sellers or people with these major problems. And some of the ones who are, I am seeing more of it just this spring, the overleveraged. Like problems come with the overleveraged. So those are gonna go power of sale at some point. I’m not sure we’ve been seeing the power of sales on MLS recently. But I do see more power of sales coming. Are they going to be great deals these power of sales in MLS? Probably not, I don’t think it’s going to be the quantity is not going to be huge enough to make the market go back down. Personally, I think the worst is behind us. And it’s we’re going up until the next catastrophe, like the next thing that rocks the industry and lowers prices,

Erwin  

right? Because I actually think most of the public doesn’t realise I actually I concur, or the market that we operate in, in this in this because we are mainly started homes, on ground on land. Like for us, based on our data, what we’re seeing in terms of pricing. The bottom was last August. Yeah, so we’re well past it. Yeah,

Aaron  

I think is done like the bottom has gone. Like there’s still a lot of people with equity. So if you got a tonne of equity, you know, I don’t know the stats. But if someone looked into it, I’d say the majority of homeowners still have a lot of equity. Prices have gone up so much people have owned for such a long time. So that kind of buffers a lot of the problems, you got a lot of equity, you know, you don’t really don’t have to stress out so much you can sell your house at a casual pace, get a loan against your property, then sell it at a casual pace if you get into financial trouble. So you got Yup, just more options if you got it.

Erwin  

And like you said, there’s buyers out there. Yeah, in my experience, we’re not seeing a lot of power sales. I actually think that a lot of them are getting done as pocket listings. So they never make it to the MLS to the realtor.ca. So my theory was proving wrong, that I thought that spring would be the bottom. It looks like we’re past the bottom. Yeah.

Aaron  

And the power of sales will be with private lenders. So we’ll see what you know, they probably private lenders are probably, you know, with the big banks, they go certainly more on MLS private lenders, I’m not I’m not too sure what they do with as far as selling and dispose new primaries, but they’re probably probably find ways to get around certain rules and do the pocket listings

Erwin  

can be pocket listings, because they may still less likely likely still list with a realtor. But even the realtor may already have buyers or buyers within their own brokerage for example, get

Aaron  

it done quick get it out of the way. Yeah,

Erwin  

it’s just my observation is in just from I have a lot of friends in the industry, it really seems like there’s the demand is still greater than the supply. Even with more the most distressed sellers we’ve seen in a while, you know, you’ve been around a long time.

Aaron  

2008 full time and

Erwin  

she went to the financial crisis. Yeah, lots of distressed sellers, right. Yeah.

Aaron  

But yeah, last summer so summer 2022 That was when there was probably the we were getting a lot of calls from distressed people. But part of the distress was the neighbour sold for so much a few months ago and I can’t get that and you know what, you pay me that and then they keep chasing the market down, you know, until it really becomes a significant problem. Sometimes people just to keep chasing the market and then they get themselves into it or real situation, right? They really gotta take a haircut. Right, right.

Erwin  

The how’s the recent downturn compared to the worst you’ve seen previously?

Aaron  

Compared to the worst. And so, you know, I

Erwin  

think we need to like take a step back. Yeah, as far as I know of you, you’re one of the most well known higher volume wholesalers, you spend what wholesaling? Real estate is Yeah, so

Aaron  

wholesaling. We do, it’s we’re going out, we’re buying properties at a discount, likely from a motivated seller, someone with problems. So like, it’s people with major fixer uppers, power of sales coming their way. They want to just sell real fast that the bank is coming to take the properties, no one else is going to close in a week or two. So they call us there’s someone has problems, we’re buying problems, but we’re buying at a discount to take these problems and stress and just make it easy for the seller. And also I just

Erwin  

want you to spell I want them to listen and have an idea of what these problems are these problems that are you’re dealing with, yeah. How often would there be like major construction issues,

Aaron  

I’d say major rentals, if 70 to 80% of what we buy is theirs, it needs some rentals, needing work needing renovations. There’s a whole spectrum of that. Sometimes it’s people just embarrassed of, you know, maybe a dated house or a worn house. And sometimes it’s like, sometimes they’re unlivable. But people are living there, like you know, I did have some months ago, like the holes in the roof. Were you know, you could just climb up through the roof from inside the house to the holes in the roof. And so there’s water coming for, I don’t know, possibly years. You know, of course that creates wood rot mould and a host of other issues. So no bank is touching that no bank will touch that. And they’ll laugh at you. Someone’s living there. They’re extremely how they got in this situation is obviously a life is hard kind of time in their life. And they’re embarrassed about it. They don’t want this publicly known. They didn’t always live like this, right? It’s tough. We just want to make it like easy stress free, take the prom off, you know, they understand they’re not going to be maximising their equity pulling out all their. So they’re not there to sell it on MLS hold offers have massive showings, that’s not their cup of tea. So you’d want to talk about more problems or talk more about what what is wholesale.

Erwin  

This is what I want people to know. Because, like, you know, you’ve dealt with these people, lots of people buy courses. Yeah, and they’re marketed as something and they don’t know how gross it gets. Yeah. If you didn’t, I’m sure you’ve dealt with hoarder houses, Cat people

Aaron  

in the animals and the little kids take over the House. Like sometimes. You know, I think of some of these single mother houses. I’ve been into whatever situation puts them in a house that they can’t manage. And, you know, they got pets, they got kids, and for some reason life’s out of control. But it’s like the cat urine smell, the faeces is everywhere in the house. Like it’s just out of control. They can’t. It’s not within their power to clean things up and to fix the problem.

Erwin  

And people teach me a scratch that before people buy a wholesaling course. Yeah. This is what you’re getting into. That is the smell of money. Right, right.

Aaron  

Yeah, it’s like, you know, problems equals the money. So

Erwin  

the smell sexy. This Lambos.

Aaron  

Yeah, it’s not beautiful houses and marble countertops. It’s houses that are falling apart in disrepair and common situations. The inheritance, someone inherits a house. Yeah, great. Fantastic. What a great blessing to them. And then a year and a half later, yeah, it’s like the house is falling apart, they’re not maintaining it, things are going down hill gutters are hanging off. Just last couple of months, I was looking at a lead with one of my sales reps. It was inherited. So I just had some notes, looking at their notes in the CRM about this. And it was, you know, it sounds like the kind of house the situation we buy from an inherited need somewhere else. And then I looked at Google Maps. So you know, Google Maps has the date. So one picture of the house was 2020. And then you just zoom over to the other angle, it was 2022. So the 2020 He looked beautiful and well maintained. And then 2020 After inheriting it was like all overgrown and a mess. It’s just a common scenario. People kind of get themselves in these holes. And we’re here to kind of just make it easy. Yeah, we’re gonna make money. But we can, you know, get them out of this.

Erwin  

How is it dealing with the sellers? Yeah. Well, hey, they’re all They’re all. We’re all in good health and good spirits. And we just bought one

Aaron  

in the last month. And this one, you know, we our company closed on ourselves. We’re a little lacks and lenient sometimes. Like normally I would have done a whole back with the lawyers for this kind of person. I knew they weren’t going to move out on closing date. But I also you know, I talked with him myself over, you know, months, so I was comfortable enough, but I know they’re broke. They’re not moving on closing date. But then it just keeps dragging on. So, a week after closing, they’re still there to ask for more and more days. Is it the sellers or sellers? Yeah. Oh, the sellers. Yeah, we know they’ve got a large amount of money from the sale now in their account. So it’s like, please just, you know, hotel move out. So I did you know, at some point, I gave him a few days, Lindsey, but then my guys, I send my rental guys there who are going to do some cleanup in demo. So they actually helped them, pack up their bags and carry stuff out to the garage to just get their stuff out of the house. Typically, when we’re buying, we’re saying, Take what you want, leave what you don’t want. But then the second day of them still be in there with my guys trying to clean up and demo. I said, Listen, demo the kitchen, they gotta go today, get a hotel, like that’s it like, so. Sometimes it’s just yeah, if keep being nice to keep kind of using and abusing you. So at some point, so we just started the demo. The end of the day, you know, che put a deadbolt on boarded the windows and on the go. But you got to work around these people sometimes, right?

Erwin  

Are they cooperative? Is there tears is there anger in it happy.

Aaron  

People are thankful like these people are very thankful, it’s just they need a lot, maybe hand holding or assistance. Just we deal with a whole variety of people. Sometimes we’re dealing with people on the ball, like, they just need a fast sale, because they got to close on something else. And you know, they’re willing to sell to us at a discount to do that, you know, they’re very on the ball capable people. Other times it is these people than me, maybe let’s say a challenging life situation for a while. They’re broke at this point, they need the money from the sale of the house to move on to their house rich, rich cash poor, we got to be lenient. And typically I don’t like to let them stay. After closing on this. I have a major hold back with my lawyer. But there’s been a few times, like in the past month where I’ve let it happen. And it’s it’s kind of it’s always a concern.

Erwin  

Do you imagine not being elite if they were not least house rich? Yeah. Yeah. House poor and cash poor?

Aaron  

Yeah, that would be trouble. And we’ve had that before. But you got to make sure you get the vacant possession. Yeah, we’ve done security hold backs, and another one I just bought in the past two months. And they just moved out. I’m told yesterday, we’re sending someone today to verify it’s vacant. For that one. We do have a large security hole back soon. I’m not too concerned that they will never be able to have like 50,000 with my lawyer deduct penalties from that if they move out later than expected.

Erwin  

And just for context, to share. For example, I had to add a student of another programme. He bought a house off a wholesaler a local wholesaler, this is this is I think it’s r&d has nothing to do with you. But he had negotiated vacant possession. It was rented tenants were there, right? And then on closing day, was not vacant possession. And the wholesaler told them, oh, they’ll move out. Don’t worry. And this gentleman, the student band who shared on the show, like he just took their word for it. And I looked at him like, I would have held back a lot of money. It’s a tenant. Yes. Like, you’re harder to remove, then, yes, if the previous owner, if not for putting anyone I’m just sharing that lesson so people can learn from it

Aaron  

exactly. And like, I don’t always do this myself. But if I’m closing on a property, I’ll go the morning of closing to see how things are going. Does it look like they’re moving out? Does it look like they’re absolutely not moving out? You know, I want to see, maybe they’ve already moved out, there’s good progress made, there’s boxes there, there’s a moving truck there, then, you know, then if I see all this progress, I’ll probably be pretty lenient. Like, you know, I’m pretty sure just if you need to sleep overnight, then move out tomorrow. But otherwise, it’s no, we need a significant hold back. Otherwise, you’re not getting the rest of your funds today.

Erwin  

But you see, like, that’s fine expresses to the to the listener. Yeah, we had a you had an amateur, even though he take he spent like 50,000 and courses he didn’t know hold back on attended that property. Yeah. Right. Versus you held back 50,000 from the previous owner? Yes. Like your situation is likely easier. You held back and you actually held back a good chunk of money. So good on you. The difference between what a Pro does versus an amateur? True, right. True.

Aaron  

Most of the time, there’s always risk out there though.

Erwin  

As you’ve you’ve seen the other side. Yeah, when you don’t hold back, and then I’ve ever gotten really bad. I’ve never had it

Aaron  

really bad. You know, it’s, I do have someone we assigned it to. It all worked out very well in the end, but we had to lower our hold back because the seller had so many mortgages liens that couldn’t close unless we lowered our whole back half. I think we had a whole back of its own between 15 and 20,000. It was like maybe 70,000 But that whole Buck did get eaten up and but it was used to and this wasn’t me this was an investor and what we’ve done multiple deals with him wholesaling. So he had to use that money to basically pay for a rental to move As a seller, this happened around the COVID time as well. So COVID hit, it was early 2020 COVID hit during this long window she had, she had to move out. So she had months she stayed after closing, where she could move out. It’s kind of okay. Because it was during the winter months, unfortunately, it was Winter COVID Winter COVID hit. So of course, it lots of excuses once COVID You know, I can’t, you know, can’t move out because of this, that the other all kinds of reasons. That’s the smallest one we ever did. Because we had to because all the equity was eaten up. It all got used up in penalties. We I think we typically do that somewhere between 400 to 500 a day. penalty that out of the security hole back if they don’t get out on time. It’s good. Every beefy, good. Yeah. So it’s a significant. So it’s a penalty. It’s like, please leave when you say otherwise. This is happening. Hotel is cheaper. Yeah, hotel is much cheaper. all worked out? Well, it took extra extra, like we gave this person months to move out. But then it took way more months to actually get it out. It all worked out great, because house prices went up so much. And the investor flipped into flipping and making a bunch of money. And it’s all worked out well eventually. But with some stress.

Erwin  

In not it’s not worth it. Yeah,

Aaron  

it’s not worth it. No, but it all worked out. Well. He’s very happy with the end result.

Erwin  

Because to find return is often in grief. Is this something especially during this, this downturn is just going to keep popping up? Maybe I’m too pessimistic, but there’s like no easy money. Yeah,

Aaron  

I’ve done multiples of these deals where I’ve had a significant pullback. And I’ve had people move out, you know, five days later, 15 days later than expected. And my Lord sends me that check that 500 bucks a day. That’s pretty good. So I’ll take the penalty.

Erwin  

So again, you’ve seen a lot, you know, you’re around 2008. How is this time better or worse? Because yeah, you were around during the COVID. Crash? Just short. You’re on the 2017. Correction,

Aaron  

your COVID was really quick. This seems to be going on. It’s it’s went on a bit longer, right. I think it’s this one’s going on longer. It’s certainly taking our investors that we wholesale to taking them longer to sort of get back on. Now. I think the majority of people they see that, okay, markets going back up things things are moving things are active in the MLS markets, they see things are moving. So they’re, it’s like the investment investors are backing down, basically. So they’re flipping again, they’re buying rentals. I think they agree with us, the bottom is behind us as far as we can foresee. So they’re back and it took investors a long time. And it might just be the last month or two that we really see the buyer enthusiasm again. So we came quick to yet so well, yeah, it was a long time, there was a lot less buyer activity from the late spring, last year. So it’s getting close to a year but in you know, January, February this year, so it’s able to use a lot less buyer interest. It’s been about a year you’re saying yeah, let’s like at least three quarters. Like it’s not that long. But it’s I think never Behold, yeah, no, I’m old. I do tell my team like, there’s always going to be downturns. But you know, here in the GTA my experience is it’s, you know, maybe 10 to 50% of the time 80% of time, we’re on the upswing. Yeah, there’s going to be some downtime, like downturns and, you know, we’re not going to do as many deals or make as much money, but you got to have the long term vision. All right, stick hang in there.

Erwin  

I’m sorry. Because I’m just a geek, I always have these questions, but also just to give some context as well. I’m on Twitter probably too much. Yeah. But for months, it was all loss porn. As in like, people are sure like screen captures of like a host sigma. See, see what’s on boarded for and now they’re selling it for like 200 $300,000 last. And this was what was going on was all over the screen captures were all over Twitter. Now. It’s more like these prices are ridiculous and went for this much over asking. I can’t believe this what what a million dollars gets you in Toronto? Like a two bedroom bungalow? Yeah, it’s completely shifted to prices are high. Yeah. And not a long

Aaron  

time. Yeah. And it’s it can’t be things like prices aren’t as high as they were in early 2020. So we’ve been doing this for years and years. So we’re always hearing people say, you know, calling out for Doom, it’s the downturns come in, the prices are gonna go down to the 1980s price you hear kind of like people say these sort of things, but it’s hard to believe when we see we’ve been around doing this for a while. And, you know, the downturns are relatively short, like, typically less than a year like this was nine months of, let’s call it nine months. And the upsides are going for years. So it’s you know, it’s kind of like the 8020 rule.

Erwin  

Because even though we I mentioned that you’re wholesaler you still you still buying hold some of these two.

Aaron  

Yeah, still still buy and hold one of the ones I bought a couple of months ago. It’s a long term hold for us rental property, open a tenant. That’s it. Just keep it small. Keep collecting rentals every year.

Erwin  

What are you looking for in a long term buy and hold? I’m assuming you’re renovating to refinancing

Aaron  

we make it we typically buy them ugly, renovate, refinance, make them beautiful. I would see something that I’m looking for is just ease of management at this point in my life, I want to nice nice properties, nice areas, I would consider an apartment building a multifamily. Unless it’s if it’s in my sort of neck of the woods where I have my other rental properties like basically Scarborough to Oshawa in that corridor. That’s what my rentals are. So if it was there, anyway, I’d consider self managing it using my trades. Otherwise, if a deal would come along, I’d consider partnering with someone local who would do more of the management. But my track record is kind of like you know, in in my area where I’ve already got the team I’ve already got connections. It kind of easy. I don’t want the cheap triplex in the in the worst part of town. I guess that’s not for me. Not buy the triplex in Sudbury, no, nor even in the rough areas of say, Oshawa or something. But I love the nice series of Bosch and give me give me a nice two unit in a good area of Oshawa.

Erwin  

That sort of thing. Often does, like an apartment building show up, you’re going to see a colour from a foreign apartment building.

Aaron  

Not too often we get much more the single family houses or the two houses with basement apartments, or some triplex is things like no, it’s usually the converted house, we did have a really nice purpose built four Plex in Brantford late last year, we didn’t make much money on assigning it, we did end up assigning it, but I was getting close to close on that myself with someone I know who invest in brands, and he would be more boots on the ground. So I was kind of actually disappointed. We ended up assigning it and wholesaling it last minute. Because it was a nice purpose built four Plex at a great price. You know, it had its own its shares problems, but those will get fixed over time.

Erwin  

Right? So assigning is you someone buys is basically buying the property off you you make your fee. And then who’s buying because it’s law listeners have no context for Yeah, for the listener who has no context what wholesaling is, which we still didn’t finish talking about what is wholesaling did me this will be great editing for Adam to Yeah, to make it what is wholesaling a 92nd clip.

Aaron  

I’ll do what I can, but it’s basically we go out we buy, when I say buy, we sign an agreement, we get that document signed an agreement of purchase and sale, purchase agreement, whatever you want to call it, but then we’re not closing on the property, another investor can step in, he can think of it like you’re just changing the buyer name. Think of it that way, just changing who the buyer is, let’s say it’s my wife, my brother, or someone who paid me $50,000 To buy this property instead of me. So it’s we’re buying at a discount, someone else wants this deal, because typically they’re gonna flip and make money or maybe it’s a rental property. Those are some of the typical ones. And it’s a great deal for them. It’s what they’re looking for. So they’re gonna pay us a fee to close on the property.

Erwin  

And then who is your typical icon buyer? Who’s your typical buyer? What are they buying what they’re doing with the typical like the

Aaron  

majority would be a flipper, because just because they have you know flipper will buy more properties per year typically than a landlord. So flipper would be number one, someone who’s going to renovate rent and resell. Number two, I would say would be the landlord’s people who, you know, it could just be a condo in Toronto or a condo somewhere in the GTA. They keep it as a rental. It could be some of these nice two unit properties of bungalow, like I have a number of these bungalows we’ve made as legal two units. So it could be that strategy. Or, you know, certainly these not exactly legal tutus like there’s lots of houses with basement apartments, some people just some buy them keep them as a two year rental, it works much the same as a legal one. It’s just the awesome little bits of the building code aren’t in place, that’s all. So those are the top two, we do get some homeowners that will move in. And typically they’re also investors or realtors, usually people there are some the business in in real estate to some degree. Sometimes they’ll just get as a one off homebuyer as well. But real estate investors are number one, whether it’s a flipper landlord,

Erwin  

and then the flippers. So through the downturn, something I’ve observed is the people that didn’t lose their shirts, were often the ones that were on the tools as well. Right. So again, I’m often leading with my question. Yeah, where I’m leading from is for example, there’s a lot of marketing out there says like, you know, you can, you can be a flipper, and sell a four hour workweek, right. You know, it is hiring it all out. Yeah. Are you seeing that? Are you seeing successful people being able to, you know, not be actively on their practice on the flip? Because that’s that’s sort of yourself.

Aaron  

Yeah, the people who do you got to buy Well, you got to buy well, and you probably you have some of your own capital, so you’re not paying the highest private money prices. There’s definitely people you know, they’re buying with, like 100% financed even more Borrowing for the rental cost, you know, that’s you better be in and out pretty quick. If you’re doing that have a really good buy price. It’s those people who are gonna get if your cost of money is very high. And yeah, if at all, if you’re buying, renovating with an expensive contractor, like those two things can hurt

Erwin  

you pretty quick. Because you kind of have like your own team.

Aaron  

That’s yeah, like I still do. Like I have team like a full time staff team of six local people. And we still have some bas as well, full time. So we’re up to nine now, nine full time people. And I do have contractors I’ve worked with for over a decade. And same with like trades as an electrician, plumber, all this sort of thing, different ones different areas. So you know, between my full time staff, and my connections, and I’m not I’m not doing a high volume of flipping, but I might have two or three going on at a time. So it’s enough to two is plenty. And there are times when we might not have anything for a couple of months. But yeah, like you still gotta be somewhat hands on in that. For me, it looks like now it’s I do have staff who are doing it. They’re not just doing my, like looking after my trades people in flips, but they certainly make it easier for me, so I can do other things. And they’ve got my go to trades people. So it’s really not that challenging. Yeah, the more you do this easier, it gets

Erwin  

maybe easier for you. Because I was trying to explain to them what you did for a living. Yeah. And then his automatically his question back to me was how does someone get started in this right?

Aaron  

Well, definitely getting started kind of with real estate sort of one property, whether it’s rentals or flips or wholesaling. With wholesaling, let’s say, between me my brother, we had sort of two rental ish properties to start then I got into marketing that this this wholesaling constitute you do some marketing, you attract discounted deals. So how I got started it just sending letters to houses and kind of older neighbourhoods where I’d want to originally was I had other investors, more seasoned investors than myself who wanted to buy so I, I just sent letters, different areas, you know, saying things like, I want to buy your house, I’ll bite in any condition, I’ll do the rentals make it easy for you that sort of concept. That’s kind of the basic way to start. You don’t have to overdo it. But if you’re focused on buying a house in a certain area, you know where those houses are, you can drive right over there, throw in a couple 100 letters yourself. I remember some townhouses. Like I remember hiring a local guy, like, Let’s go deliver specifically to townhouses, it’s, you can do it real fast, we’re going to bang out, maybe a bottle fire of 500, let’s say in an afternoon, so you either got time or you got money. So when you’re first starting out, you tend to have more time, hopefully a little bit of money. So you got to leverage that. And if you go, even like that example I gave, if you want to buy townhouses, whether it’s for flips or rentals, then put yourself out a letter. If you want to speed things up, you hire helper, it’s always good to have helpers. And talking like 15 bucks an hour or 20 bucks an hour, whatever it is, and you go an afternoon, deliver some hundreds of letters and you know, see what you get from it, hopefully get some calls. And maybe you’ll even get a deal from it.

Erwin  

Right? And then when did you start doing more online advertising?

Aaron  

I know it was 2010. So I’ve been doing that for a long time as well. And it definitely like the majority of our leads do come from online nowadays. And we built up to a significant web presence. So we’re very easy to Google and find our Google reviews and our website and people talking about us on the internet. So we’ve built into that.

Erwin  

So Google is what works best AdWords SEO

Aaron  

yet, we probably still Google AdWords is our number one source of leads, you know, we get good leads from just as SEO from web searches. Those are probably the top two. The internet’s powerful these days, so people are searching for what they want.

Erwin  

Alright, but it is competitive out there though. Yeah, for flyer in

Aaron  

my space. Yeah, keeps getting more competitive. I’d say like, every year it kind of gets more competitive. So you gotta keep getting better. I was just looking at my team and what we’re doing and we’ve had a lot of leads in the past you know, so far this year, but not many appointments. I can look at previous years and we certainly had less leads with more appointments. So it’s kind of like sometimes you just get a little lazy. This is the bottom line. And you just got to do the little things add up like it just don’t prejudge this or you just go to the appointment just go see the house instead of waiting for the easy you know that kind of the no brainers it’s kind of like our team has been waiting for the price has to be near perfect on the phone before they go to a an appointment. It has to be a major motivation, major problems. So we’re talking this week, okay. New rules, focus on appointments. It’s sort of a not busy. Exactly. Because we have not been got nearly enough about it? They’re not busy enough. So it’s new role. Go deployments, like any motivation. It doesn’t have to be high motivation, any motivation? Go if you’re not going, then you need to kind of tell Aaron why you’re not going. Yeah,

Erwin  

I hate my neighbour good enough CNCO 12

Aaron  

There are certainly rules like, I would not go see, like if they’re over leveraged, or if they’re listed on the MLS already, then, you know, there would be reasons why we don’t go see them. But

Erwin  

yeah, yeah, it’s funny because I put a put a post on my socials about, you know, my teammates inventory, and just please send some stuff over. Yeah. And I was not specific enough. Right. So over half the stuff was already listed. Thanks. Yeah, I know how to use the internet. I was looking for that I would found it all.

Aaron  

We asked for referrals as well. We get Yes. Sometimes too many of oh, this is on, you know, just send us the MLS as well. Yeah. That’s not what we’re looking for it

Erwin  

because it’s easy for us to find that to say that’s not what you’re looking for. No, wholesalers do not want listed properties. Got it? You said the competition still is consistent. It gets hard. I wouldn’t have thought the downturn would have likely because for example, like one of the education companies, so a couple of them are actually gone now. Yeah, I’d imagine all their students are wiped out

Aaron  

to you know, I should probably pay attention to that some of the names? That’s a good question. I should probably look into some of the smaller companies see if who’s disappeared in the last couple of years? Because I’ve noticed a lot who are gone quiet. Yeah, I know. Some people have to think that one person has moved on doing other things. But it’s still pretty. It’s definitely consistent. Like there’s a good number of competitors good number of options for for our industry. Definitely compared to I mean, I think like eight, nine years ago, when I first started, there was like this industry has grown so much in Canada in Toronto area. Yeah. Since since I first started night and day, which is good. It’s great for the sellers, more choice for them.

Erwin  

And then was it just the downturn report for the we were recording? We were talking about the downturn? And how is different more difficult for buyers to follow through with the actual purchase?

Aaron  

Right? Yeah. So we did have some first during the downturn, there were multiple deals of ours where buyers were backing out. And you know, fortunately,

Erwin  

sorry, but these repeats, were these regulars are these newbies.

Aaron  

I don’t think we had any repeat investors who backed out. So it was, you know, the first first timers. And fortunately, you know, I’m thinking, I think there’s at least two or three scenarios, we were able to reassign it. There was one where it was day of closing, the buyer kind of just makes up an excuse on the day of close on the day of closing, like, oh, I wasn’t, I was out of the country. I thought everything was all set to close. And I don’t know, didn’t close the walkway from the department, which is pretty a little smaller than I liked. And our company ended up closing it takes us a few days later. I’m sure with less than a week we closed on it. But you know, it does leave a bad taste for the seller. You know, when closings delayed that much it’s not the end of the world either. But we made it good for the seller. But yeah, we stepped in and we knew like it was not this was during the downturn. So from when we got it under contract to closing prices had fallen. So we did not want to buy it. We knew we’d lose money. We lost money. We flipped it. It was in Kitchener as well. So it’s not my area. If it was kind of an East GTA that I might have considered, I probably would have kept it as a long term rental actually, but being out of my area, I just I gotta get rid of it. So

Erwin  

well, you start you bought it knowing you’d lose money. Yeah. So why? Just because you just walked away?

Aaron  

Well, it’s a firm, it’s a firm deonna. It’s just our company is like the guaranteed buyer. So we do to give different options to sellers. And there are and we started during the downturn, we started being less of the guaranteed buyer. But there are still times we were you know, typically if we’re the guarantee buyer, we do buy at a lower price. Now, it’s kind of like we go to different ways with our options for the sellers. So yeah, I’m willing to keep our company reputation to lose a bit of money.

Erwin  

Yeah. Because I don’t think many people would have done that help to the seller, probably not.

Aaron  

Probably most people would have configured their contracts from the start to be easily back out a bowl or something. Right?

Erwin  

No, I literally spoke to wholesalers recently, who said to just give it back? Yeah, the whole the buyer bailed?

Aaron  

Yeah, but we, you know, we do like that our contracts are a bit stronger for the seller. And we’re, we don’t want to be back in. Alright. And to make that happen, we do ask for bigger deposits from investors. You know, we started doing more more of this since the downturn. So increasing our ask for deposits when we have an investor and, you know, buy price has to be right. But yeah, a lot of the things we’re buying we’re willing to close on.

Erwin  

So what do you see going forward? Like, anything changing your plans?

Aaron  

Well, for our company, we just we are focused on growth. We like we see opportunity, you know, part of it’s just within the company tweaking what we do. To being better at what we do, we just see a lot of opportunity and, and we expect to continue like growing and doing a lot more deals per month. Like we’re in the Greater Toronto Area, there’s tonnes of people, tonnes of sellers, tonnes of sellers with problems. The only question for us is, are we attracting or making ourselves known are, are the sellers with problems going to come to us, when they get into these situations like that’s, that’s where our heads are at. And we want to be the ones who are able to help them out, handle the problems, solve the problems, I just see more opportunity. And now with the market getting better, our investors and other buyers that are more eager for deals now. So it’s easier for us, it’s becoming you just last month or two. It’s getting a lot easier for us to wholesale those properties and to be tighter deals like we don’t have to have as big of discounts as we did maybe four or five months ago.

Erwin  

So you feeling that people are pretty much back your regulars are back?

Aaron  

Yeah, I wouldn’t say it’s we’re not back to early 2022. But yeah, definitely the regulars are back. Yeah. And getting back in. Yeah. You know, I got a couple of calls myself, some regulars who have been haven’t even like I’m thinking of one who hasn’t, hasn’t bought maybe two years. Chill it out for a bit, but ready to jump back in. You know, some of these some of these flippers are, you know, people have good financial positions. So, you know, whether they, you know, what, they make more money this year or not, it’s not a huge deal. But it’s sort of a choice, right.

Erwin  

So we talked about some problems in the industry, specifically before we started recording red flags, if you could share, because I know some things we could keep confidential. But can you share some red flags that some general red flags around when you’re acquiring property? Yeah. And because I had no idea. Yeah, probably well, so I read about it, I shared with no knew personally, I shared with Irwin, earlier

Aaron  

that we did get hit. And we bought a property from a fraudulent seller. And we closed on that property. So we currently now own the property. And it’s going to be tied up with, you know, title insurance, legal issues for many months, probably a lot more months than I want to know about. Or I will try to speed it up as best as I can, when you’re not working for you. Yeah, it’s money tied up. And you know, insurance, I find are never the quickest. So there’s a legal process it has to go through as well. And this has been popular in the newspapers in the media, I’m sure people listening. So I remember starting to read the papers here about this on the news in let’s say, this summer, late in 2022. And the past six, eight months. So really, I know for people personally, this has happened to it’s because I’m in the industry, the you know, the industry of wholesaling and buying and selling houses from people with problems. But we’ve all heard it’s also happened on the real estate market. There’s MLS listed properties this has happened with so one thing like we’ve had to start, you know, checking IDs of sellers just being really cautious and aware already did because yeah, we already checked IDs from the person that we bought from so yeah, we’ve got their fake ID, their fake, Id passed us it obviously, they’ve got good fake IDs to get through their lawyers and get through bank to open a bank account or get money out of the bank and to discharge the use of mortgages. There was an existing mortgage on the house we bought that got discharged. So yeah, by the banks lawyer to Yeah, they got past all kinds of lawyers and banks, and which is totally crazy. Yeah, it’s totally crazy. Like, in the past, we didn’t ever even use to worry about checking ID because we’re like, what, kind of like a private buyer, but we’ve had to step it up. But you know, we always relied on the lawyers like, yeah, probably because it’s since COVID. And it’s gotten easier. People don’t have to go in you don’t even have to go into the lawyer’s office anymore. Like there’s a lot more you can find. You send them your ID you have a video card. Maybe it’s just getting too easy, but please don’t change that. I like that.

Erwin  

I don’t want to go to my website, like assuming with my lawyer. Yeah, but but my Lord allows me to do business for years.

Aaron  

Yeah, I’m sure title search is going to work on solutions like something needs to tighten up because they’re eating it on the insurance. Yeah, I’m sure it’s not good for title insurance. Between Insurance

Erwin  

companies do not like losing money,

Aaron  

or losing money. They’re telling me because it Mikey’s got private investigators looking into this. So I’m talking with that I’m talking with like the title insurance. Telstra has hired a lawyer to represent me, they’ve got private investigators. And so it’s like, there’s all these people working on the case. Yeah,

Erwin  

they’re probably investing in the lawyer. Yeah. And they’re the banks probably doing their own internal investigation. You know, all these resources are being used on this.

Aaron  

It’s pretty clear to me and everyone that is a fake seller, but then, you know, there’s still always sort of initially there’s Okay, which seller is the real seller, but it’s pretty obvious, but then it’s like, is the actual seller involved with this somehow, like, you know, what, do we really know what’s going on? So there’s still all these Questions, but it then there’s it has gone through a legal process with land titles, which you know, I don’t know much about, but I know this, it’ll take time. So where was it going? We do red flags. Yeah, like the red flags. As a company buying houses, we are a lot more cautious now just we have our spidey senses up for like vacant houses. If there’s no like family living there, you I guess, like it could be, if there was a family living there would have to be sort of like a tenant who’s selling behind someone’s back or assuming someone’s identity. But the scenarios we’ve seen, it’s more the vacant house, we’re not quite sure the relationship between the fake seller and the real seller, like I believe one common scenario is someone who will rent the house, and then sell it. But for us, you know, we see a common term sort of like vacant or almost vacant type houses as opposed to a lived in house. But we’re still like the property we bought, we met this fake seller there. It’s someone on my team met them there at least three times over a series of almost a month or maybe three, three week kind of closing. They were committed. So they were committed, like, you know, I seemed like a nice person. So it’s really like I don’t have the ideal answer on how to stop this. We do need title insurance. And banks and lawyers sort of helping this is an off market deal. It’s an off market deal. Ours. Yeah, that’s what we deal with. And I’m sure that

Erwin  

for cars, for example, like they give like, for example, my tennis tried to sell a property. Yeah. And there was a for sale sign that whenever you align, you know, most of the neighbours know me. Yeah. So that would look great. You know, I’d probably get a phone call. Yeah. I have friends that live in the neighbourhood. I have friends that are already in the neighbourhood, laying your houses for sale. Why don’t you listen to yourself?

Aaron  

I heard from one of the other not ours. But another fraud cellar case that I heard about for someone else is that’s kind of how it was found out. The property has been flipped. And then so the new owner put a for sale sign on the property, and then the real owner drove past. And then what’s going on? Discovery and

Erwin  

all that sort of thing. So it makes sense for Facebook to do it off market. Yeah. Because you wouldn’t want it online. You wouldn’t want to belong sign. Yeah, we’d have you’d have to have it because then my friends would see it go on sale. Like hey, your host for sale like yeah, it’d

Aaron  

be much easier. It’s much easier from sure for them to do it private. I know. Some have been doing it on the markets, which they probably have to really know. The seller is the seller, like? Can’t be someone who’s going to look I don’t know how they could do that. But we gotta be really careful. Yeah, wild times because past six, eight months a lot of this has been happening crazy, man. Yeah. Can’t trust people these days.

Erwin  

wasn’t happening. Wife and Kids are good. Ha

Aaron  

yeah, my wife. She’s busy with me and real estate doing her thing and helping me with our things. So the child is we bought our cottage the past few weeks nice fixer upper cottage so that so it came in through your marketing through my marketing. Gotta a fixer upper cottage that’s in a good area for me like Cortes, a lot of my family’s out in Oshawa. So it’s good for me and my family.

Erwin  

We just thought it was excited. Was it in your marketing targeting a cottage or they just happen to come across your marketing? I do.

Aaron  

Yeah, I do marketing for cottages. So we do have some internet advertising specific to cottages or we don’t get we do get some cottage leads and waterfront properties and he was not our bread and butter or anything. Our sort of bread and butter would be you know single family homes or duplexes in the cities but some intention to get a cottage so there it is. How bad is a fixer upper? It’s it needs you know everything new inside new kitchens baths but it’s nothing nothing too crazy. It’s it’s a 90 Honestly, late 80s built house. So like it’s it’s it’s a house not a three season cottage or anything. So it’s it’s good on the water on the waterfront. Yep, waterfront. So we’ll use it as a family cottage for some years. If we don’t like it, we’ll rent it or resell it. See how it goes.

Erwin  

See multiple exits. Yeah, right. Yeah. Not highly leveraged.

Aaron  

No, no. Right. After we renovate will refinance. Yeah.

Erwin  

Right. For like a Schedule A or you or

Aaron  

what? We’ll see what I can get these days. Oh, yeah. I’ll probably talk with the big banks. Yeah.

Erwin  

That’s our attorney. Again, I’m trying to be unleashed. Apologies for leading with my questions. Yeah, you’re not highly leveraged. You don’t have super expensive private mortgages, no promissory notes and second mortgages and no, I’m

Aaron  

not at the moment. No, but you know, I do I do use short term private money and it’s typically you know, eight to 10% sort of sort of money, but you know, it’d be under six months but I’m looking to do that. It’s rare when I’ve had that for projects over

Erwin  

six months. Let’s use today’s environment. When would you go back to using private money six months eight to 10% annualised

Aaron  

for for some flips, it And when we do buy one of these houses where it’s really rundown, like myself, I’ve been doing this while so I have some large lines of credits on properties and different ways to get money, right. But But yeah, for houses in really rough condition, you’re not going to, you’re not going to get a good loan from any bank. And especially if it’s a fast close a week or two, typically, usually only private lenders who will do that, you know, if you work with the same lender quite a bit, you know, I have had experience with the big banks, they can do in like, less than two weeks and things like that, but it’s, it’s pretty odd and stressful. I it’s been a few years ago. So things play keep getting slower with the big banks. Trying to remember the last time they did something fast. Yeah, anyone big I find this slow. Yeah. Yeah. They seem to be slow. And slow to get done. Yeah. Oh, yeah. They’re

Erwin  

two weeks. I would know, I wouldn’t dare.

Aaron  

I wouldn’t have counted them for two weeks. If it would be, hey, if you can do it in two weeks. Great. Otherwise, I’m closing on it with my line of credit. That’s kind of what I would have your plan would be that I have

Erwin  

kneaders. Landry. I can’t count on them for as close. Because like what my Lord has told me about one of the one of the well known beat lenders. I think he said he does. I think he says one of the three do not close on time. Yeah. Because of the lender. Yeah. Yeah. You’re waiting around Friday afternoon. Yes. Where are you? Ready for like banking instructions. And it doesn’t come.

Aaron  

Which reminds me, I never like to close on Fridays.

Erwin  

Yeah, I don’t know. I speak a little obsessed with closing on Fridays.

Aaron  

Yeah, it’s a terrible day to close because or Rick for a long weekend. Because then if any delay, like you know what you said, What did three or whatever. Then you got to wait till the Monday or if it’s long weekend, you’re waiting four or five days, whatever it is. So it’s just a nightmare. Would you like to close on Monday? Tuesday and Wednesdays, Tuesday, Wednesday. Thursday is good, too. But sometimes I remember closing on a Thursday, and then you find out it’s long weekend. It’s like, oh, I didn’t know it was long weekend on Friday, then, you know, something that happened to us last year, closed on Thursday. You know, it happened. There was a delay. And then it’s the long

Erwin  

weekend. We’re gonna deal recently where it was. The conditional days were business days. But we just had Easter right? And no one factor that in so yeah, just be careful out there, folks. Yeah. there anything else you want to cover?

Aaron  

Oh, that’s the gist of it. I can always talk about how people can find us that sort of

Erwin  

thing. Of course. Where can people follow along your journey? Where can people learn about more about GTA host buyers? I see your ads.

Aaron  

You can google GTA has buyers and will probably follow you around on the internet on retargeting advertising. But investors like like to learn about us from our, from the our investor, website, house deals gta.ca. So people can go there. And we’re covering we are doing deals across Ontario these days. Like we do have a kind of Golden Horseshoe focus, of course, Toronto, GTA Barry, really a PWC down to Niagara and like, OSH, we’re clearing in all that area. But you know, we’ve done deals in the past year or two in Sarnia, Kingston, Huntsville, you know, we’re getting all over. But yeah, so if people want to, you know, go to our website, see our deals tell us the areas that they’re interested in, they can, you know, sign up, and we’ll we can send out the deals that sort of match their criteria. And that’s just house deals. gta.ca

Erwin  

And if you’re driving, folks, I’ll have it all in the show notes. Perfect. Aaron, thanks so much for doing this. It’s always I joked with someone that like sometimes I need a nice interview for like a palate cleanser, as they call it. Because sometimes it’s we have some disaster stories on the show. So it’s nice to hear. It’s always nice to have a nice guy on the show. Yeah. And like the fact that you closed your clothes in the wholesale deal that you knew you’re gonna lose money on, right? I like do you know what anyone you know, do that. Don’t know of any of those stories. That’s the truth about real estate investing. I think it’s a great place to end like urine. Thank you everyone.

Erwin  

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Erwin  

Real Estate Investing has become such a craze online in the last five years and I’m so over it and recording today’s guest, Dominique Shannara, who is a real estate investor with a couple of small multifamily properties in Thunder Bay, Ontario, where she lives and she happens to also practice. Be a practising certified financial planner and a Chartered Professional Accountant. Hello and welcome to the truth about real estate investing show for Canadians. My name is Erwin Szeto. In case you’re new this show this is one of the top podcasts in the space, including being recently ranked number 81 in the business category and all of iTunes across the world. Dominique is a successful real estate investor believes real estate is an effective means to build wealth. But so why is she over the craze? I don’t blame her. I’m seeing many many questionable education organisations pushing real estate investing using questionable questionable methodologies and unqualified coaches. There was one influencer attempting to hype him and his coach up as they’re driving around together in a car around Ottawa. And they made some disparaging disparaging comments about a property that they were offering on saying was a slum and they needed a whole bunch of work. Funnily enough, the owner of the building saw the video and commented on the post. They also shared that the property was not listed for sale and they had received no offer the most are backtracked privately. I’ve seen the screencaptures they apologised and admitted the video was created to build their influence create hype on social media. So how embarrassing is that, such as the truth about real estate investing, there are many fakers out there. And they continue to post on social media, picking up fakers and other private mortgage companies in receivership there is $50 million in money missing. There were promises of high returns. The accuser is being accused of spending lavishly on private jets, and supercars and owning several luxury condos, all over the world. If you Google, Greg Martel and my mortgage auction Corp, you will find the news. I’ve posted the link to the CBC in the show notes. Really bad news for investors involved in yet another reminder that how important it is to do quality due diligence. It’s always required, never going all in on one investment. Experience matters. Diversification keeps one out of trouble. Speaking of experience, for example, cheering I made a investment in the development project using some of our registered funds. And the builder has over 40 years experience over 40,000 houses and condos. They are one of the biggest builders in Ontario. So when someone has that kind of track record, I do give me a lot of confidence versus a newer MC project. Like that happens to have $15 million missing. Very popular question out there as being a landlord hard. Yes and no, I’ll just say yes, to keep it simple. And to my experience is not nearly as hard as compared to all the other options out there, including having a job building a business, there is no easy money out there. And direct ownership of real estate is the most efficient strategy to becoming wealthy. I know because my team members and myself, we’ve all done it. Over 45 of our clients have done it as in making a million dollars or more intentionally on income properties. landlording is honestly much easier if you treat it like a like a well run business. And unfortunately, the majority do not. The majority are often the source of those nightmare stories. If my team and I can help you on your investment journey. Simply just reach out to us on Iwan at infinity wealth.ca My team and I would be happy to hop on a zoom to guide you help guide you and point you in the right direction. If you’d like to like to book a call directly with me understand my availability is not the greatest I think I have like one maybe two appointment slots for all May. And it’s May 12. Monday I’m recording this but reach out. I might have more availability in June. Of course there will be some homework involved. I will continue to evolve dossier. Again think that’s I when I have you i n at infinity wealth. That’s yeah, I’m a personal sad note. A good friend of mine shared with me that his daughter has an eating disorder, which is just terrible to hear his wife, the mom had to drop down and work from full time to part time to supervise meals, which can take up to two hours to oversee that the daughter finishes all her food. I checked chat DBT and it tells me that nearly one in five teenagers may have similar symptoms of eating disorders. My friend’s daughter also competes in a sport, her passion in her sport that takes up five, six days of her week. It’s unfortunately one of those sports that where certain look in body type is that is considered ideal. When I told cherry about our friend’s daughter, I explained to her that I’ve had the same concern for years. Hence I vetoed our daughters interested in participating. That’s that same sport a couple of years ago, even though I did go against both my or my daughter, my wife and my mom. Instead, I’ve chosen it Babies that produced the greatest physical skills, strong self defence, and spend honour does CrossFit Brazilian Jiu Jitsu, gymnastics and track, she will be we’ve asked her to choose a team sport as well, because we believe there’s lots to be learned from team sports of leadership, both being a good team member and being a leader. I specifically chose CrossFit because in our gym, and understand that we’re our gyms a little bit different than most, it’s a lot more chill, especially a lot more chill than what people think is a CrossFit gym. And folks who go to our gym, and also we there are folks who are very serious, there’s quite a few varsity athletes that attend our skip are in like AAA athletes that go to the gym. But for the old folks like myself, it’s pretty chilled. And for the more serious folks that are there, they’re always eating or drinking protein shakes in the gym, including the ladies that treat food as they treat food as fuel for the engine. They’re the engine, of course, and not something that should be deprived of, in order to be skinny, including, again, Nicklin, the ladies and some of those ladies run circles around me in the gym. My point is that I make decisions today based on what I see happening, risk I see happening 510 1520 years down the road. And that is why we bought each of our kid already. investment properties. You know, before the turn the age of one, one kid has a duplex. The other tip is a student rental. We’re also adding to our whole life insurance policy to pay for our massive tax bill from when we pass. And also that’s why we make business decisions today, in our businesses that push us out of our comfort zone. You’ll hear more about it eventually this other business that we’re looking at acquiring when it’s done. Yeah, because we’re looking for a brighter future. But also we want our clientele and our businesses to align with our core values, which include helping people and on the real estate side, creating rental housing supply, creating. My point is that we all know what the future problems are coming, like eating disorders, more concerned about my dad for my daughters and my sons, and how today’s young people can’t afford houses, thanks to governments all over the world, printing money. Whatever you invest in today, whether it’s a gym or buying an investment property, it’s both are hard. But time will pass and those who put the hard work in today will get ahead in life. on to this week’s show. Our guest is tired of real estate. Tired of the real estate investing craze, at least the craze has died down significantly during the downturn. Several education companies are gone. Coaches of some countries have gone quiet. Some of them going bankrupt, such as the real estate cycle, we can get flushed. We have domination, our owner of 100 wealth, who provides managed investments, financial planning, Insurance Group benefits and accounting services. She has CFO to her rental property business, her husband serves as the CEO oh, here’s the notes on the tools. And they have a plan to stop growing their portfolio at five properties. Even though Dominique attended, attended a weekend course years ago, and hired a coach of over two years. Well, I’ll let her explain. I don’t want to spoil it. But she’ll explain why she does not follow the hype of aggressive growth and wants balance her life running her own business, a self known real estate investment stuff that she does. She’s also young think we talked about starting a family. She’s still young, of course. Plus, we chat about why she hired an accountant, even though she is one and how she’s fighting inflation both in her work in her portfolio. Please enjoy the show. Oh yeah, it’s always a treat. To me. It’s always a treat to have someone in from the financial planning world on the show. So please enjoy the show. Hey, Dominique, of keeping you busy these days, tax returns a lot of them. How much of your business is accounting?

Dominique  

I’d say it’s mostly March and April of every year like we do taxes vary seasonally. So in March and April, it takes up like maybe 80% of my workday. But the rest of the year, we do everything else. So we focus on the investments in the insurance for the rest of the year. So maybe revenue wise, like 15 20% accounting stuff.

Erwin  

You wear many hats. Yeah,

Dominique  

I like to think I wear three hats. You know, I don’t want to wear too many more hats. And that’s part of why I’m not as actively involved in our real estate holdings anymore. Because it was it was a lot of hats.

Erwin  

They probably argue you wear more hats, but Okay, for the listeners benefit. Let’s go through the hats that you wear.

Dominique  

Sure. So I own my own business Chouinard well, so that’s where I offer those three hats services I mentioned. So we manage investments. So I’m mutual fund licenced we sell insurance like life insurance, disability insurance, we manage group benefit plans for employers, and then we do tax returns or other related accounting services. So that’s in my business separately from that we have four rental properties that we own personally with me and my husband. So I’m not involved in the operations of them so much, but I think just by being married by default, we still talk about properties a lot. And I tend to be more involved when it comes time to like mortgage renewals and those kinds of things. Tax Time, obviously.

Erwin  

So yeah, it sounds like your function is very much like the CFO. Yeah,

Dominique  

I’d say. Yeah. The wife of the CEOs hash guy that does everything.

Erwin  

Very cool. Very cool. So you have sort of designations as well.

Dominique  

Yeah. So I’m a CPA. So that’s the path I originally took. I went into accounting worked at an accounting firm, and then got into financial planning that way. And I’m a certified financial planner. So that’s the commonly known financial planning designation.

Erwin  

So I think you’re only this second or third CFP, we’ve had on the show. Oh, nice. No one listens. Anyway, it’s not

Dominique  

seven listeners? Or is it 13? Now, are you up to 13? Now,

Erwin  

it depends if people share the podcast thermometer on so yeah, right.

Dominique  

Or if they play it in the background, you know, they’re doing something else.

Erwin  

So my point is that not many financial planners hold actual real estate. Yeah, like some, some will do some REITs or whatever other investment, a passive investment vehicle for real estate, but you’re rare. Are you not? Is that your experience when you talk to other CFPs?

Dominique  

Yeah, like I would say, in our profession, like holding a property, and especially doing those strategies, like, you know, refinancing, what we call a burr in the real estate world, that’s considered pretty risky. If you talk to a certified financial planner, or someone that studies that area, like that’s considered a high risk strategy. But if you talk to a real estate investor, that’s considered low risk, because it’s real estate, right? It’s like, well, buying real estate is low risk. So what I find funny in bouncing around those two different worlds is the difference in definitions of risk. Because, you know, you go to buy a duplex and or even a single family, and you can argue, we all know, there’s a limited supply of real estate, and that there’s always gonna be a need for people to live somewhere. So from that standpoint, you could argue that’s low risk, but it’s this the fact of having a lot of your wealth in one thing, you have less diversification, right? And the fact that these values are not promised, right, like when we aim for an ARV when doing a project, like that’s based on a professional opinion, but you don’t know what your contractor is going to bill, you is not necessarily what they agreed to on the estimate, what breaks that year is not promised. So there’s a lot of aspects that I think everyday people would consider risky. But when you talk to real estate investors, they’re like, No, it’s the lowest risk investment possible. And it’s interesting,

Erwin  

right? Especially coming from your world. Yeah, especially if you network a lot with a lot of financial planners.

Dominique  

Yeah. Like I consider from an objective lens, like I consider the holdings we have to be like, kind of medium high risk, like what we’ve been doing, right. And we’ve only ever done one project at a time, and also people that do multiple construction projects. And that’s crazy, right? Once we experienced that three and a half percent rate hike last year, right, we were faced with the reality like, wow, if we had more going on, if we had more projects we took on, we could have been in serious trouble. Right. And so we grew our holdings, like fairly slowly, I guess, based on the hype that was going on at the time. But we’re just I say we maybe I should just speak for myself, I’ll let Richard tell his piece. But um, I think I’m just really glad that we took it slow and kind of took our own tolerance for risk into the picture, instead of just listening to the hype and what other people were saying like, Oh, take what you’re doing and just do double that, because hashtag fast growth.

Erwin  

Where did you see that? Because I

Dominique  

was discussing for a while, like I did a, I constantly do a purge, you know, I’m just deleting people, or there’s this newest Real Estate Group now, is it? I don’t know the name. I don’t want to guess. But there’s a newer one. And they started adding me on Facebook and you know, posting like, oh, we do this, we do that and have your investments been down last year, buy real estate instead? And I’m like, oh, you know, I keep deleting people. But yeah, the Internet can be a pretty, pretty unsettling place. You know, like, it’s just really easy for people to type something and post it and not really realise the consequences of what they’re saying.

Erwin  

Yeah, it’s really difficult to fact check. It’s actually hilarious when people are called out. I remember I remember seeing on social media giveth and taketh away. I remember someone posted that took a selfie outside an apartment building and so they had a tie it up. And then the actual owner commented, like, that’s my building, I had no idea is for sale. Right. And then he shared that he shared the DNS afterwards, the original poster apologised, saying they’re just trying to hype hype themselves. Yeah, social media is not real, you know?

Dominique  

It’s not and honestly, the people that I thought were incredibly successful. And, you know, people that I thought would have had millions of equity by a certain point all of a sudden disappear, right? And then you hear that they’ve gotten insolvent or that they’ve had to liquidate and it’s like, it really puts things in perspective, right in your mind, you’re seeing them post and do all these things. And so you have a picture of how they are financially or otherwise. And then you hear like, that wasn’t at all the real Look at all this equity was fake, right? It was just this kind of, you know, based on these inflated values and it’s just shocking. I think people underestimate how many properties or overestimate how many properties you need just to be financially secure or financially comfortable in the future. Right, like, you know, and I think the reason I think I look at it differently is based on again, being a CFP and doing financial projections for a living like if I build a financial plan for somebody, right, you punch in their property, estimating it goes up in value, 2% a year looking at the pay down of the mortgage, looking at the other assets, paying off your personal mortgage, eventually selling those turning it into an income. Just a regular family, having one or two or three rental properties can be extremely well off in retirement. And not everybody needs to retire early. Because if you just have a job you love, that’s your way of contributing to society. You know, like, I think retiring early became this other internet craze that people had, like, once you reach certain goals, it’s like, what else should be your goal. So people kind of felt the need to make retiring early their goal, because it’s just like a goalpost that you can move up, you know, and it’s strange, like, he asked me when I want to retire, my dad asked me that the other day, he’s like, do you want to retire, you’re probably gonna retire at 40. And I said, I’m retiring at 65. He goes, what I’m like, Well, why would I want to retire at 40? What do you want me to do? You know, I’m just gonna sit at home and watch Netflix and go take my dog for a walk at 1pm and go for a nap at three. And

Erwin  

I think you part of it is that you understand that the return, especially the cash flow is not nearly sufficient in this market that we’re facing. Even if you wanted to, if you really difficult generate enough cash flow in a short amount of time.

Dominique  

Yeah. But I think if you liquidate your portfolio, you kind of could write like, say you’ve got five properties, and you kind of sell one at a time and live off of that income. You could, you could do a combination of that, but definitely not on cash flow from rental income. I think people learnt that the hard way. You know, as soon as the interest rates went up a couple percent are like yeah, nevermind. So we have thankfully, we have cash flowing properties even still in today’s market. But our cash flow from what we got three rentals that are fully rented out one that’s ongoing and construction, but it’s just enough to top up our income a bit and to pay the taxes that we have to pay on our rental income.

Erwin  

Can you told me a bit about your investment strategy? You have three rentals that are fully tenanted what kind of property? Are they?

Dominique  

Yeah, so our first one we bought in I think 2015. That was a duplex. So we lived upstairs, rented out the basement, kind of classic starting point for people. So we renovated the basement into a one bedroom apartment. We rented it out pretty much right away. And then we moved out of there three years later into our second property, which in what if we did the same thing? So we’d lived upstairs, rented out the basement? So that takes us to what year 2019? Yeah, is when we bought our second property. So at that point, we had 1234 units, because two of them were in our basement was actually a huge house. There’s two different units in the basement. And then after that, what did we do we refinanced our first property at some point, so that was great. Then we bought our third rental and August of 2021. I think I’m getting my timelines, right. No, in August of 2020. Thank you. That was a 20 minute building. Yeah, I guess. Yeah. It was a vacant triplex for 80,000. That’s been vacant for a very long time. What happened to so that kept Richard really busy throughout COVID. So you know, basically revamping the entire thing, creating three units. And then that one, we did a refinance. So that was a classic Burr, I guess this was on Cameron Street,

Erwin  

in Thunder Bay. Yeah, all in

Dominique  

Thunder Bay. Then we bought our primary residence in November, so three months ago, and so we moved out of our rental and then rented out that unit. So that helped to offset the cost to our new place. And then last but not least, Richard just bought a, I think three unit building, which he’s currently renovating. So he closed on that like two months ago now. So in February, and that one, I haven’t even seen the spreadsheet on it. So I’ve been very, very removed from that one. But I’m, I’m trusting him with the operations and he knows what he’s doing by now.

Erwin  

So to me, this doesn’t sound very risky.

Dominique  

So if you talk to anybody in real estate, they would say like, this is not risky, right? Especially we’re doing one at a time. We have plenty of capital reserves, like we’ve got by now. Like we’ve got lots of home equity line of credits, unsecured line of credits that we have access to, that we’re able to do to basically use our own capital for renovations, which is super nice.

Erwin  

And your husband’s in renovations, like Sorry, what is Richard Richard right.

Dominique  

Yeah, so he was a painter wasn’t is a painter. Perfect. After only for years, and so he’s like, he doesn’t necessarily do a lot of the other trades, but he’s very familiar with them. He knows how to interact with contractors, which I think is a huge part of being a real estate investor, right is knowing, knowing the basics of all the trades, and then knowing how to interact with people and how to know which parts your job which parts their job, what to reasonably expect, right? How to monitor the job site,

Erwin  

you have contacts, and as well, you may already know who was good at what the job? Correct, they probably already know, would be on budget on time.

Dominique  

Exactly. And he knows like, what’s a reasonable quote, and what isn’t right, more than most. So I always said, like, if you know, if Richard left, or if you died or something, I would not own these rental properties. And you know, I’d be it’s very much a team effort. And it’s something that I think if you don’t have experienced in the trades, you’d be very careful, right? It’s kind of like going into a mechanic and having no idea and the mechanic could easily take advantage of you.

Erwin  

There’s a reason that I show up. When I show up to see my tenants I show up in my minivan, I don’t show up in the other car. Same thing with like, your protip for listener, you know, if you invest in Thunder Bay, or any anywhere outside Toronto, you show up and you look like Toronto, when you call and you have a 416 number, automatically, they think something else that they think they have impressions of you, which aren’t usually favourable for your pricing. Exactly, exactly. So where’s the risk in this?

Dominique  

Well, the risk is the leverage, right? The risk is that are you 100% of finance, like what? Well, the risk is that your payments on your mortgage and on your debt are higher than what you’re bringing in. So you have to make up that difference elsewhere. Right. And I think we all know people that right now they’re paying more towards their properties than what they’re making. So they have to go and thankfully, a lot of these people make good money at their jobs. So they’re able to make just minor lifestyle sacrifices to make it happen. But if you find yourself at that extreme, where say, you know, you need a grand a month just to keep your properties going and you can’t find it. You got to make quick decisions, right? If you have to sell a property quickly, you know that you won’t get what you want for it. Whenever you have to sell a property quickly, you have to take a cut on that amount and pay a lot of selling fees, breaking mortgages, mortgage penalties, right. There’s a lot of costs to not having your house in order that come in. And I think that’s risky. I really do. Like if you when you run out of cash, and you don’t have cash, and we’ve seen that we’ve seen people you know, kind of put on putting their stories like hey, I need cash needed, need alone need an unsecured loan. Once you’re at that last straw, sometimes the only solution is insolvency. And being anywhere close to that would spook me a lot.

Erwin  

So I’m gonna read some lines from your Facebook post that got some attention, your 69 comments. I don’t know if you’d call it viral. But a lot of people in my community community commented on it. It’s got attention to toxic positivity while avoiding any mention of insolvencies and losses, quote unquote it’s all been about your mindset, oh boy. And constant more and more and more. It’s just getting exhausting. I can’t seem to find a way to purge it from my feed no matter how hard I try.

Dominique  

I found a way by the way since then, I found a way to leave Facebook but yeah, I just started unfollowing like constantly. I alternate between unfollow and unfriend. You know, like if I, if I can see who it is, I know them but they’re annoying then I unfollow but if I see who it is, I can’t place them from a hole in the wall. Like I don’t know who it is unfriend. And I just had to do that for like two months. And yeah, eventually my newsfeed had better things on it takes time takes a long time. It’s from yours, you know, like, I think in 2020 is when it really picked up and I started whenever I get a friend requests, and it was someone with 46 mutual friends. And their profile didn’t have any red flags. I accepted it, right. But then it became hundreds of people, you know, over time. And now I’m like, Why did I accept all these people? And they’re all just trying to pitch their real estate something or get some investors or

Erwin  

me because I can tell because I have some friends and they’ll take a course. And then their social media profile, I will put, you know, goes nuts in terms of how often they post and what they post and they change their look. They change their hair,

Dominique  

all of a sudden they’re very polished. investment savvy, you know, storytelling. Yeah, they took a storytelling copywriting course on the weekend too. And there they are telling stories about how they made it from the bottom and now they’re here, you know,

Erwin  

you have two properties. So now they’re here. They’ve arrived.

Dominique  

They can teach you for only $2,000 a month.

Erwin  

And you speak from experience. You’ve attended some of these programmes.

Dominique  

Yeah, so again, with without names you know, we’ve been to like One weekend event at some point during COVID, actually, and then we’ve been part of a coaching programme for two years I was in there in the first year, it was like a joint thing. And then Richard did a second year. But what else? I don’t think I’ve taken any other like weekend things again, I was never big on doing you know, the too much information thing I think we all know, like, once, you can only receive so much information on investing, like eventually you just gotta invest. Right? Just Just do the investing. And lately, I don’t know what’s happened lately. But there’s a lot of those weekend conferences. Have you noticed that? Like, it seems like every weekend, there’s two or three real estate conferences happening?

Erwin  

Yeah, the greed is still high, in my opinion, even though Yeah,

Dominique  

yeah. And I wonder, you know, to an extent, I think that’s one of the hidden costs of real estate investing is like, do these people count their time that they’re investing and attending these events and networking? You know, all those hours, you know, you could be building a business, no one needs to attend them all? No, but I see people like attending a lot of them. And sometimes I wonder like, are they actually investing? I don’t know, like, I think a lot of them are or sometimes people are attending them as a coach or as a mentor? That’s a little bit different.

Erwin  

For them. They’re raising capital to show up to my events as well.

Dominique  

Yeah, I don’t know. I think I think time is the real wealth. You know, it’s like having time having control over your time. And when you’re spending so many hours a week on, quote, unquote, investing, like investing is supposed to be something you do without needing your time, right? It’s something you do, and then you put your hands up, and then you collect evidence. That’s what investing is? Well, I think it’s a really unfair comparison, when people compare, you know, building a real estate business to putting money in mutual fund, like it’s complete apples and oranges. It’s not at all the same thing, right? Like, I know some people that work in a sales role, like say they’re working a commission based job, and they invest in RRSPs, or TFSA, or what have you. And if they took away their time, from making sales revenue, right making Commission’s to go and build a real estate portfolio, they would make less money, right? They make less money from their commissions, and then they’d be divvying up their attention between these two things. And that’s what I think nobody’s factoring in. I don’t know, that’s, that’s the feeling that I got, I decided for myself, I was like, well, am I going to keep splitting my attention? 5050 between real estate and my business? Or should I go all in on my business? Because you can only wear so many hats, as you mentioned, right? And, you know, we’re not even parents, yet I realised at some point in the future, I’ll have a third hat that I’ll be wearing. And that’s a lot of hats. So you kind of have to decide, like, do I want to be a generalist that I do 17 different things and make a little bit of money at each one? Or do I want to be just really good at one or two things and get some of my free time back. I remember at some point, like my Sundays, were all dedicated to bookkeeping, for our rentals and my business to planning out the week ahead, when it came to the rental properties to doing our cash flow updates to doing you know, all this tracking and doing all this planning for our construction projects that we had going on and updating, you know, where are we so far in the budget? And I was like, you know, is this going to be my Sundays for the rest of my life? Is there another way that we can do this? So now that I even decided I don’t do our accounting anymore, we brought on an external accountant, and especially because we’re both incorporated now in our businesses. So there’s kind of a lot going on. So I decided, You know what, like, I, I rather have a third party, advise us on this and be more like in the the business owner seat versus the accountant seat? And I’m learning a lot from that. Right? So

Erwin  

you you want to okay, what are you learning? What are you learning from having an external accountant, second set up,

Dominique  

I’m learning the corporate side a little bit more. So we did, we’ve always been working with self employed people a lot, right? People that are not incorporated. And now, I’m getting to apply a bit more of those, like technical concepts that I’ve learned in school, or that I’ve learned through my CPA programme, but that I haven’t seen that much in detail in real life. So I’m learning a lot from that, you know, and as we know, you know, a lot of questions people have is, should I incorporate? Should I buy properties in my corporation or not? So doing a lot of that analysis for ourselves has been very interesting. And then what you’ve decided for yourselves or university for ourselves. I mean, that’s maybe another topic, but we we decided that we’re probably going to put a stop at five properties, to be honest.

Erwin  

I mean, not buying another one or whatever. Yeah,

Dominique  

exactly. If we buy another one, we sell one and, you know, buy a different one, but we’re gonna keep five, five properties. And so with that in mind, being that they’re already purchased personally. We’re going to keep them personally. And then we just To pay ourselves an income from our businesses, to supplement whatever other income that we need, so that we were able to control the taxable, you know, the taxable income that we have,

Erwin  

why Cabify? That’s No, it’s a, you know, full time real estate investor.

Dominique  

Because we don’t want to be, you know, neither of us want to be a full time real estate investor, we’ve made that decision. Right. And that’s been kind of pondering for a while. And again, I don’t want to speak too much on Richard’s behalf. But it sounds to me like, he likes the idea of having a business, you know, being a business owner, and actually having an occupation. You know, like, I think there’s something to that, like when you can go out and earn an income and do a job, you get this kind of immediate feedback loop, you know, like, say, yeah, like, you just do a job for somebody, you invoice them, they’re happy, you get paid. Like, there’s, there’s something to that, where you feel a direct, sort of looking for satisfaction. Yeah, you just feel like a satisfaction, like you’re actually involved in a community of people, right, I think, sometimes we lose sight of that, you think back to an old fashioned village, you know, you had the baker, you had the mechanic you had, you know, everybody had their job. And they all exchange goods and services with each other. And if you can go back to even a small, like a different version of that, you just have a more fulfilling life. And I think, you know, that’s what it’s all about is having a fulfilling life, where you say,

Erwin  

it’s gonna be that tiny, where you have that you can have that kind of small community where each,

Dominique  

you know, like, I’m, I’m a financial planner. So I do financial planning for people, I go and buy my coffee beans from our local coffee roaster. You know, I come in and say, Hello. And then I go in and purchase, you know, a nice coffee from our coffee shop nearby. And I go and get my lunch from the lunch person across the street. I know the owner like I, I’m really, I’m really all about that. Yeah. And it just feels, you just feel a connection to your community, when you just interact with people like that, right? Like, I’m involved on our neighbourhood Association board. And so there’s a lot of, you know, just being in contact with small business owners that have all kinds of businesses. And yeah, I think once you disconnect yourself from that, and you’re no longer you’re just, you know, sitting at home collecting dividends or collecting rental income, like, you’ll notice a lot of people that have quote, unquote, retired early or reached some kind of financial level, they pause for a while or maybe played video games for a year and you know, started pick it up maybe a, I don’t know, drinking or drug habit or something. And then they pause and then they go, Wait, is there something more to life? And then they go on, they start a business, they all do they all start a business because they realise that starting a business, you can still have some control over your time, at least in the long run, and you have more control over what you do what you focus your attention on. And even though financially they don’t need to, we all need some kind of belonging, like some kind of role that we that we play right?

Erwin  

Japanese called iki guy. Oh, yeah, there’s, there’s actually a word for it. It’s a neat words. It’s iki guy like it’s, it’s so memorable because it’s it’s a funny sounding word. Like Tim Ferriss talks about as well. The the Japanese believe that you need to have to have something to keep you going. My dad’s doctor even tells his patients never retire completely. Because you still need the mental stimulus to keep yourself going. He’s no television where people just like, like the body shuts the brain just shuts down. When it’s no longer challenged and doesn’t have a business you know, you can have a grandkid great character, you know, people have puppies, whatever, choose whatever it is you do, but you know, I’ll probably be always be in some sort of investment something because I enjoy doing it.

Dominique  

Yeah. And again, it doesn’t have to be a paying gig, right? I think that’s usually what occupation but you could be a full time volunteer if that’s your thing. And you know, that’s still a way to get that fulfilment. It doesn’t have to pay you money.

Erwin  

I don’t know full time dividend collector sounds like a good gig. So Dominique, you’ve met many beginner investors in all worlds, both probably in your in your local community and also in like the real estate investor community, like my word eToro. Far

Dominique  

Yeah, in our local community a bit less. So I only know maybe two or three real estate people in our city, but

Erwin  

I don’t know I don’t know how else to ask this. But what kind of advice do you give the beginner real estate investor?

Dominique  

Ah, honestly, my my main piece of advice is to know why you’re doing it. And I think I think I mentioned this to you before like, you know, we’ve all heard of this seven levels of why exercise that you know, we’ve all heard it, please explain. So you ask yourself, Why am I doing this right? Why do I want to build a real estate portfolio for example? And then your immediate top of the mind answer might be to have financial freedom or something like that. And then the second layer is, why do I want financial freedom? And then you answer that and then you kind of keep going deeper and deeper. And this is supposed to give you like this amazing, blow your mind kind of answer as to why you’re doing all this. Can you share yours? Honestly, no, because I have done the actual started a couple of times, and it didn’t really compute for me. And I realised that the reason why was because I wasn’t really trying to build a real estate portfolio, like my husband was trying to build a real estate portfolio. And I was participating in that. But I never said there was stars in my eyes, and I want to build a real estate portfolio. So it didn’t really work for me. But I think that I’ve seen some people’s answers is like, I want to start a foundation and I want to change the world. And I want to bring wealth to other countries and these kinds of really crazy, amazing sounding answers. And I’m like, but is that really what you’re doing? You know, is that realistically what you’re building? Or why are you doing that? You know, I think the reason why most people start is because they want to be a little wealthier, right? You’re kind of looking at your status quo, you know, like, Okay, keep working my job and keep putting a little bit of money away. And I’m kind of stalled, you want to be a step above wealthier? That’s where most that’s what most people want at the end of the day. And what does that mean? Well, that might be being taking some time back, right. And then what they end up doing is spending double the time working to build this real estate portfolio, they would work their 40 hours a week job and then work 25 hours a week to build this thing and miss the whole time of their kids growing up. And it’s like, well, I don’t think you had your your why exercise really thought through, right? Like, do you want time with your kids? Or do you want to be worth 20 million when you die, pick one, right? And then they tend to gravitate to be worth 20 million by the time I die, and then miss a lot of that time,

Erwin  

which is why I what I preach to my clients is you know, real estate as a side hustle is very rewarding financially, it doesn’t have to be a full time gig. Like I can’t imagine people doing the career advice, like quit your job, that you make six figures for you that you trained your entire life for and that you are in your highest and best purpose, quit your job, go be a full time real estate investor, be a full time landlord.

Dominique  

Or take somebody for example, that makes I don’t know 150 grand in their job, but their job is extremely stressful. So there’s a lot of people in that boat, right? They make 150 grand, they get that that’s a good income. But their job is like, you know, their boss is terrible. The job itself is terrible, their customers are terrible. And they’re like I need to get out. And the ticket we’re told is like, you know, retire with real estate. So go from this job 150 grand to owning a bunch of real estate properties, and then start that cash flow, then you realise I can’t make remotely that amount on cashflow, and then it’s like, well then become a property manager, or then become some other service. Be a realtor. And it’s like okay, but that’s that’s not at all, being a realtor is not at all connected to owning a couple duplexes is two completely different things now. Sales Professional, which which can be great, but well, your CFP, that’s what you were told originally,

Erwin  

how safe is a realtors income?

Dominique  

I mean, it’s just similar to any commission, right? You could argue as a realtor, we’re always going to need houses, right, similar to the argument about real estate being safe, but replaced anyway. So the person making 150 grand, you know, plan a could be retired with real estate, which we argued might be, you know, not the best solution. What about option B is finding a better job that’s more fulfilling, less stressful, and that might pay you I don’t know, 120. And then you make up the difference by investing in an asset. You know, like what about, you know, like, I’ve got so many friends and people I know that change jobs during COVID for jobs that pay them less, and there’s so much happier, they have more time, they sleep better. And just by having good financial habits, they were able to maintain a similar lifestyle and just be

Erwin  

happier. So only one Lambo instead of two.

Dominique  

Right? Yeah, no more the example of going from 150 to an amount less than that, you know, and I think that nobody talks about that, because it doesn’t sound very sexy, you know, go with less paying job doesn’t have to be paying less. But what about like, open up your other options, whether they pay the same or they pay less, or hey, maybe that new job will pay more that’s that’s obviously a win win. But you don’t have to, like, leaving a job you don’t like doesn’t mean leaving having a job altogether. There’s a lot of fulfilling jobs. There’s a lot of people I know that love what they do. And if you can’t find a job you like, maybe being a business owner is your thing, right? If you’re a harshly independent person, or you’re a very, you know, you’re like a type A kind of person, you’re self driven. Being a business owner can be awesome. And that’s something that I did that I never thought it would do. If you asked me 10 years ago because I didn’t know a single business owner. No, no, my parents were teachers. I sold most of my parents friends were also teachers are some kind of administrative workers. And I didn’t really know business owners. I didn’t really know what it was. I thought it was just kind of a separate class of people that I didn’t understand. And so is never computed to be a business owner that’s not on your career map when you’re in grade 11 careers class, you know,

Erwin  

you mentioned you were a financial planner. For those who don’t know, actually, I think there’s some people I still don’t know, how does a financial planner make an income and they make their money? Before you answer. There’s one thing I find, I find the all these novice investors who have hired coaches who are like they pay like $10,000 for them. They don’t ask enough questions. Anyone that any service provider you’re hiring? No, I don’t think it’s I think it’s fair question. How do you make money this? How does a financial planner make money in this? Like, for example, Google Mail article, Rob Carrick. I liked his stuff, because he okay. Yeah, he’s all right. He shared a link to a Google document with the list of like financial planners. I’m not sure if everyone knows there’s like a wide variety of financial planners, but the for example, the one in the list, he provided they were fee based. Yeah. And I think often is started at five grand for a financial plan. Yeah, I’m lucky enough to have context from charity that I know, a lot of work. Yeah. To tell someone what to do financially. Does that be accurate? Is that your experience?

Dominique  

Yeah. So I mean, most of those, they’re called fee only fee based is actually a totally different thing. But again, it’s only something you would know internally in our world, but fee only is like a flat fee, right? Like, here’s your fee, I’m going to give you a financial plan and basically like a roadmap to follow. So that is something that usually only CFPs do certified financial planners. And that’s something that I kind of do like off the record, like I’m, I’m able to do that. But I tend to believe that from the podcast. It’s not off the record, it’s approved. I mean, it’s not on my website, like if you go on my website, it doesn’t say Dominique does straight up fee financial plans. I just kind of offer it to people as it comes up. But a lot of financial

Erwin  

planners, do you explain why you don’t advertise it? That’s a good question. So

Dominique  

one of the main ways I make money is by managing investments. So say, or when you had 500 grand, and you wanted it managed by a financial planner, so I could manage your money, and then I get paid, like a 1% per year fee, minus a bunch of fees that I paid my overhead. And so that’s the way that I get paid for that it’s an ongoing fee. And for that kind of client, I do the full financial plan, right, we do a financial plan, we monitor it, we, you know, stay connected throughout the year onwards as their life changes. So for those clients, I’m already doing a financial plan. And by putting both on my website, if it’s confused a few people, they’re like, oh, like, do I need to pay you to do financial planning? No, no, like, by having your investments with us, you get that already? Instead of having huge paragraphs on my website, explaining it, I’m keeping it simplified for now. Maybe, maybe I’ll add a few videos. And also

Erwin  

Clickbank generally follows that same model. So I find and they’re the bit of the biggest marketers. Exactly.

Dominique  

So it’s a similar model as the bank, just that we don’t only have funds from the banks, right. Like, if I was RBC, I would just sell RBC funds, like we’ve got, you know, fidelity is one of the main companies we work with, I think most people know what fidelity is. And so we’re, we’re an independent investment broker at the end of the day. But yeah, that’s, that’s the main way that I work with people. And what’s nice about it is it’s kind of like having a lawyer on retainer, right? Like you, you know, you have your financial planner, somebody’s got their money with me. I’m with them, either until they leave or until I retire. And as I mentioned, I’m not retiring till I’m 65. So I’ve been here for a while,

Erwin  

which is like, what, 45 years from now?

Dominique  

You kidding me? I’m not 20 years old. I’m 29 years old right now. So yeah, baby. I’m not I’m not counting the years, let’s just put it that way. But I think as a business owner, the end of the day, you can just kind of hold on to the the main parts of your business that you should be doing. And then why would you retire at that point?

Erwin  

How many real estate investors do you think have a financial planner?

Dominique  

I’m not that many. I’ll tell you a couple of reasons for that. What I’ve noticed and from myself, also, like I’ve had some people that are real estate investors come up to me to see you know, if we could work together. And I have to say it’s, it’s a little bit awkward on both ends, right. So a lot of times, I noticed that real estate investors have been trying to find a way to say this very nicely. They they tend to be very, I don’t know, I noticed the very cost cautious except for when it comes to hire a coach. You know, like, they’ll watch every expense very carefully and ask a lot of questions about whether they should really be spending that money. Right. But if a coach has to be rather like

Erwin  

listening, but wants to be a property manager, you should hear this.

Dominique  

Yeah. So I’ve noticed that, you know, I’ve tried to, you know, for example, making a financial plan, right, if you’re a real estate, if you’ve got some real estate holdings and other personal assets, and you’re like, I want to know if I want to retire that’s a common thing, right? I want to know if I, if I can retire, go into a financial planner, that is perfect, right? But I noticed is that there’s a bit of a disconnect between how a financial planner would calculate your ability to retire with your real estate, versus what the client or the person with the properties would think, you know, like, they might have a bit of a wrong idea of what their cash flow is. And then you kind of have to explain it to them. It’s like it gets very granular. And I’ve just noticed a bit of a bit of a disconnect. I don’t know how else to explain that.

Erwin  

Are you going on? Are we times I’ve talked to people about like, like, we were talking before we were recording, for example, you know, one way to be able to retire in real estate is actually sell something for assets when you’re ready to, you know, when you’ve stopped working, right,

Dominique  

which if you use a financial planning software, that’s one of the things that you can actually put in, right, so I could put in 2037, selling duplex B and estimating it went up by 2% a year. So you can have all that math in there, which is nice. That’s really hard to calculate manually.

Erwin  

But I have these novices, it’s like they’re trying to help, obviously, they’re trying to help. Again, they’re novices though, so they just told me want to just keep refinancing it. Tell me why don’t why not just keep refinancing?

Dominique  

Yeah, that’s assuming that it’s forever gonna go up and forever that interest rates are 1.7% a year? And, you know, happen? No,

Erwin  

and again, my financial plan, Dominique,

Dominique  

that’s another thing, right, is that we know that you can take a loan against an asset and live off of that, you know, and mathematically, yeah, you could do that, right. But in real life, what happens is people don’t actually want to live off of loans,

Erwin  

you know, especially if I’m paying 7% on it. Like, you

Dominique  

know, that the math checks out, you know, you can do that. But people behaviorally, and that’s another financial planning concept, like, they don’t want to borrow against their assets and live off of that, like, in your mind, you’d be like this, this feels wrong. I know, I’m paying interest. I don’t like the feeling of this. So people don’t actually end up doing that in real life. And that’s actually another concept that ties into, you know, that strategy with Whole Life policies. Right. Okay. I know, you’ve heard about, you know, you build up this whole life policy, and you can borrow against it. And it’s a super nice thing. Yes, but most people are reluctant at the end of the day to go and borrow against their whole life policies. And I’ve seen it, you know, we manage policies, like people that bought them 1020 years ago, you know, that put 1020 grand a year into them, like, I do hold a few of those policies. And, you know, it’s now they’re in retirement age. And, you know, we mentioned like, Hey, you have this cash value, you can borrow against if need be. And now, you know, all of a sudden, they kind of forgot that initial conversation 20 years ago, and they’re like, Wait, borrow, I gotta pay interest. It’s like, Yeah, you, you were told was not with me, but with someone else. Some other advisor that’s now long gone, and they’re hesitant, or they’re reluctant. They’re like, well, I rather not take out a loan. And I’m like, well, it’s not a loan, it’s a policy loan, you know, it’s not the same as having a loan with the bank. It’s a loan against your own assets. People, when you see the math, you see that a checks out. But when it comes to like, day to day behaviour, they’re reluctant, and people don’t like having loans they don’t like to. So it’s a very advanced concept, at the end of the day that only, like an advanced investor would be super comfortable doing.

Erwin  

Because the alternative is a sell. And I have a massive tax bill,

Dominique  

right? Or the alternatives to live off your other assets and consider that policy to be what you leave behind at the end of day, right, which actually, a lot of people do, I think we’ve got a lot of people that have Whole Life policies for 234 100 grand, and they’re never going to need the cash value from it realistically, right? They’re doing well, they’ve got businesses, they’ve got other assets, unless they live to like 110, they’re never gonna have to dip into it. The

Erwin  

whole financial education, everything, especially I always see people ranting about on Facebook, they don’t teach this in school. I really liked the way that I think it was. Actually, you mentioned the psychology money, like the 401k, for example, is not that old, because previously people didn’t have money to save. You didn’t need a savings plan,

Dominique  

or everybody had unions, and they had like pension plans through their work that were completely sufficient to take care of their needs.

Erwin  

And then, for example, I had two gentlemen that are starting to read. And they were telling me how these market dealer is. It’s only like 15 years old, because chains have never been this rich. That’s probably like when you’re telling you’re talking about this mindset that people have like they have trouble borrowing borrowing against their whole life policy, even though it checks out. Like that’s just Yeah, because they’re doing it for the first time.

Dominique  

Yeah. And again, I think they don’t have to either right like a lot of people should take if you’re an adult, you know, you’re in your 30s 40s whatever. And you still have room in your TFSA for investing. You still have room in your RRSPs if it makes sense for you to use them. Just maxing out both of those can put you in a really good Financial Position, right? If you’ve maxed out your TFSA, and your RSP, and you’ve got a rental or two, and you otherwise have a good income and like a reliable job that your skill set is always going to be needed. We already in the 1%, right? And I think people don’t realise that, like how well off you are, once you take some of those boxes, and I think I’m in a unique position, because I see people’s finances all the time, right? Like, that’s my job. So I, when someone comes to me and goes, like, Am I doing okay, and they’ve got, you know, only, quote, unquote, three rental properties and a really good job and a half paid down house. And I’m like, Yeah, you’re actually doing great. And sometimes they don’t get to hear it, because they only see themselves, they only compare themselves today, to where they would like to be where to they would like to have three more million dollars and a Lamborghini, and they don’t. And that grounding that you can get by talking to a professional, I think goes a long way. And that’s what I get, you know, I don’t have a financial planner of my own. But I have an accountant. That’s part of what I wanted is I wanted to have other professionals, right, that could be like a third party, but grow along and see how you know how I’m growing in my business and be able to advise, like, sometimes you just want to ask someone like, Do you think I’m doing all right? Do you have any things you think I should do slightly differently? There’s value in that and yeah, like, you know, you mentioned people hiring coaches, but rarely financial planners. If you just had a financial planners perspective, even I know, like, you mentioned a financial planner, full engagement, sometimes like five grand a lot of financial planners do smaller engagements, you know, where it might be 500 bucks for like a detailed consultation or 1000 bucks for like a simpler one page sheet of recommendations. There’s other probably

Erwin  

simpler as well, versus like someone like myself with I don’t know what someone would charge me. Because there are just so complicated.

Dominique  

Yeah, you and I probably have similar, you know, in terms of complexity, yes. Probably a bit more complicated

Erwin  

for corporations. Yeah, like businesses, we only have

Dominique  

two corporations and for rental properties, but I consider that to be compared to what I see that’s fairly complex. Yeah, right. Yeah. And if I went to a financial planner there myself that can you build us a financial plan, I wouldn’t get a lot for 500 bucks. 500 bucks would be like, a consultation, where we go through a few of my top of mind questions and where I might not get complete answers, right. But even then, like, I’ve paid a few one time consultations for professionals in the past, and I got a lot of value from that, like paying a CPA for an hour, like, let me drill your brain with stuff that, you know, I want to get a second perspective on, I think there’s a lot of value in that, like, I think we shouldn’t limit ourselves to hiring like a business coach only, and then slashing all the other professionals, although I don’t want to put all CFPs in one bucket, right personality fit is important. So if you walk into, I don’t know, some random financial planners office, and the financial planner doesn’t really get what you’re doing with your real estate, like they’ve never seen it before. They don’t really get it, maybe that’s not the right person. Right. But there’s not many like you that they want. If they don’t know what a burr is like that might not be the right person for you, if you own multiple properties, because they might not really get what you’re doing, right?

Erwin  

There’s not many that I can imagine ones when you

Dominique  

charge a flat fee, right, you’re not gonna get a flat fee person at the banks, that’s only independent firms. At the bank, they’re only going to do a financial plan for you if you have at least 250 grand in mutual funds with them. Right, which most real estate investors don’t. If you happen to have that, then maybe, maybe they’ll do a financial plan for you. But I kind of doubt that they’re going to incorporate all your rental properties into the mix. It might be a little above and beyond

Erwin  

what is your opinion on on like mutual funds and ETFs?

Dominique  

I think, again, like as I mentioned before, I don’t think it should be compared to real estate at all, because it’s not at all the same thing. But I think honestly, it’s a safe, steady investment that isn’t leveraged. If you have it in a TFSA all the money you make is tax free, that counts for something. And I think people should work closely like if you took your real estate holdings and you know, did an actual rate of return calculation and compared it to a good mutual fund over a 510 year period. You know, it’s not completely off base. I think if you look at your mom or your grandmother’s mutual funds in a conservative portfolio, yeah, the returns might be a little underwhelming, but she’s not going for high returns. So you can’t compare your your grandma’s mutual fund to this really high risk strategy that you’re taking on. What makes real estate higher and returns when it’s done correctly and an upwards market is the leverage part. Right and that’s also it makes it risky if we just bought properties in cash, and then just held on to them in a 50 year period if the market wasn’t this crazy, in Toronto, for example, you know, we would make moderate returns, and then you back out all the fees from selling and you know, it’d be kind of like buying gold. If it wasn’t for the leverage, you would just be buying it and holding it and eventually selling it.

Erwin  

You said the word word does? Well, not all financial planners like real estate, that’s like a gold.

Dominique  

Well, and again, the financial planners depends on they get paid, right? Like if their fee only they charge a flat rate, they might not hate real estate, like if you just own an apartment building, and you tell them I own this apartment building, they might be like, Cool, good for you. That’s a pretty safe asset class. But if you’re flipping and you’re like, aggressively doing these hardcore renovations, they might have an aversion to it because it feels risky, right? And planners tend to be a bit more risk averse, and they just, they’re not enthused, they’re not excited for you that you’re taking on a lot of risk in a shaky market, like they’re not going to be excited with you. In the same way. So sometimes I think real estate investors look at that, and they get kind of bummed out, they’re kind of like, oh, this person is super lame. You know, it’s like, when you have a lawyer that all they have all the time to say to you is like, well, I don’t know. Well, I don’t think so I don’t think you should do that. You can find a lawyer that’s not like that. There are some that are a bit more balanced, where like, you know, they’ll kind of level off with you, but they’re not always going to be giving you bet news. Same for a financial planner.

Erwin  

What’s your thoughts on gold and silver and Bitcoin?

Dominique  

Well, I don’t I’m not going to speak on Bitcoin because again, speculation, but like gold, silver, I mean, you know, if I had many millions of equity, and I was like, looking to diversify in another way, maybe I get a bit of gold? I don’t know, it is so well, preservation strategy, right. And I think people hype it up as being this anti government thing nowadays, you know, like, don’t trust the government don’t trust the stock stock market buy gold and, okay. But again, it’s it’s not, it’s not going to be a wealth builder is just a wealth preservation strategy. It could be like, your safe thing that you keep aside that if something crazy happened, you could always trade it in for your money, I guess. I don’t think much of it. I just think it’s, it’s too hyped up as being this, you know, anti government alternative nowadays? And

Erwin  

how do you advise your clients on on handling inflation?

Dominique  

I think I mostly advise people honestly, on just making sure they’re, they have a skill to offer the marketplace. If you’re a business owner, just focus on growing your business as much as you can, so that your, you know, your revenue keeps up with inflation. If you’re a sales professional, get better at sales. If you are, you know, otherwise climbing up the corporate ladder, just make sure you know your value and that you’re negotiating your salary. I think that’s the biggest thing people can do. And so you kind of have to know, like, look at yourself, look at your family situation and go okay, what’s the best use of our time? Is it to increase our income? Or is it to cut our expenses? And for some people cutting the expenses is the best place they can allocate energy. But for most people, it’s increasing income, or for some people, it’s both right. So you take take an example of a stay at home mom, right? Like, she’s home, she’s not earning an income. The thought of starting a side business while caring for a three month old is maybe not super great, right? So this person might be best served by watching their expenses and just cutting things like takeout, right, you can, you can save a lot by just cutting those extras that we’ve gotten used to write all those quick, convenient services.

Erwin  

Disney plus. Shirky, Christian Freeland

Dominique  

Yeah, never, never mind that but just cutting like a skip the dishes. Purchase once a month is way more, you know,

Erwin  

I’ve been opposed to never bought a Starbucks.

Dominique  

So I think even just looking at your family unit, you know, also in us is like me and Richard, right? We look at okay, as a family, right? As a family always look at your family as a business. I know sounds kind of, I don’t know. That’s how I look at everything. So you list out like, what are skills? Right? What are our income sources? What are our core expenses? What can we do about them? So for us, like one of our largest expenses is our mortgage on our new house. And because we have a lovely variable 6% mortgage. Fantastic. So one thing we can do about that is to use some of our rental income to offset our customer mortgage, which is great, but otherwise, we’re just focused on having better businesses, right, like getting better at getting leads and getting better at sales and doing valuable work work that people find valuable, so that they’re happy to pay for it. You know, I think if more people focused in those areas, even people with a job right like if you have if you’re employed somewhere you have a regular T for job, and you want to make more money instead of just waiting every year to see if you’re gonna get To raise maybe it’d be more proactive about it right? Like, try and put yourself in your boss’s shoes, like what would be more valuable that I could be doing. And it doesn’t have to be working overtime, it could just be like doing different things in your job doing things a little deeper. Or just asking your boss like, what would be more helpful to you that it could be doing to go up in my career? Right? I think those are things that people have just kind of been comfortably just doing their job for a while. And maybe it’s time to be a bit more assertive.

Erwin  

And for the full time real estate investor get better at raising capital.

Dominique  

Yeah, I think we could have a whole other conversation around, you know, the security around lending out money or using lent money. Oh, yeah.

Erwin  

You even mentioned, your properties are all just your your own. Like even though you went to those like those, like the group that you’re a part of that you tend to, like they were all about? Oh, PM.

Dominique  

Yeah. And we just never like we’ve thought about like, Should we have a joint venture, you know, but for us, it would have just been like, there wasn’t a huge advantage, because we had some of our own capital, whether it was cash, or like very low interest, secured line of credits, like we have capital, we have the skill set, we’re in the location. So there wasn’t like a missing gap. Like we didn’t need someone’s capital that badly, we were able to qualify for mortgages. So I think if there was like, a big gap in something, whether we couldn’t qualify for mortgages, or we had no money, maybe that could have been something that would have made sense, but I’m kind of glad we didn’t do it, you know, because then when you don’t have a business partner, you don’t have to go and like crawl back to them, when things aren’t going well, or when the interest rates went up, you know, I feel like having to present like a quarterly report of your financials to your JV partners like that, that makes it a business. And that’s not passive by any means, you know, and it just adds more weight. Like, if I’m going to lose money, I rather just me lose the money and not have to crawl back to somebody else to say that they lost money to

Erwin  

even the quarterly reporting was pretty easy for you to do what I call like investor relations, like keeping your

Dominique  

capital. So either it would take up more of my time, or I would be paying my accountant more to actually have a quarterly report ready for us. So I think that’s another phantom costs, right, and other costs that

Erwin  

don’t pay your accountant as a real cost. Yeah, and not

Dominique  

just to do your tax return, but to maintain your books throughout the year. And if you’re gonna have to do reporting for JV partners, you need quarterly, like completely done up financials. And there’s a cost to that. You know, like, we happily pay several 1000 for bookkeeping and accounting every year, and I’m glad to do it. But I think a lot of people don’t realise the cost that goes with that like, but my business is super complicated, you know, like, we get income from all kinds of broker, all kinds of insurance and investment companies, right. And it all has to be reconciled. And, yeah, there’s a lot to that. And we got payroll, and you know, business loans, that kind of stuff.

Erwin  

Really difficult question. Asset allocation convention, many different categories of investments, mutual funds, gold, silver, whole life, owning real estate outright. We haven’t even talked about passive real estate, like either private equity, or like REITs. How should one split it up?

Dominique  

I think I think for most people, it’s easy to kind of look at it as a pie chart, you know, you look at a big circle, I

Erwin  

literally have a picture in my head,

Dominique  

you could draw it out on a piece of paper. And then for you know, anybody listening to this, I guess, just draw it out and then drawing the circle, like, what do your assets look like right now, right, for most people, is probably equity in their rentals. And then a separate part of the pie chart is like equity in your home, like your principal residence. And another part of the pie chart, if you’re a business owner, like myself is like the actual value on paper of your business, what it would sell for. And then another part of that would be whether you’ve got a pension through your work, you know, looking at the actual value of that pension, I think is important.

Erwin  

Do many people even know how to value a pension? I’ve googled the manufacturers

Dominique  

statement, you don’t have to do a crazy formula, like it says on your pension statement somewhere down there. Like, if you were to transfer this out, it would be 542,000. Like there’s depends on the pension or like it depends. But that would be part of your part of your asset allocation. Right? Or if you’ve got RRSPs would be part of that too. So I think for most people, just knowing where they’re at right now is helpful. And then you have to ask yourself, you know, maybe involving a financial planner be good idea too, but just looking at yourself, like, are you comfortable with this allocation like does that does it make you uncomfortable? That 80% of your wealth is in real estate? Some people might say that makes me comfortable? Because real estate safe Okay, fair enough. As long as there’s many different types of real estate or maybe your spread in different sectors, like if all my my real estate for example was any various Small town with no economy, or that was relying on one economy, I’d be pretty spooked. Right? It’d be like, well, all it takes is for that one industry to leave or to close down. And then my properties actually go down in value tremendously, because nobody wants to live there. So that would be something to be concerned about is the different types of real estate, the location, you know, the concentration, are you buying all these properties on the same street? What if that street ends up being the crappy part of town eventually, right. And then looking at those other asset categories is like, if you have RRSPs, and they’re in mutual funds, for example, and you’re not super impressed by them, maybe actually make an effort to see if there’s better mutual funds out there. I think people just assume they’re all the same, or that they’re all bad. And then sometimes people bring me their mutual funds. And I’m like, You’re in some conservative portfolio, like, of course, you’re not impressed by its growth. And I could tell that you’re more comfortable with risk than someone in a conservative that would normally be an in conservative folio. So let’s change that. And that can be a huge shift. But for me, like right now, the our main wealth is in real estate, because we agreed to start with that right away, because you can take advantage of the leverage. But I’m planning like, as soon as we sell our first property, I think we’re planning on selling one of our properties in three years. And when it renews what, what our 1.7%, mortgage renews, I told Richard, like, what I want to do is I want to sell and take all the proceeds, and put them in our TFSA is and mess them out. That’s my goal, like I want to start having that more like genuinely passive source, I want to use up that TFSA room because it’s going to be over 100 grand each by then. And, you know, then you have 200,000, that is earning money completely tax free, like all the money you make is tax free. So if you make, say, 8% a year on average, that’s what 16 grand a year tax free. So you can either take it out and use it or you can let it grow. And isn’t that amazing? Like, that’s no work. And if you have a property that cash flows, 16 grand, like you have to do a lot of work for that.

Erwin  

Okay, you know, 8% cash on cash return? Yes, please wear?

Dominique  

Yeah, I mean, we kind of have that here to be honest. But you know, it’s a lot of work. And there’s a lot of risk. And as soon as a tenant leaves, you’re spending a month working to fill that vacancy, like, that’s work, I’ve seen Richard work to fill a vacancy, like, he’s on the phone, like for weeks, and then he drives there to meet with somebody, and then it’s, it’s a dud, or they don’t show up, or they were looking for something different than he drives back, you know, you forget how much time you’re spending. So I’m looking forward to changing our asset allocation a little bit, to having that truly passive piece as a part of our overall portfolio. Like, we’re still always going to have those active properties. But I don’t want to have 25 of them. You know, like, I don’t aspire to that at all. I don’t see the appeal. And thankfully, I looks like Richards on the same page as me. So I think that’s a big part of it is agreeing with your spouse on your on your investment strategy, or the CFO,

Erwin  

you cut them off from financing, there’s just cut off. Yeah. Well, would you be putting your 100k TFSA into place today?

Dominique  

I would be Well, honestly, I’ve been it’s been three years, I haven’t fully drawn that out. But honestly, probably just some kind of growth funds, like I’d have it spread between a couple of different funds, like usually we build like four or five fund portfolios that are complementing each other. And then that way, when you if you need money from it, and you’re in a market downturn, not all five funds are going to react at the same time, right, some will be up, some will be down. So for example, like a Canadian value fund would have been up during all of COVID, like weirdly, keeps going up versus a growth that global growth fund was doing the opposite, during that same time period. So if you’re invested in a couple different funds, they’re all you know, kind of hovering at different rates. And so you can access capital without taking a loss.

Erwin  

So you would find the fun though, you’ve never tried to try to own individual stocks that would mimic

Dominique  

I don’t have interest in that because I honestly like part part of what I do I’m so big picture and everything that I just I don’t have an interest in individual securities like I don’t. And that’s why I stick at the mutual fund level because I like the idea that there’s these portfolio managers that like all day, all they do is trade stocks, right? They research the stocks, they buy them to sell them and I just don’t have an interest in that. Like I opened up a self directed TFSA for myself at some point I bought a couple of stocks but I realised like I’m really uninterested in it. And I don’t want the human emotion aspect to kick in when it’s my money. I almost want to be removed from that and have someone just making rational decisions in the background. fascinated me.

Erwin  

That’s pretty cool. I really liked the idea that you’re doing five different funds. This made it so they they move differently. That way you’re never caught in any market.

Dominique  

That’s not Never Never say never right. But yeah, you would think but they’re not all down at the same time. Yeah, normally trying to

Erwin  

think of a scenario where that happens, basically a meteorite hit ever hit Earth.

Dominique  

I mean, last year was a really weird year for like more conservative investments, you know, because the interest rates went up so sharply that the bonds got all devalued. So people that were invested very conservatively last year, were like, totally let down by the returns were like people that thought they were in the safest investments in the world might have been down like five or 8%. And they were like, holy man, like it was the first time it happened in 100 years. That was very, very interesting. But going forward, they’ll say, for investments to do really well, because again, like, the interest rates are up, right. So the interest rates that you make on a bond are higher. And that’s great.

Erwin  

Fabulous, Dominique, this has been very enlightening for me. Thank you so much for coming on the show. Where can people follow along your journey?

Dominique  

So I’m mostly on Facebook. So I’ve got my personal profile that people want to connect personally. But please, if you post a lot about coaching and stuff, yeah, I might unfollow you don’t take offence to that. And then I’ve got my business page as well on Facebook or my website. And then I post on Instagram too. So just under my name, domination are

Erwin  

fabulous. And live for listeners benefit. I’ll have it all posted in the show notes.

Dominique  

Oh, and on LinkedIn, I post a lot of like business stuff on LinkedIn. So for the entrepreneur types, or real estate people,

Erwin  

any final words for the listener, especially someone who’s newer, or someone who’s in a tough spot, but Dominique, just listening to you like, two different people. But Dominique just said, his observation because you’ve been like, I can even observe your own journey. Like you’ve been like the rah rah rah buttons. Right? And here you are now. It’s very different. And it’s totally cool. I think every restaurant is going to journey wild about that experience in themselves. There’s no right or wrong for anyone. I do think is wrong to lose money, though. Yes, yeah. Yeah. Any final words you want to share?

Dominique  

Honestly, like I think, what are you publishing this episode? Just based on timing? Is it after before the tax deadline? Deadline after the tax deadline, okay? Well, if you if your accounting stuff was a mess last year, and you know that you should do better just bite the bullet, get an accountant. And if their fees are higher than you thought, that’s probably a good thing, it means they’re actually going to take time with you. So I think people should go invest with an accountant. If you know if your great aunt does your bookkeeping, that’s, that’s great. But you also need an accountant to bring it all together. So I think if more people invested in working with an accountant, the world would be a better place. And it’s not really a shameless plug at all. Like I, I don’t really work with real estate investors that much like if they have one or two properties, sure. But as soon as it gets to like corporate stuff, or having multiple holdings, I recommend going to an actual accounting firm.

Erwin  

I might know of one.

Dominique  

You might know of one, I hear that your wife does accounting stuff. So yeah. And then on the investment side, that’s my final word honestly, is just the investment side. Raised professionals, not not just coaches.

Erwin  

Fabulous, Dominique, thanks so much for doing this. All right, nice being on this podcast.

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. Sign up 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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