**Transcripts are auto-generated.

Erwin  

Hello, welcome to cash flowing Windsor, Sudbury arson, leading to sleepless nights, putting corporate with 27 year old Boston. Welcome to the truth about real estate investing show for Canadians. My name is Erwin Szeto and I’ve been a real estate investor since 2005. licenced real estate since 2010, full time realtor of the year to investors. So I’ve personally invested through many, many good times and never have I seen so many bad times such a bad time as we are in today. Everyone’s experience is different, though. You know, like our guests, Allison, he’s doing quite well, yes, he’s had some challenges, obviously. And we’ll get into that mantra view. But there’s a lot of flippers speculators out there who are having the toughest time, even those who pose who bought pretty smart over the last three years, even they’re having some challenges. But generally, anyone who invested the longest, for example, if you’ve bought before 2020, you’re generally faring quite well. I spoken to listeners who are negative $1,000 or more negative cash flow, a lot of them are having invested in pre construction condos. And then I’ve even spoken to some burr investors, folks who have renovated, done significant renovations and then they refinance those properties, taking a lot of money out. And now they’re negative cash flow. Many people are selling to get their debt under control. And thankfully, we have taken on new clients and we’re able to help these folks out. We all got into real estate investing to gain freedom and get more control over our lives, control our financial futures. Get ourselves Financial Peace. Unfortunately, when it gets out of control, then we’ve lost control. We’ve lost peace, we’ve lost freedom. But thankfully, many people who invest in REITs are invested for the long term. They’ve honestly have lots of equity in their properties. So our even our clients, they’re selling and they’re taking significant profits of six figure profits. And of course, they return their capital, and they get they reduced their debt. Then even last week, I put out a request for income properties, as we still do have some clients or are in the market for small multi families. So my request was specifically for duplexes are better last week, and I’ve never received such a large response. Numerous legally, small multifamily properties and top towns just outside the GTA, which are the ones that cash flow which fit the sweet spot for our clientele. One interesting observation. Almost none of these small investor small market multi investors are overly motivated to sell. Why? Because they invested right, those who invested purely for appreciation without an eye on cashflow. Those are the ones who are having a tougher time. I even spoke to an investor who is operating Airbnb, in licence in a town with very strict Airbnb licencing. The location is fantastic. It’s an area that that draws tonnes of tourism, but they are having difficulty selling it. Just know that anytime you’re going against the local bylaws, including if your property is not legal, it’s for example, if it’s not illegal duplexers Or you have units in the property that are not legal, then that will be a different one difficult property itself in this in this market, because the financing is more difficult. And honestly, buyers are just being pickier these days because they can be there’s a lot more property to choose from. But understand that’s only for the short term. Interest rates will not stay high for forever. And again, this is why here at Island real estate, we’ve always focused on legal small multifamily properties. Because one one focus is on cashflow one can survive these tough times. And when it’s time to sell, there’s more buyers for for quality properties. And also, as predicted, with housing affordability having having eroded over the years, people honestly need more income to qualify for property. So buying a property that has tenants that that pay rent, helps pay the property so people can afford more when they’re buying an income property, especially if they’re planning on living in it. Also understand we are in the middle of summer. So it’s called seasonality, where the long term rental market and the resale markets they just come down even for you know, thrive like myself. For anyone watching the YouTube I am recording this. We rented a cottage. We are technically not working this week, sort of working a little bit, but many people are on vacation. So a lot of people are not focused on buying or leasing right now. Add to that the bank you can raise interest rates another point two 5% last last week, bringing the overnight lending rate to 5%. I know many people are unhappy with that. But the markets did predict it. For anyone who follows the news, pretty much every bank predicted that that would happen. And also pretty much most of the smart money. Thanks. So there’s a chance of another increase later this year. I know some people who think there’ll be impossibly too. And also there will not be any interest or an interest rate relief until that as soon as June next year, June 2024. So elevated rates will be here for a while. So for many it’s survival mode. For others, they’re just for those who are honestly, it’s the ultra rich are just getting richer because they’re the ones who are still buying a property while others are fearful. For tonight, we’ve had some we had some issues with one of our portfolios in Catherine’s two. So in order to improve cash flow, I had to fire our St. Catharines property manager. As our rents were underperforming rents were coming in lower than expected leases were being signed for less than I expected. And also we have a vacancy. And as a discerning investor, like any investor, I personally hate vacancy. I think we all hate vacancy. Now, I don’t like to use the word hate often, I use it sparingly, but nothing ruins a real estate investment like vacancy, ask any flipper or burn investor. So after an onsite tour, they did back in May, I took notes, I took pictures, I spoke to the tenants, after the onsite tour with the property manager I knew that I can trust them to take to to continue working there. So I actually immediately assigned all the work to my handyman, who I trust who I’ve had working I’ve been working with for close to 10 years, he referred me to a local leasing agent. And I’m happy to report that we sent we signed a lease and our property will be fully tenanted by September. So the previous property manager was either negligent or didn’t know what they’re doing. Because my property was experiencing mace vacancy because it didn’t show well. I have burnt out light bulbs, and badly needed to paint job. One door was one bedroom door was broken. One bathroom had drywall damage, all generally minor things. Hence, the previous student tenants did not renew their leases. Nor did new tenants want to sign. I don’t blame them. In the end, the work to repair the property was under $2,500. And we signed three new students for close to $2,000 rent per month between the three of them. So we got near top of market rents higher than what the previous property manager was signing for. And all the existing tenants are happy with the change of management, I’m saving money. And now I’m making more money as well. If you want to get an under street understanding of how much of the landlord’s market it is in the student rental market, for those who follow the news, like you know, there’s a lot, there’s a lot more international students in Canada than ever. So the smallest bedroom in this house is just under 10 by 10 to 110 feet by 10 feet, which is normal for most in rentals, it’s just common that there’s always one small bedroom in every house. So this room used to fetch only $400 for the room before the pandemic $400 per month before the pandemic, we just signed the the tenant just signed for 575 For that very same bedroom. It’s the same bedroom, like we made a painted it, but nothing else is different about it, it’s still the same size, that’s an increase of just over 44% just over three years. 44% just over three years. So thankfully, that beats inflation. I’m very happy with this investment. But the lesson is that not all real estate professionals are are equal. It’s not uncommon for things to not work out with the property manager. I’ve been through about six property managers myself personally, one just needs to keep tabs on them and take action when necessary. We disagreed on management styles to them vacancy was acceptable in this market. For me, I don’t know if I know better. But I have clients that own about 100,000 rentals, and we all catered to the top 20% of the market, I was the only one experiencing vacancy. So I knew something was wrong. So here it I wouldn’t real estate we play to win. I enjoy winning, I enjoy cash flowing, I despise losing aka vacancy. So make sure everyone on your team is playing to win. And everyone’s rowing in the right the same direction both and that’s the way to go. Investing in make sure everyone on your team knows how to achieve those wonderful returns. If you are an investor and can use a second opinion on how your existing portfolio is performing, maybe you have some properties with equity in them, but they’re negative cash flowing, then feel free to reach out to us at I wouldn’t have any the wealth.ca The year is halfway over the value to you is to make sure that each property is serving. And if they’re not, we can suggest better uses for your investment capital. Just like the stock market, things change frequently, several investment strategies no longer makes sense. It’s time to review and reset your portfolio and set it up for future success. It’s a 30 minute call, there is no charge, just reach out to me the ball and one of my coaches will get back to you. If you’re more on the information education wave right now, we do have an upcoming upcoming meeting all online. It’s actually next week. This next coming Tuesday, Tuesday night at 7:30pm. It’s all online on Zoom, where I’ll be sharing the latest market update. I’ll be talking about interest rates, I’ll be showing the data on when we’ll see an interest rate cut. I’ll be also talking about something that’s a massive interest to myself, artificial intelligence, and I’ll be sharing specifically what AI tools that I’ve been using today in our business, AI is already causing massive disruption. And for those, in my experience has been for the good. It’s gonna be great for those who know how to use the tools in order to be more productive. I’ve already saved myself 1000s of dollars in using certain AI tools and I cannot wait to show you how. As always, I’m on a mission of truth seeking to find out what works best and what doesn’t work in my business and portfolio of real estate properties. The next I’m gonna meet again is Tuesday, July 25. At 7:30pm Eastern Standard Time, also from my team, Coach Tim Hahn will be sharing how he and other clients are dealing with high interest rates in rebalancing their portfolios. These unprecedented times as we navigate the uncertain terrain of high interest rate environment, we understand that managing your investment properties may seem more like a burden than an opportunity. This is an opportune moment to rethink your strategies seize these opportunities, these high interest rates are currently yielding. Yes, that’s right. The smart money is taking advantage. They’re being greedy right now. While those are beautiful, there are great opportunities now. Many sellers are being squeezed by high rates. So being a buyer as a winner is a winning strategy in this market, just make sure that you’re set up to be a buyer in this market. In the face of change. Knowledge is power. embrace this opportunity to enhance your understanding, refine your strategies, and prepare for success. Your investment properties don’t have to be a source of worry in these high interest rate times. Instead, let them be a powerhouse for your wealth generation. Leverage my team in my team and I have vast experience, close to enjoying in person experience. We are hosting an island match my tour the following Sunday, July 30. It’s a Sunday, the following Sunday, July 31, in Kitchener Waterloo where we will be touring to income properties, and there’ll be a lecture as well. There’s nothing better than learning hands on on site in person hanging out with like minded people. And that’s from my experience. Unfortunately, I won’t be any good their chairs Sign us up for our old family, family camp, a Family YMCA camp, so I won’t be in there at that event, but Tim Hahn will be so make sure you’re on my newsletter to stay connected with all of these all these best in class educational events. One can register on my website, www dot truth about real estate investing.ca On the right side, just give your name and email and you’ll know cuz then you’ll be registered to receive all the latest and greatest events information. And if you have friends and family who you care about who care about improving their financial futures then please invite them along to onto this week’s show. We have a very real conversation with full time professional investor awesome. Yeh, who does it all? He does wholesales, flips, burgers, negotiates his own Cash for Keys. He’s gotta get steroids share about that. Several good stories to share. He’s a podcaster and meetup host. And honestly, it’s not all not all pretty, which is why this is shows called The Truth about real estate investing. Austin shares how he’s had to rebalance his portfolio, how the wholesale market was down when his short term problems are because again, he’s very successful. But he does have short term problems, which, but his success has led him to be able to transition out of his corporate job. It’s only 27 years old as well. And also he started off investing in Windsor Sudbury, and now he’s even in downtown Toronto. His career has definitely changed a lot, which is what I really enjoy about this episode and learning about Austin’s journey. Again, he starts He also shares how he started learning at local local investor groups connecting with locals to build it as teams. We walked through the numbers of a couple of his deals often isn’t candy coated the challenges that come with buying ugly, ugly properties, including a case of arson, or as part of property was intentionally burnt down by criminals. The phone calls partner got in the police that’s how he found out about it must lead to sleep, sleepless nights with insurance we get paid out and how Austin’s the markets they targeted before the markets and properties he’s used to target how they’ve evolved over his career. This is a very real truth about real estate investing episode, where problems are not always worth the profits. However, hopefully, my friend one of you or 70 listeners can take away how to improve upon your real estate businesses. Leverage the lessons from this episode and the 300 Plus episodes before this one to follow Austin. You can find him on Instagram and Austin. Yeh. A U S. T I N Yeh Ye h six. Number six. Awesome, Yeh. If you want to follow Austin’s podcast and network meetup, check out him on Instagram at prize network event. All right, please enjoy the show.

Erwin  

Hello Austin, what’s keeping you busy these days?

Austin  

A lot is what is keeping me busy nowadays. We talked a lot offline but I guess we’ll dig deeper into it. I’m going through a couple of apprai bought a couple of properties last year, going through appraisals. That’s a little bit of a mess. I’m doing some fixing and flipping. I’m doing wholesaling, wholesaling has slowed down pretty tremendously despite the market picking up on the MLS doesn’t necessarily translate to to investor demand all the time. Yeah. So I mean, there’s a lot of things, buying properties, selling properties, selling a decent amount of my portfolio, a decent amount, but selling some of my portfolio where interest rates have gone up significantly non payment of rent with tenants dealing with that we can go on and on. But that is it in a nutshell.

Erwin  

Okay. Okay. Yes. For listeners benefit. I asked you before recording how many properties have come through your portfolio?

Austin  

Yeah, I would say about 30 to 33. I’ve owned 25 or 26 concurrently. Right now I’m probably at 17 ish or 18 ish. Now. I don’t always be tucked off. I don’t always keep track. I guess to my detriment, but that’s sort of mental math. I think that’s where I’m at right now. I sold a decent amount over the last couple of months for sure.

Erwin  

How do you decide whether or not you’re going to keep a property?

Austin  

Well over the last few months, that was pretty simple. The market decided for me right? Fortunately, I started investing at a good time, right where the market was was doing its thing prices were appreciating year, what year that was end of 2018. I got my first property I closed on a December 2018. And the market was doing obviously pretty well. A lot of my portfolio to begin with were single family houses, scaling up to duplexes, triplexes, five units, six units and eight units. A lot of the properties that became negative cash flow, were the single families because of obviously what interest rates did and so that was, for me, my thought process and selling it. I thought the market wasn’t going to recover very quickly would probably be sideways for a while. Obviously, I was proven wrong, but it was going to be sideways. I wasn’t gonna get appreciation these mortgages were with RBC. So I was paying interest only so not getting equity pay down and they were cashflow neutral. So what was the point of holding them? If I didn’t have faith in the market recovering at that time during it was like may ish, may ish around that period. So it was a pretty no brainer for me. The difficulty I faced they were all tenanted. Right. And so really the active buyers over the last few months were first time homebuyers or people end users. So I had to negotiate with the tenants Cash for Keys, get them out and then list the properties for sale. So the vast majority of my sales have been the smaller single family homes, but these multi families I have fortunately, I haven’t leveraged to 80% loan to value. I quit my full time job in February 2020. So I wasn’t able to leverage them anymore after February 2020. And we know the market roundup since then. So yeah, just got rid of the single families kept the Maltese for the most part.

Erwin  

So you’ve been through a lot. Yes. A lot. Five years. Yeah. What have you learned?

Austin  

I learned a tonne. So let’s get started with

Erwin  

the back. You invest. So you live in Toronto? Yes. Where do you invest?

Austin  

I invest in Windsor and Sudbury other tertiary markets. I’ve invested in like a small city an hour out from London. What’s called it’s called Stratford Ville.

Erwin  

Excuse me. Yeah,

Austin  

it’s like a population for Ville Yeah, not sure. Yeah, Stratford Ville. I know what you’re thinking and it’s not the same one. When I tried to send it out to my wholesale list, everyone was thinking about the other one too. I was like, no, no, this is Stratford bill. That was actually one of the tenants that actually stopped stopped paying recently that I had to deal with. Are they still alive? They’re still alive. I guess if we’re gonna get into that sooner to audience will know what that means.

Erwin  

Population of Stratford Ville that’s like 1000 2000

Austin  

Oh my god. Yeah, it’s very small. It’s about it’s about 25 minutes from St. Thomas. I want to see 45 minutes from London. But funny enough like I honestly don’t know what really drives the market there but the house prices there are quite expensive.

Erwin  

Ontario is messed up man. It’s more expensive

Austin  

than St. Thomas and some of these other bigger cities so like I don’t know what the appeal is exactly. But the court for me it was just like a burr it was a flip and I was gonna you know, I might as well keep it because it’s a duplex. I got it extraordinarily cheap. So sort of my investment philosophy and it’s changed since then was to just find deals that I can be in and out of very quickly. Get it at a make money on the buy, complete the renovations Burt refinance my money because I’m a wholesaler so I’m able to get great deals at pretty steep discounts. So for me, I wasn’t really market dependent. I would go wherever the deal was, and that has led to some headaches now. So I’ve definitely realised why being focused in a particular market is better than spreading your portfolio wide. But it’s also at the same time I’m not gonna say that it’s a completely bad thing because it’s helped my net worth tremendously as well. So like there’s been pros and cons of doing God.

Erwin  

How do you source property as a wholesaler? Yeah, as a wholesaler so

Austin  

I was an investor first, right? So I was buying properties and a lot of what I was doing was just networking with other investors in Windsor. That’s where I started off, then doing Kijiji before Kijiji, became super popular going on Kijiji every day, refreshing the page, being the first person to contact any new advertisement. They’re cold calling realtors, it was a popular one that I was doing that and now as well, right, just looking at expired listings and making those cold calls door knocking, doing low cost lead strategies is how I got started off with low cost high effort though low cost high effort, but I was an investor first and I wasn’t willing to you know, like as investors a lot of the money’s in like thrown out in the market a lot of the time so I didn’t have a lot to start off with. But I realised that obviously you can’t scale that way in the wholesaling business because the lead flow is inconsistent, especially when you’re doing it full time. You’re getting leads maybe once Are you getting deals maybe once every three or four months if you’re doing that good deals, but it’s just not consistent enough. So then we started moving over to like flyers we did bandit signs, which are those we buy houses, signs and just sticking them down in grasses in high traffic area, digital marketing SEOs, we did a little bit of everything. Everything works, you just got to obviously work it hard enough. And right now kind of what we’re seeing in wholesaling, we’re putting a lot more focus back into the high effort, low cost strategies, because what you’re seeing in wholesaling is your assignment fees are slipping out, right, just generally people are less willing to give 5060 $70,000 assignment fees were used to be or normality. If you didn’t get a 50k assignment fee, at least once every month, you are doing something wrong as a wholesaler, but your marketing costs is also increased as well. And your buyers had slowed down as well. So even if you get the deal dis Boeing is another story. Kind of what I was alluding to earlier, is is not the markets picking up but a lot of it is and users right, and your buys this is mostly consisted of investors. So how many cash buyers are really active. Now, there’s still a decent amount active but nearly not as much as what we’re seeing before. So as the margins are selecting expenses are increasing and wholesaling. We put a lot more emphasis back into high effort, low cost strategies to get us through sort of this downturn. That was a mouthful. Now, that was a mouthful,

Erwin  

when he came into the office asked you about how has the market gone for a wholesaler? Yes, because you’ve you’ve gone through, like the biggest downturn we’ve had, and in my recollection. So how did you fare in the downturn? And you’re saying, let’s start the downturn. The downturn?

Austin  

Yes. So here’s the thing everyone was live on. There were wholesalers everywhere, and everyone is living off the high of wholesaling, you could get deals under contract, that for me, were marginal deals. I was like, I wouldn’t do this. But you know, I’m not to tell people what their business plan is, if someone wants to buy it, sure. That’s your business plan, I trust that you run the numbers. So people were paying, you know, wholesalers market as is value, I’ve wholesale deals higher than my marketed as is value, right, because the market was just so crazy. And as a result of that, we pivot. So we’re doing a lot of very, we had a team where everyone was getting paid, or majority of people were getting paid variable, right, based on deal flow, they bring in so on and so forth. But when you’re bringing in the type of assignment fees that we were during a hot market, it made sense to start fixing your costs so you can keep more of the spread. So near the end of 2021, we started making hires or transitioning people to fix salary plus commission. So we were keeping more of the spread to ourselves. But that wasn’t necessarily prudent in a downturn market, right. Like we started our wholesaling business during a hot market. So I don’t think anyone saw what was going to happen in 2022. So that definitely impacted us drastically with deals that were getting under contract, it was impossible to find a buyer crickets, sometimes we’d have one people reach out, sometimes we wouldn’t have any people reach out. And that it was during that time where, you know, our fixed expenses were now high, we’re paying like 25 $30,000 a month and fixed expenses, bringing in zero costs, non zero cost bringing in $0 in revenue. So I mean, how long can you operate a business like that? And what was really worrying me is is that with wholesaling, advertising is what drives your revenue. If you don’t spend dollars in advertising, how are you going to get deals unless you do the high effort stuff, right? And so with your fixed expenses, really high, man, like you don’t want to spend $10,000 in advertising, right? It hurts. Yeah, and especially if there’s no buyers, which is what we’re seeing. So we’re in negotiating with people being like, hey, look like this is where the market is right now. Like, are you okay to go back to variable, but you can get a higher percentage of the variable assignment fee, right? So and have that go have a discussion go, obviously, like they knew what was happening in the market as well. So not well, so we did our best to try to pivot. So we’re like, okay, let’s bite the bullet and start advertising, start doing different things, start connecting with realtors directly taking advantage of a realtor as buyers list, we were able to move maybe a deal a month, but during that, like, super downturn, but that’s not enough to keep the lights on. And after a certain point, we did have, you know, lay some people off, change your business model, slow down and take a step back and rebuild it upwards. So we were impacted from it. But very fortunately, during the good of the market, we’ve made a lot of money. So we’re able to sort of sustain that downturn, but we didn’t want to just burn all that money. So we took a step back, took a look at our business and slowly agree sort of like rebuilding it to make it profit which it is profitable again, but taking things slower and steady now instead of just like, you know, trying to maximise margin without any regard to risk. So yeah, I mean, that’s a big learning lesson that we had there.

Erwin  

Right. So now we’re recording this in May. Yes. Everything looks like we’re well past the bottom. Yeah. Is that your feeling as well? We’re well past the bottom.

Austin  

Yeah, definitely. sentiment has picked back up again. A lot of it is end users I find so what we’re seeing on the AMA last year, anyone who goes on Twitter, they see Realtors consistently tweet out like Oh 20 offers 30 offers, which is not untrue. A lot of great listings are getting that but that doesn’t necessarily always translate into the off market world because think about it like we have a different clientele. Oh, we’re targeting investors and have numbers and proofer investors. Not necessarily if anything, they’ve gotten a little bit worse than that may try there. They’ve been a few more rate hikes and since May and no one was buying in May. So we’re finding that these multifamily properties that are cashflow negative on onset, there’s not much interest in and people want vacancies people have people want vendor take backs right to be able to cash flow a little bit during the transition phase. And with the single family homes, people want very large margins on it, understandably so because I’m doing flips as well. And on my flipping side, I’m sharp, right, I’m like low balling the numbers really need to make sense for me to get into these deals. So we are finding the market is picking up on wholesaling, definitely don’t get me wrong, but not nearly the extent of what we’re seeing on the market. Right. But that being said, there is good opportunity out there. I was speaking with another wholesaler who had a deal out there, no interest, no buyers. So the whole tale that they closed on it, cleaned it up, listed it and made close to six figures in profit. So they’re operating like you know, it’s investor psychology, there’s a deal that we marketed at $550,000 as his value for 470,000. No interest in it, we had one or two walkthroughs no one wanted it. So we had to let the deal go. And the seller listed on the market one week after we let the deal go is sold for over 550 K. So the numbers are on point, right? It’s just like, investor psychology, if someone was to negotiate us from 550, down to 470, they would buy it. But if we listed it out for 70, they want to negotiate us down to like 400. So there are opportunities out there in the market right now in my opinion, but you do not you do need to be a little bit wary of you know, you got to make sure you crunch your numbers and you have confidence in these deals.

Erwin  

It’s interesting because you’re we’re talking about buyer psychology, investor psychology, because I’ve spoken to many people like oh, we’re going to wait for the crash to buy gonna wait to the crash the VI word those people go

Austin  

Yeah, for sure. And for myself, speaking about investor psychology, I would consider myself a savvy investor. But sometimes it does, like you fall victim to it at times, right. So when I listed a single family home last year, it got appraise for like 330, or 340 K in 2021. Or like 2020, maybe, and I listed it on the market to D leverage wasn’t cashflow positive, like sort of the reasons I mentioned earlier in the podcast, and I got an offer at like 270. And I was like no, like, there’s no way the property is worth more. You know, I was talking myself into like, I’m not selling it at that price. Because it should be worth more than that, like people are just scared, so on and so forth. But that’s invested in the market dictates what it’s valued at, right. So like, after a few days, I took a step back, I was like I’m not going to get any better offers. And so we negotiated with that party and just ended up selling to them. So even a savvy investor can fall victim. And speaking of that, like I bought in a couple of properties in November 2022 and December 2022. Right, which were good deals, obviously, because markets picked back up since then. But going into those deals like knowing that the market was was in a downward trend, I was able to negotiate different things, but I still didn’t feel confident with 100% Anyone who says, Yeah, I’m buying this deal. And I’m going 100% confident like, you know, all the numbers, check out so on and so forth. You probably have probably maybe the same investors that if things change and the tides change, you’re gonna get caught again, like even for me what the numbers checked out, things are perfect. I was able to negotiate vacancies, all of that stuff. Still in the back of my head, there’s a voice What if the market corrects further? Right? It’s just that little voice in your head and that is investor psychology? 101. I tried. I almost talked myself out of those deals. I’m glad I didn’t. Because now with the market picking back up. All of those are, I mean, several, not several hundreds but 100,000 Plus and equity on several of those projects, right? But if I was to fall victim to the fear and that voice in my head, then I would have lost on all this opportunities.

Erwin  

So you’re connected with the wholesaler community as well. Yes, I’ve noticed love gone quiet. What have you noticed, um, like some, like well, including the organisations they learned from they’re gone. Yeah,

Austin  

a lot of the smaller players I think you’re referring to have definitely gone quiet, they either didn’t have the relationships with the buyers or they’ve never really had the skill set per se because at that time you lock up anything like even things close to market value, and you could still make a 10 or 15k fee, right? So those wholesalers or what have kind of came and went, but the wholesalers you really do treat it as a business or are still actively marketing deals I can name a couple off the top I’m not going to name names so that they name a couple top of my head that are still actively marketing we’re still actively moving deals right but they’re not probably obviously not making as much money that they would have been in the past but honestly it’s with any business right business moves in cycles the ground when when the pandemic hit all of these restaurant can I swear or no? Okay, all right, these restaurants ate shit, right? Like when the pandemic hit and they’re struggling now it’s it’s our turn to stop I got it right like and it’s our turn to show resiliency. Not every restaurant survive during the pennant. Same thing with wholesalers. Same thing with real estate investors, same thing fixing and flipping Right? Like, it’s our turn to eat shit and the resilient the risk mitigated, those will survive, right? So a lot of wholesalers are quiet, some are still moving deals, some have pivoted, their strategies are seeing all these different unique things. I’m seeing wholesalers say, take this like survey, and we’ve done it as well take the survey and you can win XYZ, because they want to see which active buyers are still buying. And you can make those phone calls what exactly you’re looking for what price I have this lead what prices need to be, and you work one on one with these buyers. I see other ones that say we have no price, throw an offer, just so they have an idea, which is kind of clever and kinda it’s risky, but it’s sort of clever, too, because people want to feel like they got a deal, right? And that person made like a 90k fee on that, right? They’re like, Okay, I’m gonna negotiate around this ballpark, boom, did it that person like you’re just, there’s no perfect answer. I think everyone’s kind of throwing stuff and seeing what sticks, which is the beauty and the risk of entrepreneurship, right? You just end times like this, you got to figure out what’s working for me, what I’ve been doing is I understand the markets picking back up. A lot of it is like, you know, end user so we’ve been cold calling a tonne of Realtors, we’ve been SMS blasting a tonne of Realtors, when we have a Hamilton deal, you’ll probably get an SMS blasts, too. It’s just like blasting like, hey, we have this off market deal. Bring your buyer client, here’s the buyer’s package. Let us know if you’re interested. Right. So we’ve been catering towards end users utilising Realtors because realtors, they want to commission you probably know a lot of realtors want to make a commission, right because they also are not making as much as they were before. So we’re kind of pivoting who we’re targeting to and that way it hasn’t worked yet once or twice. But, you know, that’s enough for me to build proof of concept and continue down that path. It just, there’s no perfect answer to this.

Erwin  

Let’s go back to early days. So can you give me an example from like the early days that you think was a good deal? Something you’re happy with? Yeah, pick a city.

Austin  

sure most of my portfolio was in Windsor.

Erwin  

What did you buy in Windsor?

Austin  

So for example, I bought a I bought a duplex off the market with a vacant land beside it. And this is when I was just doing all of the different sorts of high energy marketing strategies low cost. This was via Kijiji, I constantly refresh the page got in contact with the seller who just literally listened so I was the first viewer

Erwin  

on MLS. GG, GG GG also for sale by owner for sale

Austin  

by owner that was back when nowadays, Kijiji listings are worth more than what the MLS listings are. So times are a little bit different than what was the first person that spoke to them build rapport and then had my contractor through their go through their through an offer. So this one was a duplex vacant possession, which is amazing, vacant land beside it. I got it under contract for 250,000. And it was worth like we got it appraised by the bank. When we went through bank financing. It got appraised at 330,000 as is. So we did like very cosmetic renovations and then got it further appraised at 370. We refinanced that in February 2020, February 2020. And we haven’t refinanced that sense. So it’s probably worth closer to half a million now because of that vacant land because of what happened in the Windsor market. Right. But a more recent deal. I mean, I don’t know if you have any questions, or did you want me to go code?

Erwin  

Let’s finish off this example. How big was the law?

Austin  

The law was 65 feet by 100 and feet by 150 feet depth,

Erwin  

I believe. Where was the vacant lot? What was that?

Austin  

Yeah, so the vacant lot was 30 feet and then the duplex was 30 feet or 30 feet? Yeah. Okay. Yeah. So they’re just like a double wide lot. Yeah, exactly. So we haven’t severed it yet. It’s a long term thing we could plan to develop on it. If I choose to go down that route. I can sever and sell it off. But I’m just land banking right now because the refinance of the duplex paid for that lot. Pretty much

Erwin  

abuse areas. Good tenant profiles. Good. Yeah, it’s

Austin  

like a student rental area. So a lot of students are in transition tenants every year which, which I like so it’s a decent area for student rentals. Not so much for families, you

Erwin  

know, and so were you driving to Windsor to do this deal?

Austin  

No, no, no, no. So I never I’m a pretty lazy guy in terms of like driving well, it was a struggle for me to drive down here too. And it’s only a 35 minute drive. Windsor is what four or five hours four hours away yeah and even hold sway when we get deal with like they’re all Sudbury we got deals everywhere, right? Like I am a firm believer of hiring things out right and just hiring it to the right people. So

Erwin  

look, I’m not a concert or you never seen this house.

Austin  

I’ve seen it when I visited Windsor. Yes but during the entire burr process I don’t think maybe I went there once but even that I don’t remember even stepping foot there. I had just like referrals right like just when I was grinding away at Windsor when I was initially starting. I would visit there every week and meet Realtors meet investors meet contractors in Meet people. But once you have that team set up and reliable people, you don’t necessarily need to be there per se, right? You just need to have people that you can trust rely on your Power team. And so my contractor knows way more than I do. And so I’ll get him in there to look through what needs to be done. So on and so forth, get a home inspector in there, I usually get home inspections right before putting in a clean offer. I almost always like to get a home inspection or a contractor in there. And yeah, I mean, they know way more than I know. So there would be no value of me going there. Right, right. So yeah, I just I just trust the professionals to do it.

Erwin  

How did you build a reliable team? Like this? Is the winning early properties? Like yeah, you didn’t have much of a rep or relationship with these folks? How did you do it?

Austin  

Yeah, I go through because I’m all over the place. I kind of go through like a systematic approach. The first thing I do is to jump in these to these investor communities on Facebook and say, Hey, can I connect with an investor in Sudbury? can I connect with investors in Windsor? Few people message or I’ll use a search function, see who has asked that question before or has invested their D on them. Get on a call, ask them who their realtor is contractor, whatever they’re willing to share, right? Get on like three or four calls with these investors, and then call their power team. So if they shared realtors, I’ll get on three or four call with realtors, I’ll get an understanding of good and bad neighbourhoods, I’ll get referrals from realtors and contractors. If a realtor doesn’t know a contractor, I’m not even going to use them, right? You’re not investor oriented. So then my contractor list continues to build out right Property Management list starts building out because the investor share it and the realtor share property managers get on calls for separate property managers. Then ask them what are good and bad areas? What are the rent rolls up, like two bedrooms, three bedrooms, one bedrooms? And then ask the property managers do you know any contractors as well? So it’s almost like, what do you call it like a like a tree diagram where it starts off with a couple investors in the branches out to multiple realtors, branches out to multiple property managers, contractors, and just go down that list and, and get a feeling of at this point, I kind of use a gut instinct as well of of who I trust, who I don’t if they’ve been mentioned several times, things of that nature, right. And I go through the same thing in Sudbury and Windsor. It’s just following the same sort of systems. But I do go down there, at least a few times before decide to commit to invest there, right just to meet not only people on my Power team, but to meet the investors to build a relationship with these people. Because seeing and speaking to someone face to face is different than just over the phone. But once I have that all set up, I find I don’t need to step foot in those in those areas. Again, unless I’m doing Cash for Keys conversations. That’s the only time I would I would step foot in the cities.

Erwin  

Yeah. So we were talking about what is the work that’s high enough value for you to do personally and personally.

Austin  

So people love to say property management’s that $30 An hour tasks Yes, and no, it is when you’re just like your property is fully stabilised, and the collecting run getting snow grass removal and small tenant complaints, it becomes $1,000 An hour plus task when you’re dealing with tenant troubles because your property manager, no matter how good they are, and I’ve worked with so many different property managers, they’re not going to care to deal with the tenants in a similar situation as you they’re going to serve the notices. And that’s pretty much the extent of it. They’re going to go to the paralegal and all of that they’re not going to build their relationship with a tenant and why should they they’re managing 200 units, what makes your unit any more special than another investors unit? Nothing, right? They don’t have the time capacity or the resources to speak to every single tenant. And so I’ve had situations, like the most recent one in Stratford Ville, for example, one of the see you’re dying of laughter now, one of the one of the tenants. So I got an email from the property manager, it was an N five saying that the tenant upstairs threatened to kill the tenant downstairs and you know, all of that, then they miss me rent on top of that. So I got like two notices. Kudos to her for filing the paperwork. Obviously, that’s your job. But then I was like, Okay, I know how this goes. It could be a year long process nonpayment or it could be a year. If they got evicted, they’re definitely going to destroy the unit. Let me just pay them a few $1,000 Or like, negotiate with them, figure out what exactly is going on. And then have them and then hopefully get them to sign and 11 and transition at a landlord. We’ll see Oh, my God, a tenant don’t need to kill another tenant. This is not going to be an easy combo. And I knew that going in. So I got the phone number, call the tenant, I was like, hey, look, I got this notice from the landlord. They said XYZ. Like, honestly, there’s always two sides of every story. Like Was there something that the other tenant did? Like, you know, like, kind of figuring out their side of the story

Erwin  

to them? Let’s see here on the hair. Yeah, and like I know,

Austin  

it may they’re going to stretch scores, right sides, every story, all that matters is that you’re hearing them out and you gain the respect and trust so I heard their complaints and all of that, like look like and then obviously making it seem like leaving is the best option. I was like look like obviously you too, are going to have problems in the foreseeable future that it’s going to be constant bickering about and like man if this escalates any further, not saying that it will or won’t or then criminal record this that immediately No, like, it’s going to be huge issue for you. And honestly, like, I sincerely apologise that you’re going through all of this. And I know that moving is expensive for you. But what if we can work something out? Right? Because I don’t want this to escalate any further. It’s no way to live. So why don’t I give you some a few $100 for moving expenses in some time? Release? Yeah. And then they were just like, Sure, fine, thank you for understanding, so on and so forth. But do you think a property manager is going to do that you think a paralegal is gonna do that? No way, a paralegal just serves no, like here, take this money and leave, or their paper pushers, right or transactional. They’d be like, This is what you did, this is what it could lead to. But they would never sit down and spend an hour two hours of their time speaking with a tenant. And that is a task that will easily add 1000s of dollars will save you 1000s of dollars and a tonne of headaches. So all of that I do it myself. I tried to do it over the phone. But if I find over the phone is not working out over the first phone call. I’m like, Hey, how about we set some time and grab coffee with each other? And I hate doing that, because you’re driving, I haven’t found a way to systemize it

Erwin  

because you’re going to Sudbury or Windsor? That’s hilarious that you said that because I’ve talked to novices. When I raise issues of being a landlord, especially when you have a lot of tenants, your rough air and beverage and tertiary markets. Yes, there was an audience to just build systems around it how?

Austin  

Like yes and no, right. But because again, you’re dealing with these tasks are very high value. Most property managers don’t know how to do it, and most most paralegals don’t know how to it’s like almost like sales and negotiation. Yeah, exactly. So

Erwin  

a high value skill. Yeah, they’re usually held by high value people.

Austin  

Yeah, yeah. Like people, man like these negotiations when so left, when I first started them out. I was a complete novice, but I would try to do it myself. And I’ve learned from experience like how to, you know, navigate around these conversations, especially like with sellers and wholesaling as well. Same. A lot of them are the same profile as tenants, right? Motivated sellers. So you can outsource these out, but it’s not going to get the results that you want. Right. And that’s the troublesome part that I’ve been facing for sure.

Erwin  

And then, like I said, like just just throwing off often people just offering them, let them out of their lease is a big weight off their shoulders.

Austin  

Yeah, exact, but it’s like how you position it? Oh, like, I’m gonna let

Erwin  

you out and like, if you want to leave, it’s okay. Well, we can we can break the lease.

Austin  

Exactly. It is Oh, moving costs is expensive. I know how to act on it. Why don’t we give you some time? Right? Like, how about I helped me with it, let’s say it’s positioning a lot of the times, right. And it’s like trying to be a problem solver. Exactly. And the only way you solve a problem is is by spending the first 30 minutes building rapport and understanding, you know, like, their situation, because if you’re going there and trying to solve the problem without having that small talk or that understanding in the beginning, why would they trust you or be capable to solve their problem at all right, Mr. That’s something I’ve realised to

Erwin  

this conversation. I’ve I’ve attended the Oasis rent today. And she said that she’s behind his father passed. Yeah. So I or phone call today, because it’s due today, barring a senator Uber, an Uber gift card first. Because you can use it for Uber Eats. Yeah, I mean, yeah, here’s dinner on me. And then then I’ll call Yeah, did you get it? Cool? Are we are we are we good? today? We’re good for rent today.

Austin  

Or at least have an understanding. Is it? Oh, no. Okay, let’s figure it out. Right. Like people, as soon as a tenant doesn’t pay rent, it’s like, it’s D Day. It’s like, you served them with everything. Let’s get them. I was like, dude, like, these people have lives as well. Like, what if? What if they got let go? How are they going to pay rent, if they gotta let go with a job? You You almost have to cooperate with them to some extent, because you know, that the cards are heavily dealt in their hands with with the regulation, so you gotta get on the phone. Exactly, exactly. And understand, right? Because sometimes the more you understand, the more you realise that some times patience and cooperation with them, figuring out a payment plan goes a long way than just hitting them with all these notices. Because as soon as you do that, when you call and you think they’re going to pick up hell no, because they think they’re gonna get evicted. Right. So they start that’s when people start dodging and ignoring. So you got to go in with empathy or sympathy at the very least.

Erwin  

I’m sure there’s many times my show, I explained to my my team members, like contractor park managers, I say to them, you know, if you spend $10,000 a year at a restaurant, how do you expect to be treated? Right? My tenants all pay me over $10,000 a year. Yeah. So like, I need something I need some that that translate to them. Right? So yeah, so yeah, I’m not the I’m not the guy that immediately enforce. I usually exchange emails at least first.

Austin  

So I do serve and force first but I give them the heads up. I’m like, Hey, right. People just serve it and they don’t even speak on the cake. This is like, this is the process, but like, don’t worry about it. Like it goes away as soon as you pay. Yeah, exactly. Or like as soon as we figure it out quite like if you let me know what’s going to take you a few weeks to pay let’s figure that out sort of situation. I’m like don’t even worry about it. Right like

Erwin  

because she got back to us right away. Their father passed like we’re I’m gonna hold off. Yeah,

Austin  

yeah, yeah. And I think that’s reasonable. But like, you’d be, it sounds reasonable. Everyone would be like, Yeah, that makes sense. But like, how do you find that out? By having a good rapport with them? So most landlords will never find that info. Wow. Yeah, yeah. But

Erwin  

we’re small enough that we can we can have these relationships with our tenants. So actually, when I asked you like, you have a decent sized portfolio, yeah. Do you have anyone else on staff? Do you have like an operations person or assistant

Austin  

that is i? Yeah, so I find honestly, the most difficult part is like stabilising the asset, but once you stabilise it’s not, it’s not a whole tonne of moving parts for the most part, right? Like if you find a good quality tenant and all of that, like your property manager does handle the bulk of it, it’s just not the beginning where it’s a disaster, like, okay, like, let’s choose finishes, how are we going to add extra bedrooms, all of that stuff, that’s where it becomes a little bit busy. But I don’t take 5678 projects at a time now. Right? Like I take like one or two projects, Max, and once I stabilised then I’m on to the next one. So it’s not like I’m killing myself with my business as well. And the people who do do a great job when they buy tenanted this a lot of like big operators who crush it, that’s just not my business model. That’s just not who I am. That’s just not the scale I want to get to. So I’m totally cool with just doing things myself and want to stabilise then barely takes any of my time.

Erwin  

So I actually just had Calvert mortgages in yesterday. So because they’re private lenders they have I don’t want to spoil it. But they’ve had a number of power sales.

Austin  

I’ve gotten some of them that fell across my desk as well as Okay, you want to wholesale it.

Erwin  

Whereas going was we’ve covered at some of the show the commonalities between investors that that failed, not fail, but there’s bumps along the way. Everyone takes losses, right. So these power sales, what was common was, well, they’re borrowing from culverts, they’re paying, you’re paying the private money, it’s expensive, and also multiple projects, and buy multiple projects. That means renovation projects, significant renovations, so they have multiple vacant properties. Yeah. Right. So you mentioned that you use you’ve done as many as like, five, six at a time. Now you’re done more like one, two? Yeah, what happened? Yeah, so five, six, that means you make some big money.

Austin  

When I was starting off, it was like aggressive growth by any means, right? I was like many of the investors were like, oh, grow, grow, grow, grow gross. Yes, this is scale. As long as they count, it wasn’t flipping but sort of the same principle where you’re you have a tonne of renter’s going on. And I thought that was the way to one raise money and to that was the way to become rich quickly. Like I looked at real estate as as much as I never talked about I’m like, oh, long term like we say that to ourselves, but our actions say differently. Am I believe that real estate was a long term investment, but my actions clearly show I was doing something different. So it was I scaled aggressively right before the pandemic of 2020. So like, I had like four closings, right when the pandemic hit and I was like, this is where like, like being a tonne of trouble pulling up from a tonne of lines of credits. I’m not going to make it out from this like who knows, right? Fortunately, the market picked back up I did like even getting these deals at a discount like getting it at a discount in a falling market. You don’t know how far that you know, that night falls and you don’t know how how marketable or liquid your property is during a falling market. Right? There’s just almost went through the roof. Yeah, it was definitely really stressful my expenses really, and I was living at home with my parents. So that was a big plus. But it was not good, good for my mental health those couple of months. And so market recovered, ended up doing really well on the deals as with anyone who bought during that time, but I was very fortunate where I was almost given like a second chance, right? Like I, my ego, just I was humble. And I was like, alright, like, Let’s do slow and steady growth. And there’s been times where I stepped out of my comfort zone again. So we’re talking offline about So after doing slow and steady again, you kind of investor psychology, you see, like, people making money hand over fist and people who are newer investors like unsavoury that are just making so much more than some overly prudent investors right. And I fell to that camp of of overly prudent during that after COVID Right after that sort of scare I had and I was like, okay, like, let me let me get a six unit got it under market value, so it appraised higher than when I bought it out. And then I took out like the bank only gave me 50% loan to value data on a commercial loan. And I had to raise the rest through promissory notes. So I want 100% loan to value plus construction on it. And man like so the deal went, I could surface level I could say that it went perfectly in terms of turnover all the units I got a full burn all my money came out cash flowing like crazy now, but what people don’t realise during that time from when I closed it got all that private promissory notes to when I refi it was a man it was like beyond stressful. It was like if one thing went wrong, like how am I you know, like how am I gonna dig myself out of this situation? It’s the peace of mind is what I’ve realised is extremely important. So although that deal went through quickly. And again, if I was egotistical if I didn’t have that experience at the beginning of COVID, I would have continued doing that. I’m like, Oh, my God, full burn none of my own money, cash flow and multifamily. Let’s do this again, right. But now I don’t I don’t feel comfortable doing this again, right, like I want well, it’s almost like, you know how crypto borrows the portfolio. A lot of them then sell off, they just hold hold hold. You could say like, I like sold off. I was like, Oh, I got like, the strategy worked well, but I’m not doing it anymore. Right. So then I stopped myself early. And thank God, because if I continued on that path, like who knows, you know, like, who knows now, like, if I got a tonne of projects, I’m pretty sure, I would have been in trouble too. But I’ve learned, I’ve learned from my experience, my short four or five years, I’ve learned a lot from it. So raising

Erwin  

raising capital lessons. So how did you grow so quickly? Yeah, you’re independently wealthy?

Austin  

And no, no, no. So I did a lot of joint venture ships. I’m starting off. So at the beginning, everything was my own money. It was like scaling with my own money, then it hit a point where it’s only one project at a time with nothing wrong with that, right. But again, this is like before the the COVID. So I was like, alright, let’s, let’s try to do multiple projects at a time. And there’s only really two ways to do multiple projects at a time, right? Well, there’s a couple, you can get a VTB and stuff, but I wasn’t that experience where I went down that path. So it was like, I either take private money, or I raise capital through joint venture ship route. So I was like, let’s, let’s, let’s do some joint venture ships, right? So it’s 5050 5050. Partner, they carry the mortgage, the younger renovation money, they Yeah, 100% of the capital. Right. So that’s kind of how I was structuring it. And like the the joint venture ships went went really well. So what I will say is, is that I do I am pretty prudent when it comes to running my numbers. So like, fortunately, all of the deals worked out really well. But at the same time, like I did realise, I bought myself another job to some extent, like most of my partners are fantastic. But then of course, there’s like, times where they give input on things that they shouldn’t be giving input on because they haven’t done this. Like it’s like almost penny pinching, like, let’s try to Cash for Keys budget $2,000 listed like this would add like 5060 grand in value, like just let’s they want to get five grand, the tenants skim five grand like No, no, no. 2000 I’m like, alright, what you know, like, so there’s those sorts of feedback that I got, but for the most part, investors are frugal. Yeah. And I understand on the other side of things, I would, if you’re not the operator, and you don’t understand the full picture, you would think like, why not just negotiate lower, you’re the expert, but it doesn’t work like that.

Erwin  

We’ve seen Cash for Keys for like, between 515 1000 Yeah,

Austin  

I paid I paid 12 grand for Cash for Keys before like, and that instilled that as a perfect return on investment. Right. But

Erwin  

I need to find the example. But I remember several years ago, rent control building in New York, the developer writer bought it. Yeah, they’re gonna tear it down and put up something big, right? One tenant, one that one holdout your guests casualties for the very last tenant, they probably like 50, grand 40 grand, or a million. Wow, I find the article. That’s crazy. And I’m just gonna delete that. So no one gets that idea. Right, right. Yeah. Like, you know, someone was standing the wave of a large condo development, right. Yeah. But yeah, so yeah. So for yeah, that’s, that’s tough that you’re getting? You’re getting input from people who don’t have experience? Yeah,

Austin  

yeah. So I don’t want to phrase it such that like, it happens very commonly. It’s definitely happened a few times. But most of my journal, I think having jayvees was essential for my journey for my growth, for my confidence on social media as well. Like, of course, social media is all about like the number of vanity metrics, but it was essential for my journey. But the last couple of property actually, the last two properties were still joint ventures, one of them was myself and the last two bigger, Maltese are not bigger, like, like six, eight units. I did that myself, but one of my other business partners, like we’re both putting capital, but I figured, like, now control matters a lot more to me, and I’m okay with having like slower growth as a result of that. That being said, I still I still do joint venture ships with people that I have a good relationship with. I have done properties with me in the past. And I think that’s really, because people do JV successfully, a lot of people will like to shit on jayvees. But people do it successfully and grow a business with that. It’s just a matter of putting the processes in place. You want to work with people who are easy to work with, and do repeat business with her. So when I do jayvees, that’s the angle I look. I’ve turned down so many people, which I would have never done before or the capital. Yeah, let’s let’s partner now. No, it’s like, if you have capital, it doesn’t matter. Right. Like, I need to see a long term relationship with you. So yeah, a lot of the growth was that and then full bursts, full bursts plus some money out so leveraging off of that

Erwin  

it does seem like every partner who does take on partners Yeah, has a journey. Yes. And usually the first they within the first couple, there’s people they don’t get along with. Right so how many JV partners do you think have come through your world? Probably like a 10 a 10. And you currently still have

Austin  

I have four or five now. A couple of them most of them have been repeat like of those that Most have been repeat,

Erwin  

which is good. So what’s one of your lessons learned?

Austin  

qualifying people at the beginning, making sure their intentions are aligned, and then walking them through worst case scenario, almost selling them out of it, right? Like not like letting them know the realistic picture, right? So

Erwin  

just tell them it’s sunshine and rainbows. So

Austin  

right now recent JV combo I had like qualifying I was like, where’s your source of capital coming in a HELOC? I was like, Are you guys I gotta know, man, like 7% rates, like, what happens if I can’t pull a dime out until like, three or four years? Are you okay with that? Because, you know, like, that’s gonna be stressful for you. So that conversation, right, like walking them through, if they thought through the whole picture, because here’s the thing, like, I’m an investor, you’re an investor, most people that listen to this podcast are investors, you guys, when you’re injecting your own capital, you know, the things that are in consideration, in your mind, communicate all of that to the partner, as well as some people like to hide things with the partner. So being completely transparent in that sense, making sure it’s not every dime that they have, they need to have a decent amount of reserves that are not invested into real estate, that’s pretty important as well, stable, full time income, sort of the long term view looking three, four or five years out what their expectations are at the beginning, everyone’s expectation was I want a full burn. Now I set the expectation that that may not be possible, right. So a lot of it is just being realistic,

Erwin  

interesting. I’m enjoying this person listening during this, we’re joking around as well, because like your path has been very aggressive, tertiary markets, you don’t invest within four hours of where you

Austin  

basically, it needs to be at least four hours away.

Erwin  

And you mentioned that you want things to be easier. Yes. So you’re choosing easier properties, like less seems like you’re buying less disasters, got better markets,

Austin  

better markets, better neighbourhoods. So I do still see the value in tertiary markets, right, because there’s more information asymmetry there, there’s I find this usually better deals and the disparity between knowledge of like local, local investors or local realtors, and you know what’s and what the value is truly worth strategic Reno, I feel like that info is more, more people are savvy in these big cities. So it’s a little bit harder to operate the business model that I want. That being said, I’ve ran into so many troubles with with some of the less desirable properties that I’ve had, right where it’s like not good neighbourhoods, we talked about a property we talked about this offline, a property being burned down by an arsonist, and the worst hit one of the worst neighbourhoods in Windsor. And that was such a pain in the ass. So that was one thing, nonpayment of rent tenants losing their jobs and these are mostly concentrated and not the most desirable neighbourhoods. So if I am to invest in these tertiary markets and needs to be in high quality neighbourhoods, right and I am okay to sit with for five months vacancy to find the right tenant. So I just really adjusted my expectation on a lot of things. And even slowly moving my portfolio again to some of these like bigger cities, like I wouldn’t say I would come down to Toronto, you need big money and you need big financing to be able to make that work but like London, Ontario, right, that’s a more stable market, then then like Sudbury or something like and not to shit on Sudbury and all this more, I still invest there just has to fit my current my criteria has changed for sure. But

Erwin  

two hours drive instead of four. Yes,

Austin  

exactly. But I’m okay with that. Like, I’m not driving everywhere, right? So less headaches has been a priority for me, because I’ve had cases again, houses burning down tenant quality being crap, and I’m involved in all of that, and I just want less of that. You know, that’s not why I got into investing. I’ve built great skill sets doing those things, but I don’t want to exercise those skill sets anymore.

Erwin  

Julie Broad Grover wrote a great book called The more than cash flow. But there’s more to being an investor than just what what it looks like on a spreadsheet. Yeah, because they detail themselves about a multifamily. They bought in to happen that the property manager in a tenant got in a fistfight, and then the tenant actually got injured quite badly. Right. So there was lawsuits. Right? It probably wasn’t gonna get area. But yeah, it seems though there’s comic there’s, you know, Stan about areas Yeah, you have less trouble right because I’m sure it looked great on the spreadsheet,

Austin  

but I want the quantitative part looks great qualitative is diff I almost neglected qualitative a lot of the times for for quantitative and that I’m finding that balance of why both are so important.

Erwin  

Because we’re joking how I my clients are buying pretty lazy for offering it compared to what you’re doing a bit later, but I want to go on more about this this house that burned down what was it triplex or

Austin  

a four unit so we got it during COVID as well. So it was it was a really good good discount. It was the house that was filled with drug users. It was a drug house right bad neighbourhood drug house

Erwin  

with finances RBC

Austin  

finance Yeah, but they,

Erwin  

we would the appraiser say nothing. Letting go in right it’s COVID

Austin  

Yeah, I certain COVID. Yeah, okay. You know, things appear better and photos sometimes. But yeah, so I mean it was we got it financed and then served notices on different things got got everyone to agree to leave, they don’t really care. I mean, their mobile The house was kind of beat up as well. And so sorry, it wasn’t RBC with Scotia. But same thing. Same principle it was during COVID. So photos,

Erwin  

so photos No, no on site appraisal. Exactly.

Austin  

Yeah. And things weren’t going as planned to everyone. Everyone signed everyone agreed to move out, move out date no one moved out. LTB serve the eviction notice Sheriff eviction was scheduled. And then what happened during COVID? No evictions. Right. And so got the sheriff eviction notices but no Sheriff obviously came and so the people were just sitting there rent free, whatever. I didn’t think too much of it because I was like, Yeah, once they leave the upside was incredible. It was like a pretty big four unit now it’s vacant. It’s like I’m gonna make a lot of money on this thing. Sorry Jeff, a partner on this one as well. Yes, I had a partner on this. And they were chill. They’re cool. They’re chill. This was a great partner to work with. Yeah, the numbers are perfect. Everything was panning out as planned. Cash for cubes is only $1,000 A unit. So then what ended up happening is is that obviously we’re sitting we’re waiting until the sheriff comes or whatever they are able to come and the house went on fire got a call from my partner on night and I say love and pm I ignore it. It’s 11pm sleeping or whatever. Call them tomorrow then they call it again. If they call it twice a night picked it up they explained Hey, our house is on fire the police called me I was like oh my god Alright, so we told your partner because we’re on title or yeah and then and then they called me and so I mean it was like there’s nothing we could do there was very limited information house is on fire what can you do just fire department comes puts it out wait for the information tomorrow sleepless night and I don’t hear back from anyone the police anything I call the police no new information anything that they could share went on Google search for my property my property is on the on a bunch of news articles and then one person passed away from that fire. So now this becomes like a liability thing right is there because the house had not been to but the insurance was aware I was aware everyone was aware it’s not like we hid that from anyone right like oh my god it’s it’s a knob and tube thing like what? My mind is running a million miles per minute right? So I’m like, Oh my God, if it is like this is I could actually face like legal troubles because someone has passed away. So started speaking with lawyers and all of this stuff. And started making the drive down to Windsor. Right? The day after I spoke with the lawyer lawyers turned back around man don’t don’t make that drive Don’s like why he’s like, look, this is going to be police. They’re like, what if they pull you in for questioning is like why he’s like what like, what do you plan to get out of it? I was like, Look, my house went on fire treasonable. I want to see what’s happened if everyone’s okay. He’s like, Yeah, but like, what, what do you plan to get out of that? Like, what if they pulled you in for questioning? Like you don’t just just like, wait, wait and see how this sort of pans out? Then someone else passes away? None of these people have next and kin from their injuries from the part of the injuries? Yeah. And I was like, Oh my gosh, this is like a disaster situation. I cannot sleep. I feel terrible. My stomach is turning. And really like I had no one to help me out. I’ve asked for help, right from like, coaches, mentors, and they were just like, go go through insurance. And they’ve gone through a situation like that. I don’t think they’ve had anyone passed away. But they’re just like, just figure it out. And we didn’t even get on the phone with you. I mean, they left a voice note. Yeah, they left the voice. No, I left the voice. No, I received a voice note sort of thing. But yeah, no, not not much. No. So I was like, Okay, I guess I’m in this on my own.

Erwin  

So I know we’re gonna do it. But but this is a coach you’re paying for?

Austin  

Yes, this is this is a coach. Yeah, they wouldn’t get on the phone with you. Because you’re I got a message and that was about it. And it was basically like, Go run it through your insurance to figure everything out. So that’s it. All right. Yeah. I’m got to figure it out on my own now. So well, of course, I like speaking about this right now. I was telling you like it just it gets me a little bit upset. Right. So I don’t like to dive too deep into it a lot of the times because I do get a little bit. I get upset. I hope people understand why.

Erwin  

Especially at the move the forgive and forget. Yeah. So

Austin  

anyway, so I spoke with the insurance people, the lawyer so on and so forth. And about a week later, just sitting patiently waiting, find out that it was an arsonist, right. So it’s like, okay, like, really, it’s peace of mind that there’s nothing I could have done to not prevent this from happening. Who was one of my customers? How quickly did you find the day in a week?

Erwin  

That was pretty quick? Yeah, it

Austin  

was pretty quick. The Ontario Fire Marshal and everything’s everyone was there. Do you have any idea how they figured it out? No, I didn’t. You know, honestly, like when I found that out, I was like, I was like, Okay, great. Like, this is not something I could have done differently to prevent like, stop arson, bro. No, it’s just the person went to jail. And it was probably drug something drug related, because it is a known drug building. Right? But here’s the thing, had the sheriff been able to come in the evictions weren’t held up. Everyone’s life would be intact. Right and nothing like this is almost like I don’t even think I could have projected for something like this to happen, right? Like if everything went as it should. and all of these pandemics sort of rolls in come into place like, then no one’s lives would have been lost. And the deal would have went as planned. But yeah, that was that deal. And in a nutshell, so insurance tried to screw me over. So we had to hire a lawyer to be on there. But apparently, with insurance, insurance provider reuse, I’m not going in a name is what they said that like, our insurance broker was saying that after a year, if there’s no payout, then you can’t go after the money show. Right? Yeah. Or like become significantly harder. You have to go to court and all so they were they were winding down the shot clock, the insurance people, so they’re ignoring us. So we had to hire a lawyer on retainer to be on there. But was there any any reasoning given for the delay? Yeah, they were just like, we want to speak with your property manager and my property managers like dude, like, I have nothing to do with you know, obviously, I understand property managers like, dude, like, they’re going to try to blame something on me. Oh, it’s arson. Yeah, no, yeah, exactly. Exactly. It’s arson. So what they were still super worried. They’re like, Oh, they’re gonna say I didn’t visit the property enough this that whatever. So they were worried for hours. Yeah, I don’t know, man. Like there were a little bit worried. Eventually, we convinced them to do it. So they ended up doing it. We hired a lawyer for the property manager, which I think is responsible for the property match and want to have a combo with an adjuster with the lawyer. It’s good, right? Getting a lawyer doesn’t harm anything. So we paid and then they had the Convo and then the insurance company went MIA on us and for like eight months, and then following up. Yeah. And then the last day, the last day before the payout, our lawyer said we can register this sword. I don’t remember the technicality. We can register something that shows we’ve done everything we can and then we have to take out the cord after that, that last day, they paid us out. And it’s like, okay, hallelujah. Thank you. But it was it was

Erwin  

like they’re checking to make sure you’ve covered all your bases before they decide to pay you.

Austin  

Yeah, no, they were just trying to run down. Yeah, exactly. If we didn’t register that. I don’t remember what it is called lawyers, like you could get into a heap of trouble because a good insurance company said we are will pay you out by on a day to day last day. That is like you have to spend 3000 4000 to write this letter. It’s like, oh, no, he’s like, it’s up to you. I would suggest you do it. Austin. I was like, God, I have to spend another few 1000. Let’s do it. Because I don’t trust these guys anymore. But when we registered the letter, they ended up releasing the funds to us bad areas, bad neighbourhoods, right? These are unlimited measures. So what do you do with the property? Now it’s just vacant land at the moment, because by the time all this got settled out, it was near this near the peak of the market, right. And so the market interest rates started going up. So we didn’t decide to develop or do anything on it. We’re like, let’s just hold off on this. We own this land free and clear. Plus, we have an additional payout, we can explore developing it later. Clear. The insurance paid out large, so you have to pay pay out Scotia as well, because the property is not there. So we own the land free and clear. And we have like a payout as well. So we’re just sitting in just land banking at the moment. Vacant land is not really as saleable right now. Yeah, in that area. So

Erwin  

an area Exactly. Someone wants to build a custom home, we like really beautiful three 4000 square foot home and doing that.

Austin  

The other thing is zoning, the zoning, it was grandfathered in the four unit so it’s really illegal non conforming for Yeah, so now it’s like a get somebody’s going to be able to build a four probably not unless, you know committee of adjustments, and I doubt they will. Maybe there’s precedents there’s a lot of four units and six units, but all of them have been grandfathered in, but you’re chancing it. Yes, yes, yes, you’re you’re spending a lot more money and taking a lot more risk than you would have otherwise. But I don’t worry about that one too much now, because there’s really no there’s no risk. It’s just lad now. Right?

Erwin  

So when we talk to my realtor like Matt Bigley about it, in case, because a lot of cities have changed their their bylaws and zoning to allow for more units. Yeah, I would think Windsor is not far from that.

Austin  

Yeah, the lot size is quite small. It’s 30 frontage. Oh, and it’s but it’s deeper. Right. So the 14th, it was built really deep. And the parking was at the back. I just don’t think it would have the side offsets and all of that. But still, like, I’m not in a rush to do it. Bad area one because I know development. Like I don’t want to really develop in a bad area. Because I know there’s going to be break ins materials being stolen. Like I just can’t even I can’t even imagine the amount of headache it’s going to be so I’ll wait till the market recovers and sell it off. Because we’re not we’re not really losing anything by holding it right now.

Erwin  

Yeah, yeah. So just to not scare folks, my client at a different insurance company, like the same one I use, so they had to fire the tenants guests and properly dispose of a cigarette, right on the house. So like a bedroom was lost. But if you lose a bedroom, you lose a lot. Right? So like the she got a pretty much a brand new house out of it. But everything was quite smooth.

Austin  

Yeah, you gotta watch out with which insurance company that you use, right. And these are like learning lessons for me is like what’s the most affordable option because you don’t imagine a house is gonna go on fire. Arson. Yeah, homerun. Yeah. And so like now, I’m much more wary of that, right. Like I look through the insurance coverage or I’ll speak with my broker and it’s something The brokers fault because I like, you know, it’s ultimately an investor’s problem just to go get me the cheapest one. So it’s not his fault. It’s my fault. I’ve taken accountability for it. So I’ve learned from that as well.

Erwin  

Yeah, yeah. All right, this isn’t all scary, because you’ve done well for yourself.

Austin  

Yeah, I’ve done I would say, I’ve done really well for myself, where I’ve gotten to the position where I can definitely choose to work or not to work. Yeah, so I’m scaling in a much more responsible manner. I don’t feel rushed to do anything, I’ve hit my major goal of quitting my full time job, obviously, selecting entrepreneurship, but having the ability and the finances to be able to make that selection without being stressful, right like, because during the during where wholesaling was drying up, and you know, we’re putting a lot of money into or like we had savings and wholesaling, but the bank account and wholesaling was was was going down. I wasn’t trust, like I had my liquidity I’ve done well for myself, I participate in the bull market, I didn’t over leverage, again, the last time I refi, it wasn’t like when I quit my job, which is in 2021, in February. So all of these properties were below 80% loan to value. So yeah, I think I’ve definitely adjusted my portfolio accordingly. Since I’ve gotten started investing,

Erwin  

what would you tell a new investor? So that’s a question What would you tell a new investor today to do

Austin  

be irresponsible with your growth? Right, and, and realise that in social media, not not everything? Not all the answers are in social media, social media is like basically just a contest of who’s doing the biggest and best things. And you see a lot of people go quiet when when things hit the fan, right? So do things at your own pace, understand risk, right? Understand that mindset is important. But mindset isn’t necessarily an excuse for ignorance. I feel like that’s a lot of people’s downfall is mindset was number one. Were all mindset triumph, risk mitigation in their back of the voice in the back of your head can definitely hold you back. But it can also keep you’re responsible. Right. So understand that risk management is extremely important. In real estate, it’s a long term investment on slow and steady growth is the best way to go about it. Right. For most people, for most people.

Erwin  

It’s funny, because like, I have some friends who are like, very, very good entrepreneurs. Yeah. And one of them said to me, like mindset important. Or being a visionary, important? Yeah. But there’s lots of them. Yeah, it’s actually the execution that’s hard. You need both

Austin  

you need like almost like both. Either you have the skill set in both, or you need, like a partner who’s able to bring that other balance, because you could get out of control. Right, and then take on more, you know, people who have, everyone has probably known people in the community. Yeah, that’s gone. Well,

Erwin  

you’re you’re you’re in Yeah, certain communities are very aggressive. Yes. Right.

Austin  

Yeah. You know, like, some people make it out. Some people don’t. But we’re just crazy. It’s not supposed to be Yeah, but the people who make it out, you’re like, even me, like I was earlier. For me, it was 2020, where I’ve had that thing, like sorted down to but it was a split. I survived that. But that was enough as a for a wake up call for me where it’s like, let’s change the way that I approach things. But not everyone. Is that lucky?

Erwin  

So say, say Austin is beginner today. Yeah. What are you telling him to do? How are you telling him to invest? How am

Austin  

I telling them to invest? Yes. So in this current market that we’re in Sure, sure. Sure. Yeah, honestly, when I got started off at about $40,000 saved and I know I’m I kind of what I was talking about earlier is like, invest where there’s like a little bit of headache. But the reality is, when you’re capital constrained, it’s better to be in the market. That’s what led me to be successful, I was able to get in the market and just not participate at all. So I would find a market where you can stretch that $40,000 to make it work for you. Whether that be entry level fixer flips or entry level burrs to first, like understand the mechanics are real estate with relatively low capital risk, right? cash flowing assets, exploring the borrower partnering with someone who has capital, both the guys starting off investing and working together through that, and then slowly scaling your portfolio down that way. That’s one thing I feel like I’ve done right in my investing journey is that rather than complaining that which is a lot of people, oh, I can’t invest in Toronto, dadadada da, and we have this much, I didn’t do that I got off my ass, and I found an opportunity that I could take advantage of. And that’s what led to the majority of my wealth, how to not made that first step I wouldn’t be I wouldn’t be sort of where I am. And now I’m repositioning, right so I had to go through that headache, I had to learn those skill sets. I have to be willing to eat shit, for lack of better words, to be able to build something, sell things off and then be able to slowly pivot back in to some of these major markets, right? So it’s better to be in the market than not to be involved at all right? Because if you’re sitting with 40 or 50,000 and waiting to be invested in Toronto, Hamilton, London, Ontario, but you’re gonna be waiting forever.

Erwin  

Yeah. So say I want to start in Windsor, for example. How much do I need to start? Push capital a lot

Austin  

more, a lot more. So I think most single families are going for like 400,000. Now I would almost move it towards Northern Ontario. Honestly. Get to sort of started off and how far north Sudbury, Sudbury, right. Well, it sorry, it was a single single family home in Sudbury, Sudbury, it depends on which area I like you can get some the two hundreds, you can get some of that three hundreds, right. So you can make the numbers work there in Sudbury still. But again, like just understand that it may not be ideal, but it is a stepping stone because sometimes it is easier to get in the market. And he just did not participate at all right? Because you learn the most when you’re involved in these transactions. So yeah, I mean, I would look for a cash flow and market summer something that you can afford, whether that be turnkey, or whether that be a value add ideally value add to make your money sort of work for you. And if you don’t have enough for value add, find someone who’s new again and kind of partner up there and build a home base and scale from there. That’s exactly my blueprint in Windsor. And I’ve made mistakes like on how I’ve gotten about like how I’ve gone about like bad neighbourhoods, so on and so forth. But the general blueprint, I would do the exact same, maybe like some of those small decisions I made that were wrong. I would exchange but yeah, and then and then from there, again, you can reallocate your portfolio accordingly.

Erwin  

Right. But let’s restart our Austin. Yeah. What about modern day?

Austin  

Modern day Austin? Yeah, that is good neighbourhoods.

Erwin  

Because you said you have a house in Toronto that you’re working on? Yeah. So

Austin  

I would never I would never prior I would never, ever imagine Toronto, I was always a cash flow. Why would anyone do anything in Toronto? Yeah, so I got I got a deal in Toronto, 830k. And little Portugal, a semi detached house 92%. And vendor take back 3.2% interest rate, I can do a duplex conversion, I was looking at a couple of options. And architects said I could do a duplex conversion on a pretty decent budget there. I could do a single family flip. Or I can live in it myself. So you have multiple options. multiple options. Yeah. And here’s the big thing is I don’t mind living in it myself, if none of those things pan out. Right. So like fiance approval waiting, but yeah, no, no, she’s approved. She’s, she would love to live in a semi and near downtown Toronto. So yeah, I mean, that has multiple exit strategies. And also, I mean, you think about it like the VTB. Right, the VTP is 3.2%. So the carrying cost is not significant for a project like this. And again, like you’re talking about around less than a million dollars for a semi an a primary. So I feel like the risk is, is relatively low there. I would have to go back to 2017 2018 Prices for me to lose money on this deal.

Erwin  

Yeah, how’d you get through the BTB. On this week,

Austin  

the guy owned it out in cash, he was somebody nine years old. First, we’re doing everything traditional. And I was like, oh, man, the numbers aren’t gonna work as much. If I get private, too much risk, so on and so forth. I was like, Hey, do you own this in cash? She said, Yes, that’s it. Do you know what undertake pack is? No, then just explained it to him. And the guy was really cooperative, right? Not every seller is going to be super cooperative, but he was. And so he was, we started with 95%. And then he’s like, I’m okay. Then the lawyer is like, No, I don’t I don’t like 95% too much shots. Like, he’s like Austin, can you do any better? It’s like, 92. And he said, sure. Yeah, I’m not gonna sell myself short. So he said, 90? Yeah, it worked out. It worked out really well. This one isn’t really as much of a negotiation tip. The person who was just really easy to work with? Yeah, all good. No one can be like 92. Now, it just ended up being locked that the guy was super flexible.

Erwin  

What was it about the VTB that was attractive to the seller, he

Austin  

79 year old. So different sort of person, not not an investor with apartment buildings or anything like that very much an investor who has bought one or two properties at a time, sit on it for 10 years started to appreciate it’s a different sort of investor than you and I are right. So obviously, their priorities, their goals are a little bit different. The guy 79 years old, he’s like done holding properties. He’s done what he’s done in real estate. And so he just wanted to, I could tell that he just wanted to make sure that the next generation or whoever’s buying this to succeed, or almost like a mentorship, sort of role, and you can get that vibe from him. We sat on the porch, and we spoke for an hour just about random, this building rapport and all of that. And I could tell that he was like, he liked being that guidance figure. So he wanted to just make things work for me. Right? So it wasn’t about what’s appealing of a VTB. Surely there’s nothing appealing for him and a VTB right, like save on capital gains this that what who cares? The guy Sunday nine, right? Not a huge deal. And he’s made a lot of money in real estate already. So it was just more so I explained to him like, this is how I’m looking at things. He agreed with me through my thought process. I was like, This is what I need to make it work because it’s how it changes the numbers and he was just willing to give that right so it’s almost like knowing, I guess it is knowing who you’re negotiating with, right? Like I feel like elderly people who have had all the success in the world. Some they fall into two camps, one of them stubborn in prices. If you don’t meet my price, then doesn’t matter. I can just hold on to this thing. And the other one is they actually wants to get rid of the port. folio and doesn’t mind taking that sort of mentorship or guidance approach with the person who’s buying in next. And that’s where he fell into.

Erwin  

So how did you find the property? Yeah, this

Austin  

was from a bird dog, actually. So I have a couple of bird dogs and the wholesaling programme. And one of the things that we do is multiple things that we do is again, expired listing, Kijiji ads, door knocking, cold calling, so on and so forth. This is from DGI, we’re just one of the first ones to reach out. The guy was, first he didn’t want to negotiate on price at all, so 870, and that the numbers didn’t work out at 870. We had it under conditions for a month 30 Day inspection condition. By the end of the 30 days were like, look like we tried our best, whatever way we caught it, whatever quote, we get, the numbers aren’t going to work out. So by the end of the 30 days, we’re like we’re still interested, but it needs to be at this price has to change because it was under contract for 30 days. Let’s just get this to the finish line. First, he wasn’t negotiable. And so by waiving conditions and negotiating the price lower, we got the deal done. But again, we’re competing against another wholesaler on this deal, a really big and more experienced wholesaler as well. And same thing the guy was not willing to budge on pricing. I guess the other wholesaler tried to push too much on the pricing aspect. So we just took it down. Instead, we weren’t able to find a buyer and we weren’t able to do it ourselves. Not at the price. We got it under contract for somebody sounds pretty cheap. It is it is but it’s located on Dufferin. So right on the main road. So you do take it here on price. And you do take it here because on a busy road or main road. Yeah, so marketability is going to be something to consider 870 is still a good price. Don’t get me wrong, but its marketability this risk at that point, it’s not like a no brainer price, like you want to get it at the lower eight hundreds, right, especially when he wasn’t giving any VTB or anything. So private money and all of that you add that in your transaction costs before before doing anything in the property, land transfer tax all of that, like it’s probably like low, mid nine, hundreds, for touching anything. So it didn’t work out for a lot of people, including ourselves. But at the again, at the end of the condition. A lot of people if they dedicated that much time with you throughout the process, they would rather just work with you then start from square one again. So we had that advantage. 30 days passed and the markets picked up. So we started seeing recent comps, and we’re like, oh, these numbers are juicy. But let’s get it down to this price. And it all worked out.

Erwin  

Yeah. So deal made sense to you not done. Yeah, the deal made sense.

Austin  

Especially with like the past 30 days have been insanity. Right? So the column started showing as Alright, this is like we Yeah, yeah, I think I could, but you know, like a lot of that competition is the turnkey assets because its end users. Yeah.

Erwin  

Is there anything wrong with the property that?

Austin  

No, no, no, no, there’s nothing wrong with it. The other wholesaler who’s really experienced as well, we chatted through it after I waive condition. He’s like, Yeah, like, his his thought process was exactly aligned with mine. Right. And he’s seen probably five to 10 times more properties than I ever saw. So yeah, I mean, we both didn’t catch anything. And then how much this is renovation budget renovation budget is about 85 grand. Let’s see. No, not much at all. Yeah, like if I was to show you photos of it, it is not a garbage property. It is in decent condition. But not Toronto. good condition. Like you take this and you throw it in Windsor rentable, throw it in Sudbury rental, throw it in London, Ontario, probably rentable, it’s just not up the price optimising in our market, then when you think instal for initially I was hoping for 1.1 but now just the way that the market is going, I wouldn’t be surprised for 1.2

Erwin  

Fantastic. All right. Awesome. Thank you for being so generous with your time for sure. Any any final thoughts you want to share?

Austin  

Not necessarily I think real estate there I guess this is more of a shout out to you. I like the conversations that we have because not everything is just like you know all all roses and things are going well like things do happen in real estate investing and I feel like this is the the only podcast where I’ve been given the platform to not only share the successes but a lot of the struggles I’ve gone through it if you look on my Instagram, you can’t really maybe I share struggles here and there but you know like a lot of it’s on stories it gets lost or whatever the case is but investors who achieve big things have gone through their fair share of struggles right and I think people need to realise that I’m speak to many first time investors who get into like just one I was speaking to on Instagram don’t know names they got into investing with their first asset they thought things were gonna be great and then baseman leak they have to do exterior waterproofing. open work permit that the Lord and catch oh yeah, this is the reality of investing, right? Like not everything is all rosy. And if it’s your first property where you get caught offside, it could really deteriorate you from from moving forward. So really just make sure to do your due diligence and be slow. Hosts Yeah, title, or even then like I don’t think there was moisture or a significant audit. No, I wasn’t doing the due diligence there. But like these are things that can happen if you get too ahead of yourselves, right. So educate yourself. Take Action don’t get stuck in analysis paralysis, but that also is not an excuse for being stupid and just rushing into things.

Erwin  

Yeah. Crazy. Yeah. Inspect the house. Your novice inspected.

Austin  

Yeah, yeah. But it’s like I don’t I it’s hard to blame them as well like bad advice from a lot of people. Right? Oh, there’s

Erwin  

tonnes of bad advice out there. Yeah,

Austin  

I just feel for these people. When we have the conversations like, what can you do? It’s like, you gotta go through title insurance and just hope for the best. So you got to see if they’re going to buy the seller is going to give you any sort of reimbursement, which they’re not right. I highly doubt it. If it go to court, probably. Yeah. If the seller knew about this, and what are the chances is

Erwin  

one, like a Porsche,

Austin  

I don’t know what it is. I don’t know what it is. But even that it’s still even a small one is 1000s of dollars that it shouldn’t have have costs.

Erwin  

No, hopefully, it’s like, you know, in rail or something. You know, a few 100 bucks, right? Yeah. Yeah. It’s not like a, you know, like an addition on the house. Yeah, yeah. And awesome. Where can people follow your journey?

Austin  

Yeah, on Instagram at Austin 86 on Instagram, and then I have my link tree on there. And you can just take a look at everything. What’s the six, four? I don’t know. Since I was young. I just it was the only thing available my my email is the same thing. Austin needs six at Gmail dot everything’s just Austin J six.

Erwin  

Oh, just because there’s too many Austin news out there.

Austin  

This is what Google or Hotmail recommended a long time ago. And I just went with it. Cool, nothing creative about it. Well, you’re

Erwin  

in the sixth. So I guess it works out. Before we go, you’ve been trying to buy condos off market?

Austin  

So yes, yes, yes, I have.

Erwin  

I have assignments, I’ve been looking for new construction assignments. I’ve had success

Austin  

with it before in the pandemic, which is why I’m trying to repeat it again. You know, peak fear, people want to hoard liquidity. And condo assignments are something that require a lot of liquidity for people for you to pay out profit. Most of them are international buyers. So you got to put 30% So with my first condo,

Erwin  

especially if they’re not appraising they I come up with even more money to come in. A lot

Austin  

of them are like what the ones I’m looking for, they need to have a lot of juice in the deal, which there were quite a bit, but they require a lot of capital, like the first time I did it, which is the primary I live in right now. I got it for 600,000, march 2020 assignment deal, and 730 square feet in downtown Toronto pre con. Right. So I live in it now. And then we just sold it. So I was looking for another one now where it’s like, how can I get 150k equity on the buy, not compete with a lot of people because either people are fearful of that people are not actively looking or people just don’t want to throw the liquidity and not so I’ve been on the hunt, but I’m just not. It’s a little bit different than it was before. Before people were asking for a little bit more reasonable profit or breakeven, and then march 2020. Now, they’re still great prices, right, but they’re still asking for profit. And so the injection is 330 350k for the best deals, right? Because most people can’t afford that. I could do that. But it just limits my ability to make any sort of investment moves. And I’ve kind of abandoned in that. And that little Portugal fortunately I did because a little Portugal deal fell in my hand. And that’s an that’s an even even better deal. But you know, when everyone’s running away from from a strategy, it’s there might be opportunity there, especially if you’re looking for a primary. There may be opportunity there for you. Yeah, you just need the cash.

Erwin  

That’s super cool. Because we’re DM diva. That is super cool. And you’re posting like you’re doing station with folks. Yeah. What do you think a good price to pay isn’t per square foot.

Austin  

Really, like anything needs to be below 1000 square. So young and ag like the person was willing to do I think it was 920 per square feet. So it was a three bedroom, two bath. No parking, though. And I think they wanted 760 And it was 800 and something square feet. And I was like No thank you. I’m like Sara has to be below 900 square feet. And there are entertaining it. Then someone came and scooped it up, over negotiate. But that’s okay. Like I’m not that’s not my bread and butter strategy. If I get something that is too good to turn down. Yeah, I’ll do it. But if it is not too good to turn down, then I don’t care enough to do it. I’ll buy resale and then just work on getting leads that way.

Erwin  

I just love the I just love the idea that you’re trying to find a deal for a primary. Yeah. Because I’ve told people to do that you’re looking for a deal. Go find someone in the assignment market.

Austin  

But it is still a numbers game. You got to pick up the phone and call see he was negotiable, who’s not people who are signing 2019 deals. There’s not a tonne of meat on the bone 2020 Not like these are like 2017 2018 that are about to be completed this year or next year. That’s where there’s meat on the bone, right and I’m almost trying to convince them to take minimum profit, which has not been a very successful endeavour. But again, I’m not in any rush. So that’s okay. Awesome.

Erwin  

I think it’s a pretty good pro tip there. Yeah. All right. Thanks, Austin for coming in.

Austin  

Yeah, appreciate you 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 today. are certified 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  

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.

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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  

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