Multifamily Conference, Sharks & Stock Hacking For An Engagement Ring with Seth Ferguson

Erwin  

Hello, friends, welcome to another episode of The Truth about real estate investing show. My name is Erwin Szeto. And for those with kids or had kids or still have kids, are you planning on doing private school? It’s a question that Cherry and I have discussed several times. And we decided that our kids would go to the public school that’s only four minutes walk from our home. We want our kids to be close to their friends so that they could have really healthy social lives outside of school, and to invest heavily in extracurricular activities. The kids might actually be a little bit too busy. At this time, they have math and English homework, which is private five times a week, that also includes two of those two of those sessions are private tutoring, one on one and four times a week, they have two boxing. And then once a week, they have swimming, skating, public speaking domestic classes, and we just had a basketball recently. Nothing was too much is it? Maybe a touch, I know there could be they could be doing so much more. But then the dreaded moment happened. report cards came home, but two weeks ago, and between the two of them out of 12 categories, they only managed to receive 11 excellents. And there’s one good, but to my surprise, my daughter received a B plus in math, I was confused. So I go and check Robin’s math homework. She’s been, again, she’s been doing she’s been doing math for since the pandemic started. So she wasn’t doing extra homework outside of school, five days a week for the last two years. So check what she’s currently doing. She doesn’t have a challenge. She rarely asked for help. Maybe once, maybe once a week, twice a week, she asked for a little bit of help on her math homework. She’s doing three digit division. So she’s dividing three digits by one digits with remainders. And then I asked her to show me some of her schoolwork. And they’re still adding double digits together? I don’t know. I don’t know. I’m no teacher. I’m not an expert in this area. At the bottom of a report card is blank field to write into questions and to sign and return it. The first question is, what area did my child improve in the most? Second question is, how will you improve your child’s education? Like you’re the parent, you’re the Guardian, whatever, how will you improve your child’s education? So I didn’t know how to answer that. And I was just thinking, like, if teachers know what my kids do, what kind of grind they’re in? So if they asked me that to my face, I wouldn’t have an answer. My answer would probably be private school. And yeah, I had pretty uncomfortable parent teacher interview last class time for it for parents came home. So I email my teacher let her know I was disappointed with the B plus, I shared some pictures of Robins private math homework, because I believe in showing, not telling and asked what she thought would help. Her response was more playdates with her classmates. Yes. Right. That’s professional opinion. So I was done talking to the teacher. It’s, it’s cool. It’s it is what it is. I even offered to ask her what her favourite gift cards were for, to buy school supplies from so I’ll continue to donate and support my kids school that way. I pulled some of my successful friends about their experiences with their kids. Some of them have kids older than mine as well, which is helpful. Most of them rolled their eyes at me when I told them that we only got 11 out of 12 excellents, and, more importantly, how the public system is not ideal for over achievers. And they I think they actually give me advice which are not supposed to be said, as either private school, or load up on extracurriculars. For Cherry and I, we will continue with the latter as it’s always been our plan to keep to teach our kids a lot of things not taught in school for emotional quotient items in an IQ item such as marketing, entrepreneurship, investing in stocks and real estate anyways, again, this stuff they’re not going to learn in school. So we’re just gonna suck it up what public school has to offer, control what I control and as always, not rely on the government for anything, aka the status quo. 

 

Erwin  

Today’s episode, we have an apartment building investor, multifamily investor, Seth Ferguson, who I met back in 2019, when he invited me on this podcast at the recording, Seth told me about his relationship challenges with his romantic partner. It was also his investment partner also investment properties, and then the related financial challenges when she wouldn’t cooperate in signing documents, to sign to sign leases with tenants so that they could you know, have rent coming in to pay for these mortgages. Anyways, it was not a pretty situation, many mortgage payments were missed. Seth had to be in regular contact with the bank. Not pretty. So here’s the time you have as many problems and relationship problems. I suggested he take our beta stock hacker Academy course that weekend. So Seth interviewed me on a Friday say What are you doing this weekend? He takes me up on the offer. And we’ve been friends ever since. Other than being on YouTube. He podcasts, he’s a realtor business. He’s a real estate investor and apart buildings focuses more there in the southern US markets. He is the father of an energetic young boy. and newly engaged. This is a joke. But Seth has plenty to do as you can tell. And he also took on a quote unquote full time job as a conference host, event planner, of the multifamily conference that is coming up soon. It’s only something like two months away, May 14 and 15th 2022. So that’s this year folks at the CAE centre near Pearson Airport. There’ll be plenty of parking because I include that because some advisory gives up all conferences should have plenty of free parking. It’s important it’s important. It’s not like free parking journey. I literally have tickets front row centre that we pay for as one of the earliest to buy. The headline speaker is I’m not going to spoil it. I’ll let Seth tell you who it is, anyways, be talking about structuring deals right, right and wrong way, especially with all the all the deals, all the businesses, real estate businesses that are going sideways these days, both in private lending, and joint venturing. We’re talking about due diligence began there. Sadly, there’s a lot of investors being caught up with local Securities Commissions. So folks, please stay safe out there. Yeah, doing one’s due diligence, even if the property is far, far away from you. And you can’t see it personally. Seth has some some concrete examples of what he does. If he’s not if he can’t see properly personally, because again, he’s buying property in like Texas and Florida. So he needs his own team. But he can trust on the ground to see check on his investments, assess shares his losses, and also his successes with stock hacking. The show is a good one. Thank goodness for stock hacking. And I’m sure assess back agrees with them. Maybe his fiancee too. And it all makes sense when you listen to the show. Please enjoy the show. 

 

Erwin  

Seth, thanks for coming back on the show.

 

Seth  

Thanks for having me back. You’re not fed up with me. So… 

 

Erwin  

You have a lot going on…

 

Seth  

Well, we do have a lot of going on. I enjoy coming. I like the new digs here. This did a beautiful job. 

 

Erwin  

It’s not nearly as nice as your studio. 

 

Seth  

Wow. No, this this is nice. So I like the bookshelves and everything. The fireplace. I do not have a fireplace.

 

Erwin  

Well, it’s not assembled. inspected, because it’s likely original. So this place I think isn’t built 1989.

 

Seth  

I was just my say 80s. Yeah.

 

Erwin  

I think 89. And the quick tip for investors, it’s in the window. Inside the windows, I can see where the manufacturing date on the windows. So I believe it’s 9019 89. So there’s buildings around that time. And yeah, when we bought the place, we’d haven’t had inspected the fireplace. So try to keep it safe, not get blown up. Have it inspected before we turn it on.

 

Seth  

But at least Santa Claus can come down and leave presence for you. 

 

Erwin  

Yeah, because we will move in if all this real estate stuff doesn’t work out. So Seth, what’s keeping you busy these days?

 

Seth  

Oh, lots going on. We got like the multifamily conference coming up. I’m sure we’ll talk about that. So that is basically a full time job and a half as you know. So we’ve got a really good team working on that. And then yeah, just, you know, talking with people about the multifamily real estate stuff. And that’s, that’s a whole lot of fun as well. So between the two right now I am, I’m working nonstop.

 

Erwin  

So when did you decide to do a conference?

 

Seth  

It was at the start of last year. So we were in the middle of the pandemic. 

 

Erwin  

Oh, good time to plan a conference. 

 

Seth  

Great time to plan the conference.

 

Erwin  

And start selling Tickets. 

 

Seth  

Yeah. And here’s me thinking, hey, you know, we should be good, you know, COVID will only last a little bit longer and then we’ll be fine. But, you know, things are opening up now. You know, vaccine passport requirements are gone. masks should disappear. Maybe by the time hopefully we’re back to more normal than not so. Yeah, it was but it was funny. Like we’ve got Kevin O’Leary coming as the keynote. And I was sitting beside my fiancee now on the couch, and we were watching Shark Tank, we love watching the show. And I turned to her and I said, You know what, I’m going to have Kevin at my conference and she’s like, Yeah, sure, whatever, whatever. And the conference was just an idea at that stage and you know, I played the telephone game. And so I made two calls got in touch with Kevin’s people so I was thinking it would take six calls like the six degrees of separation to and sure enough we had Kevin on board and then everything else just kind of fell into place.

 

Erwin  

Can you share how you got a hold of him? Like did you just go Kevin O’Leary.com and call the number was there?

 

Seth  

No, I wish it was that easy. I ended up knowing a guy who knew a guy and so I got connected that way. And then honestly, I just DM his executive assistant to because it was being a little slow the other way so I I used Instagram and slid into the DMS and got it done that way. Yeah. 

 

Erwin  

You won’t tell your fiance about that story. Obviously. 

 

Seth  

No, no.

 

Erwin  

She doesn’t listen to the show anyway, so she you’re safe. And yeah, I find when people ask me about the speakers that I booked before, they think it’s complicated. My experience is that if you’re willing to pay they will come. Yeah.

 

Seth  

Money Talks. It’s like anything. It’s like real estate too, right? Money Talks. Yeah, yeah. And yeah, like the thing I wanted, I wanted to have, like a really good roundness to the speaker lineup where we cover like every aspect of multifamily, so like financing to underwriting to structuring to everything. And then Kevin obviously fills in the the celebrity component and the capital raising component. He’s gonna, yeah, oh, for Well, I thought of it this way, like, he has been pitched more times than most people, like in a month more time. He has been pitched more times in the month, the most people get pitched in their lifetime. And, you know, when you’re raising capital for deals, like it doesn’t matter if it’s for your first joint venture or your 10th fund, you know, your competitions, trying to take your investors money and put them in put in their deals. So what better guy to talk about the capital raising process, the nature of capital, how investors look at you? So you can, you know, shore up your pitch and make it really, really tight?

 

Erwin  

Yeah. And so the show is the truth about real estate investing. Like you said, it’s a full time job.

 

Seth  

Full time job and a half full time job. 

 

Erwin  

I’m lucky because cherry and I mostly her perspectives together. Yeah, we’re two people. You’re one person.

 

Seth  

Yeah, one. First of all, you know, I do have a really good team behind it, like running a conference of this size. You can’t do it on your own or even two people, you need people behind you. But yeah, I think first and foremost, you have to have really solid speakers. I’m also really excited to have my friend Joe Fairless. Speak, Joe controls over a billion dollars of multifamily assets. So when that guy talks, you want to start taking notes. So whether you’re brand new, he can kind of show you what’s possible, or if you’re, you know, your fifth deal in his scaling frameworks obviously work because he’s done it. So he’s the guy you really want to take a lot of notes with to then Joel block with structuring, you know how to structure your first syndication. Joel actually, I was sitting beside some well known real estate, people who had a fund, and they were operating their fund. And Joel took a long look at how they were running things. And he figured out that they were leaving about 2 million bucks on the table every year in profit with how they had structured their fund. So where was the money being leaked to? Well, it wasn’t it was just in the minutiae of how everything was being calculated, and how the preferred return was set and everything like that. And so Joel took the luck and helped them restructure it. And yeah, there they launched a new fund in his 2 million bucks a year in profit. So structuring is so important. And so Joel’s a wizard when it comes to syndications and funds. So if you’re looking to really raise capital, like Wall Street does in a really efficient way, he’s a great guy, somebody like he Bouchard is coming in from out west. And he’s doing some really cool things with creative deal structuring. And Delia Barsoom is coming in to talk about financing. We’ve got so many top speakers. Like I obviously I’m a little biassed, but I’m so excited to have everybody in the room. Like it’s going to be amazing.

 

Erwin  

It’ll kind of like be like the the event that announces the end of the pandemic.

 

Seth  

Yes, yeah. And and we’re talking with everybody who’s like signed up for the discounts and our free VIP ticket draw. And everybody is so excited to get back out there. 

 

Erwin  

There was free ones? I had to pay for mine. 

 

Seth  

So yeah, if you go to multifamily conference.ca/vip draw, you can actually enter to win the draws in April, but at the end of April, but we have a draw for a free VIP ticket.

 

Erwin  

They better not be sitting next to me. I know a lot of money for my seat. Back to be front row centre. 

 

Seth  

If they gotta sit next to you will have to raise the price, right? 

 

Erwin  

You’re gonna get a refund because they’re like, I guess like the next visit.

 

Seth  

Yeah. Yeah, so like, the thing is, I’m sick and tired of zoom. I’ve lived on Zoom for two years, like lots of people. And this is why I love coming to do your podcast because you’re really close. We can do this in person. If this was over zoom, like it would have 10% of the impact and would be way less fun. You get everybody together in one room. Like the get more deals done the connections I future partnerships. It’s just way better for everybody.

 

Erwin  

Yeah, the energy in the room. Let’s be crazy. Oh, yeah.

 

Seth  

And we’ve got some cool energy coming. We got like fire on the stage. Yeah, we’ve got some cool stuff.

 

Erwin  

Fires bad.

 

Seth  

That’s, that’s right. Yeah.

 

Erwin  

Okay, so I’m gonna determine what I’m going to dress because I’m close to the stage. So you mentioned some of these American speakers. 

 

Seth  

Yeah. 

 

Erwin  

And where’s their focus? And are there still deals out there to be heard, because you’re an investor too. 

 

Seth  

Yeah. Yeah.

 

Erwin  

You’re not you’re not just trying to do conferences, you invest as well.

 

Seth  

No, I do. After running the conference. I’m sure with you guys, too, you know, yes. Yeah. And you don’t want to become a full time event promoter. But, but yeah, we’ve got a pretty good split. We’ve got about half Canadian, half American for speakers because we do have investors from both sides of the border. And I think that’s a cool thing too, because we can learn a lot. The fundamentals of investing remain the same whether it’s in Canada or the US. And I think we do ourselves a disservice if we strictly focus on only I’m only going to listen to Canadians. So I’m only going to listen to Americans, because there’s so many incredible people doing things in place. 

 

Erwin  

You know, if you and I waited for an electric car and made in Canada, yeah, waiting a while.

 

Seth  

Exactly. Yeah. So so the fundamentals remain the same. And so like, you know, Joel, like, really, really interesting guy. He’s coming, Joe, but on the Canadian side, we’ve got Pierre Paul Turgeon, on the underwriting insider talking about underwriting. Mike Reed, actually, Mike Reed’s Australian living in Canada, so so we’ve got three different countries.

 

Erwin  

Right. And all these multifamily investors, they focus in different markets do they not?

 

Seth  

Oh, yeah. Like, I’m good friends with people who are investing in probably almost every state in every province in the country. Obviously, everybody has their own niche, but yeah, right. Yeah. And, you know, people will choose their markets for different reasons. You know, there’s, if we’re talking about the US, there’s some really good Midwest investors who, who like the strategy, their goal, but less in terms of capital growth, but the cashflow is stronger. There’s other investors who are going with, you know, I even know investors are making a killing in California. Yeah, that’s, that’s a pretty, you know, competitive, very competitive. It’s like here in the GTA.

 

Erwin  

And the laws. The tenant laws are…

 

Seth  

Yeah, so it’s, it’s very, so I was just on a guest on another podcast right before this. And we were talking about California and Ontario, because California has ranked control. It’s not as tight as Ontario’s, but it’s, it’s still there. So there’s a lot of similarities between the two. 

 

Erwin  

Interesting. 

 

Seth  

Yeah, yeah. But there’s markets for everybody. That’s kind of like, you know, here in the GTA. There’s some people who will buy like, right in the centre of Oakville. And then there’s people who will buy in Woodstock. And then people who buy in St. Catharines. Like it’s all over. 

 

Erwin  

So there’s still deals out there, then? 

 

Seth  

There are, the competition for those deals is definitely there. And especially on the multifamily side, it’s not just putting in the biggest number on your offer. It’s your ability to close, because…

 

Erwin  

Some of these aren’t closing?

 

Seth  

Well, yeah. So what happens with the, you know, to take a syndication, for example, the sponsor will put the deal under contract and they go out and raise the capital. I know of a couple instances, recently where the syndicator was not able to raise the funds necessary. And sure the seller gets to keep a couple $100,000 In deposit, but then they have to go back on market. So when we’re dealing with these multifamily properties, yeah, sure. Like you have to have a good purchase price. But you also have to be able to close. And that’s where having a track record, or the track record of people on your team really, really comes in. 

 

Erwin  

Okay. Having cash on hand? 

 

Seth  

Yes, yes. proof of funds? Yes. 100%. Yeah. So, yeah, markets competitive. But you know, that there’s absent flows, like I talked with guys who were really active in 2008. And the challenge, you know, there were a lot more deals, but it was a challenge to get financing. So in every market in every stage of the market cycle, there’s challenges, you just have to be a little bit more creative, in how you’re going to tackle that. So you know, whether the markets at its peak, or is slumping, or is recovering, like, there’s always you can always make money in real estate.

 

Erwin  

Where do you think we are in terms of like, well, things have gone up? I don’t know. I can’t really speak for the states. But I’ll speak for like the GTA, it’s been this reminds me a lot of 2017. You going up so fast in such a short amount of time?

 

Seth  

Yeah, we talk about that a lot. So I’m not sure if people know that I actually run like a small residential sales team to and we talk about that a lot. Where, you know, in terms of inventory for the residential product right now in the GTA inventory is less than it was spring of 2017, sales volume is higher. So I would argue that we’re even probably worse off than we were in the spring of 2017. 

 

Erwin  

Affordability is worse. 

 

Seth  

Yeah, for sure. So we are watching, like on a weekly basis, because you know, a couple months ago, because we do these, like weekly market, or sorry, monthly market updates. And I kind of drew everybody’s attention to the fact that yeah, we’re seeing very similar patterns. And just to keep an eye out, like nobody has a crystal ball. But I think, you know, we may see something similar to what happened in 2017. What happened before will happen again, so I’m not sure what your thoughts are, too. I’d be interested in hearing.

 

Erwin  

Hard to say. It’s just recency bias. And just to make it easy for my brain to compute, is we could just see the exact same things. 2017. Yeah, yeah. But like for my market, Hamilton, we were recovered. you’ve recovered every single loss, every dollar loss by the following March, for sure lasted 12 months.

 

Seth  

Yeah, yeah. 100%. And I remember in 2017, you might have had people to where, you know, you see the pricing, drop, drop, drop. And it’s like, okay, now’s a great time to buy. But like, it always happens, like, like, I broke into real estate in 2008. And it wasn’t a slow like, in the States. It was way, way, way, way worse. We just had a little blip here. Yeah, I remember telling people Yeah, this is a great time to buy people sit on their hands, and they miss it. And you know, whenever, something happens again, you know, just don’t sit on your hands because like, you only know the true bottom after you’ve passed it. Just like you only know the true peak. Whenever, you know, when you’re looking in the rearview.

 

Erwin  

I know, I’ve been staring at the Bitcoin chart for a while. 

 

Seth  

Yeah, exactly. Yeah.

 

Erwin  

I think I missed the bottom. But there could be another one. There should be a new better bottom.

 

Seth  

Yeah. Yeah. So I don’t know who knows what’s going to happen. But yeah, like you said, like, it’s very, very similar. And we’re keeping a pretty close eye on it. Yeah.

 

Erwin  

My regret was we only bought one property in 2008. But the key was that our group was had enough people and enough capital enough income, that we could get financing. Yeah. So I think for folks that need to get ready for this is, you know, have all your ducks in order. Yeah. Right. Don’t go leasing a new car or something, you know? Yeah. Yeah. I’m like, whatever your priorities are my priorities are I talk to Cherry about this all the time is like to have some cash on hand. Yeah, just in case anything happens. So I’m trying to refi the heck out of everything. 

 

Seth  

Why not? Like, it’s a great time to do it? 

 

Erwin  

Yeah. It’s just to get some line of credits, for example, in case we need it, yeah. We’re gonna go spend it, but just to have some available capital, without having to sell something and pay all those taxes. 

 

Seth  

Yeah, for sure. 

 

Erwin  

So actually, we’re talking about structure. So I’ll share a story. A friend of mine sold a decent sized building, and then I’d see the seller side, the buyer hadn’t closed yet. And they’re raising money on Facebook. Pictures of the property. So I know, I know, the same property my client owns. And they’re saying like, you know, like, guaranteed returns like eight to 12%. So it looks like they’re trying to raise they’re trying to borrow privately. And one of them actually literally had the word guaranteed returns.

 

Seth  

Are they raising for debt? Are they raising debt or equity?

 

Erwin  

I think in that case, I think bad case. Debt. Okay. But also just think from a seller’s perspective. Yeah. You’re raising money. It wasn’t that big of a purchase price. Yeah. But, and I said, I sent a screencap to my lawyer. He’s like, That’s not even grey.

 

Seth  

Yeah, you have to be so so so careful. And like you and I hear of situations all the time.

 

Erwin  

I know. No, I would say there’s more these days than ever, of people getting busted over securities violations.

 

Seth  

Oh, 100%. And like, one thing I see frequently is, okay, so I think the past episode, we talked about the difference between active investing in passive investing, and how syndication really allows you to passively invest. That’s true passive investing. 

 

Erwin  

But that’s not syndicated borrowing or lending. 

 

Seth  

Oh, yeah. Syndicated mortgages, very different. We’re talking private equity. 

 

Erwin  

Right, right. Yeah, we actually own shares. 

 

Seth  

Correct. 

 

Erwin  

So you, you lose, and you gain as, as the value of the project grows?

 

Seth  

Yeah, it’s just like, you know, you own your piece of that property, or the entity that owns it. 100%. But what people will do, and I see this happening a lot is because you know, syndication and private equity that’s governed by the Securities, you know, legislation here in Ontario, it’s a provincial thing. So what people will do to bypass that is, they’ll say, Okay, well, I’m just going to raise, you know, let’s say $100,000, from 10. Investors, but we’ll structure it as a joint venture. So I’ll say, oh, yeah, everybody’s active. But if everything goes, right, nobody will say boo. But the minute something goes wrong, you’re toast, because the way that is structured is you’re basically syndicating the deal without actually calling it a syndication. So you are violating the securities laws, and you will get shut down. And I see it happen, like, you know, we’ve got people in our circle who do it. And like I said, if everything goes, right, it’s great. But the minute something happens, your neck is toast.

 

Erwin  

And the deal, the investment could be good. It could just be someone’s complaining about it could even be a competitor who calls the Securities Commission complains about you.

 

Seth  

100%. So like, whenever you’re raising capital, you have to be so careful that you’re doing it the right way. You’re just like guaranteeing returns, you know, you can’t do that. But I guarantee Yeah, and like, you know, just because you you say yeah, it’s a joint venture, while by the time like the Securities Commission takes a look at how you do things. They may decide that even though you call it a joint venture, it’s not your syndicating. And, you know, now you fall under the securities laws and then you didn’t do X, Y and Zed. So yeah, you have to be so careful.

 

Erwin  

And then the punishment for one group is the cease and desist order. Yeah. All right. So now, what are you supposed to do? Like say you’re in the middle of a flip? Even still the cease and desist? Yeah, you can’t finish the project, right? Yep, you’re gonna be in a lot of trouble.

 

Seth  

A lot of trouble, and it’s not worth it. Like, like the price of a good lawyer who’s experienced with this kind of stuff is it’s well worth their hourly fee to go sit with them and find out exactly what’s happening. Yeah, I think a lot of people like from the people I know who are kind of in the grey area, either they got bad advice, or they’re, they’re trying to use a JV structure that they were familiar with doing like a duplex conversion and trying to make it fit into a larger raise. And it’s just not designed to do that. Like that’s not what it’s there for.

 

Erwin  

Yeah. A friend of mines cousin posted something on Instagram, just him talking to the camera thing. And I said, I messaged him like, hey, please do me a favour. Have your lawyer review this before you post this? Yeah. Right. And he took it down immediately. Thank God. All right. Hopefully it did have like, yeah, just ask you have your lawyer review it.

 

Seth  

Yeah. No. 100%. And like, you know, I think Instagram.

 

Erwin  

He was blatantly raising money. 

 

Seth  

Oh, yeah. Okay, like Instagram, like, sure. Okay. Besides twerking on Instagram. Like, you know, people like to post everything they’re doing, but you have to do it in a way that’s compliant. And whenever we’re raising money, especially, you know, if we’re accredited investors only, we can’t be seen as soliciting funds from non-accredited investors like your toasts at that point. So I think in terms of marketing message, you know, hey, contact me to learn how you can invest in properties like this. That’s totally okay. But you can’t say this is my deal. Invest in it right now.

 

Erwin  

And we’re not lawyers. So your lawyer for sure. Yeah. Don’t take advice from us.

 

Seth  

So of course, if you do an offering memorandums, like everything changes. But if you’re working in the exempt market, where you don’t have to do your filing, you have to be very, very, very careful.

 

Erwin  

You, you spent a lot of time researching this.

 

Seth  

Oh, yeah, well, I’ve had to do it for the Canadian stuff, or in Ontario, as well as the US, because we’re kind of on both sides. So yeah, it’s like rule number one, like, just get good advice. 

 

Erwin  

That’s not the easiest thing to do. 

 

Seth  

No, well, yeah, danger devices hard.

 

Erwin  

First, I’d probably pay for advice. Yes. That’s probably, you know, making at least 80% of the way there.

 

Seth  

Yeah. Yeah. Don’t Don’t go. Don’t rely just on YouTube. 

 

Seth  

And don’t listen to a free podcast either. 

 

Seth  

No, no, exactly. 

 

Erwin  

Talk to your lawyer. 

 

Seth  

Even though when you do get give pretty good advice on this podcast. We try. We try. 

 

Erwin  

But we’re not perfect. 

 

Seth  

No, no, definitely not. I have many flaws. Yeah.

 

Erwin  

I have more like your hairs at least done. So before we were recording, I mentioned it, I’m seeing more people in trouble than I’ve ever heard of. 

 

Seth  

Yeah. Oh, yeah. 

 

Erwin  

Financially in with regulators. Yeah, maybe because our industry has gotten bigger like this, because there’s so much money being made in real estate these days. It’s been it’s been such a long Bull Run, especially more recent bull run that, you know, I’ve always I always give people the benefit of the doubt. I’ve seen many people fail as investors. So I give them enough doubt. My assumption is they fail for operational reasons. It’s hard to scale. You try to do 50 properties and like even five years like that, that’s a lot. And then when the when the when you find out whatever they happen, you’d like, Well, those are some morally unethical business decisions that were made. Yeah. Like, literally, I know, someone like their sister invested. And she lost her house. It was that bad. Yeah. That was back in forget, listen around. Oh, wait. So the credit crisis exposed all these issues with that portfolio with all these people that had put money in and like that went to crap. And yeah, nothing’s really triggering it right now. But yeah, I think Securities Commissions are just cracking down. 

 

Seth  

Yeah, and I think too, like, there’s definitely a lot more, there’s less forgiveness in the deals today, because there’s more competition for them. So if you’re really, really tight in a deal, like some people are paying ridiculous money for deals that should never have sold for that, and there’s no way to add value, like people are buying dumb stuff. Let’s put it that way. So if you’re buying a dumb product, like there’s no way you’re going to make money, like we’re seeing stuff, we look at deals every week, and you know, some of the stuff we underwrite. And then we find out how much it sold for it’s like, whoa, either we’re totally out to lunch with our numbers, or, or somebody has magic fairy dust. So and it’s always unfortunate to hear like, the impact of of one like sponsors bad decision or the person running the deal, and it just has like that. You know that epicentre and the impact like just spreads out. So like, you know, now that investors hurt and the That means their kids are going to be impacted by it. So it’s just I just wish people were a little bit more careful before they start bringing other people in.

 

Erwin  

Yeah. And I wouldn’t be surprised if the Securities Commission is going to start regulating a lot more products, like syndicated mortgages, for example.

 

Seth  

Yeah, yeah. Well, syndicate mortgages got a bad rap. Oh, I’m sorry. I’m just gonna say a couple years ago, but I forget I’m old now. So it’s probably like, 10 years ago, there was a lot of bad stuff going on. And as bad actors. I, for the most part.

 

Erwin  

Bad actors, bad deals. Yeah. Yeah. Selling bad deals.

 

Seth  

Yeah. But it’s like in anything like you have a small group of bad apples in it, but it spoils the whole bunch, right.

 

Erwin  

So one commonality I see among deals that go sideways is the investor has no idea about the property. So for example, it’s way out of town. Right? And it’s not I’m not saying that’s always gonna happen, because you’ve made it work for yourself. You invest way out of town. Yeah. Right. So can you share about like, what your diligence processes? So say, the properties in Texas or Florida? What’s your diligence process?

 

Seth  

Yeah, well, number one, we need to know our market like the back of our hand. So we have to know what’s driving that market, you know, the market influencers market drivers, we also look at how the market performed over the past three recessions. Because we want to see how it’s going to, you know, whenever the next recession happens, we want to make sure we know kind of how it reacted in the past, we have to know the sub market as well. Because you know, you have your macro market sub market, then you have to walk the deal. So you have to have boots on the ground. I know people buy properties with like, sight unseen, but you have to have people they’re looking at it because real estate, everybody seen the pictures, and then the real products different. And also you always you also have like a feeling your gut when you’re walking a property. So and your guts very rarely wrong. So if you get like an uneasy feeling, Something’s just not right. You know, it’s something to think about. Also, you know, if you’re there during a weekday, and the parking lots full, why aren’t people at work? Now is different that now it’s a little bit different, but like, it’s like, okay, like, something’s off here. Or, you know, just looking at the cars in the driveway, if it’s being advertised as a class A property, and you have some not Class A type of cars, you know, that’s something to think about too.

 

Erwin  

Non Tesla’s Yeah

 

Seth  

Yeah, exactly. 

 

Erwin  

That’s a good point. there should be a charging station if it’s a Class A builder, your tenants probably won’t demand it

 

Seth  

That is a great value add, that you can add to your property

 

Erwin  

Yeah, mine will be a paid one. 

 

Seth  

A paid one, there you go. Drive that noi up a little bit more. But, uh, but yeah, so so just understanding the market. And then I think where a lot of people are making mistakes now is their, you know, in their underwriting, they’re using 2% for inflation, when you know, we’re at, you know, let’s say 6% in the US. So you just have to make sure when you’re underwriting the deal, and you’re doing your modelling, you’re actually using realistic numbers, or being a little bit too rosy for when you exit the deal. So using the same cap rate is when you purchase the product, versus when you exit Well, no, okay, hold on, let’s make sure the markets worse. And so we’ll we’ll use a higher cap rate. So we’ll expect the softer market. And yeah, and you just have to find the true value add there and kind of think outside the box sometimes. So like, what can we see in the property that nobody else is going to see or realise we can do in order to get an extra X amount per month in rents or or revenue?

 

Erwin  

Yes. Yeah. And then we talked about boots on ground. So one of these one of these, like, big real estate folks that have issues. I’m not there. I don’t invest personally. But I’m, what I’m being told is that the realtors involved and even the appraisers are were not honest. So for boots on ground, like what do you do for boots on ground? Yeah. Do you ever inspect these properties before you invest?

 

Seth  

Oh, yeah, like, we’ve got guys in a couple different markets. So we’re, we’re kind of spread out. So depending on who’s closer, they can hop in the car and go for a drive. Got it? Yeah. And I think someone’s separate from the deal. Right, but well, like on our side, not on the seller side, not on the broker side, not on the lender side, like on our side, because like, we want to have that frank discussion without any other bias. Right. But yeah, like, they get that the situation you were talking about. If somebody doesn’t understand the fundamentals of the deal, they don’t know why they’re investing what makes that a good investment. I don’t think you should invest. And same with the apartment stuff. A lot of people I get I get DMS and messages like every single day, which which is amazing. But people say well tell me hey, I have like $150,000 I want invest right now. They say okay, well, like, Do you know what you’re looking like? And then we have that conversation to figure out if it’s the right fit for them. And some people are not at the stage yet where they understand how multifamily deal actually makes money. So I’m very uneasy, you know, accepting capital from somebody like that, because they need to be able, like nobody, if you’re passively investing in a deal or investing in a deal, Nobody’s expecting you to become or be the true expert like that. That’s why you have a trusted person running the deal. But you should at least have a basic foundation of knowledge. So you can at least have the right ask the right questions or understand the basics of the deal. You know, for example, with apartments, if you don’t know that the NOI is what’s driving the value, then operating income, you know, is it the right time for you to actually invest in an apartment deal? Probably not, you might want to take a month or two, and just learn how that works? Before you start putting your money in, because then we end up with examples, like you mentioned, where somebody is investing in the deal, they don’t understand how it’s going to make money. And if it was a bad deal from the start, there should have been a bunch of red flags, even with basic level knowledge. Right? So setup there. Yeah, but But that’s why it’s important just to find people who, you know, have a good reputation have a good track record, who come recommended, rather than just finding somebody on? I don’t know, like Reddit, or whatever it is. Yeah.

 

Erwin  

And then I agree with everything. And then I would just like you kind of said, you have someone on your side. Yeah, that the deal, like drive through it drive by it, you know, no different than when I’m screening a tenant. Exactly. Right. They’re gonna give me a rosy picture, and you’re gonna be rosy references. So when they give me a working reference, I’m going to call I’m going to Google the employer and call the number that’s given there, and then ask for the person they’ve they’ve given. Yeah, alright, because I can be a bit cynical. And assume, like, there’s people trying to make money off off this investment, find this totally cool. I appreciate it. And I encourage them to they need to earn my trust. Yeah. Right. If I’m gonna put money into it. 100%. So I’m going to, you know, for these deals, for example, when I was talking to this investor, that’s, that’s, you know, she’s underwater already. On this investment. I should just keep my mouth shut sometimes. Because, you know, hindsight is 2020. Like, no, I wrote, I wrote a post about it. Don’t have a realtor friend that can double check for you. That’s not a part of this deal. And can tell you, if that makes sense. That’s a good neighbourhood. If it’s worth what they think it’s worth, if a tenant profile profiles who you would they think it is, alright, you just blindly took what the people trying to sell you as truth? 

 

Seth  

Yeah, yeah. And that’s why you know, whatever investment there should be, like a deal package where it gives you the the demographics of the neighbourhood. Yeah. You know, what’s the business plan here? You know, what, what are the the numbers we’re looking at? Just so you can look at it, read it. Okay, this makes sense. You can double check it, verify it. But if it doesn’t add up, then okay, well, start asking questions. Don’t just blindly invest.

 

Erwin  

Here’s another thing that I’ve noticed is like securitized investments. Yeah. seem to be more. I can’t recall off the top my head of deals going bad. Versus it’s still like smaller scale investment projects that seem to be going sideways. Oh, well, scale, even though it’s still hundreds of properties, but not like 30 unit apartment buildings at a time yet? 

 

Seth  

Well, my circle, I know of a couple of messy situations where one sponsor things didn’t go out, they they firmed up on the deal, then there were issues with financing the property, they couldn’t do that that hurt their capital raise, and then they ended up losing their their hard money deposit. So we’re talking like $400,000.

 

Erwin  

Whose money is that?

 

Seth  

Well, that’s the sponsors money, right? So almost half a million bucks up in smoke. So yeah, it can’t happen. But I typically when you get into the larger properties, you’re the lenders underwriting the deal, because they want to make sure their money’s safe. You know, you’re underwriting the deal. The seller actually usually wants to see your underwriting, and what you plan to do with the property. So there’s a whole bunch of different sets of eyes on the deal. And you know, if you’re shopping three different lenders as three different lenders underwriting it, so between the lenders, yourself, or the insurance company, you’ve got more eyeballs on it, rather than like with a smaller residential deal. It’s just the person so there are some fail safes kind of built into that system. But yeah, like it can, it can happen, it could just be a lot harder. Yeah, it would just you would have to, you know, the lenders that are giving you the debt for the deal would be wrong. And you know, when you’re we’re talking about a larger scale, like, there’s some very smart people who are underwriting these deals, the insurance company would be wrong. You would be wrong. The broker would be like, their red flags should be popping up at some point in that process. If something’s not right.

 

Erwin  

Yeah, interesting. Speaking in crazy, yeah. How’s your stock hacking going?

 

Seth  

Well, the stock acting was good. peloton kind of hurt me a little bit. So… 

 

Erwin  

Hurt a lot of people.

 

Seth  

Like a lot of people. Yeah. But that was actually, that was really, really interesting. And when when I saw when I woke up the next day, and so I had plummeted so much. I thought back to the stock hacking course I went to. And the message there was no, there was a phrase about companies just like plummeting overnight, and it can’t happen. And like that, you know what this is? This is this is it? Yeah. But yeah, besides that, I think last time I was on here, or two times ago, we were talking about my back surgery, I had a herniated disc. So stock hacking, thankfully, you know, I had that going, I paid for my surgery in Mexico, because everything was shut down here. got engaged over Christmas, and stock hacking paid for a very, very, very nice ring for Darcy, my fiancee. So she’s very happy with that, so, you know, I’m still hiding the insurance, the valuation on it, so she doesn’t see it. But yeah, so So stock Hacking has done a lot. And it’s been awesome. So I think, you know, eventually, I may use it for some other stuff. But it made two pretty big purchases for me over the past year, so yeah, it was awesome. So happy for you. Well, I should I’m so happy that you told me that you were doing this course. And then I’m actually happy with myself for saying yeah, I’ll go.

 

Erwin  

No, it’s like we got engaged. 

 

Seth  

Yeah, that’s right.

 

Erwin  

When’s the wedding? 

 

Seth  

Probably September next year. Oh, okay. Long engagement. Yeah, well, like just like, the thing is, like, you wouldn’t know because you’re not in the wedding planning business now. But we’ve got basically two years of brides who have not had a wedding. And they’re all all trying to compete for, like the real estate market right now. All these buyers, so few properties. So the planning business is ridiculous. venues are ridiculously busy. And like blocked.

 

Erwin  

And prices? 

 

Seth  

Prices are ridiculous. 

 

Erwin  

Inflation. 

 

Seth  

Yeah, inflation. Yeah. So. So yeah, so we just figured we don’t want any stress. We’ll just do something September. Hopefully things aren’t out. And kind of calmed down. Since then. Yeah.

 

Erwin  

It’s nice that things are getting back to normal, which is nice for your conference.

 

Seth  

Oh, we were so happy. And like, I’m such a big proponent of like, doing things in person that like I told everybody on the team, I’m like, There’s no way we’re doing a virtual event like this has to be live. So now that vaccine requirements are gone, mass should be gone too. So it’ll be so nice to walk into the building. And it’ll just be like it was three years ago, or like at your conference, when you ran the wealth hacker conference, like just regular people, like doing what they love to do, like networking and having a whole lot of fun. Like, it’s going to be amazing. And then Where’s where’s it going to happen? We’re at the CAA centre. So it’s actually a hockey rink. So it’s not like your typical convention hall or something like that. So we’ve got the CAE centre. So it’s 15 minutes from Pearson Airport for people flying in. We chose the location just so it was really accessible for everybody. Because we’ve got speakers flying in from all over attendees coming in from all over. Say, we’ve got like this 20 foot like LED screen. It’s going to be insane. We got fire on the stage. There’ll be a couple pictures after Yeah, I can show you some renders. Yeah, yeah. It’ll be cool. And then what’s the date? May 14, and 15th. I should already know it to my count. Yeah. And I think you’ve got a special code for all your listeners. Oh, yeah. The code is iwin.

 

Erwin  

Oh, wow. You thought ahead. 

 

Seth  

Yeah, so use your code and send Erwin a thank you message once you do. 

 

Erwin  

And I’ll be in front row if anyone wants to join me. 

 

Seth  

Oh, yeah. Well, actually, so let’s talk about the VIP stuff if you don’t mind. 

 

Erwin  

Yeah yeah. So, please, What did I buy? 

 

Seth  

I’m so excited for the VIPs. Because basically, what we’re doing is, it’s about 200 people, we’re very limited. But if you’re really serious about the networking side, we’ve got a special VIP lounge. So the VIPs will be rubbing shoulders with each other the whole weekend. So I guarantee like every person coming to VIP will walk out with at least one like potential deal or partner future partnership. And that’s like we’ve designed it that way. So if you’re serious about the net plus you get all sorts of like, bonuses, you get to meet Kevin like after and have your picture taken and you get all these other perks. But just from like the networking side, the very deliberate networking. Like if I wasn’t running the conference, I would be in VIP, because I’d want to meet the other top performers there for sure.

 

Erwin  

Yeah, I’ve been to other VIP events, and the conversations you have are just inspiring.

 

Seth  

Oh, yeah. Like I see who buys tickets and stuff. Like we’ve got some really cool people coming. So not saying like, you know, the other texts we have aren’t great. But like if you’re coming to really network like VIP 100% 100% And there’s a Ember 30% sold out, so you gotta hurry. And if First slo Oh for sure. My experience is the first solo. Yeah. For most people’s experience. It’s the first. Yeah. Why funny? Because it’s the most expensive. Yeah, but I remember for your conference, like the second it went live, I bought my VIP ticket.

 

Erwin  

Which was smart, it was the cheapest price. 

 

Seth  

Yeah, exactly. Yeah. 

 

Erwin  

Cause it sold out.

 

Seth  

Yeah. Well, actually, our prices will end up going up. We have some secret targets once we hit them prices go up. So yeah, don’t delay.

 

Erwin  

Does Kevin have any books? I know only on the surface about Kevin. Yeah. It’s like when a band band you like is having a concert. And you haven’t heard the new album and the touring the new album. Like, I need to listen to the new album before I go see them. Yeah. Is there any recommended books of Kevin’s that you like? 

 

Seth  

Yeah, he’s written a couple bucks. And we are kind of working on a special gift for all the VIPs team. I can’t say anything. But there may be something special there for me after. I can tell you after.

 

Erwin  

I’ll make it on the next episode.

 

Seth  

Okay. Yeah. But, but yeah, so um, yeah, Kevin has a couple bucks. So you can get them at chapters. And ones more about like, like life in general, and how that impacts money. That sort of stuff. So, but yeah, like, and a lot of people like some people have asked me hey, like, is Kevin really like he is on Shark Tank is not like super nice guy. So if you’re a VIP, and you’re meeting Kevin, like very personable guy, and really cool too.

 

Erwin  

And before the recording I shared with you another time about how all these speakers come out of the woodwork. I don’t have an event. 

 

Seth  

Yes. Yes.

 

Erwin  

I don’t know how to frame this question. Are you looking for more speakers?

 

Seth  

Yeah. So we actually have a couple speakers we haven’t announced yet. Okay. But we have a couple more announcements to make with that. So our speaker roster is full. Okay. 

 

Erwin  

So no one needs to reach out? 

 

Seth  

No, no. But you know, like, we’ve had some very great people reach out. And we’ve certainly put them on the list for 2023 For the next year’s conference, but for this year, we are I’m very happy with lineup we have like we hit all the major components of multifamily. And, like I’m really happy with the energy everybody’s bringing to so yeah, no, we’re full for speakers right now.

 

Erwin  

Awesome. Is there gonna be a VIP party, like Saturday night or anything?

 

Seth  

Oh, boy. Okay, so speaking of…

 

Erwin  

This is the end of the pandemic, like people are gonna be, is gonna want a party. 

 

Seth  

So the budget we have for the VIP party is insane. Insane. So it’s just so the VIP party. It’s Saturday. So basically what happens is Kevin does his keynote, we have meet and greet, you have dinner and then you come to the VIP party. So we’ve got only the VIP tickets and the platinum ticket. So it’s very, very exclusive. You know, for food. We’ve got like a sick taco truck, like coming in. And the budget is ridiculous. So it’s just going to be party VIPs get open bar, if you’re into that. If you’re into that. It’s just gonna be insane. All right, insane.

 

Erwin  

Looking forward to the end of the pandemic party.

 

Seth  

Yeah, actually, we should rebrand it as the end of the pandemic party 

 

Erwin  

End of the pandemic real estate conference. 

 

Seth  

Yeah. Yeah. So and that’s, that’s the thing, like we’ve been cooped up behind computers. Like it’s time to get back out there.

 

Erwin  

Yeah, yeah. Are you doing a live stream option?

 

Seth  

Right now? No.

 

Erwin  

Because sorry, I skipped customer listeners in context, It costs a lot of money to be able to simulcast.

 

Seth  

Oh, yeah. Yeah, we looked into it and like, here’s the thing like, I think, I think by not having the virtual option, it kind of gives people a nudge to actually show up in person again because like you will get so much better experience showing up in person like the connections you make the conversations you have after are so much better, like you know, rather than going on your computer and then you’re probably making dinner and listening at the same time or making lunch late it’s not the same so I want somebody to come to the conference and get the most they can out of it and then showing up in person doing the networking and having those face to face conversations. 

 

Seth  

Yeah, awesome. Well, Cherry and I will be in person front row so you can’t miss us.

 

Seth  

No, yeah, I’ll be I’ll be waving from the stage. 

 

Erwin  

I get my laser pointer trying to get in your eye and Kevin’s eye. Seth, thanks so much. One more time. Where can they learn more about conference?

 

Seth  

Yeah, go to multifamilyconference.ca Make sure you use code iwin. I w i n and if you want to enter the free VIP ticket draw it’s at the end of April just go to multifamily conference.ca/vipdraw.

 

Erwin  

Fantastic. Thank you Seth. 

 

Seth  

Thank you, Erwin.

 

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

 

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