JF2665: Tricks of the Trade: Financing, Enticing Investors, and an Indefinite Hold with James Knull

When James Knull first started in real estate, he leveraged his youth by asking experienced investors to critique his business plans. Most people provided him with a lot of feedback, but a few were intrigued by his plans and asked to join him. Flash forward a few years and now James is the founder of his own realty group and a multifamily investor. In this episode, James walks us through how he went from single-family homes to starting his own realty group while investing in commercial real estate.

James Knull Real Estate Background

  • Full-time career: Founder of Mogul Realty Group 
  • Portfolio: 300 rental units 
  • Organizes and hosts Mogul Mastermind, one of the most popular Real Estate Investing meetup groups in Western Canada.
  • Based in Edmonton, Alberta, Canada
  • Say hi to him at: james@mogulrg.com
  • Best Ever Book: Traction: Get a Grip on Your Business by Gino Wickman

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Ash Patel: Hello, Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m with today’s guest, James Knull. James is joining us from Edmonton, Alberta, Canada. He’s the founder of Mogul Realty Group and has over 300 units. James also organizes and hosts a popular investing meetup in Canada. James, thank you for joining us. How are you today?

James Knull: Hey, I’m fantastic, Ash. Thank you so much for having me. It’s a pleasure to be on the show.

Ash Patel: The pleasure is ours. Before we get started, James, can you give the Best Ever listeners a little bit more about your background and what you’re focused on now?

James Knull: Yeah, absolutely. I started buying and selling properties just as I was graduating from university. I started with single-family homes, had a really successful initial run at that, and decided to get my real estate license. From there, I was a realtor, grew my real estate practice, hired people and grew a team of real estate agents, and upgraded my portfolio to commercial assets as well. I buy a lot of commercial multifamily. Nowadays in the real estate realm, we’ve got about 25 realtors across Western Canada that are a part of our team, mostly focused on investors. We do everything from selling people single-family income properties, to commercial, to project marketing for condo developments.

On the investor side, I’m choosy. I’m not aggressively acquiring properties, but I see cool deals all the time. My most recent acquisition was a 24-unit building in Edmonton, close to where the metro line is under construction right now. We felt that was a really great location. The building itself had a very, very large lot, with some additional land that could be used for a site for future development, to maybe add an additional building to the property. It all just made sense and that’s what we were targeting.

Ash Patel: James, how many years ago was it that you started this real estate business?

James Knull: I bought my first house in 2006, just as I was graduating.

Ash Patel: How many years has it been since you started the realty firm?

James Knull: I’ve been a licensed realtor since 2007. I started the actual firm, the greater company now, at the beginning of 2017.

Ash Patel: And you’ve got 25 realtors, and they focus on investors. Why focus on investors?

James Knull: That’s just always been our background. I love the real estate investing world. I’m an investor myself. As a result, it was a natural progression to attract investor-oriented clients. It was a conversation that I loved having with people. As we scaled, I wanted to work with people who had that area of focus, because that’s just always been our clientele, based on my love of real estate or personal interest, and just looking at deals, analyzing properties, and helping advise people on what to add to their own portfolios.

Ash Patel: That’s the advice that I give a lot of realtors, focus on the investment community, because you’re dealing with people like us, versus first-time homebuyers. I can imagine my wife and me trying to buy a house and arguing in front of the realtor. That’s not what you want to deal with. You want to deal with professionals, smoother transactions.

James Knull: Yeah. The nice thing about professional investors is they also are in the process of curating a portfolio, so there’s more transactional volume to do with an investor, as they buy more property, sell more properties. You get to build deeper relationships with clients who do business more often, which again, is another perk of it. You get to really know your clients instead of selling somebody one house every six or seven years. We have a lot of clients who buy six or seven houses every single year.

Ash Patel: Yeah, that’s a great point. What percentage of your time goes into the real estate business, versus the realty business?

James Knull: I would say probably about 80% of my time is into the realty business. I’m a big believer in hiring quality property management, so the actual day-to-day management of and focus on managing our tenants – that’s not really my responsibility. I more have a monthly check-in with our property managers to see how the properties at large are performing. Then depending on the property, I’ll either pop by once a quarter or once every six months, just to have a quick peek at it with my own eyes to make sure everything is in order. Other than that, the day-to-day is delegated, which frees up my time to focus on growing the realty business.

When there’s a live deal right in front of me, that gets really time-consuming. All of a sudden, 80% of my time is spent on due diligence, raising capital if necessary, architecting the deal, working towards closing, getting it set up, building the business plan, etc. But that’s very deal-specific. The rest of the time, it’s mostly managed for me.

Ash Patel: James, how did you find the 24-unit building?

James Knull: That one was one of my colleagues, who is a commercial mortgage broker, happened to know that the vendor was thinking about refinancing or was open to sale, and just happen to say, “Hey.” I make sure I share with everybody who’s in the industry what my general criteria are, and remind them — just friendly reminders once in a while, “Hey, if you see something in this area, I’d be interested.” Sure enough, something in my target area came up, and they thought of me, made the introduction, and the deal just kind of moved from there.

Ash Patel: When you say vendor, who does that refer to?

James Knull: The person selling the building.

Ash Patel: Okay, got it. Did you end up raising money for this property?

James Knull: Yeah, we ended up raising a million dollars to buy this one.

Ash Patel: And what was the purchase price of the property?

James Knull: Three and a half million dollars, give or take, a little bit.

Ash Patel: So roughly 25%. Did you have some CapEx built-in as well?

James Knull: Yeah. There were closing costs, contingency funds, a couple of suits needed a refresh… So yeah, there was more than just the down payment, that million dollars.

Ash Patel: What’s the game plan for this unit?

James Knull: Right now, we plan on just renting it and letting it sit stable. It’s a fairly stabilized building. We’re really being patient about the value of the land and the use of the land kind of catching up and growing, because of the new metro line. This particular building is about a 500-yard walk from the metro line. It’s very, very convenient access for people that live in the building to now have access to the rest of the city by way of the train. That infrastructure is just going to drive density and value to the surrounding area. We’ve got a great building, with a lot of land that we can add density to. At some point, it’s going to make sense to either tear the building down and build something really big, or potentially just add a second building to the piece of land in the open lot space that’s part of the property.

Break: [00:07:11][00:08:51]

Ash Patel: So you have to practice some patience if it’s going to be a teardown. You can’t over-improve the units.

James Knull: Exactly. And the units are in fine shape. They’re middle-level units; they’re not fancy, they’re not luxurious, it’s not a particularly new building. But it’s by no means in rough shape, or anything close to a teardown. The units, on turnover — cleaning carpets, replacing flooring, mending broken things from wear and tear, repainting, that sort of thing will be necessary to keep them in good shape, to attract quality tenants. But in terms of a full overhaul, that’s not really the game plan.

Ash Patel: On the topic of patience, how many years do you plan on holding this asset?

James Knull: I would say indefinitely. We may improve the asset by tearing down and building another building, or adding another building to the lot. But it’s in such a great location that it’s really well situated to be a holding property. The value that will get added will be market appreciation, as well as us building onto the property in one way or another. But even if we tear it down and build a brand-new building, it’ll still make a great holding property, just by virtue of it being in such a great location.

Ash Patel: How do you relay that’s your investors? An indefinite hold.

James Knull: With our investors, in our unanimous shareholders agreement, we break the investment down into five-year terms. At every five-year milestone, each investor has an opportunity to exit. Over time, we’ll probably amalgamate, where an investor will want to exit, so maybe another partner or ourselves will purchase out their shares in the building at whatever the present market value is, and slowly and steadily over time, whoever does want to just have it as a portfolio piece, will stick around, and whoever wants an exit will get an exit.

Ash Patel: That’s a great opportunity. Will you have to get the property appraised every five years?

James Knull: Yeah, that’ll be a part of it if someone wants to exit. If nobody wants to exit, then there’s no need. But we also kind of set those expectations when we’re chatting with people, saying, “Hey, you know what? We know life can change and priorities can change, so we want to make sure everybody has an exit opportunity that’s in writing, in the contract, understood, and agreed upon, every five years. But our intention is to just hold this thing and have it build our net worth in the background, so have a mindset of not being in a rush to dispose of this asset, because it is a really, really good asset to keep in the portfolio.” But again, if people want to exit, we’re happy to let them exit, and have a plan on how to do that.

Ash Patel: That’s a great thing to have in that deal, giving the investors the opportunity to exit if they need to. What’s the return to investors? Projected.

James Knull: The cap rate on the building was about five and a half percent, which is about on par for the area, and then the mortgage that we got was a CIC-insured mortgage, so with interest rates being as low as they are, we got a 1.4% interest. So in terms of principal reduction, we have a 20-year amortization, and with the interest rate being as low as it is, our monthly payment is actually more principal than interest, which is great. So it cash flows quite nicely, the principal paydown is pretty aggressive… And we didn’t really factor equity appreciation in, because that you’re predicting and speculating. So if the market goes up, great; if it doesn’t, great as well. But from just cash flow and mortgage pay down, we’re in for the investors a 15% to 16% range. And then real estate tends to go up in value, that’s what real estate markets do… So we’ve got a pessimistic realistic and optimistic projection for our investors on what equity growth could be. But just the ones that we’re confident we’re going to get, which will be cash flow and principal payout – that’s what we’re looking at.

Ash Patel: That’s great. What’s next for you?

James Knull: The biggest project that we have in 2022 is a city in Edmonton called Kelowna, which is kind of like a larger resort town, about 400,000 people. It’s the heart of our wine country, so it would kind of be like the Napa Valley of Canada. It’s the biggest city in the heart of that area. We’re going to be project-marketing a luxury condominium building in that area. The developers are finalizing the floor plate, but it should be about 300 units. That’s going to be the thing that takes a ton of my time in terms of project-based work in 2022. Then we’re always looking for awesome realtors to work with us, we’re always growing the team. There is a natural lifecycle where sometimes realtors work with us for a bit of time and want to go independent… So growing and attracting quality agents to our organization is a big part of my role as the leader of the organization as well. Then deals come across my desk all the time, so everybody out there knows that I like A  assets in great areas of town. I’d rather pay a little bit more for a great location than try to go into a less desirable location to save some money. Those deals will pop up, and hopefully, I buy something for my own portfolio this year.

Ash Patel: The 24-unit deal – was that the first time that you raised money?

James Knull: No, definitely not. I’ve raised several million dollars for several deals over the years. It was a pretty routine process at that point. Our marketing package, the verbiage, how we did the presentation, what our unanimous shareholder’s agreement looks like, etc., etc. That was all pretty dialed. It’s nice to have gone through it, because I was just able to take the work that has been done on previous deals, repurpose it, change the address on the property, change the numbers on the spreadsheet, and away we went.

Ash Patel: How did you get started raising capital? If you can go back to your first deal.

James Knull: I didn’t really know that raising capital was a way to buy real estate when I first started buying real estate, to be honest. I went to a couple of real estate investment clubs, conferences, seminars, and just started learning and educating myself, and reading books. There isn’t really a college or university level program about real estate investing. A lot of it is just talking to investors, learning from the industry, taking courses that are held by private institutions. I stumbled across the strategy of joint venturing, learned about what raising capital meant, and thought, “Hey, you know what? I think I can do this.” I started finding deals and pitching deals to people, and eventually somebody said yes.

Ash Patel: Who were the people that you were pitching the deals to?

James Knull: I was quite young at the time, so any adult that I knew through my previous job, my parent’s friends, my dentist; anybody that would give me the time of day to talk about real estate, I’d asked them if they’d be interested in talking about real estate. I went through a lot of no’s and a lot of disinterest, but there were people that were genuinely curious about the deals I was putting together, and those were the ones that I ended up doing business with.

Ash Patel: So anybody and everybody.

James Knull: Yeah. I kind of leveraged my youth. I knew that if I spun it the right way, it would be an asset. I basically said, “Hey, I’m creating a new business plan and I want to get your feedback on it. I trust your opinion as an adult in my life who I hold in high regard. Can I show you my business plan and get your feedback?” I got all kinds of responses. I got people saying, “This is crazy.” I got people who gave me a lot of constructive feedback, and then I got a couple of people who said, “Hey, wait a second. Are you actually going to do this?” “Yeah. This is what I want to do.” They said, “I’d be interested in doing this.” Sure enough, the feedback turned into interest.

Ash Patel: Awesome. And you run a meetup. Tell me about that.

James Knull: We run a meetup club. Prior to COVID, it was an in-person event for about five years, and then we’ve been broadcasting it live online ever since. We get investors and industry experts together to talk about all things pertaining to real estate investing. We’ll get people that have large portfolios talking about how they put together their portfolio, we’ll get people who own property managers in to talk about how to manage tenants, we’ll get people who do off-market deals to talk about how to do an off-market deal, and all kinds of stuff.

If it’s a topic of interest for real estate investors, we’ll put that topic out there with an industry leader, and then utilizing Zoom and the way that you can kind of have breakout rooms, we still facilitate online networking, but we’re definitely looking forward to online events being feasible again, at some point.

Break: [00:16:52][00:19:49]

Ash Patel: How has that helped your business, both the realty business and your real estate investing business?

James Knull: That’s a great question. It definitely adds a lot of legitimacy to our operation, just to be in the position where we’re collaborating with experts in the field and educating people in the network and community about real estate. It also attracts a lot of interested individuals. People come to learn about real estate, and we have the opportunity to put our best foot forward and earn the opportunity to work with them. More often than not, people choose to work with us after getting to know us a little bit through what we’re doing in events like the ones that we host.

Ash Patel: What’s a hard lesson that you’ve learned about investors or taking on investment money?

James Knull: I would say, in terms of taking on investors, not every person’s suited to be the right partner. I think a lot of people are just so excited to do a deal when they start down the journey of real estate investing that any partner who has money, they feel is a good partner, let’s go for it. But often, the truth of the situation is that not every partner is qualified for your business plan. It’s just as important to ask a potential partner questions about what their exit strategy goals are, what their timeline is, what their expectations for communication are, what their expectations for return on investment are… Because if that person isn’t a good fit for the way that you want to do business, it might not be a great business partnership, and it’ll turn into more difficulty than benefit very quickly.

Ash Patel: Did you have an experience that taught you that? Was there a tough situation you dealt with?

James Knull: About a tough situation, one of the things that we put into our unanimous shareholder’s agreement is what we call an early exit clause. So we have our five-year exit events, but we have the early exit clause, that basically says if somebody wants to exit at a time that is not on that five-year milestone, they have the ability to sell their shares to another shareholder at a 20% discount to current market value. That’s kind of the cost of the inconvenience for somebody else having to come up with cash on short notice to exit somebody. So you get a bit of a deal for doing that. We’ve had a couple of investors early exit, but to be able to buy out their portion of the property at a 20% discount to current market value – that mitigated the inconvenience of having to come up with that capital on short notice.

Ash Patel: What’s an example of a deal that you lost money on, and what was the lesson learned?

James Knull: The only time we’ve ever really been burned is just taking on too much leverage. I find a lot of people will get excited about buying a property for as little money down as possible, or no money down, or some kind of creative financing in the background so that very little cash actually comes out of pocket. When those deals work out, they’re huge home runs, because you basically create returns out of no cash whatsoever. But the flip side of the coin is, the more money you borrow, the more your monthly payments are. And if things don’t go exactly precisely according to plan, the monthly burn rate can very quickly swallow up a property and all of the investors in it.

We’ve had a couple of deals where we went with some pretty extreme leverage, with the concept of repositioning the property quickly and then refinancing. The market shifted, we weren’t able to reposition in the way that we wanted, and we were caught holding the bag on some very high interest payments for loans that were only ever meant to be short-term. Those were money losers for sure, because the monthly expense just added up and added up.

Ash Patel: That’s a great lesson, because I think a lot of people will do their pro forma, and they’re like, “Awesome. If I can raise the money, these are the returns that I can make.” I don’t know that everybody factors in interest payments to the investors.

James Knull: Yeah. Another example of that would be if you could buy a property at 30% down, 20% down, or 10% down, and you choose to borrow 90 from the bank and raise 10% – it puts those investors with 10% down at a much higher risk than raising 30% and borrowing 70% from the bank. Borrowed money is expensive.

Ash Patel: Explain that to me. It puts those investors at a higher risk. What does that mean?

James Knull: If you’re borrowing 70% from the bank, the servicing cost is lower than if you borrow 90% from the bank. It’s riskier to have a higher cost of debt service. If the investors or equity partner is putting in the 10%, sure, their projected return on investment might be higher because they’re putting in less money as an investment, but the risk is higher, because there’s higher debt servicing, and so there’s less margin for error. So even if a property looks like it might break even or cash flow on paper, more interest payments always mean more risk. If there’s a vacancy, or a suite gets damaged, and so the cost of repairing the suite and the vacancy associated with it or whatever.

Ash Patel: Yeah. Again, a great point to reitarate – when you do your pro forma, make sure you add in those high returns to your limited partners.

James Knull: Exactly.

Ash Patel: James, what is your best real estate investing advice ever?

James Knull: Being patient. Good deals often require fast action, but if you’re in the market and you’re not entirely confident with a deal, another deal will probably come up. It’s important to have a certain degree of confidence. If something doesn’t feel right, and you pass on it, that’s okay. But don’t let that be the reason that you stop investing altogether. There’s always going to be another deal. But if you don’t take action, you’re never going to get any deal.

Ash Patel: James, are you ready for the Best Ever lightning round?

James Knull: Let’s do it. I love the lightning round.

Ash Patel: James, what’s the Best Ever book you’ve recently read?

James Knull: I just read Traction. That was a great book. It’s a book about how to systematize your business more efficiently. I really enjoyed that one.

Ash Patel: What’s the Best Ever way you like to give back?

James Knull: I really like to give back in terms of time. If there are newer investors, young entrepreneurs that want to go grab lunch, have coffee, pick my brain, I’m very open to spending time with people sharing with them whatever I can.

Ash Patel: James, how can the Best Ever listeners reach out to you?

James Knull: The best way to get a hold of me is to just send me a quick email. It’s james@mo gulrg.com.

Ash Patel: James, thank you again for sharing your story from single-family homes to getting your real estate license, building a real estate investing business, growing your realty business, and now syndicating deals. Thank you again.

James Knull: It’s been my distinct pleasure. For everybody listening, I hope 2022 is your best year as well.

Ash Patel: Awesome. Best Ever listeners, thank you for joining us, and have a Best Ever day.

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JF2362: Cherry-Picking the Deals with Gary Spencer-Smith

Gary’s father’s death pushed him into the real estate investment path. In 2007, he emigrated to Canada from the UK, and that’s when he got serious about doing real estate full-time.

Utilizing his electrical engineering background, Gary became an owner and a contractor of several single-family properties. Through joint venturing, he managed to create a portfolio, eventually refinancing and moving on to a different phase of his life.

Gary Spencer-Smith  Real Estate Background:

  • A full-time investor for the past 8 years
  • 20 years of investing experience
  • The portfolio consists of 24 single-family homes, 5 cabin holiday resort, 110 person restaurant, houseboat, and converted a 24,000 sqft dealership into offices, storefronts, storages, and a warehouse,
  • Based in British Columbia, Canada
  • Say hi to him at: www.revnyou.com 
  • Best Ever Book: Sapiens

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Best Ever Tweet:

“I looked at what real estate could do for my life, and that was like a switch.” – Gary Spencer Smith.


Theo Hicks: Hello Best Ever listeners, and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we’ll be speaking with Gary Spencer Smith. Gary, how are you doing today?

Gary Spencer Smith: I’m doing fantastic. Thank you very much for having me on. I appreciate your time and effort to put this together for everybody.

Theo Hicks: Thank you so much. I appreciate you taking the time to speak with me today. I’m looking forward to our conversation. Before we get to that conversation though, a little bit about Gary… He is a full-time real estate investor for the past eight years and has 20 years of investing experience in total. His portfolio consists of 24 single-family homes, a five-cabin holiday resort, a 110-person restaurant, a houseboat, and a converted 24,000 square foot dealership, converting that into offices, storefronts, storage, and a warehouse. He is based in British Columbia, Canada. You can say hi to him at his website, which is revnyou.com. So Gary, do you mind telling us some more about your background and what you’re focused on today?

Gary Spencer Smith: Sure. I guess people will hear the accent and think that doesn’t sound Canadian… So I was born in the UK. I grew up normal. I say normal upbringing – normal in these days, with divorced parents; single mom… Didn’t have that silver spoon start that a lot of people have. I got to 18, thought I don’t know what I want to do. Ended up going into the military, served 11 years in the Royal Navy, served in the Afghanistan conflict, Iraq conflict, Bosnia… I got to go to over 100 countries in the world. That gave me a real perspective on, I guess, life in general.

My father passed away when I was 21, which enabled me, but it kind of started me on the real estate path ahead of the curve then. I managed to purchase a house. I did 11 years in the Navy, got injured while I was in service, and in 2005 I was pensioned out of the military. In 2007, I immigrated over to Canada. A couple of years after that was when I really started investing seriously, following a plan, and had a goal in mind when I was doing it. So that’s kind of my life in a nutshell.

Fast-forward to now, I’m a full-time investor, and I guess all my income is generated around my real estate businesses. I kind of get to live the life that I planned when I was 16 years old. So I’m pretty lucky and grateful for where I’ve got to, and the challenges I’ve had along the way, and the lessons they’ve taught me.

Theo Hicks: So when you first started to invest – you kind of went over your portfolio – what was your original focus?

Gary Spencer Smith: I’ll take a quick jump back. My first investing [unintelligible [00:05:52].13] impressionable age, maybe I was 18 or 19. He said, “Oh, such and such has rentals, and he gets X amount of dollars per month.” And something just triggered in my head.

When I had my house, the first house I purchased after my father passed away, and my wife at the time, I was like, “Let’s just rent this out when we move” and she said “I don’t want to deal with rentals. Rentals are a headache. You’ve got to deal with tenants,” that story that people say. I listened to it and I didn’t do that.

Then when I left the military, I had a house down the South Coast of England, and I’m like, “You know what? I’m keeping this and I’m renting it out.” It was purely a mathematical choice. It was just, I figured out where I’m moving to and renting, and what I would get for rent there, and I was like 200 bucks a month better off. There was no plan around it. Subconsciously, I wanted to have about three houses over my working career. Retire at 60, I would have my military pension and three houses. That was kind of my goal. I don’t know where that came from or how that was planted in me.

Then I emigrated to Canada. I bought a single-family townhome, and that was for my kid’s college. That was the idea behind it. My kids end up not going to college, and we can get into that a bit deeper if we want. But I guess I was looking for a way to create income within houses. I didn’t want to do the job I was doing when I emigrated. I just used that to get to Canada, which was a life goal. Then I’m like, “I don’t want to do this till I’m 60.” So I kind of looked at real estate investing and how I could generate revenue.

We started doing single-family homes and from those single-family homes, we would actually go in, act as the general contractor… Now, a little caveat to that, I do have some skills. I’m a qualified electrical engineer, so I have an ability (I’m a certified electrician) that I brought to the table, so I utilized those. I didn’t have money so I started joint venturing really early on. Through joint venturing, that’s where I managed to create a portfolio. We were doing like two to three single-family homes, buying them, [unintelligible [00:07:50].11] in them, and then refinancing and moving on to the next. The BRRRR type strategy; it wasn’t exactly that, but it was a variation of that.  That’s what got me to a point where I’m like, “Okay, I guess I’m full-time at this.”

Then in the last few years, again, you look at life, you get to each stage, and you get to each goal that you achieve. I was kind of like, rather than going out and looking for real estate, I looked at what I want real estate to do for my life. That was like a switch, and that’s how we ended up buying the resort that’s on the lake. Even though it’s a business, it was a real estate purchase, because the assets themselves, the land assets, the property assets are worth the same price as the business we were buying, effectively.

Now my focus looking forward is just to keep growing properties. But I have a different strategy. I’m not involved in the day-to-day real estate as much as just looking at the bigger picture stuff, and I guess cherry-picking the deals.

Theo Hicks: Thank you for sharing that. So after the single-family homes, the next non-single family home purchase was the holiday resort?

Gary Spencer Smith: No, it would have been the dealership. It was an old Ford dealership from the 50’s, so it had the car mechanic shop, the body shop, the paint shop, the warehouse, the showroom. The lady who owned that building… I was actually at a funeral and we’re sitting at the table, and I’m from a smallish town, people know everyone in it, 25,000 people in the town… And she said, “Oh, would you look at my property? I’ve been trying to sell it.” I was like, “Sure I’ll look at it.” Honestly, I was being polite. I was going to look at it, but I had no intention of buying it. I’m walking through the property and I’m just looking at the space going, “Well, this is a space that would rent individually. This is a space that would rent individually. I could put a mini storage here, here, and here.” So I’m just doing the math in my head is a walk around… And then we walked into this huge warehouse, like 3,000 square foot, 35-foot ceilings, and I was just like, “Wow.” I was blown away.

This building was made from all first-growth fir wood, so even if you knocked the building down, you could probably sell the wood and get back the money that we were paying for the building. And I was like, “Well, this makes sense.” So then I made a few phone calls to some investor friends I have, we each put in $100,000 and bought it for 500,000. So that was the next one after single-family homes.

Actually, when you deal with single-family homes, there’s a certain lifestyle that comes around that. Especially if you’re managing it, which we weren’t. We had a property management company, which looked after that, plus another 50 doors. The commercial real estate was just so much better. It seemed to be for me, for what I wanted to do for it to get some time back. The tenants are great, they’re all professional people in all the different spaces. We’ve got plumbers, electricians, roofers, they’ll rent different spaces within the building…

And the holiday resort, that came about a year after purchasing the commercial space. It was actually the local pub and restaurant on the lake where I was living anyway. It’s a houseboat marina, there are 12 houseboats that go out, there’s a marina… We knew the owner, we knew he wanted out, so we had a conversation, we looked at the books, and it made sense. It was like a switch, it’s like, “Okay.” Because we lived on the lake, but I didn’t enjoy the lake, because I was always doing something else, albeit real estate related… And I love what I do, by the way, don’t get me wrong. I’m not complaining about anything I’ve done. But this gives me the chance to actually live and work in the location that I want to spend my life.

I was like, “Wow, this is just a slam dunk. So why would we not do this?” So we got creative, we raised some capital privately, we had some joint venture partners, we got a vendor takeback on the mortgage, you name it, the strategies were involved in the purchase of that property. So it wasn’t very straightforward, but it was everything I’d learned from the single-family homes, that skillset that I could transfer to enable us to buy that business.

Theo Hicks: Going back to the old Ford dealership… It sounds like a lot of work. How did you know that “Oh, this would be good for stores. Oh, I could put offices here. Oh, storefronts. Oh, the wood.” You saw the wood. How did you know all that?

Gary Spencer Smith: I seen her outside, she was having a smoke outside and I was driving past, and I remember thinking in my head, “Oh, I said I will go look. So I should.” Because that’s what I said I do. So I just did a U-turn and went back, and it looks like three little single-story storefronts from the road that you drive past every day. So I thought it [unintelligible [00:11:52].14] in a strip mall, it looked like that.

Then I go inside and I’m looking, and they’re each individually located. So where the garage used to be where they’d repair the cars, that had its own unit; it had three big garages, its own office, its own washroom. Then the showroom had its own office, its own area… Then there was a middle room that I guess would have been management, like the middle building, and the same thing, had its own office, all broken down already. Then she showed me the outside space; it was under the deck that was the body shop, and I’m like, “Wow, this could fit six vehicles in here, at least. Or someone could use this space.” It’s actually a fabric company that’s in there now. But it’s a good usable space, and had its own office. So everything was already compartmentalized.

But what she’d been doing was using the main showroom for herself, just for her little sewing business, and then she’d been renting the warehouse out to fisheries. That’s all she has done with the building. Everything else, she was like “Oh, I’ve got some stuff in there. I’ve got a friend that’s got some stuff.” Then she showed me the middle floor of this building [unintelligible [00:12:55].04] side on side, butted up against each other. I know it’s fair, you can tell, and the time it was built… ANd I was just looking at it going “You could park a tank on this roof.”

So then we got the drawings to the building and I’m like, “Wow, the amount of material that is in this to create the strength, what they used at the time – there is huge value in that.” So I was, “Well, it makes sense.” I did the math and the building itself [unintelligible [00:13:16].25] six and a half, but I think you’d be running between 10 and $12,000 based on market rents. For $500,000, that 1% rule, it absolutely crushes that. So I was like, “Well, why would we not do this?” So we moved our personal offices into this and we set up our studio for doing our YouTube channel stuff, and then we rented the rest of the space out in the building to cover costs and make a profit. I wish I could say it was an open space and I designed the idea, but it was already set up.

Theo Hicks: Okay. So you bought it for 500k… How much did you put into it to get it ready to go?

Gary Spencer Smith: $200,000.

Theo Hicks: 200K. Okay. Who did the work? Was it just your contractors you had met through the single-family business, or did you need to find someone new? How did you find the people that did that work?

Gary Spencer Smith: I’ve got a pretty good team from doing the single-family homes. We got to where we were doing three or four properties a year, plus all the odd jobs that come with managing 50 to 60 units. So I’ve got my backup plumber, electrician, backup electrician, framer, drywall – all those people were in place. We did do some of it ourselves, Chris and my business partner, when it came to our office space. And when we were looking through the building, the old big glass sliding doors that they would have had on the showroom, they were actually downstairs in the storage. So we just framed up a two by six wall and put the big glass sliding doors in, and that’s our office. It’s through all these big sliding doors at the back of the showroom, so we have our own sectioned-off space. That’s the only thing we did ourselves, was set that up. But for the most part, it was pretty much set up ready to go. A couple of partition walls, and an upgrade on the hydro, and some new lights and escape lights for the separate spaces. That was it. It doesn’t sound like a lot, but that 200l – $70,000 of that was a new roof. It’s a huge space, and we did this silicone roof on it. It’s got a 50-year warranty. So that was a huge chunk of the money was that. And then hydro was probably about $30,000. So 100k just on those two things, and the rest $100,000 was pretty quick, once you do in flooring, and trim, and a little bit of work.

Theo Hicks: Got it. Very fascinating stuff. Alright, Gary, what is your best real estate investing advice ever?

Gary Spencer Smith: Actually, take steps and do it. Don’t sit and wait. Get some knowledge, which is free. You’ve got awesome podcasts like this that you can listen to. You don’t have to pay tens of thousands of dollars for the knowledge. Get the knowledge that you can for free, pay a little bit of money to get some more refined knowledge, and then go take action. That’s it. Action will teach you more than any mentor or coach.

The second tip would be to find a good mentor. You don’t have to pay for that. That would be someone that’s done it, successful, who is willing to let you take them for dinner, take them for a coffee, bounce some ideas. If you can get a good mentor, you’re going to jump leaps and bounds ahead of everything else, and listen to what they say.

Theo Hicks: Alright, Gary. Are you ready for the Best Ever lightning round?

Gary Spencer Smith: Okay, let’s go.

Theo Hicks: Alrighty. First, a quick word from our sponsor.

Break: [00:16:04][00:16:44]

Theo Hicks: Okay, Gary, what is the Best Ever book you’ve recently read?

Gary Spencer Smith: I so wanted to plug my own book right there, [unintelligible [00:16:51].05] which is about human evolution. I actually use that when I’m discussing with my JV partners, just about how we think; it’s a mindset. Because real estate managing, buying, it’s all about the mindset. I’ve actually used part of that book where he talked about human evolution to help people understand about where we’ve got to and why we do the things we do. People are like “Wow, that’s so good.” We didn’t even talk about real estate, but they became a joint venture partner through discussing that book Sapiens.

So it’s crazy – not a real estate book, but I think one of the best books is written by Julie Broad, called More Than Cash Flow. That book is fantastic. Because I think anybody who goes on their real estate journey, that is pretty much the journey that most people will go through. You read the books, you sign up for the courses, you pay some money, you make some mistakes, you keep going, you achieve success.

Theo Hicks: And that first book you said, I think I might have missed that. What was the first book?

Gary Spencer Smith: Sapiens.

Theo Hicks: Okay, Sapiens.

Gary Spencer Smith: By Harari. It’s actually about humanity and the evolution of us as a species. But I actually used parts of that book when I was discussing mindset with people who were looking to be joint venture partners. That conversation they even said to me, was a turning point for them, understanding their own belief systems.

Theo Hicks: Nice. If your business were to collapse today, what would you do next?

Gary Spencer Smith: You know what? To start with, I’d go get a job at McDonald’s, so I’ve got some money, and I can have a roof over my head and have some food. Somebody said to me once, if you lost everything, what would you do? Not that there’s anything wrong with working in McDonald’s, but I’m willing to go do anything to put a roof over my head and put food in my mouth, and for my family. So if I’m willing to do that, why would you not take the risks to go try something better, and even big? So I would go get a job first, then I would start looking for new joint venture partners, and I would move the business on and start again; you just keep going. If it fails, you start again and keep going. It’s like picking yourself up from walking, right? Like what would you do if you fell over? You pick up and you keep going.

Theo Hicks: What is the Best Ever deal you’ve done?

Gary Spencer Smith: It was probably my first joint venture. That was the house I bought when I came to Canada. I bought it individually. I put $6,000 down, then joint-ventured with my cousin a year later; he gave me $20,000. There’s a whole story behind this, but he gave me $20,000. He didn’t have to qualify, I managed the property. But I use that money to take my family for a trip back to the UK and have three and a half weeks over Christmas. And that one transaction made me look and go “Wow, I put $6,000 in, I got $20,000 back a year later, and I still own half the property. That’s a 333% ROI.” I didn’t really understand ROI, but this opened my eyes to the real percentages you can make using real estate, using joint ventures, and that was it.

I just said myself “How do I do that more?” And that was that one there, my first property in Canada, because that opened my eyes to ROI and huge returns, and it ignited the fire.

Theo Hicks: What is the Best Ever way you like to give back?

Gary Spencer Smith: I had a leadership company — well, I still have a leadership company that we do from time to time, and I work with a lot of youth at risk. So I help the youth at risk develop their leadership skills, just so they can do simple things like go get a job, go find a place to rent. A lot of them I’ll talk about getting their first place to rent, and how they should show up, and how they should answer people, communicate with people, shake their hands.

So I like working with the youth at risk, those 15 to 19-year-olds that are on the verge of going one way or the other. Hopefully, if you can give a tiny bit of guidance to even one person like that, you have no idea how far that ripple can go, where it can change someone’s life. I know that was done to me at an early age, and that’s why I like doing it.

Theo Hicks: And then lastly, what is the Best Ever place to reach you?

Gary Spencer Smith: I think if people email us at info@revnyou.com, or connect with us on Facebook, it’d probably be best.

Theo Hicks: You said you have a YouTube channel, right?

Gary Spencer Smith: We do, yes. Same as well – Revnyou With Real Estate. I think we’re about 7,700 subscribers right now.

Theo Hicks: Nice, good stuff. Well, thanks, Gary, for joining me today and going over your background and your journey to how you got to where you are today from in the UK, in the military, to moving to Canada and becoming a full-time real estate investor.

We talked about how you got started in single-family homes through JVs, as well as doing some of the rehabs yourself as a GC, as well as eventually the management company, which made you realize that commercial real estate was a better play for you. So you did the old Ford dealership, which you found at a funeral, of all places. And you talked about how much it cost, how you analyzed the deal when you’re walking through it.

And then after that was the holiday resort, which again, you walked us through how you got that deal as well, and how that made you start to think about how to use real estate to get what you want out of life. I thought that that was solid advice.

And then your Best Ever advice was to really just take action. Don’t sit and wait. Get some knowledge that you can now get for free pretty easily online. The different websites, and YouTube channels, and blog posts, and podcasts. If you need to, maybe pay a little bit of money to get some more refined knowledge, and then start taking action… Because that action will teach you more than any mentor or coach will teach you. But you still also said that it makes sense to get a mentor, but you don’t necessarily have to pay a lot of money. Just find someone who’s done what you are trying to do, and then the goal would be to take them out for dinner or coffee to pick their brain and get some advice on how to end up where they’re at.

So thanks again, Gary, for taking the time out of your day to speak with us today. Best Ever listeners, as always, thank you for listening. Have a Best Ever day, and we’ll talk to you tomorrow.

Gary Spencer Smith: Thank you very much, Theo. Have a great day, and it’s been a pleasure. Thank you very much.

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JF1970: Property Management Beyond The Rent Roll with Tony LeBlanc

Tony caught the real estate bug at a young age, he started investing in multifamily buildings while working full time at a software company. Now he’s the head and founder of a large (2000+ doors UM) property management company in Canada. He likes to take a more broad approach to managing properties, branching into more revenue streams with more services offered than your typical company. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“By having additional services, you can make your management company stronger” – Tony LeBlanc


Tony LeBlanc Real Estate Background:

  • Entrepreneur and owner/manager of Ground Floor Property Management, one of the largest property management companies on Canada’s East Coast
  • Author of The Doorpreneur: Property Management Beyond the Rent Roll
  • Speaks to investors about why you should be cultivating rich and engaged partnerships with your property managers
  • Based in New Brunswick, Canada
  • Say hi to him at https://doorpreneur.com/


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Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever, we don’t get into any of the fluffy stuff, what to stay. Tony LeBlanc, how are you doing, Tony?

Tony LeBlanc: I am doing great, Joe. Thanks for having me.

Joe Fairless: Well, I’m glad to hear that and my pleasure. A little bit about Tony – he’s an entrepreneur and owner-manager of Ground Floor Property Management, one of the largest property management companies on Canada’s East Coast. Author of Doorpreneur: Property Management Beyond the Rent Roll. With that being said, Tony, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Tony LeBlanc: Absolutely. So I come from a property management background, second generation. My mother managed the world of multifamily throughout her 35-year career. I was fortunate enough to have a place in that, early on in life, where I used to help her in the building that we lived in. We were resident managers, so I did a lot of the cleaning and various other activities to help her out. So I was very fortunate that I got the real estate bug actually quite early. Learning from the owners of her company put that in my mind as I went into college, although real estate and property management wasn’t my first career – I did a 15-year stint as a software engineer at IBM.

Luckily enough, early in that career I started investing in multifamily, quite young. I bought my first building when I was 23; I bought a triplex. I continued to invest, and then about 10 years later the traveling at IBM started to become problematic for the family situation… So I went back to my roots and started my own management company. Fast forward 10 years, we now have an amazing property management company that spans three provinces here in Atlantic Canada, with close to 2,000 doors that we currently take care of.

From that portfolio, we’ve been able to spin off around six other service businesses that complement the management business. I’ve taken that, what we’ve done, and put it into a book, The Doorpreneur, where I hope to provide some context and perhaps some new visions for other property managers out there that are looking to grow beyond just adding doors.

Joe Fairless: Yes, let’s talk about that. What are the six lines of business?

Tony LeBlanc: We currently have landscaping, snow removal, residential cleaning, commercial cleaning, mortgage sales, and we’re looking at two others – appliance repair and roofing.

Joe Fairless: Okay, and… I type as quick as I can while trying to be quiet, so that the Best Ever listeners don’t get annoyed by my quiet keyboard that I’ve purchased, because it was annoying before. So I wasn’t able to get all that. So landscaping, snow removal, mortgage sales, appliance repair, roofing… What else?

Tony LeBlanc: Commercial cleaning and residential cleaning, and the most important – maintenance services, handyman services. That was by far our biggest opportunity and our biggest workload for sure.

Joe Fairless: Okay. You said you’re looking into appliance repair and roofing. So does that mean we shouldn’t really talk about that for this conversation, because you’re not– okay, all right. So that’s two things you’re looking into. So let’s talk about the stuff you are doing. Maintenance repair, you said that’s the biggest opportunity. Is that currently the one that makes you the most profit?

Tony LeBlanc: I would say there’s definitely a financial reward to it. There are great opportunities in that space. Probably more importantly, from the property management perspective, is having control over that maintenance from a quality coordination, and all that, to be able to control that in-house. We’ve had the experience to where you work with different trades… When your unit count gets pretty high up, it just becomes more efficient to have your own staff take care of those things.

Joe Fairless: Absolutely. That makes a lot of sense. From a profitability standpoint – just to make sure I’m understanding correctly – out of those six, does maintenance services generate the most profit?

Tony LeBlanc: Yes.

Joe Fairless: Okay. How does it stack up against your profit from managing the 2,000 or so doors?

Tony LeBlanc:  I’d say, probably from a margin perspective, maintenance is a little bit lower. I would say the management side is a bit higher. But 2019 has been an interesting year that our maintenance division has actually grown bigger than our management company. That’s really when we knew we had something really cool that we want to share and put it out there, because a lot of property managers and even investors– it’s all about door count, door count, door count, and just “How can I accumulate more doors?”, when the reality is, from a property management perspective, there is a ton of things that you can do with one door before you go searching for door number two. We’ve done a lot of work in that and try to extract everything that we can with a single door before we start moving on.

Joe Fairless: When you say bigger than the management–

Tony LeBlanc: Revenue, general revenues.

Joe Fairless: Revenue, okay. So maintenance services has more revenue, but lower margins than management. It makes a lot of sense. I’ve never had my own property management company, but I’m thinking about if I did, the challenge I would have with having these other services is, I’d say, “Tony, there’s a lot of opportunity, you’re right, but I want to focus on what I’m good at, and that’s managing properties. And I want to hire the experts who are trained in the other areas.” So what’s your response to that?

Tony LeBlanc: I also had that mentality, probably for the first five years of running our management company, where we weren’t so much into the other things. But what I’ve learned over the last five years is – the second half of our company – is that by having these internal services, they’ve actually made our property management company ten times stronger, better and more profitable, because of the life cycle and the relationships that we’re able to build with our investors, and the reusability of the staff within the environment.

So property management, and I’m sure you can attest to, is a difficult industry; tough things about it. And growing in door count, continuously striving for more doors, more doors and more doors, and worrying about a churn rate – the amount of doors that are going out and you’ve gotta replace every year… By having additional services, in my opinion, you can make your management company stronger, and your churn rate is going to go down because you’re not having to go after as many properties… Because essentially, you don’t have to continuously grow in door count when you’re building the other businesses.

Joe Fairless: Well, does the churn rate go down or does it just become not as relevant?

Tony LeBlanc: It becomes not as relevant, and essentially, it has gone down tremendously.

Joe Fairless: Okay. Why do you have a lower churn rate by having these services?

Tony LeBlanc: Because you’re attracting a better quality owner and investor and partner. I’d say, over the last two years, that the quality of people that are with us now are much different than probably, seven or eight years ago. Now we’re working with investors that are financially okay, we’re dealing less with accidental landlords that are coming into situations where they really can’t do a whole lot with a property when situations may or may not come up… And we’ve been able to connect with different investors and entrepreneurs that have that mindset. They love what we’re doing, and they want to be part of it. It’s worked out really well.

Joe Fairless: I’d love to hear that for your business. I guess the question I have is, “How does having a higher quality of investors relate to having different lines of business?” It seems like that could be more just the result of you all being more intentional about who you bring on, and the evolution of your company getting more established… But help me understand that connection.

Tony LeBlanc: Quality of service is a big one and also costs. We’re lucky we’re being put in a position, or we are in a position to where, I would say, 99.9% of the time we can do things at a lower cost than outside trades. Oftentimes, we believe that we can do it much more efficiently and better, just because we have more control, everything. So probably the biggest bonus or benefit to our owners is from a cost perspective. We give them amazing deals. Now, the beauty about what we’ve done here is it’s important to note that these service companies – they handle our internal portfolio, but they’re also outside, facing businesses as well. So there’s a lot of clients from the outside. So our own internal portfolios are obviously priorities, and the pricing is pretty phenomenal. So we built it out intentionally.

Joe Fairless: So now let’s pretend that you have to remove one of your lines of business. Which one do you remove and why?

Tony LeBlanc: Landscaping. Landscaping – you’ve seen that over the years, it’s kind of a low-hanging-fruit type product. It’s very labor intensive, there’s a lot of overhead involved, and the margins are very, very small. Initially, we got into it because we weren’t happy with a lot of the vendors that we were working with, constant babysitting… So we ventured out into that market. We’ve done a great job, and it continues to provide some dividends for us, but it’s a lot of work.

Joe Fairless: Almost a loss leader.

Tony LeBlanc: Yeah, definitely. We do a lot of landscaping in order to get snow contracts. We love doing year-to-year type engagements to where we take care of everything, indoors and outdoors, for a client, whether if it’s our properties or outside.

Joe Fairless: Why is it that snow removal — because I’ve heard this from every landscaper I’ve spoken to, in places that have snow. They’re like, “I want to get into snow removal, much better margins.” So why is it that snow removal has better margins than cutting grass and planting flowers?

Tony LeBlanc: A lot of times it’s because of the big gear involved, the immediacy of the service. So when it snows, or if it’s ice out, you need somebody there now. It’s not something that can wait. On the snow removal side, the gear is incredibly expensive when you start talking about tractors, loaders, and all this other type of stuff… And one of the most important things is liability aspects. If you got an ice storm and your parking lot is full of ice, or your front walkways of your apartments or your houses are a mess, you’re setting yourself in danger, a lot of risk. So risk-reward in that type of environment — salting is definitely an area to where the margins in it are incredible. Snow removal, there’s a lot of risk in it as well. It’s all dependent on mother nature. We’ve had years where we’ve won tremendously, and we’ve had years where we were ready to pack it up. We were like, “I can’t go through another winter like that.” Or it just snows 30 centimeters every two weeks, and you just can’t get ahead.

Joe Fairless: Well, isn’t that a good thing, because that’s just a lot of business?

Tony LeBlanc: No, not when you have set contracts, set price.

Joe Fairless: Oh, there’s the rub…

Tony LeBlanc: There are some people that go out and they’ll charge an hourly rate for snow removal, but from a client perspective, they find that that’s too much of a risk. So a lot of them will go with fixed contracts. Regardless of how much snow falls – it could be next to none, or we could have a brutal winter, and just crush any snow operator. So you’ve gotta be really careful.

Joe Fairless: I love talking about this. You’ve got all these different lines of business and they’re all related, and it’s really interesting to talk about.

Tony LeBlanc: One of the points you made a while ago, how it rolls back up to the real estate investor – I want to make sure it’s clear that creating these additional businesses and lines of business doesn’t necessarily take our focus away from property management, because we know the game is getting access to the asset, controlling the asset, and then you have options. So without the management component of all this, all of this goes away to nothing.

So we’ve really put a focus to where our management is obviously number one, and then the other businesses that we’re bringing on board, once they’ve [unintelligible [00:13:19].04] a proper point person, a manager is put in charge to run that operation as if it’s its own little business.

Joe Fairless: So with close to 2000 doors, you’ve seen some things, and your team has seen some things, and there have been bad stuff and some great stuff, I’m sure… So let’s talk about a landlord that you worked with that no longer works with you, because they don’t like your company anymore and they went to a competitor. Tell us a story about when that happened.

Tony LeBlanc: I would probably say this will happen quite often with the accidental landlords. So an example of one is somebody that has a house, either they’re getting relocated, they’ve gotta move, or they’ve run into a separation. So we’re stuck with a single family home. They’ll call us out of desperation, “I got a move and I need somebody to take care of this house because I can’t sell it.” So we come into the picture and we start managing the property.

The tenant turns over, so it comes back up for rent, and the house is a mess. It needs a new paint job, it needs this, it needs that. Oftentimes, the owners are not in a position to financially be able to do the things that we’re requesting to have done. That has caused many relationships to be broken up. Just we’re not on the same wavelength in terms of what we think is rent-ready versus what they think is rent-ready… Especially when they’ve lived in the house and it used to be their personal home – there’s a lot of personal feelings involved, and it gets a little dicey. Multifamily apartment buildings, God love them, no emotions around them, it’s just numbers; and you don’t get that same attachment as you would a single family home. So that’s been a popular one.

Joe Fairless: That makes a lot of sense. It’s a black hole if you allow a new resident to live in there without it being rent-ready, according to you all… Because then they’re not going to be as qualified, and then you have to evict them, and then it’s a downward spiral; that’s what I should have said – not a black hole, but a downward spiral.

Tony LeBlanc: It’s a reputation thing. Nowadays with social media, if I don’t provide a house or an apartment that is spotless, that has hopefully a fresh coat of paint, that maintenance-wise it’s all intact, light bulbs are all in, light switches work, things that people expect, it all comes back falling on us. They are two minutes away from going to Facebook and telling the world that company XYZ sucks, when the reality is they don’t know the challenges that we face in the back end, nor should they. So that’s why we’ve learned over the years, over a lot of painful mistakes like that, that we go through a great amount of work to choose who we’re working with now, and to make sure that those types of things don’t come into the picture.

Joe Fairless: Yeah, I like that you mentioned that. One thing that comes to mind is — I’ll talk to owners who are looking at potential properties to buy, and they’re also looking at property management companies to manage them… So they’ll go drive by a property, they’ll see that the property — and I’m talking like a 20-unit, or a 30-unit apartment building… They’ll see the apartment building looks run down, and then they’ll immediately assume that the property management company is not good. But in reality, the property management company can only do so much, because they’re handcuffed by the money that’s available from the owner. They might be in the process of firing the owner, or they might be talking to the owner like, “Hey, let’s get this money into the property.” So there’s always two sides to the story. Now, it very well could be that the owner’s giving them the money but the property management company’s dropping the ball, but it shouldn’t be an immediate assumption.

Tony LeBlanc: Yep, absolutely. And unfortunately, it is, because we’re the face of most of the properties that we’re dealing with. So nobody knows the owners; they’re in the background, and that’s how it should be. We accept full responsibility when we take over a project, and that’s the way we like it… So we just got to make sure that everybody’s in line, everybody’s got the same core principles and guidelines in how they want to run a building. Maintenance is the number one topic that you’ve gotta get out of the way and you’ve got to be on the same wavelength.

Joe Fairless: What’s something challenging you’ve come across with a landlord or tenant outside of the accidental landlord component or dynamic? Either a particular tenant was complaining about something and you’re like, “Wait, how do we solve this?”, or you all were working with the landlord on a particular deal and it just took a lot of effort on your team’s behalf, and then you turned it around… Just anything like that.

Tony LeBlanc: So this has happened to us unfortunately quite a bit in the last, I would say, two years. So we get the management of a property; everything goes well, we get the tenant, everything’s going great. Then the owner decides to put the property up for sale. Trying to sell a property with a tenant living there is a nightmare. Apartment buildings are fine, it’s definitely a lot easier. The tenant is not expecting to get kicked out.

From a residential perspective, whether it’s a single-family or a duplex, kind of a smaller type property, specifically single family, it’s very, very tough for the tenant to be able to deal with those types of situations. So constant showings, constant interruptions, and the fact that they don’t know when they’re going to be kicked out.

So that’s a very tough situation for a property manager to be in, because we want to help support the investor in selling his assets and helping them do what’s best for them, but we also have to empathize with the side of the tenant, to say “Okay, how are we going to make this situation as painless as it can be?”

Sometimes it gets a little messy, in terms of they get a get a quick sale, the tenant is on a year lease, we’re supposed to give them this amount of time to get out, but the deal has gotta close in 30 days… Then you kind of get put in that awkward — you’re doing things that you necessarily don’t want to be doing, trying to kick the tenants out. It can get a little frustrating and a little hairy at times.

Joe Fairless: What’s a tip or two for someone who comes across that scenario in their management company?

Tony LeBlanc: Well, from a property management perspective, put in a new clause in your management agreements that protects you from this situation. So if an owner decides to put his property up for sale, then he has to provide a certain amount of notice to you, so that you can provide the proper context for the tenant… And the proper lease needs to be put in place. So if I’m signing up a new owner, and he’s wishy-washy about selling in a year or two, then I’m going to protect myself in my management agreement, but I’m also going to protect the tenant in terms of a lease.

So maybe I don’t do a year-to-year, and I do maybe either a month-to-month type lease, to where I went with them and saying, “Listen, this owner has decided to rent this place right now, but that could change. So I’m telling you in advance, there’s a risk here.” Then that way, when the situation – and if it comes up – I’ve covered as many bases as I can to make everybody happy. That works out really well.

Joe Fairless: Taking a step back, based on your experience, what’s your best real estate investing advice ever?

Tony LeBlanc: Property managers and real estate investors can create epic results when partnered properly.

Joe Fairless: Well, I think everyone would agree who’s had a good experience with a property manager that is the case, and I certainly would agree. Real quick, what are two or three questions (at most) that a real estate investor should ask a potential property management company that will manage their residential one to four-unit property?

Tony LeBlanc: Staffing. What does the staffing situation look like? There are a lot of property management companies that are one-man shows. They can have a nice website, they can have a nice this, and they can have a nice that, but you want to know what the staffing situation is, and you want to know the unit count of what you’re getting into.

So if it’s a one-man show and he’s got 250 units, you better be careful… Because in this business there can be days where there’s not a whole lot going on, and then you can be completely underwater the next day. So huge, huge importance is that whole staffing aspect or ratio in terms of how many units they have.

I would also look at, from a community perspective, what is the historical picture of the company, how long they’ve been in business, and what is kind of their primary job. We see a lot of realtors doing management on the side. So it’s really a little bit of a side hustle for them. Again, some of them are absolutely amazing, but it’s just a matter of being aware and okay in that situation.

Personally, if I’m handing over a million-dollar asset to a property manager, I want to make sure that there’s a company behind this and that there’s good insurance policies in place, they’ve got an office, there’s a staff… I want to make sure that it’s something legit in the back-end, and not just, again, somebody that’s just floating around with this on the side. It’s too dangerous and too many bad things can happen quickly.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever lightning round?

Tony LeBlanc: Yeah.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:22:20]:04] to [00:22:56]:09]

Joe Fairless: Okay, what’s the best ever resource you couldn’t live without, that you use in your business?

Tony LeBlanc: I would say our property management software.

Joe Fairless: Proprietary software?

Tony LeBlanc: Yes, it is.

Joe Fairless: So proprietary — do you license it out, too?

Tony LeBlanc: Yeah, it’s a third-party software… Buildium is what we use.

Joe Fairless: Buildium? Okay, cool.

Tony LeBlanc: Absolutely could not live without it.

Joe Fairless: Best ever way you’d like to give back to the community.

Tony LeBlanc: We do a lot of lunch and learns, or coffee dates at our buildings. It’s a way for us to be able to get to know our tenants a little bit better. In the same way, we provide these types of boxes where they can make donations. We do a lot of work with the Red Cross when there’s emergencies that come up, like fires and stuff like that. So we’re able to take stuff that tenants give back and that we can give back to the Red Cross.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Tony LeBlanc: The best place is doorpreneur.com. All my information’s there.

Joe Fairless: Tony, thank you for being on the show, talking to us about your different lines of business as well as your focus on property management, having a discussion on certain lines of business that make more money than others, where opportunity is, and maintenance services, and questions to ask and think about prior to hiring your property management company. So I hope you have a best ever day, I really enjoyed our conversation, and we’ll talk to you again soon.

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JF1900: Dealing With The Ups & Downs Of Real Estate & Life #FollowAlongFriday with Trevor and Theo

For this week’s Follow Along Friday, we have a special guest on, Trevor Mcgregor is Joe’s life and business coach, coach to other high level investors, and a high level investor himself. Trevor’s focus with himself and his clients is on our mindset, as his mentor, Tony Robbins, told him: success is 80% mindset and 20% action. Trevor will  give us some insights on how to be strong and mentally prepared for any bumps in the road. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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“If you condition yourself incorrectly, you may freak out when things go wrong”


Trevor McGregor Real Estate Background:


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Theo Hicks: Hi, Best Ever listeners, and welcome to the best real estate investing advice ever show. I’m Theo Hicks, I’ll be the host today. It’s Friday, so we’re doing Follow Along Friday, and as you know, usually it’s me and Joe talking about what we learned in the previous week’s interviews, but we’ve got a special edition of Follow Along Friday today, because we have THE Trevor McGregor with us today. Trevor, how’s it going?

Trevor McGregor: It’s going great, Theo. Blessed and grateful to be on the show with you.

Theo Hicks: Absolutely. Best Ever listeners, you know Trevor. He’s been on the podcast countless of times, Joe has talked about him countless of times… But just kind of a high-level introduction before we get into his advice on today’s topic – he’s a master platinum high-performance coach; he’s done over 20,000 coaching calls. He’s actually Joe’s coach -which is why you know who he is – since 2013. He worked with Tony Robbins for over a decade, and his international clients have done over a billion dollars in deals. He himself is a high-level real estate investor.

Since Trevor has not only done deals himself successfully for a long period of time, but also helped others do over a billion dollars, maybe two billion dollars (who really knows…?) and bought lots and lots of deals, he obviously has experience going through the ups and downs of real estate. I wanted to talk to him today because he is a coach, so I know he focuses a lot on mindset, so I wanted to talk to him today on some strategies that you can do right now, today, in order to set yourself up so that you’re able to successfully navigate any problem that comes up, whether it be real estate-related, or health related… And the analogy I wanted to use is — obviously, a fire would be a perfect example of an issue; a fire at your house.

If you wanted to get rid of fire, buying a sprinkler system at that moment in time is not gonna stop that fire from happening. Sure, once the fire is gone, you can put a sprinkler system in place… But ideally, you put a sprinkler system in place when there is no fire, so that once a fire actually comes, the sprinkler system activates, it extinguishes the fire… And obviously, there’s going to be some damage, but you’re able to minimize that damage. So I guess to start off, Trevor, my question to you is what is the mindset equivalent of a sprinkler system?

Trevor McGregor: Well, I love the analogy, Theo. And again, thanks for having me on. I love being on the show. It’s really, really important, because you can’t literally install that sprinkler system as you’re having the freak-out, or as you’re going through the fire, or the journey of whatever is upsetting you. And you’re right, it can be in real estate, it could be in your personal life, it could be in your relationship, it could be in your health, it could be with your children.

For this episode, we’re gonna really talk about how it relates to real estate investors. And again, thank you for the warm intro, because I’ve had a unique perspective, with 20,000 people from around the planet, on what allows them to navigate the freak-out and what allows them to just flow through it… Remembering that out of all chaos comes order. And it all goes back to really thinking about one thing that my mentor Tony Robbins said, that success is 80% psychology and 20% mechanics. That is 80% mindset and 20% action. So if you really think about that and we go back to mindset, what are you doing to condition the mind, so that when the sprinkler system is needed, that fire starts burning, you’ve already got some tools in the toolbox to use to navigate what you need to navigate. Does that resonate with you?

Theo Hicks: Absolutely. So what are some examples of the sprinkler system, things that we can put in place…? And it sounds like what you’re saying is that – just to summarize what you’ve just said – basically we’re trying to condition ourself constantly, so that whenever an issue happens, we just naturally (in the words that you’ve used) flow through the problem, as opposed to if we’ve… Not conditioning yourself is still a form of conditioning, but if you conditioned yourself incorrectly, then you are going to – I like that you used “freak out” in that situation, and at that point who really knows what’s gonna happen. So what can we do to condition ourselves properly?

Trevor McGregor: Well, I think the first thing – and thank you for that – is to really understand that we’re all in real estate, and things don’t always go in a straight line. Things are gonna happen at your properties, things are gonna happen with your property managers, things are gonna happen with the weather, things are gonna happen with an investor that says maybe is coming into your deal with a large sum of money, and with 48 hours to go they say they just can’t get access to it… So really it all starts with understanding that if you’ve got a belief, or you’ve got a value or a rule that says “Everything is having to be perfect all the time”, you’re really setting yourself up for disappointment… Because again, we really understand and appreciate that a challenge or a problem is the Universe’s way of seeing how defiantly committed you are to getting through it, or over it, or around it, or under it.

So conditioning a high-performance/peak performance mindset in real estate would be no different than a pro hockey player or a pro basketball player, or a pro tennis player, a golfer who knows that sometimes they’re gonna be putting the ball in the hoop and other times they’re gonna be going through a scoring drought, or sometimes they’re gonna get tripped and fall down. But it’s really getting yourself up and dusting yourself off and really remembering that even as a baby learns to walk, and they’re literally pulling themselves up on the coffee table, and they fall, and they tumble over and everything, we don’t go “Oh, that baby is never gonna walk”, we still cheerlead them, we applaud them, we get them to continue to feel it out until eventually they start walking again. Well, that’s the same thing in real estate. If you ever fall down, you’ve gotta  pick yourself up, dust yourself off and really understand that there’s only three things that you need to really remember.

The first thing is that failure is nothing more than really understanding that there really is no failure, there’s only feedback. And it’s an old quote from Napoleon Hill’s Think And Grow Rich book that there is no failure, there’s only feedback, and that as real estate investors we’re gonna be getting a lot of feedback each and every day. So number one, remember there is no failure, there’s only feedback; number two is to really understand that we all go into what we call an emotional home when stuff goes upside down.

Theo, you know those people that always seem to get angry and always stay angry? Well, that’s their emotional home. Some people do sadness, they get sad. Some people beat themselves up. So I invite the listeners to really ask themselves “What’s the dominant emotion you fall into?” or “What’s the emotional home you camp out in anytime things go upside down?” And it’s not that that emotion is good or bad, right or wrong, but you absolutely have to ask yourself “Is staying in this emotion gonna help me or hinder me?” That means if you camp out there for 2, 3, 4, 5 hours, you’re probably cheating yourself out of getting up, getting back on the horse and continuing to ride.

So really ask you to really identify your emotional home and then have the awareness — it’s almost like you’re the observer, looking at yourself and going “Wow, I’m aware that I’m pissed off right now. I’m aware that I’m angry. I’m aware that I’ve just lost some money” or “I’m aware that my occupancy isn’t as high as it needs to be.” But guys, that’s an invitation to go back to “What do I really, really wanna do and where do I need to go from here?” Does that make sense, Theo?

Theo Hicks: Yeah. So you said 1) there’s no failure, only feedback, 2) the emotional home, and then what was the third one?

Trevor McGregor: Well, I didn’t get to it yet.

Theo Hicks: Oh, sorry.

Trevor McGregor: It’s really that that emotional home is just really being aware that we’re human beings, and that emotions are there to serve you. But for you to stay in a negative emotional home for far too long would be like sitting in your own manure. You can get out and move beyond that if you choose to. And the third thing is really all about really going to what we call the three S words. And Theo, you’ve heard of these before; Joe’s talked about them before… It’s where you check in with your State, you check in with your Story, and then you check in with your Strategy.

Let’s take a look at all three of those, because guys, your state is really your focus. We often say “Where focus goes, energy flows.” So if you’re focused on the problem, you’re gonna absolutely stay in that problem. If you’re focused on a negative emotion and being angry – well, you’re gonna get more of that angry emotion. But if you change your focus to the polar opposite and ask “What is my outcome and what emotion is gonna serve me?” and sometimes that emotion or that word we’re looking for could be determination, sometimes it could be resilience, sometimes it could be where maybe you’ve had an experience before, but the minute you start focusing on the solution, all of that negative emotion starts to dissipate and go away. So the first word is the state management you’re in, and you’ve got to really make sure your focus is on what you want instead of what you don’t want. Does that make sense?

Theo Hicks: Yeah. So if I know, for example, that my emotional home is I get angry, or when something bad happens I just take it out on other people, I’m irritable, things like that. But obviously, I know rationally that that’s not gonna help me…

Trevor McGregor: Correct.

Theo Hicks: So how do I actually change my state in that time? So I’m angry, I realize that I’m angry… Is it something that the realization stops me being angry, or is it just practice… What exactly do I need to do to make sure that I’m not taking out my real estate issues on my kids, or my wife, or something?

Trevor McGregor: That’s it; well, I love the question, and it’s really all about this. When you talk about state manage, it’s learning to discipline your disappointment. I want your listeners to write that down, because if you learn to discipline your disappointment, that means that you’re not going to love your you-know-what. You’re gonna absolutely understand that “You know what – there are highs and lows in real estate. There’s good and there’s bad”, but nothing has meaning until we assign it a meaning. Maybe you needed to learn a lesson, maybe you needed to have a smaller hiccup now to prevent a bigger hiccup the next time you buy a 200-unit building.

So that’s why we always go back to disciplining your disappointment – to really not beat yourself up for it, not to blame or shame, or justify, but to get real with it, and not really dwell on the negative, but say “Even though this has happened, and even though I may not be happy with what has happened, where do I need to put my intention to move beyond it?” That’s the first thing. Otherwise, the wife is gonna get it, or the husband is gonna get it, the kids, the dog, the business partner, and that’s just not fair.

So that’s the first S word. From there, Theo, we go to the second one, and this is the big one. This is the one I really like to talk about with my clients, or if I’m standing on stages around the world, and that is your story. Your story is really your identity. It’s who you are in the moment that that stuff starts happening, because most average people become a victim in that moment. And if you live in a victim story or a victim identity or a victim modality, you’re gonna make choices from that place. Instead, I invite you to get out of being a victim and into what we call being a victor, or victorious. Because we’ve all had times before where we’d had mistakes, but we’ve moved beyond them… Because you’re never really defined by the mistake. And it’s not even you that should be feeling bad about the mistake; the mistake is a mistake, but you shouldn’t get into the habit of blaming, shaming and justifying yourself all the time.

So really the identity piece, the story piece is to really remember that there are other people – even Joe Fairless himself has had to get out of a victim mentality and step into a victor, and give himself a powerful name, like Joe the Warrior, or what’s something that really makes you feel like you’re not in the victim mentality, but in the victor mentality, to start climbing up the mountain again. Does that resonate with you?

Theo Hicks: Yeah, but before we go on to the next one, I’d just like to add something… The victor or victim thing I think is the perfect example… So I’m a victim right now, and my goal would be to always be a victor, or is the goal to be a victor more that I’m being a victim, or is the goal just to be a victor more than I’m being a victor now?

Trevor McGregor: It doesn’t mean that you can’t be a victim. Again, my intention and my question is “How long are you willing to camp out in victimhood?” Most people when they’re just starting out in real estate get really upset when stuff doesn’t go their way, and they literally will sit in victimhood for 2, 3, 4 hours, or even a whole day or even a whole week. Well, again, that doesn’t support anything in terms of us building our empire, or buying the next property, or hiring the new property manager, or whatever.

So the invitation is to go back to a time in your life where you stepped out of being a victim and back into being a victor. Maybe you broke up with your significant other and you felt really bad at the time, but you knew that you were still a great person to go out there and meet new people; you adopted that new story, new identity and you found the love of your life.

Maybe you were in a job that wasn’t serving you and you were a victim to it, but you knew that staying in a victim mentality isn’t gonna help that job, so you literally say “Who do I need to be and how do I need to show up to climb out of this and step into the highest and best version of me?” And we’ve all done it before. We’ve all done something called crossing the river before. And that river might be flowing fast, it might be deep, but again, if you stay on the side of the river you don’t wanna be on, you’re really cheating yourself from getting to the other side. And that’s why I always say that your state, which is your focus, and your story that is your identity are things that you’re always gonna need to call upon to move beyond the problem field. Does that resonate?

Theo Hicks: Yeah. For example the people who think the world are gonna end tomorrow will have built a pack, so once the crap hits the fan, they grab their little pack, and everything that they need to survive the situation is in that pack, and they leave… So this question is about how to remember all these things. So would you recommend that I have some sort of anti-freak-out pack, so that once something bad happens, I can open up this little booklet that says “Okay, here’s what you need to do: Story, State, Strategy.” Okay, I need to figure out what my emotional home is, I need to remember that feedback is only failure. I guess my question is — because you deal with this stuff all the time…

Trevor McGregor: Yeah.

Theo Hicks: …how does someone that’s hearing this for the first time, and then they go through a problem tomorrow, what would you recommend specifically that they do, so that when the times comes they remember all these things, and they don’t instantaneously go back to their old behaviors?

Trevor McGregor: Yeah, I think that there’s a few different things I’ll speak to for that. First of all, State, Story, Strategy. They all start with the letter S; you should write it on a post-it note, stick it in your office, or stick it in your car, or put it up where you can see it, because at the end of the day, those three little words are gonna make a huge difference in how you show up. So that’s number one.

Number two is go back to really understand that we’re all programmed to have ANTs. That stands for Automatic Negative Thoughts. But that’s what most average people do. The human brain has roughly 60,000 thoughts a day, Theo. And did you know that roughly 75% of those thoughts are negative? And that’s conscious thoughts, that’s subconscious thoughts… So you’ve gotta really understand that when these ANTs come up, those ANTs are an invitation for you to then drawn upon the three S words – State, Story, Strategy – which is focus, identity, and then doing something; the third S is the strategy, where you do something that helps you get out of the situation and take action towards the resolution. And if you think about it again, in Think and Grow Rich Napoleon Hill has another great quote where he says this, Theo, that every adversity brings with it the seed of opportunity. I’ll say that again – every adversity brings with it the seed of opportunity. What does that mean? Well, it means that anytime something bad happens to us, let’s say in real estate, there might just be a silver lining around the dark cloud. That is it might be something that you needed to give your time, your energy or your attention to, to fix it before it manifested into an even bigger problem.

That’s why oftentimes I’ve conditioned my mind and my clients’ minds to get curious, and say “What am I meant to learn from this adversity? Is it true that maybe I can make even something better out of this?” It’s like that old, dark rain cloud. If you guys are outside and you’re having a picnic with your family and there’s dark clouds and it’s raining, I guarantee that the sun is behind those clouds. And if you look at the edges of those clouds, there is a silver lining. And at some point the rain will stop, the sun will come out, and you’re gonna have an amazing picnic, but only if you own your state, your story and your strategy. Does that resonate?

Theo Hicks: Yeah, that makes sense. So to specifically answer the question, it’s more along the lines of State, Story, Strategy – have that on a post-it note, basically. If you do wanna remember these things, have them on post-it notes. I’ve got post-it notes with my to-do things, but you need to be constantly reminded of these things when you’re first starting out, because as these ANTs come up, since you’re used to not having any sort of defense mechanism against these ANTs, you’re just gonna do whatever you’ve typically been doing… But obviously, someone just hearing it for the first time – you’re not gonna be able to be Trevor McGregor-style State, Story, Strategy, “Alright, I’m out of my victimhood status in ten seconds”, or whatever… I’m assuming the goal would also be to get better and better at this, practice-practice-practice…

Trevor McGregor: It really is. It’s really a conscious conditioning right now where you’ve gotta say “Now, what did coach Trevor say to do? Alright, he said to really discipline my disappointment, understand that this too shall pass, and then really step into those three S words of checking in with my focus, my identity and what I’m gonna do to resolve it. State, Story, Strategy.”

The other thing that I often remind people too is even the world’s best, even people like Elon Musk face challenges, or somebody like Steve Jobs. So you can do something called Character Trait Integration, which is a pretty cool exercise you can think about, where maybe you choose one of those guys, or you choose a role model where you know that they faced adversity, but they’ve found a way to absolutely be committed to move through it; they’re decisive, they’re coachable, they’re resourceful. And Theo, you know this old adage that “If you spot it, you’ve got it.” That means what’s inside Elon Musk for determine, or what’s inside a Steve Jobs for just finding a way, is also inside of you, it’s also inside of me, it’s also inside of Joe. So we can borrow these character traits from people that have gone before us. And it really goes to that old thing by Henry Ford, that if you think you can, you can, and if you think you can’t, you can’t. It’s that simple.

It all starts with the way you think, and the way you think is absolutely gonna condition the way you behave. And as you do this more and more and more every day, every week, every month, every year, that State, Story, Strategy will anchor itself into your autonomic nervous system where you won’t even have to think about it. You’re just gonna go “Okay, this is not to my liking. I’m not gonna lose my shit. I’m absolutely gonna get crystal clear on what I need to focus on, what I need to show up as, and then I need to step into something that moves me beyond this”, and it’s like water off a duck’s back. Does that resonate?

Theo Hicks: Yeah, absolutely. I wanted to make one comment before we close out… [unintelligible [00:20:45].05] were you the one that taught me about the mental board in your head? Was that you?

Trevor McGregor: Yeah, it was.

Theo Hicks: Okay, because I really like that concept, and I actually saw it in a movie once. But basically, for the Best  Ever listeners, the concept is — because you were kind of hinting at that a little bit…

Trevor McGregor: Yeah.

Theo Hicks: …you take people that have traits, characteristics that you want, people that you admire, or people whose lives you wanna live, whatever reason why you picked these people… Basically, pick people, and then you learn about them as much as you can. Then you literally act as if they’re board members, for example. Let’s say my board members — I’ll just use the names that you used: Elon Musk, Napoleon Hill, and then Steve Jobs. Let’s say those are the three guys on my board. So whenever there’s an issue, you literally ask your board what you should do. Based on your understanding of Steve Jobs – maybe you read his biography or something – you know exactly how he solved problems. Maybe you listened to interviews with Elon Musk, so you know how he solves problems. Maybe you’ve read all of Napoleon Hill’s books, so you know how he solves problems.

So you literally ask each of them, in your mind, “What should I do in this situation?”, and if you know them enough and if you’re creative enough, you can literally get a response from those people in your mind. I thought that was a really good strategy, and I wanted to just mention that right now; that’s another tip that you could do as well. Once one of these issues happen, going back to my analogy in the beginning, your sprinkler system could be this mental boardroom of people that when things go wrong, you lock yourself in your office, and depending on the way that you do it, you can think about it, you can write it, you can talk it out loud, whatever you need to do… You could reply as Steve Jobs, or whatever. Obviously, it would take practice, but the whole idea is that, as you mentioned, people have gone through issues before and overcame them, so you can as well. And you can leverage these people who’ve overcome these major issues, to help you overcome what’s most likely objectively a lot smaller than something that Elon Musk has to deal with; he has a problem with a spaceship going up in space where someone might die, whereas for you it’s like “Oh, my toilet’s clogged. What am I gonna do?”

Trevor McGregor: I love that analogy, Theo, and it’s absolutely true. It could be Elon, it could be Richard Branson, Oprah Winfrey has faced adversity… There’s a ton of people out there. And again, it begs the question “Are you gonna take extreme ownership over the issue? Are you gonna be defiantly committed to resolving the issue?” And I’ve said it before, you really wanna make this part of the law of familiarity, too. We’re always gonna have challenges, we’re always gonna have problems, we’re always gonna have negative experiences, but I really do believe that when you become familiar with the law of familiarity and the law of polarity (one of my other favorite laws), you can absolutely know that just like Steve Jobs, Oprah Winfrey, Elon Musk – they have always found a way to move through it, and so can you.

And I’ll just share that before we wrap up – the law of polarity decrees [unintelligible [00:23:30].08] that you can’t have one thing without the polar opposite being available. In fact, I’ll give you some examples to make this easy to understand. You can’t have day without night. You can’t have black without white. You can’t have masculine energy without feminine energy, and you can’t have the North Pole without the South Pole. “So what’s that got to do with anything, Trevor?” Well, the same thing that you can’t have failure without success. And to condition the mind, and to condition the neural networks of the brain – which weighs three pounds, it sits between your two ears, and it’s a bunch of electrical and chemical charges; that’s all that’s going on up there – is to really bring the law of polarity to the three big universal fears that most people have.

The three universal fears that most people have is “If I try, I could fail”, that’s number one. Number two is “People might not like me or they might criticize me negatively”, or number three, “I’m not worthy.” I’m not worthy of buying a 200-unit apartment. I’m not worthy of buying a twelveplex.” It’s that self worth, self wealth and self esteem issue. Well, if we live in those three areas, that’s not gonna help us build a real estate empire. So what I invite the listener to do is to apply the law of polarity to those three things, and here’s how it sounds, Theo… “If I try, I could fail”, and if we go 180 degrees the other way, it becomes “Well, if I try, I could be wildly successful with this real estate purchase.” Or “I could be wildly successful in getting this investor to invest.” That’s the law of possibility.

Let’s go to number two. If the thought is “People might not like me, or they might criticize me, or they might call me crazy for getting into real estate” – well, what if the polar opposite existed, that people love what you’re doing, they’re inspired by what you’re doing. Hell, they’ll even invest in your next deal because of you absolutely showing them the path to freedom. That’s pretty cool.

And then the third one, “I’m not worthy” is a bunch of BS, because if you go to the polarity on that, I’m telling you guys, abundance is your birthright. You have just as much opportunity to go out there and use the greatest wealth vehicle on the planet, which I believe is real estate, just like Joe Fairless has, to go out there and create a ton of impact for the tenants, the communities, the landscapers, the engineers, the roofers, the plumbers, the electricians… Everybody. And as you make that impact, you make a ton of income.

So I’m a  big believer in the law of polarity, that if you ever have that freak-out moment where you feel like you might fail, you feel like you’re gonna be criticized, or you feel like you’re not worth it, apply the law of polarity to it, guys, and I’m telling you, there’s nothing that you can’t do on this planet.

Theo Hicks: I think that’s a good statement to end  with. I’m not even gonna attempt to summarize what we’ve talked about, because we went over so many… So Best Ever listeners, you’re just gonna have to listen to this episode again, and again, and again. As we said, it’s all about conditioning, so if you want to absorb these concepts, you need to hear them, think about them, write about them, and things like that.

Trevor, again, it was great catching up with you, it was great seeing you again. I know that every single person listening to this took something away from this that they hadn’t heard before. I know I did. My main thing actually was the ANTs. I had not heard the acronym before, and you were my coach for a while, and I’d never heard that one… So it’s always good to hear something new. Again, Best Ever listeners, make sure you listen to this podcast again.

Trevor, before I close this out, where can the Best Ever listeners contact you, learn more about you? What’s the main place you wanna send people?

Trevor McGregor: Well, once again, thanks for having me on the show; I really appreciate what you and Joe are doing. You guys are crushing it, and best wishes for continued success. For anyone who wants to reach out to me, there’s two places you can do it. You can find me at my website, www.trevormcgregor.com. Or the easiest way, Theo, is for people to head on over to coachwithtrevor.com. You can enter in your details, and if you wanna have a 45-minute complimentary session with me to talk more about how to condition your mindset for success, I make that available to the Best Ever listeners.

Theo Hicks: Alright. Best Ever listeners, you’d better take advantage of that. Trevor had better be calling me up and  saying “Theo, I can’t do this. It’s so many people… There’s not enough time in the day.” [laughter] I’m just kidding. Alright, Best Ever listeners, thanks for tuning in. Trevor, thanks again for joining us today. Have a best ever day, and we’ll talk to you soon.

Trevor McGregor: Thanks so much.

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JF1840: Buy & Hold, Development, & How Meetups Help Your Business with Steve Arneson

Steve is on a mission to educate and inspire 1,000,000 people with his podcast, meetup, and his own real estate investing. With over 20 units, 4 development projects, 60-70 person real estate meetup, he is on his way to that goal. We’ll hear about how he grew his meetup, what that has done for his business, as well as hear about some of his real estate deals. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“Keeping track of all the places you are looking at or have made offers on, and revisiting them after a month” – Steve Arneson


Steve Arneson Real Estate Background:

  • Real estate investor with 20+ doors
  • Has 4 development projects in the early stages, hosts a monthly meetup for the last 3 years, and is a co-producer of Victoria Real Estate Investment Expo
  • Based in BC, Canada
  • Say hi to him at https://thereinvestors.ca/
  • Best Ever Book: Traction


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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Steve Arneson. How are you doing, Steve?

Steve Arneson: Joe, I’m having a best ever day.

Joe Fairless: Oh, well, that’s as good as you can get then, I guess… I’m looking forward to our conversation. Steve is an investor who has over 20 doors, he has four development projects in the early stages right now. He also hosts a monthly meetup – he’s been doing that for three years – and is the co-producer of Victoria Real Estate Investment Expo. Based in British Columbia, Canada, right?

Steve Arneson: You’ve got it. Hometown is Victoria, BC. I absolutely love it here. It’s best place ever to be, in my opinion.

Joe Fairless: Alright, well let’s learn more. Do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Steve Arneson: For sure. Background in real estate; I’ve been a full-time investor for about three years now. With my best friend and business partner, Randy Molland, I bought my first investment about six-and-a-half or seven years ago now. It was a live-in condo flip. All my family is involved in real estate on one  level or another. Like you said, we have a monthly meetup here in Victoria to help educate people on the benefits of real estate investing… And yeah, we are on a mission to inspire and educate a million people to live a more fulfilled life, and have the equity and the cashflow that can supplement that lifestyle through real estate.

Joe Fairless: Do you keep track of the million people that you inspire?

Steve Arneson: Mentally, I’ll say. We don’t have a formal tracker to it. I think our number is about 1,500 right now, so we’re steadily pacing.

Joe Fairless: Got it. You need a little thermometer on your wall, where you color it in all the way to a million. So you’ve been investing in real estate for six years, full-time for three years. Your first one was a live-in condo flip… Are all of your properties in Canada?

Steve Arneson: They are, yeah. West Coast.

Joe Fairless: Okay, let’s talk about your monthly meetup. You started it three years ago. That, by no coincidence, I imagine, is when you became a full-time real estate investor. Why did you start it and how do you structure the meetup?

Steve Arneson: We started it basically for our own accountability and to grow our network. It wasn’t until we started listening to podcasts where we found like, hey, meetups can be a really good source of building network, building content, educating people, and kind of building investors and other people into our funnel, as you say in marketing.

So we took it upon ourselves to become the face here in Victoria, because there wasn’t an educational meetup, so there was a huge demand for it. There were those typical meetups where it’s a sales pitch on like “Hey, join my new fund”, or whatever, and then the other side of it, where it’s the old white guy, sitting around and drinking their scotch, talking about their yachts. There was nothing in between where it was just educational-based.

We bring in professionals from all across Canada to come and speak and present with us, and the format is like a half hour of networking to start off, and then about an hour and a half, two hours of content, where we talk about any given topic, from simple things like market updates, to creative strategies, to financing. We bring in developers to talk about what they’re doing in the green space, and everything in between. It’s really the community that we wanted to build from day one, to help people come, feel safe asking those “stupid questions.” So it’s an environment and a community for all levels of investors, and it’s been a lot of fun.

We started off — our very first one  was 12 people in the back of a restaurant… And at the Real Estate Investment Expo we had 900 people come through the doors one year, and our meetup now is steadily at like 60-70 people every single month. It’s been so rewarding to watch people who have come a year or two ago and go through this massive shift between realizing they have equity in their home, for example, and then refinancing that and reinvesting that into growing their portfolio to produce more monthly income, or a nest egg for building a legacy for the rest of their family. It’s been really rewarding, and that’s really what drives us on a monthly basis to keep active and keep doing it ourselves, too.

Joe Fairless: Twelve people in the back of a restaurant, to now consistently 60-70 people… What are a couple tips that you’d give someone who has a meetup to help grow their meetup?

Steve Arneson: Great question, thank you for asking that. There’s a lot that we’ve learned over the last few years. Number one is as you start building it, don’t allow anybody in. We literally vetted every single person who wanted to come, and we denied some people because we saw that they were the more selfish type, of like “Hey, here’s my business card. Hey, here’s my business card. What can you do for me?” And the community we wanted to build was the exact opposite. It’s people that we want to have in that room, or people who want to go there and be able to support and give to others. So that’s kind of rule one.

Joe Fairless: Before you go to rule two, let me just make sure I understand it. You vet people to attend your meetup… So how do you vet someone? If there’s someone you don’t want in there, like you described, how do you vet them if you haven’t seen them at the meetup before?

Steve Arneson: We didn’t market the meetup the first 6-8 months. It was just word of mouth, and they had to go through a screen process. Joe, say you had a friend who wanted to come. You would introduce us and we would have a quick conversation about basic stuff like building a relationship, but also where are you at now and what do you want to accomplish from this. We don’t want it to be that type of community where it’s just a bunch of solicitors. We’ve seen that not work, and it doesn’t align with our mission.

So it was just a five-minute conversation. You can tell a lot from people’s demeanor, how they respond to questions… So that was how we executed on that.

Joe Fairless: Sure. But now do you still do that interview process?

Steve Arneson: We don’t now, and it’s really interesting, because I can pick out a couple different situations in my brain where somebody comes in — because we are marketing it actively now to grow it, and to get power/caliber speakers in, and impact more people here in Victoria… So when those people who are more on the selfish side and are just looking for business come in, they kind of stand out like a sore thumb… Or what’s the phrase where it’s like a thorn amongst roses kind of thing.

Joe Fairless: Yup.

Steve Arneson: And they don’t come back, because they don’t feel like they belong or fit into this community.

Joe Fairless: Okay, I get it. So  you’re intentional about who you brought in initially, and then as a result of being intentional about the initial people, it’s then built a foundation of the overall community vibe. Then people come in who don’t fit that vibe or the culture – they opt out of that.

Steve Arneson: Exactly.

Joe Fairless: Okay, cool. Thank you. Alright, that’s one.

Steve Arneson: That’s one. Rule number two is just provide as much value as humanly possible. We are very strict on our timing. Doors open at 6. At [6:30] we get kicked off with the presentations. Randy and I typically open up with a “Hey, how are you doing?” kind of thing, and it may be a quick overview of what you’ve missed over the last month. Then we jump into presentations until [8:15]. That’s kind of like a hard close. We tell people that it’s gonna be ending at [8:15] sharp, and if you wanna leave – great, no hard feelings. If you wanna stick around and continue networking, awesome. Maybe it’ll be more Q&A. But it’s really jamming a lot of content, or at least education, into that hour and a half, so that people who come feel like they’ve taken something away that’s tangible, that they can implement into their business or into their life right away. That along with it being a little entertaining just keeps the energy high, just keeps people engaged, and keeps people coming back.

Joe Fairless: With the online presence that you have with this meetup, what do you do online to promote it?

Steve Arneson: We have some targeted Facebook ads, Instagram as well… We’re pretty decent for Google search. But we have a community on Facebook that we’re pretty active in. We invite everybody who’s in Victoria or who knows about us to join our Facebook group, and within that you get the exact same thing – you get lots of content, lots of education, lots of updates, and then also just notifications on who our next speaker is gonna be, the date, the time, some tidbits, a bunch of notes with the last meetup etc.

So we wanna communicate with people, we wanna engage people, we wanna help people, and it’s a great space for people to come and ask questions. It’s really cool to watch us not even have to interact with those people, because the other members of the community are stepping up and supporting new people with new questions.

Joe Fairless: You’re a co-producer of The Victoria Real Estate Investment Expo… What is it and how many years have you been doing it?

Steve Arneson: We did it for two years, 2017 and 2018. It’s a very large event; the largest that Victoria has ever seen in this space. It was a kind of dual purpose. We had about 30-40 exhibitors both years, so for people who wanted to connect with tradespeople, or funds, and then we had two different stages as well at the venue. We had people who were interested in doing workshops, where it’s more hands-on… For example budgeting. We had a budgeting workshop. And then we had the other stage, which was the main stage; we were having our keynote speakers there educate people on trends in the marketplace, or strategies etc.

Joe Fairless: How many people did you have in year one?

Steve Arneson: Year one we had 900. Year two we had 600 or 650.

Joe Fairless: Interesting. How come the decrease?

Steve Arneson: Yeah, unfortunately we booked our date a year in advance after the first one went so well, and over that year, leading up to year two, we had three other very large events booked for the exact same weekend. Victoria is not a big town; there’s only 350,000 people here. We’re close to Vancouver, which is a million and a half or so… But when you have 3-4 very large events in a small town like Victoria, it just gets a little diluted.

Joe Fairless: What were you competing against?

Steve Arneson: I think there was Comic Con, and there was a women’s conference, and I can’t remember what the third one was.

Joe Fairless: Okay. Are you doing it this year, 2019?

Steve Arneson: We’ve shifted our model, so we’re not doing the same type of event, but we are going to continue with the education stuff. We’ve built our network to a really great space; all those exhibitors that were there… We have special connections with each and every one of them. So if people are interested in meeting them – we can facilitate that introduction. Then we’re really focusing on just doing more hands-on workshop-type events and live events, where we bring in speakers and trainers to help facilitate and host with us, to just kind of move the needle a little bit further in people’s investing careers or lives.

Joe Fairless: Got it. So instead of one large event, you’re doing a bunch of smaller events.

Steve Arneson: Exactly. Our next one is actually coming up in — today’s the 9th, and the next one comes up in two weekends from now, 18th and 19th.

Joe Fairless: Okay. And for someone who has a grand vision of doing  a big event like you had put on for two years, what are some watch-outs that you would give them? …other than the date thing.

Steve Arneson: Oh, don’t do it…

Joe Fairless: I can tell, yeah. Because you would be doing it again if it made sense… So please, elaborate.

Steve Arneson: It was one of the most time-consuming and stressful efforts I’ve gone through my entire life. Full transparency, we had over $100,000 invested into this one event, and in Victoria specifically, more so than a lot of other markets, but in events as a whole, you sell like 50% or more of your tickets the last week. So leading up to that last week, we’re sitting there going “Come on, where’s all of our ticket sales?” and stressing, because we’ve got $100,000 on the line here… It was a little nerve-wracking.

So make sure you have a good date, plan it well in advance. For real estate, I would say late spring is really good. [unintelligible [00:13:37].23] earlier spring people aren’t quite in the rhythm yet. The real estate cycle kind of picks up and is more popular in the later spring, before people go on vacations and stuff through the summer… So that’s critical timing. If you’re not gonna do it in the spring, do it in the fall, late September, October. And then just have a really good marketing plan in place, and then just cross your fingers and pray that people will start buying your tickets early.

Joe Fairless: [laughs] How much money did you lose on the second, year two?

Steve Arneson: I think we broke even on it. It was tight. And in our minds, it was the best marketing expense ever.

Joe Fairless: Sure.

Steve Arneson: Because we were at the time a very new business, but we had professionals from all across Canada come, that we got to build really great relationships with, because they got to see the integrity we have, the work ethics, the characteristics of who we are as people… And we got really put on the map from those two events. So it was basically a breakeven event which just gave us infinite return afterwards.

Joe Fairless: So if it’s a breakeven event that gives you infinite returns, why not put someone in place to do that work, have a couple interns, and then continue to have infinite returns on an annual event?

Steve Arneson: That’s definitely something we’re gonna lead up into, but we wanna take it in a little bit smaller, bite-sized pieces, hence the smaller workshops. So instead of just putting all of our eggs in one basket for the year, what we’re doing is we’re basically diversifying our risk, and going from Victoria, to up island, and then on the mainland into different markets, to create new audiences and fresh content.

Joe Fairless: Oh, okay. Start more guerilla efforts leading up to it, and then when you have some massive amount of people that you know will be confirmed attendees, because you’ve got so much exposure through all those little areas, all the surrounding communities… Then you could build back up to the larger event with more certainty.

Steve Arneson: Exactly.

Joe Fairless: Okay. Cool. Switching gears – you’ve got four development projects in the early stages… What are they?

Steve Arneson: We’ve got one basically at lock-up right now, which means we’ve got windows and doors, and a roof… It looks really good. It’s a townhouse complex of six units. And we have the lot directly beside that, where we’re gonna basically take the exact same plans, but rotate it 180 degrees and build the exact same thing. Another lot is a question mark right now, but it’s in the core downtown, in a growing city, growing market, just North of Victoria… And then the last one is really exciting, where it’s currently got a house with a suite on it. With our investor we bought it cash, so the place is covering itself really well right now. It cashflows, obviously, because we own it outright… So the investor is getting a really good cash-on-cash return. And we bought it rezoned…

We have the ability to build up to five stories on it, and it’s two blocks away from the core of downtown. Growing neighborhood. It looks out onto kind of a big community garden type thing, and it has a lot of upside for us… So being in the development space has been a goal and a dream of mine for a long time. I didn’t know if it was gonna be possible or not, but I’m really excited to complete our first one with our developer, and move on to bigger pieces.

Joe Fairless: How do you structure that with the developer, in terms of just ownership of the deal?

Steve Arneson: Our very first one, because it was completely new to us, we didn’t want to take on that mass amount of risk… Because I think it’s like a 1.5-1.8 million dollar build, and walking into the developing space there’s a lot of unknowns. So basically how we structured it with our developer was we found and facilitated the deal, and then we basically wholesaled it to them, and then we got a rev share at the back. So if we do really well on the sales, then we get a chunk of that, and the developer has the majority of that.

Going forward, we’re being more and more involved in each deal, to create more income for us as our company.

Joe Fairless: Nice. And for someone starting out and who has a similar opportunity, and they don’t have the development experience but they’ve found a deal and they’ve found a good developer they know locally, what type of structure in terms of revenue share would you recommend that they try to negotiate?

Steve Arneson: If you did a lot of the front-end work, especially if you went through a rezoning process… Rezoning is really difficult.

Joe Fairless: Oh, yeah.

Steve Arneson: I’m sure you know, Joe. If you’re going through that process, you want at least 15%, in my mind.

Joe Fairless: 15%?

Steve Arneson: Yup. And then we can kind of negotiate here and there for different pieces. We have the bonus that my business partner, Randy — he’s a journeyman electrician, so he’s gonna be a little bit more hands-on through the whole process… So that’s really exciting. And then I’m the data geek; I’m the guy that’s gonna do all the number crunching, build spreadsheets etc. and make sure that the economic factor makes sense.

Joe Fairless: What’s a deal that hasn’t gone according to plan?

Steve Arneson: [laughs] Not according to plan… I’ll rewind to my very first purchase, which was that live-in flip.

Joe Fairless: Yeah… The condo?

Steve Arneson: The condo, yes. So I bought it at 24, and it was best part of town, bottom of our market, which was 2012 here… And I knew that it hadn’t been renovated since late ’70s. It was the dream for me – walking in there, putting in some elbow grease, and resell when I’m ready to move. So as this business builds, and my time — I got less and less available for doing renovations, I hired a contractor to do the renovations for me, as I wanted to flip and sell.

Joe Fairless: Oh, and here’s the challenge… Contractors…

Steve Arneson: Here comes the challenge. The part that went unexpected was the guy that I hired, who I thought was going to be doing all the work, then outsourced all of the work to someone who was not nearly as experienced. You could tell the craftsmanship from the original guy and the guy actually did the work was not the same. That was just disappointing for me. I probably lost out on 20k, but I probably saved 10k or 15k, so I maybe only lost 5k out of the process… But the process itself was a real pain, because I was communicating with one, some other guy was coming in, and the work just wasn’t what I was expecting.

Rewinding, I learned a lot through that process, and I’m much more diligent on the communication and the upfront expectations of people who are doing work in our properties.

Joe Fairless: You said you lost out on 20k but saved 15k… Will you elaborate on what you meant there?

Steve Arneson: I kind of leveraged the relationship with the contractor I hired, so he gave me a 20k discount or a 15k discount on the work that was going to be done in my condo. So he was gonna charge me 50k, let’s say, and if I went out to the market and brought in any other  contractor, that person would have charged me 65k. So I saved that 15k, but then because of the quality of the work that wasn’t quite met, I think I lost out on about 20k of what my sale price was.

Joe Fairless: So knowing what you know now, when you are presented a similar opportunity in the future, how do you approach it?

Steve Arneson: Now I have as much as I can in writing, and very articulate with what I expect in the design and the quality of work.

Joe Fairless: Got it. What’s your best real estate investing advice ever?

Steve Arneson: I’ve actually got three, if I may.

Joe Fairless: Sure.

Steve Arneson: Real quick… One is you have to get educated. Whether it’s in your marketplace or where you want to invest, as well as what your strategies are. Hire mentors, get connected with community groups like ours, that are helping people along the way, and reach out to people who have been there and done that.

And then in our market, in BC and a lot of the West Coast, and a lot of the markets through the continent – it’s a really hot market here, so you have to be able to act fast. So whether you’re working with joint venture partnerships, or you’re buying a place yourself, you need to have financing in place, you need to have the strategy ready to execute, have the timetable set, and all your team members on the same page, to be able to act as quickly as possible.

And then lastly, we have found some of our best deals – actually, absolutely our best deals – from following up with those listings three or six months later. So keeping track of all the places that you’re looking at and making offers on, and then every month go back to that list and check which ones have sold or haven’t sold, and then follow up with the places that have not sold, and revisit that as an opportunity has really been beneficial for us.

Joe Fairless: Oh, it’s huge. It’s a big deal to just consistently follow up and be methodical about it. There’s a lot of fly by night people who try to do it, it doesn’t work out, move on, find something else that’s shiny and then try and do that… But when you’re methodical about it, there’s a whole lot of money that can be made there.

Steve Arneson: Yeah, it’s a strategy that not many people take advantage of. So if you can get creative and if you can stand out, that’s gonna put you further down the line to meet your real estate goals.

Joe Fairless: And by creative and stand out, are you meaning following up, or do you have an additional approach for following up, that’s creative?

Steve Arneson: More so just the follow-up side of things. For us, we’re looking for distressed properties. So we’ll go to a distressed property, and say it’s worth a  million dollars, we will offer them 800k, let’s say, just for examples. And it doesn’t sell. Three months later we’ll go back to there, it’s still on the market for a million dollars, and we’ll say “Hey, what’s happened over the last couple months?” and they’ll kind of tell us a little bit of details, and we’ll say “Great. If your seller is ready, our offer stands.” And then if that doesn’t go anywhere, we follow up a month later, and if it’s still on the market, our offer is no longer 800k, our offer is probably a little bit lower than 800k, knowing that it’s been sitting on the market for a little while, and there’s something probably wrong with it that other people are seeing as well.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Steve Arneson: I’m so excited, Joe.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:23:06].09] to [00:23:48].18]

Joe Fairless: Alright, Steve, best ever book you’ve recently read?

Steve Arneson: One of my favorites that I’ve recently read is called Traction. It’s by Gino Wickman. It’s all about being a leader in your company, and understanding how to put the right butts in the right seats in terms of employees and growth and scalability for your business.

Joe Fairless: What’s a mistake you’ve made on a transaction that we haven’t discussed already?

Steve Arneson: Paying too much.

Joe Fairless: Will you give an example?

Steve Arneson: There was a property that we looked at… I think it was marketed at like 700k, or something, and we ended up over-paying for it because we knew it was an awesome opportunity and because we  were just eager to buy something. It was a bit of a draught. So we actually ended up getting traded with it towards the end of negotiations. We were at that point of “We’re overpaying for this, but we’ve already put a lot of stake into the game.” We got a little bit emotional with the deal.

Joe Fairless: How did it turn out?

Steve Arneson: It turned out to be a really good win, actually.

Joe Fairless: [laughs] Well, that’s–

Steve Arneson: At the time, as we went through it, we had to really think outside the box and bring in some mentors to help us.

Joe Fairless: So how did you turn it around so that you made it very profitable?

Steve Arneson: We ended up buying it cash instead of financed.

Joe Fairless: Okay, so the purchase price wasn’t as high as what you initially offered, because you offered cash?

Steve Arneson: We paid the same price, we just did it a little bit creatively in the sense that we bought it cash… So our investor had put up 770k, or something, and then we put in additional money into renovations, and then we went to the bank for financing, once we raised the value so much.

Joe Fairless: Oh, okay, then you got some cash out.

Steve Arneson: Exactly. We got 94% of our investors’ money back out, and the property cash-flows very well.

Joe Fairless: Best ever way you give back to the community?

Steve Arneson: We’re a for-purpose business, and our monthly meetups – we charge $5 for it, and 100% of that $5 ticket entry goes to an organization that’s called KidSport. They help families who can’t financially afford to put their kids through organized sports get involved with organized sports, because we believe in the team environment, and working for a common goal, and learning how to fail, and recovery from that failure. Not only this builds your talent as an athlete, but it also gives you a lot of learning life lessons that you can use for the rest of your life.

Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?

Steve Arneson: The best thing is to visit us on Facebook – The RE Investors.

Joe Fairless: Well, Steve, I enjoyed our conversation, learning about how over the last three years you’ve built a network, you have built an expo that had 900 people year one – holy cow, props to you on that. And then the lessons you learned from that, doing smaller groups in the surrounding areas and continuing to build that interest (more of a guerilla effect) and then eventually go back up to that larger expo, so that you have mitigated the risk of having six figures outlaid with the hope that more people will come to help you breakeven… But then also just the monthly meetup that you’re doing too, and how you’ve used that to get investors and continue to be a thought leader in your area.

Thanks for sharing the condo flip example, with the contractor hiring someone else out, and how you navigate that, and what you’d do in the future.

I really enjoyed our conversation. I hope you have a best ever day, and we’ll talk to you again soon.

Steve Arneson: Thanks, Joe. Thank you so much.

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JF1572: From Selling Cars To 86 Units Before The Age Of 21 with Tyler Hassman

Tyler always knew he was an entrepreneur, wasn’t interested in college, so he took a car salesman job. As he was doing well there, he still wasn’t doing something to utilize his entrepreneurial skills. Enter real estate. He took a REI course and never looked back, purchasing a $1.5 million multifamily property right off the jump. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Tyler Hassman. How are you doing, Tyler?

Tyler Hassman: I’m doing great, Joe. Thanks for having me.

Joe Fairless: Yeah, my pleasure. Nice to have you on the show. A little bit about Tyler – he is a co-founder and president of M&H Real Estate Investments Inc. He built a 12 million dollar real estate portfolio with over 86 units by the age of 21 years old. Based in Regina, Saskatchewan. With that being said, Tyler, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Tyler Hassman: Yeah, absolutely. Thank you for the intro, Joe. Right now I’m still 21, turning 22 in a week here, so… Obviously, super-exciting. But yeah, I’ve always been an entrepreneur, I’ve always wanted more to life, ever since I was young, I’ve always wanted that. I was super-smart growing up, skipped grade six, and then high school hit, grade nine, and I just couldn’t focus in school. I was like “I don’t wanna learn any of this. I just wanna make money, I wanna run businesses.” I don’t know, this stuff I was learning just felt like it didn’t apply to what I wanted to do.

In the high schools in a small town like Saskatchewan there was no entrepreneurship or business classes; it was just the typical math, science, all this and that, so I started up a couple T-shirt businesses in high school, little side hustles, meanwhile I just let my grades slip, didn’t at all pay attention, barely graduated high school.

So I went from being the role model student, skipping a grade in elementary, and then in high school I was the story of “Wow, this kid threw everything away.” But in my mind, I knew I was gonna hit success, because I’m at home reading “Think and Grow Rich”, reading “Rich dad, poor dad”, studying all this entrepreneurship and business stuff, but I wasn’t focusing on school. It was a tough time around people understanding what I was doing, but shortly after high school I didn’t get into university, I didn’t wanna go either, or college, and I went into selling cars, because I just wanted to have a job selling stuff, because I love selling stuff. I’m a people person.

I got hired at Mercedes Benz here in Regina, three months out of high school, and I was a lot boy, so I ran cars around, got them washed up for the sales guys, but I always knew I wanted to sell cars. I wanted to be the car salesman at the time.

So I studied the cars, and then they fired one sales guy two months in when I was working there, and I was like “Put me in, please.” Super-ambitious. I had this entrepreneurial burning desire in front of me, so I didn’t care about my age, or anything. I just said, “Guys, put me in.”

So they put me in, and two years went by and I was learning so much in car sales. So much about dealing with people, presenting myself right, and really getting past that age barrier. We had a lot of clients that came in spending a lot of money, and they would see me and be like “I don’t wanna deal with this little teenager.”

The reason why I’m telling this is because then I really got mature very quick when I worked there. Then when I was sitting in on one night and I was like — I always wanted to do business, right? So even though I was selling cars, doing good, I’m like “I’m an entrepreneur. I need to do business.” I was sick and tired of me starting up these little companies, like a T-shirt company here and there, little stuff like that; I’m like “I wanna do a big boy business.”

I was on Google and I was just googling ways to get rich, and sure enough, there’s a lot of funny things that popped up, but sure enough the biggest one was real estate. Because you know, you’d find these guys that create apps, and internet stuff, and they’re billionaires, and this and that, but then real estate – you see that all over. All the big, wealthy, big guys, and all the rich people I know own real estate. So I was like “You know what, I’m gonna do real estate.” So that’s actually how I decided to get into real estate. It was just from a Google search and me wanting to get rich.

Now my morals have changed, obviously, but at the time that’s what that was. Then I was like “Hey, well, I’m broke. I don’t even have a credit card, I’ve never had a loan in my name, and I don’t know what I’m doing.” I was driving around, looking for a hood house, or like a ghetto house, like a really bad house in a bad area, because all I could try and afford, like a couple thousand dollar down payment.

Then what happened was I was like you know what, I’m wasting my time. I was getting nowhere, because I really didn’t know what I was doing. Six months went by, a year went by, still selling cars, and I’m like “I’m not getting any traction. When am I gonna buy my first property?”

I started going to networking events, putting myself out there, and then found out about real estate investing courses. I took a real estate investing course about purchasing multifamily buildings, and I just learned how to do it. Once I learned how to do it, I was like “This isn’t so difficult.”

So then I went out, found a deal, and I had a business partner as well, on M&H, too. So I had a business partner (Bailey) as well, and we went out, we found a deal, and then we ended up raising the money, closing it, and then we got our first building. Then I was just turning eighteen when that happened, still selling cars… So that’s the thing – we were looking at hood houses, then we got educated, and then went and bought a 1.5 million dollar brand new 12-unit apartment building within six months. From there, it was a big ripple effect. People saw what we were doing, and then there was three more buildings that came for sale, we closed on them, then two more, and it was just a ripple effect. That ripple effect is continuing to go to this day.

That was kind of an extended story, but [unintelligible [00:07:22].14] more insights of my start, too. Currently, actually — gotta end it off on currently… Currently we’re always growing our portfolio and raising capital here in Saskatchewan, Canada. I also partnered with another business partner, I have another company, AHDC International. Our focus there is on boutique hotel resorts down in Costa Rica, and we’re also looking at — at the end of this month I’ll be going down to Phoenix, as we’re gonna get into some short-term rentals down there, and move down South and just do some stuff down there… Tax deeds, tax liens, wholesaling, all sorts of things. I’m really branching out now.

Joe Fairless: Whose course did you take?

Tyler Hassman: There’s a local lady up here in Canada. It’s “90 days to 5k” is what it’s called. It’s a local one up here. It was a great experience to learn it… Because I’ve taken big course by big names, and the issue was with me — I was attracted to wholesaling at the start, because it’s always, like, quick money.

Joe Fairless: Was that the “90 days to 5k” course, the wholesaling?

Tyler Hassman: No, that’s apartment courses. And then I was looking at wholesaling courses, and they were all down in Texas. One was by Cody Sperber and Josh Altman, “Clever Investor”, but then what I realized is I spent the money on the course, I took the course, and then what happened was I then realized in Canada wholesaling is not a  big thing, because the banks don’t foreclose so quick. There’s no auctions where you can go pick up houses for dirt cheap.

So I was like, “No…! I wasted $2,000”, which was a lot of money for me at the time, and I just realized I couldn’t do that at the time… So it was really good learning from a local group, and I also learned a lot from being with local, you know what I mean, Joe? You can learn as much as you can from these courses, but the most you’ll learn is from people in your network, and people that are doing it in your area, because there’s certain things here in Saskatchewan that are going on that are way different than, say, down in California.

Joe Fairless: For example?

Tyler Hassman: For multifamily I would say it’s pretty generic. For multifamily and what I do when it comes down to joint venture partnerships, I would say it’s similar all around North America, at least; I haven’t looked into worldwide, let’s put it that way. But for North America, the system I use for joint venture partnership, that’s common everywhere.

But certain things when it comes down to — whether it’s the laws of the province up here, or down in the States… I do know that there has been times where down in the States the prices — you can’t even justify some of the prices on some of these places, depending on the area… So really when it comes down to it, my biggest thing is wholesaling here in Canada is much different than down in the States, for that reason – the banks don’t just foreclose real quick. But as for multifamily, I would say it’s very similar, but there’s certain little things about knowing the right people in a certain area, to get the best deals and make stuff happen… Because if you’re dealing with — the system I do for multifamily, like I was saying, to sum it up, it’s universal, but I really stress people to get really tight with their own network in their own area, because there’s certain things in the course that you’re not gonna learn, such as finding the right people and getting off-market deals. You need to be a part of your local community, and you can’t get that in any courses.

Joe Fairless: Let’s talk about the second deal that you did, and we’ll get into details there just to bring this to life a little bit. So the first deal, you said, it was a 1.5 million dollar apartment building, and you raised the money for it… What was the second deal?

Tyler Hassman: The second deal was the exact same building, but there was two of them, two 12-units. That deal there – it was interesting, because a lot of people saw what me and my business partner did, and we put a lot of work into putting that deal together, because it was a brand new building and it didn’t have any tenants in it. So we had to really get tenants in there, and it was a struggle at the start… But a lot of people saw what we did, and it turned really great profits and returns for our investors… So immediately when there was another two buildings from the same builder that came up in that area, there was actually people in our network locally that actually hopped on those ones first, the next two.

Joe Fairless: And when you bought the first one, for 1.5, how long until you bought the second one, which was two 12-units?

Tyler Hassman: Four months.

Joe Fairless: Okay, got it.

Tyler Hassman: We closed on the mortgage, we were getting people into that building, and it was really busy; that’s why we weren’t really looking at those other 12-units that were for sale… Because we were super time-consumed. But in the meantime, another person in our group went and got those ones under contract, and then they started raising money on it, and then they realized, “Holy cow, we need Tyler and Bailey to come and do the work, so that they can bring it up to where it should be and bring it up to the standards, because they’ve done it before…”

Joe Fairless: What work were you doing exactly?

Tyler Hassman: It was the management. The whole deal management and property management as well.

Joe Fairless: Okay.

Tyler Hassman: Because here in Saskatchewan these buildings are in small communities, but in the area there’s one of the world’s largest underground potash mine.

Joe Fairless: World’s largest underground what?

Tyler Hassman: Mine.

Joe Fairless: Mine, got it.

Tyler Hassman: Yeah, they mine potash, so there’s thousands of workers in that area… But you need to be in that area, you need to get some furnished units, you need to really be on top of it, and the thing is there’s no property management companies in these areas. You can hire a local maintenance guy, and that’s what we do – we have a local maintenance guy that goes in and out, but he’s not the type of guy that’s gonna be doing good viewings, or taking calls, assigning leases… So that was why they needed us to come on, because they needed somebody out there, feet on the ground.

Joe Fairless: So you took a general partnership ownership in the deal, in exchange for property management, or were you a third-party property management company.

Tyler Hassman: No, we got direct shares. We got direct shares, because we were also the deal management. We dealt with setting up the bank accounts, the corporation, getting the mortgage… We ended up doing all that, and then the other partners were the money partners. They went and found investors.

So that’s the thing, because that was part of our deal – we were like “You know what, we don’t want to just property-manage it, we want ownership, so what else do you want us to do?” and they were like “Well, since you want ownership, you guys will have to manage the whole deal, and of course, the property.”

Joe Fairless: Okay. And then the first deal, did you do all of it, or did you two break it up and have other partners on that one?

Tyler Hassman: We did all of it. We had, of course, our capital partners where we raised the money; other than that, it was just us, and then we actually — if there’s any other young viewers out there thinking that it’s because you don’t have any credit, it’s your first deal, you can’t get a mortgage, this and that… That’s total lies, because on that deal – it was very interesting, Joe… We got the investors’ money, and we go to get the mortgage; and the mortgage company comes back and they’re like “Yeah, the net worth is there from your investors, everything is good, but we’re not gonna lend you any money because there’s no experience. You’re asking for a mortgage on a 1.5 million dollar property, but you guys have never done real estate before, and your investors haven’t, either. We don’t care that they have money; the big thing is that there’s no experience.”

So we actually then dug into our network and called somebody up that owned a bunch of real estate, and we were like “Hey, we’ll give you 10%. Sign on for the mortgage and sign onto the deal.” So we ended up doing that, cutting some shares, and then ended up getting the mortgage. Sometimes you’ve gotta be very creative to make deals happen.

Joe Fairless: How many units is the 1.5 million dollar property?

Tyler Hassman: 12 units.

Joe Fairless: 12 units, okay. Usually, when it’s a brand new building – did I hear that correctly, that it’s brand new?

Tyler Hassman: Yeah.

Joe Fairless: Okay. Usually, those aren’t value-add opportunities, unless a developer is in trouble and needs to get out… So what was the story for how this was a value-add deal?

Tyler Hassman: Yes… So the builders built these to sell as condos, and in this market, Joe, everybody was like “You can’t sell condos in this market”, in this certain region, because it’s a rental region. You’ve got all the mine workers – they’re not buying, they’re renting, because they only work there for two weeks, and they go home for a week, and they come back for two weeks…

They tried to build them and sell them as condos, had no luck at that, and then they were on the verge of bankruptcy, so they really needed to get rid of these buildings. Then our value-add was simply getting the tenants in there and turning these condos – what they were branded as – into rentals.

Joe Fairless: How did you hear about it?

Tyler Hassman: We heard about it from a networking event. At these networking events we would tell everybody we’re looking for a building, because we were hungry for a building… And then there was somebody at the event that said “You know what, I actually found out about a guy that has access to these buildings, but his company is about to go bankrupt.” I’m like, “What?” So we got in contact with that guy, who actually was helping out this company – he was gonna list the building actually, and then we called him ahead of time and said “We’re looking, you don’t have to list them”, and yeah, we ended up getting connected that way. So it was through networking.

Joe Fairless: How much equity did you need to bring to the deal?

Tyler Hassman: We needed to bring $400,000. Or are you asking for the cash we needed to invest in there?

Joe Fairless: Yes, exactly.

Tyler Hassman: Yeah, it was about $240,000 or something like that, and then of course we had extra money for closing costs, reserve funds, and all that… But the investment capital we brought was $400,000.

Joe Fairless: Okay, perfect. And how many investors does that make up?

Tyler Hassman: That one was just one investor.

Joe Fairless: One investor. And how did you know that investor?

Tyler Hassman: That investor – it was a connection from my business partner Bailey. It was a connection from him, and it was really tough on that particular deal, because at the time when we  first met, the guy that had access to these buildings – the first building – we somewhat knew what we were doing, but then all of a sudden we’re like “Yeah, we wanna go take a look, we’re super-interested, we wanna get it under contract”, and he said “Okay, well how much money have you guys got for deposit?” [unintelligible [00:16:56].22] and then we looked at each other, and then in the back of my mind I’m like — I had no money at this time. I spent my money stupidly with the money I made from car sales, so I was like “You know, we’ve got like 10k…”, and to me, I’m like “Ten thousand dollars…!”

Joe Fairless: That’s a lot, right…

Tyler Hassman: And all of a sudden, he’s like, “Yeah, I need at least $100,000 to start the process from you guys”, and we’re like “Oh, no…” So then we’re like, “Oh, my god…”, so we kept on doing networking, getting it going, and then Bailey, my business partner, he actually had a close connection that actually was interested in real estate, and they ended up just putting the $100,000 in.

Then we had some breathing room, we had another three months to come up with the rest, even though we’re telling the seller “Yeah, we’ve got it, we’ve got it… We’re good, we’re good”, but we had some conditions to be met, so we were doing our inspections in the three months… And then that investor actually ended up just putting in the full amount.

Joe Fairless: And what’s the structure of that arrangement? Just to educate the listeners…

Tyler Hassman: Absolutely. What we do on that particular project – it’s a joint venture partnership, so they’re actually providing a shareholder loan. Those investors got 40% of the deal, and then we got 60%, and then of course we gave 10% up for George, one of our partners, to sign on the mortgage… So essentially they’ve got 40%, and how we structure it is that we pay them back 100% of cashflow. All the cashflow goes directly to them until they get all their money back, and then once they get their $400,000 back, then we’ll split it, where we’ll get 50% and they’ll get 50% of cashflow.

Our whole analogy on these is that we get a closing fee of 1%-3% at the beginning of the deal – acquisition fee, closing fee, whatever you wanna call it, so that our company can stay afloat, and then usually between I would say year five and six they’ll have their full capital back by cashflow, or if we take out [unintelligible [00:18:44].09] equity that we have in the building at that time, depending on how the market is, and then they’ll have continued ownership for the years to come until we either sell, or somebody sells shares. So we’re a long-term investment for them.

Joe Fairless: Yup. And on the long-term investment front, what type of financing do you have on the deal?

Tyler Hassman: We get mortgage financing on there.

Joe Fairless: When does the loan expire?

Tyler Hassman: The loan expires in 30 years.

Joe Fairless: 30 years.

Tyler Hassman: Yeah, exactly. But we’ve got a five-year term on it.

Joe Fairless: Okay, so it’s amortized over 30, but there’s a balloon payment in five years?

Tyler Hassman: No, so in five years we’re able to actually renegotiate the mortgage, but the amortization is the 30 years. We have the CMEC mortgages up here in Canada, so we don’t have no balloon payment or anything at the end of that five years. It’ll just continue on. [unintelligible [00:19:32].27]

The analogy with this and how our mortgage is – if we were to plan to own it all… Oh, sorry, the amortization — it’s not a 30-year amortization; basically, in 30 years we’ll have it paid off. That’s what I’m trying to get at. I know what you’re saying, because if it was bridge financing, amortization would be 30 years, then we’ll have a balloon payment at year five, and then we own it cash and they’re paid out… I get what you’re saying there, but no, this will be the standard mortgage on it, for 30 years. If we don’t remortgage or anything at the end of that 30 years, then we’ll have it paid off.

Joe Fairless: Okay, I’m with you. So there’s no balloon payment at all over those 30 years.

Tyler Hassman: Correct.

Joe Fairless: Different types of terms you all got up there, than us, in the U.S., that’s for sure. It’s possible to do something like that with our deals, but it’s not typical. Usually, there’s a 3, 5, 7, 10, 12, 15-year balloon payment on the loan for commercial loans.

Tyler Hassman: Yeah, that’s interesting, because I know up here if it’s private financing, then absolutely. Or if it’s seller financing, or vendor financing, or whatever you wanna call it… But up here it’s a standard mortgage; that’s how everybody gets their deals done here, unless they’re using, like I said, private money.

Joe Fairless: So you’ve basically made $15,000 at closing, because you got that 1%, and that’s split between you and your partner, and you got 50% ownership in the deal, which is zero until the money person receives all of their money back, which is $400,000, and then profits are split 50/50 thereafter, is that correct?

Tyler Hassman: Correct.

Joe Fairless: And are they making any interest on their 400k over the period of time that it’s needed to be paid back?

Tyler Hassman: No. The way it’s structured is that these are a certain type of clients that we work with. They’re the type of clients that are fine with having that money tied up… Even though we’re paying them back in quarterly payments, that’s still just going to the principal. But here’s where the huge returns are coming in – at year five, when they have all their capital back; then they own 50% of that asset, so they’re gonna get 50% of cashflow for the next 10, 20, 30 years, of that building. So then it’s gonna compound and make a lot more than if we were just doing a 10% interest over five years. Do you get what I’m saying?

Joe Fairless: I get what you’re saying.

Tyler Hassman: There’s other stuff we’re working on now – our boutique hotels, and also the short-term rentals we’re gonna be doing down South. Those we’re working on just doing interest-only. So we have investors, at least for the short-term, quick returns, a year or two-year agreements, and that’s what we’re gonna do. But these types of clients we’re working with on our multifamily properties, they’re the types that they’re looking to build that long-term wealth; 5, 10, 15 years from now is what they’re worried about, because right now they’re sitting very comfortable.

Joe Fairless: You mentioned some project(s) in Costa Rica that you’re working on with more boutique hotels; you’ve got some multifamily deals where you live, and then I think you mentioned something else, which if you didn’t, you probably have something else going on, right?

Tyler Hassman: Yeah, I’ve got lots going on. The vacation rentals down in Phoenix.

Joe Fairless: Alright, there we go, vacation rentals… So some people say there’s a lot of power in focusing on one thing and doing that well; what are your thoughts on that?

Tyler Hassman: I would say to a point, but then again, I work 14-hour days, seven days a week, so I’ve got lots of time. Because here’s the thing – I have so many people that are like “Dude, you need to stay focused on one thing. You’re focused on way too many things.” And then those same people that tell me that are working eight hours on their business, five days a week. So I’ve got a lot of time.

What I do is — especially with Gary Keller, The One Thing, his book… I love that book, it changed my life. What I do is I basically hyper-focus on each project at certain times during the day. Because when it comes down to my multifamily, it doesn’t require me to work 14 hours, seven days a week, non-stop, on that. Maybe it only requires four hours of intensive work each day, and then the short-term rentals maybe three, and then the Costa Rica maybe more…

So I manage my time really well, but I’m also at a point where I’m able to do that. At the start it was full-force only multifamily, but now I’ve got systems in place, and I also have people in place, so now I can diversify my time to grow my portfolio and also grow my company. So I’m not anymore dealing with the tenants or property management at any of these buildings; I’m just overseeing the deals, talking to my bookkeeper/accountant, sending out the quarterly reports, and payments to investors… So I’m able to now focus my time and shift my attention to different projects.

But for people that are just starting out, 100% you need to focus on one thing, for sure. One thing, and go until you master it. Now, here’s the thing – I don’t master anything; I believe I can always be growing. But I’m at a point where I am able to focus on other projects now, and I love what I do, and that’s why I’m working basically 14-hour days, seven days a week. I’m never that type of person that just work first; all the exercising, focus on my health, travel, friends and relationships as well, but I love what I do, so that’s why I’m putting in long shifts and doing all this crazy stuff.

Joe Fairless: Real quick, what’s your best real estate investing advice ever?

Tyler Hassman: My best real estate investing advice ever is to invest in yourself first before you ever invest in a property.

Joe Fairless: What’s the best way you’ve invested in yourself? What’s something tactical that others can do, that you’ve done?

Tyler Hassman: Hire a coach and mentor, or get into a course specifically on what you want to learn in real estate.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Tyler Hassman: Yes, sir.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:25:09].23] to [00:26:25].29]

Joe Fairless: Okay Tyler, best ever book you’ve recently read?

Tyler Hassman: The One Thing, Gary Keller.

Joe Fairless: Best ever deal you’ve done that we haven’t talked about in detail already?

Tyler Hassman: An eight-unit apartment building that we’re actually gonna be wholesaling. Just on the verge of closing.

Joe Fairless: What’s a mistake you’ve made on a transaction so far?

Tyler Hassman: Not being with the right partners.

Joe Fairless: Will you elaborate?

Tyler Hassman: Yeah, managing partners – making sure you truly do know your partners. And I would say — not ask for referrals, but ask other people that have done deals with them their opinion on them and what their experience was.

Joe Fairless: Best ever way you like to give back?

Tyler Hassman: Speaking, podcast interviews, and hosting live training events.

Joe Fairless: And how can the Best Ever listeners learn more about what you’ve got going on?

Tyler Hassman: They can hit me up on Facebook at The Young Guns of Real Estate, or Instagram Tyler Hassman.

Joe Fairless: Tyler, thank you so much for being on the show, talking about how you got going and how you have acquired the properties that you’ve acquired, how you’ve structured it with your investors, especially on the deal that we talked about in detail – actually, we talked about two transactions in detail – and the challenges that you came across, and what you did to overcome them.

Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Tyler Hassman: I’ll talk to you soon, thank you.

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JF1551: Follow His Strategy To The Rich Dad Hall Of Fame with Stefan Aarnio

Stefan was “sick and tired of being poor” when he came across Rich Dad Poor Dad. He sold all of his rock band equipment and jumped all in with real estate investing. After a few years, he was elected into the Rich Dad Hall of Fame! Hear his strategy for starting from scratch and building a multi million dollar portfolio. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet:

Stefan Aarnio Real Estate Background:

  • Award winning real estate Investor, Entrepreneur, Author and winner of the 2014 Rich Dad International Hall of Fame award
  • Started with only $1200, built a multi-million dollar portfolio
  • Based in Winnipeg, Manitoba, Canada
  • Say hi to him at http://stefanaarnio.com/
  • Best Ever Book: The 4th Turning

Get more real estate investing tips every week by subscribing for our newsletter at BestEverNewsLetter.com

Best Ever Listeners:

Do you need debt, equity, or a loan guarantor for your deals?

Eastern Union Funding and Arbor Realty Trust are the companies to talk to, specifically Marc Belsky.

I have used him for both agency debt, help with the equity raise, and my consulting clients have successfully closed deals with Marc’s help. See how Marc can help you by calling him at 212-897-9875 or emailing him mbelsky@easterneq.com


Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Stefan Aarnio. How are you doing, Stefan?

Stefan Aarnio: Great, Joe. Doing great.

Joe Fairless: I’m glad to hear it. A little bit about Stefan – he is an award-winning real estate investor. He actually won the 2014 Rich Dad International Hall of Fame Award. He’s also an author, an entrepreneur; started with 1,200 bucks and has built a multi-million-dollar portfolio. Based in Winnipeg, Canada, and you can say hi to him – his website is in the show notes. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Stefan Aarnio: Yeah, my story started when I was 16 years old and I wanted to be  a rock star. I told my mom and dad, I said “I wanna be a rock star. I wanna be rich and famous.” Of course, they said that’s a horrible idea, but my mom said “I support you, honey, so why don’t you go to university and get yourself a music degree”, because of course, rock stars need to have a music degree, which is completely false… [laughs] Yeah, I know, we still laugh at that.

Long story short, I ended up graduating from the university of Manitoba at age 22, and I had a post-grad depression because I dropped out of the music school, I dropped out of computer science, I dropped out of the business school, and finally I took two poetry classes, got an English degree with a minor in music, and it was 2008. There was no jobs for a guy with an English degree, so I worked my whole life, 22 years now, getting out of school, and there was nothing at the end. I got depressed.

I started working in a call center, I was making $10/hour, I had a guitar teaching job, I was teaching guitar to kids for 10k/year, living in my mom’s basement… And to me, it wasn’t the life that I was promised when I was younger. I thought “Man, there’s gotta be more out there. I’m tired of being poor.” I wanted to have a house, and a car, and maybe afford a girlfriend one day, or a wife; I thought “Man, I can’t be poor. I’m sick and tired of being poor.”

So I read a little book called Rich Dad, Poor Dad, and it totally changed my perspective. I shut the rock band down, I ended up selling all my equipment, selling my gear, everything. I went all into real estate. I started going to seminars. I bought my first house in 2009 with $1,200 of cash, with five other partners. It was a crazy [unintelligible [00:03:34].05] horrible idea. Never do that.

Joe Fairless: [laughs] Oh, my gosh…

Stefan Aarnio: Just the stupidest thing.

Joe Fairless: Did everyone put in about $1,200?

Stefan Aarnio: Oh, buddy… It was such a bad arrangement… The deal was like 5 out of 10; it was okay, it cash-flowed, but it was a horrible idea. Anyways, long story short, the first year I did one deal; the second year I did one deal. The third year I did 12 deals, and I did 24 deals the next year, and then 30 deals, and now my team does about 50 deals a year. The whole difference was I ended up getting the proper coaching, proper mentors, and in 2014 won Rich Dad Hall of Fame, which was super-cool, because the story started with Rich Dad, and they validated me… They only give out one award for that in Canada per year, and I think five in the U.S, so pretty cool to come full circle with that.

Joe Fairless: When you say you do 50 deals a year approximately now, are those buy and holds?

Stefan Aarnio: Yes, it’s a mixture. I have an acquisition team; I’ve got three guys on the acquisition team right now… And a lot of them are actually just wholesale. We tie it up, flip the contract; tie it up, flip the contract, make a little bit of money.

Joe Fairless: What do you make on average per deal?

Stefan Aarnio: I’d say usually 5k-10k, but sometimes it’s 3k, sometimes $500, sometimes it’s 20k… It’s a variable amount. Some of my students have done 70k per deal on some deals, and I think that’s amazing. But my team – it’s a lot of fives and tens. And then I’ve got a bigger commercial storage unit I’m working on, 300 storage units. That’s a big 50,000 square foot warehouse. Then I’ve got a bunch of buy-fix-refinance-rents going on, which I think is actually a pretty good strategy. The great thing about it is you just warehouse debt, you buy it now, and you just let it liquidate out for the next 25-30 years. That’s amazing, especially if you’ve got good neighborhoods, good rents.

I’m a diverse guy now. For a long time it was flipping, flipping, flipping. It was 30 flips, buy-fix-sell houses a year, 30 rehabs, and now I’m diversified, I’ve changed that.

Joe Fairless: Wow. So that first one, was that a buy and hold, or was that a buy, fix and flip?

Stefan Aarnio: Oh, bro, that was a buy and hold. For 1,200 bucks we’re not gonna be able to flip it, right?

Joe Fairless: I don’t know…

Stefan Aarnio: Yeah, man… It was–

Joe Fairless: You went in with an unorthodox structure, so I had no idea what you were gonna do with that.

Stefan Aarnio: You know what – the best part of that deal is I got in.

Joe Fairless: Yup, absolutely.

Stefan Aarnio: It broke the barrier, and I was like “Man, I’m in!” My second deal I did was a big, crazy rehab buy and hold, and it was a burnt down property, it was a burnt down mansion downtown in Winnipeg. I chopped the roof off and added an extra floor, and gutted the building and put the stairs on the outside. Never do this. This is another “never do.”

That property ended up cash-flowing $2,000/month, so at age 23 I was [unintelligible [00:06:11].24] rat race really fast. I covered my expenses as a young kid, and today it’s a great deal. It’s 2018, that was 2010 I bought that. Today it’s a great deal, but at the time — again, I don’t recommend chopping the roof off a house and adding a floor. It’s just really hard to do.

Joe Fairless: So primarily, once you got going, you started primarily with fix and flips, and now you transitioned to multiple things. One of the core aspects is wholesaling, where you all wholesale approximately 50 deals a year.

You mentioned a 300-unit storage facility – is that something you currently own?

Stefan Aarnio: Right now we got the contract. The contract is going back and forth with the vendor. I can tell you a bit about the terms though, it’s amazing. It’s a 50,000 square foot building, it’s about a million dollar purchase or so, about 1,08 million, and the vendor is giving me 5-year vendor financing, 1% interest-only for two years… So think about that; that’s a massive warehouse, great location, great signage. Actually, if I put a billboard on that building, Joe, I think it’s gonna pay for the whole deal.

So getting into the commercial space – that’s a contract I keep slapping back and forth. We [unintelligible [00:07:21].22] Not final yet… But that’s a redevelopment, with 300 units, and an office share. We’re gonna go into a big ol’ warehouse…

Joe Fairless: Just so I’m understanding the terminology, because it might be a little different in Canada — because I assume this is in Canada…?

Stefan Aarnio: Yeah, I’m up here in Winnipeg, yeah.

Joe Fairless: Okay, got it. So when you say the vendor, is that the lender?

Stefan Aarnio: Vendor — so you guys would say seller. I guess you say seller finance?

Joe Fairless: Okay, got it. Alright, I’m with you.

Stefan Aarnio: I’m French — or, I’m not French, but in Canada we’ve got all this French lingo. Sorry, man.

Joe Fairless: Okay, seller financing. Now it all makes sense.

Stefan Aarnio: Yes, you say seller financing, I say vendor financing. Yeah, seller financing… And it’s amazing, because this is gonna be a big rehab project. We’re buying it for $20/square foot, we’re putting in $20/square foot, and something like that, when it’s up and running at 85% occupancy, does $22,000/month cashflow. That’s way different than a little crappy fourplex that does 2k.

So yeah, it’s evolution, and it evolves, and along the way I’ve also become quite an internet marketer and learned a lot of business skills, and built a team… We’ve got 11 people working here every day, so I’m all about the team, and all about the leverage that you can get from having other people doing the day-to-day things.

Joe Fairless: Why not double down on the wholesaling business – because I’m sure there’s more deals out there – and just focus on that?

Stefan Aarnio: You know what, I think the limiting factor is talent. I’m actually gonna be overhauling the wholesale side pretty soon. It’s all about talent; when you start building a team and you start scaling — I was mentioning yesterday to a guy I was recruiting, I said it’s about talent and muscle. The team I have right now is okay, it’s flowing, they’re doing stuff, but I think it could be done better, Joe, and I think one of the hardest things with building a real estate business is there’s only two ways to scale – you either do more deals, or you do bigger deals. More money, or more deals. And all of that takes more skill. So you either train skills to people, or recruit better talent. For me, with that team right now, I think we have to upgrade the talent on the team; we probably have to reorganize the management a little bit.

I agree with you, man… I think that there’s a lot more meat on the bones there, but it really is about management, and it’s about — with flipping, I don’t do as much flipping, because that’s a very management-intensive thing, and I don’t have the right manager to manage that… Sort of like The E Myth – if you’ve read the book E Myth, it’s all about the manager.

Joe Fairless: When you take a look at the end of this year – or let’s just do year-to-date – overall income coming in to your business, what makes up the largest chunk of that?

Stefan Aarnio: I’m a guy who has multiple income streams; I look at it like this – there’s earned income, and then there’s the equity side, where you’re building equity… And of course, in real estate when you build equity, you can’t just cash that out, but you’re building it. And then the other side is scalable business. My organization is a multi-seven-figure operation, and the income streams are always fluctuating. Sometimes information is really good, sometimes wholesaling is really good… I’ve even had times – years ago – at a staging company, the staging company kept the business alive in bad times.

So it’s a multi-seven-figure organization, and depending on how things are doing in any way, any case — right now in Winnipeg, where I’m at, there’s talk that the market has gone down 12%. That’s gonna affect things a little bit, and it’s gonna change the game a little bit.

So they’re always changing, and I think it’s like the tide – it goes in and out. That’s why I’m a big believer in diversifying, and having a lot of different things, like for example storage. That’s a different thing than flipping. Flipping is great in an up market. When it’s going up-up-up, it’s easy-easy-easy. When it goes down, you’ve gotta be really technical and really good on your buys.

Joe Fairless: So for this year what’s the lead one?

Stefan Aarnio: This year the lead one in the real estate is probably the wholesaling. Yeah, probably wholesaling over there. Then the rentals, and they just keep chugging along. Then the other stuff – all the information, and all that. The beauty with that is that’s not tied to land.

The toughest thing I think in business is scaling, scaling, scaling; how do you scale. And one of the toughest things with real estate is you’ve got land, you’ve got the government, you’ve got lawyers, you’ve got the city that sometimes does weird things, and those are where I think the biggest limitations with real estate are – it’s where you’ve got the government coming in, or the city, and that’s where suddenly things can go really good or really bad, depending on what side of the fence you are.

Joe Fairless: Can you tell us about the staging company and how that helped you all when the economic times were down?

Stefan Aarnio: Yeah, so I’m a big vertical integration guy. That’s where you take your expenses and recapture them through vertically-integrated businesses. And when I was flipping 30 houses a year, flip-flip-flip-flip, buy-fix-sell, buy-fix-sell, buy-fix-sell, I have eight sets of staging furniture. So we have a warehouse, and we’ve got a truck, and we move this furniture around… And we would charge anywhere from $3,000 on the higher end, $1,500 at the lower end. Having sets of furniture – you can set up a set of furniture for $5,000-$6,000 and rent it for about $1,000 to $3,000 for the first month, and after that probably anywhere from $1,000 to $1,500 ongoing. So if you have eight sets of furniture out there and everybody is paying you $1,000/month, that’s $8,000/month of money coming in.

I had some times where I had all these flips that weren’t selling, and suddenly, like, oh my god, we started deploying some staging, staging goes out there, and sometimes you need five grand to survive, and suddenly five grand is hitting your bank account… And those little thousand-dollar deals – they add up, especially in a business like real estate, where it’s illiquid a lot of the time. You might have a million dollars of equity and zero cash, and now you’re in trouble.

Joe Fairless: So where is that staging company now?

Stefan Aarnio: It’s still running. Again, it’s a matter of it doesn’t scale. So it’s a business where we’ve got eight sets, we have a warehouse that I lease (how is that…?), and the furniture goes out, it comes in… One of my guys and his girlfriend – they run it, and it’s cool for me, because the checks come in, I sign the checks, I pay them.

I have not staged a house ever in my  life, Joe. I’ve never done it. I’ve never done the work with that; I’ve always had someone doing it, and they do the labor, so I pay them their piece… It’s almost like a real estate deal, and then you’re moving this little furniture around… But you run into that same problem – it doesn’t scale.

Joe Fairless: Why not?

Stefan Aarnio: Well, if you have, let’s say, 50 sets of furniture, the biggest issue with it is every realtor has his own little stager; so he might have his girlfriend, or he might have his own set of furniture, or he might have his friend or some people who do staging for ridiculous rock bottom prices… So the marketing and the selling of it is a little bit difficult.

Then the other thing is it’s just not a fun business to scale. It doesn’t scale well. It’s trucks, it’s people, it’s damages… Sometimes people stage a house and they forget the forks in a drawer, and you’re losing your forks and someone’s gotta go and buy more forks… Just the minutiae of that – it doesn’t scale well.

I’ve left that business at an eight-set furniture business, and it cash-flows, it makes money, but it’s probably not the biggest thing, where I’m like, “Oh man, this is gonna win the war of life for me.” It’s a cool hobby business. I always get approached by young women who are like “Hey, I wanna work in your staging company, I wanna do that.” If you’re a stay-at-home mom and you’ve got some furniture – that’s awesome. But if you wanna make a million dollars a year, I think that’s gonna be a really hard time to scale that to a million dollars.

Joe Fairless: You mentioned you were a proponent of vertical integration. What’s another example of vertical integration within your business?

Stefan Aarnio: With the flipping, the best thing that I did with that was I take a finder’s fee on the deal, so that’s the profit center. The second profit center is I get the staging contract. The third profit center was we charged a little fee for the bookkeeping, so there’d be a little admin fee… And then, if it was a joint venture, I’d take half at least, or we would have a different structure with the investors. So it’d be four profit centers per deal, which is really great, and that would help me run the pipeline, because your acquisition guys gotta get paid, stagers gotta get paid, bookkeepers gotta get paid; so we take all those little integrations there, and with the storage that’s coming up, I’m looking to vertically integrate that, because when we have the storage business, the staging is gonna move in there, and then my office is gonna move in there.

I think other things like bringing in-house a social media, marketing agency in there, bringing video production in there – all the things I spend money on, I try to recapture into vertical integration, so that rather than spending money, you’re making money on that. Some of those scale really well. A social media agency scales beautifully, whereas furniture in a truck, in a storage unit, is really hard to scale.

Joe Fairless: I get it. That makes sense. You said you have 11 people on your team… What do they do?

Stefan Aarnio: About eight or nine of them are income-generating, so those are either salesmen, in my info business, or they’re acquisitions people. Then we’ve got in-house accounting, which is awesome; having in-house accounting makes your life awesome. I haven’t opened my mail in five years. They just open it, they sort it, they bring me a stack of signed things and reports… It’s amazing.

I’ve got a really good assistant, who just gets better and better every day, and then the other person – we have a guy who does nothing but shipping mail. That’s all he does – mail, every day.

Joe Fairless: What is he mailing? Direct mail…?

Stefan Aarnio: We sell a lot of books. We’ve got a lot of books, courses, programs, so every day there’s a massive FedEx thing and a massive Canada Post going out. So that guy just does mail, and that’s a pain in the neck when you physically mail stuff, because people lose it, or they put the wrong address… And of course, the customer is always right, and Amazon gets it in one day to the customer, and they’ve gotta wait a week; people get pissed off now, right?

Joe Fairless: Right. You’ve got the 11 people, and it’s interesting how you labeled the 8-9 as “income-generating.” I love thinking about it that way… Who came first, and how did you bring on these team members? We can just group them as the nine income-generating people, the accountant, the assistant and the shipping person… Who came first and in what order?

Stefan Aarnio: Oh man, Joe, that’s the best question, because there’s so many guys out there that want to scale, but they don’t know how or they’re afraid. Now, I remember when I went – I think it was 2013, so about five years ago – to a conference, and a friend of mine was selling Infusionsoft packages. I guess he had  an Infusionsoft guy that would fly in, and he was selling it, and… I’d written a book, and I was flipping a bunch of houses, and I was alone, I was one guy… And he said to me, “You should buy Infusionsoft.” And everybody goes, “Oh, man, 1,500 bucks down, and 300 bucks a month… I don’t wanna pay that.” He said, “Just do it”, so I just did. I swiped my credit card, I bought the CRM, and I went home and I had no employees.

I had a little office, I walled off a part of my house, I built a wall, with nice doors and everything, and branded it up so it’d look cool… I had this little office, empty; I went to IKEA, I bought three desks… I didn’t even know what to do with Infusionsoft; I didn’t know anything about it, and I still don’t know anything about it… Other people do it, I know nothing about it. So I hired two girls – one girl was gonna be an acquisitions person; and I put her on salary, which was a horrible idea… I would never put an acquisition person ever again on salary. Bad idea. And then I also hired another girl – I had these two girls trying out to get a job with me, and the deal was “Go out and get me a real estate deal at a discount, and whoever gets it is gonna get the acquisition job.” That was the interview, and it went on for like a month or so. These girls are interviewing for a month, trying to get a deal…

So one of the girls got a deal, I hired her for acquisitions, on salary. Bad idea. Then the other girl – I was like, “I don’t know what to do with you, but I love you, I think you’re great.” So we ended up opening an accidental coaching business. And I just call that “accidental coaching” because I never planned on having a coaching business. But I said I don’t wanna let this girl go, so I’ll open a company with her.

Then the third person we hired was a bookkeeper. That was a big disaster, because that bookkeeper didn’t bank-reconcile the books to the bank account, and we went for 2-3 years with no reconciliations, and me being ignorant, I didn’t know what a bank rec was. So suddenly, three years down the road, I had a $40,000 bookkeeping bill to clean up my books, because nothing was tied to the bank account.

I was getting reports, I was getting Excel spreadsheets, I was like “Oh, this looks great. This looks great.” Nothing was reconciled. I had some multi-millionaire investors investing; one was an accountant, and he said to me “Your bookkeeper is not reconciling anything.” I didn’t know what that meant, so I was like “Oh…” And they were getting freaky and sweaty, because they did their own books on their own account with me. So I had my rich guys in one account, then I had everybody else in another account… So their account was reconciled tickety-boo, super-tight, numbered checks in Ziploc bags, and then the other account was just the wilderness. It was like squirrels, and gerbils, and wolves, and rabbits, and eagles… It was crazy, man… That was a super-bad–

Joe Fairless: How did you find that bookkeeper, the one that messed up?

Stefan Aarnio: Oh my goodness, you know what – I don’t even remember. My guess is  – I have a long list of hires and fires… The worst people have been from the online classifieds, like Craigslist, Kijiji… She was probably a Kijiji. And then all my best hires have always been referrals or customers. Those are tremendous. I stopped hiring, because I had a headhunter I hired. I think I burned through four or five bookkeepers through that headhunter, and then the lady that does it now, she’s really great. She was a referral through one of the headhunters. She came in and starting working for minimum wage in office, sorting things during that bookkeeping debacle, and then she ended up becoming the bookkeeper, and she’s grown from there. So everybody in my office is a referral. Kijiji – forget it. Craigslist – forget it. Headhunters – forget it. Recruiting people is much like acquiring customers – you need to indoctrinate them and they need to be in love with your brand. I always say it’s like Disneyland – if you don’t believe in Disney, you’re not working at Disneyland. If you haven’t seen the little mermaid, you’re not coming to Disneyland. If you don’t like beauty and the beast, you can’t work at Disneyland, and that’s how my place is. You’ve gotta read all my books, do book reports, you’ve gotta know everything about it to even come to Disneyland over here.

Joe Fairless: What’s your best real estate investing advice ever?

Stefan Aarnio: Oh, man… Best real estate investing advice ever. Are we talking for an advanced person, or a beginner?

Joe Fairless: Let’s go advanced.

Stefan Aarnio: Okay. Interesting, I think right now for me on an advanced level it’s about strategy. I’m playing it like a Monopoly board now. I want key pieces, strategic pieces of land, in strategic neighborhoods. For example, this building I’m buying right now, it’s got signage on it that’s better than the building. That’s a strategic piece.

I just bought my neighbor’s house, because I’m assembling on my street;  I’m assembling, buying them one at a time. I think that when you assemble or when you have strategic pieces and you think strategically — it’s not just about cashflow… Everybody wants to know “What’s the ROI? What’s the cashflow?” They’re like these little sizzly hot little numbers. I’m more interested in what’s the strategic, what’s the 30-year term of this.

Here’s a crazy thought, actually, Joe. This might be it. If you’re doing buy and hold and if you’re holding it forever, it kind of doesn’t matter what you paid for it.

Joe Fairless: Yup.

Stefan Aarnio: And that should blow your mind a bit, unless you already think that way…

Joe Fairless: As long as it cash-flows.

Stefan Aarnio: Yeah, it cash-flows even 50 bucks, 100 bucks, or whatever. If you buy it today at any price and you hold it for 30 years and you plan to never sell, that is an amazing deal. That’s what Warren Buffet does. So jump with Warren Buffet and buy things with the intent of never selling, and buy them strategically, so you own that street corner, and you own that sign.

I just bought my neighbor’s house and I’ve put my employees in there, and they live there in offices next door. Strategic. The strategic things you do with real estate on a 30-year period or a lifetime period is where you’re gonna make the most money.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Stefan Aarnio: Let’s do it!

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:23:49].04] to [00:24:56].28]

Joe Fairless: Alright, best ever book you’ve recently read?

Stefan Aarnio: The Fourth Turning. I think it’s by William Strauss. It’s about the four cycles of history. Amazing book, you’ve gotta read it.

Joe Fairless: What’s the best ever deal you’ve done that we have not talked about already.

Stefan Aarnio: That’s a hard one… I’d say buying this neighbor’s house here and turning into employee quarters is just really hot. It’s next-level with the strategy.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Stefan Aarnio: Oh, dude… Worst one ever – I had a deal, we were flipping, it was a buy-fix-sell on a duplex, and we found out — everything it said duplex-duplex-duplex; my lawyer bought it, we paid for title insurance, and the city came back to us and said it wasn’t a duplex, and our title insurance was never purchased, so now we were suing for errors and omissions. That was absolutely brutal. That was like a 100k loss. Super-brutal.

Joe Fairless: What’s the best ever way you like to give back?

Stefan Aarnio: Best ever way to give back… That’s a really interesting question. I go on Kiva and I fund chicken farms for people. So I do micro-loans, and help as many guys start chicken farms as possible. I only do chicken farms, and that’s it. Just chickens, chickens, chickens, because chickens have such a high yield that it can get the most people out of poverty. I really believe in setting people up with the chicken business.

Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?

Stefan Aarnio: They can go to StefanAarnio.com, or follow me on Instagram, Facebook… I’m the only Stefan Aarnio on Google, I’ve got the first 30 pages just to me.

Joe Fairless: Stefan, I really enjoyed our conversation, and thanks for being on the show. I learned about how you got to this point, as well as how you scaled, the 11 people in your company, and the order in which the first couple came about. One, the acquisitions person and the unintentional coaching business, and then the bookkeeper that didn’t work out, and how you found the person who didn’t work out, online, versus referrals and having customers then team up with you.

And then also, the  vertical integration, with the staging company, as well as other ways that you look to vertically-integrate your business. Thanks again for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Stefan Aarnio: Thank you.

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Melanie Bajrovic and Joe Fairless

JF1351: From Bartender To Millionaire Real Estate Investor & Entrepreneur with Melanie Bajrovic

Melanie was lucky enough to have parents who taught her about money, and how to save it. By the time she was 22 she had a “nice nest egg”. Looking for guidance with what to do with her cash, her dad suggested investing in real estate. Starting with single family homes and then moving into commercial real estate and opening her own business in a piece of property she bought. Hear what it takes to improve your quality of life substantially through real estate investing. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Melanie Bajrovic Real Estate Background:

  • Serial Entrepreneur, Real Estate Investor, International Best Selling Author, Speaker and Educator
  • Became millionaire at the age of 27, is an inspiration for those who have a vision for what they want in life
  • Author of The Wealthy Barmaid: From Minimum Wage to Millionaire
  • Went from being a waitress to owning multiple investment properties   
  • Based in Niagara Falls, Canada
  • Say hi to her at https://www.melaniebajrovic.com/
  • Best Ever Book: 7 Laws of Spiritual Success by Deepak Chopra

Join us and our online investor community: BestEverCommunity.com

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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Melanie Bajrovic. How are you doing, Melanie?

Melanie Bajrovic: Great, great! Thank you so much for having me, Joe.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Melanie – she is a serial entrepreneur, a real estate investor, a best-selling author, a speaker, educator; she became a millionaire at the age of 27, and she is the author of The Wealthy Barmaid: From Minimum Wage to a Millionaire. Based in Niagara Falls, Canada. With that being said, Melanie, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Melanie Bajrovic: Sure, absolutely. My career in real estate started pretty young, because I started working at a really young age. I was 12 years old, and my parents had  a restaurant; you know how it goes, you start working in the family business… So I started in the back, in the kitchen, I went on to hostessing and [unintelligible [00:01:56].08] and bartending, and I did that for a solid 15 years steady, all through school.

What I was doing at that time was I tried to save as much as I possibly could. My mom was big on saving, she taught me from a young age, so I was saving 100% of my paychecks. By the time I was 22, I had a good little nest egg, a bunch of money saved up… But at that time I was already  like — you know, not that I don’t love bartending, but I knew I didn’t wanna be a bartender forever, so I wanted to figure out how could I make that money work for me.

It was actually my dad who recommended that I invest my money in real estate, and it was one of the options I was looking at, so I decided to do it, and that was one of the biggest turning points for me. I ended up looking at like 100 properties before I found the one, and it absolutely shifted everything for me… It was the best decision I made. It was a single-family house. That’s been my strategy ever since.

Since then, I just continued to purchase more single-family homes, building myself a little portfolio, which was super cool. It never was intentionally the idea, but I just thought “Hey, I want something for retirement, I want something just in case… What if something happens to me?” I knew that these properties would produce something. I wasn’t that savvy back then, but…

Then when I was 27 years old and I was still working in the bars, again, through school, I felt it was time I wanted to start my own business and get into commercial real estate. I knew that would be another big turning point for me, so that’s what I did. I bought a big piece of commercial property out where I’m from – it’s a city very close to Niagara Falls called St. Catharines – and I decided to run my business out of it. It’s a restaurant/bar, it’s had success five years and counting now, as we do this podcast… And again, huge turning point for me, both financially and just for my own confidence, because it was such a big decision; I was scared out of my mind. I really put everything out on the line… But again, one of the best moves I’ve ever made, and that kind of brings us to today.

Joe Fairless: Wow. Well, congrats on that starting incredibly strong out of the gate with the single-family house you bought when you were 22 years old, and then you continued to buy more. Were all those properties in Canada?

Melanie Bajrovic: Yes, they were.

Joe Fairless: Okay, cool. What type of financing did you get with those properties? Especially the first one, know that that was the first deal that you did, and banks might not have been as happy to lend to you.

Melanie Bajrovic: True. What happened on that first deal… Again, I had (I guess) — I don’t know if you wanna call it an advantage, or on the opposite spectrum, I did it the really slow and hard way; I saved up a ton of money, I was able to provide the down payment that was needed to do a conventional mortgage. Now, at the time there was a bit of a mistake here for me — if I had put in 5k or 10k more, I wouldn’t have needed the mortgage insurance. So I ended up getting it with that mortgage insurance, but that added to my monthly payments, it made it a little higher… But I did it by myself, with my income at the time; I had enough down payment, so it was a conventional mortgage on that first one.

Joe Fairless: Then how many homes did you buy after that, until you purchased a commercial property when you were 27?

Melanie Bajrovic: I purchased four more over the course of those next five or so years, and again, I saved as much money as I could; I was working three jobs, so I was able to save at an accelerated rate. I was still in school, and I lived with my parents, so I kept my own living expenses down a lot, so that I could invest in real estate. That’s basically how I did it – I was able to get those mortgages; I needed a co-signer for the last two, because my income wasn’t high enough… But the banks that I used were able to use my first few properties – the rental income – as part of increasing my rate of income to give me a better ratio, so I was able to get a mortgage with them. So they were pretty standard.

Joe Fairless: Who co-signed? Your parents?

Melanie Bajrovic: My parents, yeah.

Joe Fairless: Cool. Working three jobs at one time… Will you tell us what a day looks like working three jobs?

Melanie Bajrovic: Well, it was fun… I was just revved up, I was so excited about buying more real estate, and I always am; I’m always trying to figure out “How can I do more?” and it excites me to do so. But I’d wake up fairly early, I’d go to my first–

Joe Fairless: What time, on average?

Melanie Bajrovic: Maybe 8.

Joe Fairless: Okay, [8:30].

Melanie Bajrovic: I didn’t have to be at that first job till 10 AM, so…

Joe Fairless: What was the job?

Melanie Bajrovic: I’ve had a bunch, but this one – I’m thinking now one of the first times I was working three jobs, I was a marketing director at an arts council.

Joe Fairless: Okay, so you’d work from 10 AM to what time, as a marketing director at the arts council?

Melanie Bajrovic: It was about 4 o’clock.

Joe Fairless: Okay, 10 AM to 4 PM, and then what was the second job?

Melanie Bajrovic: My second job — it would be on different days; all three wouldn’t happen in one day.

Joe Fairless: Okay.

Melanie Bajrovic: I’d go to the bar, and I’d work till — it depends… I’d have school too though, right? So I’d have to kind of puzzle every piece in there. But if I had classes that day, I’d finish those classes… And it’s really cool in university, you get to pick your own blocks of time when you have your courses, so I was good with scheduling. Then I went to work at night; I’d most of the time close down the bar, but not every single night. Weekends, most definitely I did.

Then another job I had – I worked for a PR company, so I did public relations.

Joe Fairless: And you had that job at the same time as a marketing director? So you were going to school, and you were also working three jobs – roughly how many hours were you working on average a week?

Melanie Bajrovic: Yikes! All together, I mean… Six hours — there was that, and then a good 40 at the bar, plus another… It was definitely 80 hours.

Joe Fairless: 80 hours a week, plus going to school… [laughs] And what period of time did you do that approximately?

Melanie Bajrovic: Definitely from the age of 23 on, I was working that many jobs. 12 to 22 I was just doing the–

Joe Fairless: Yeah, sure… As a 12-year-old you weren’t working 80 hours? You’re such a slacker. [laughs] Got it. So from 23 to approximately 27? Okay. That’s incredible. What a commitment. And how did you think about your social life? You were living with your parents as a 23, 24, 25, 26-year-old… Most people — well, I don’t know about most, but some people (myself included) might think “Oh, what a buzz kill! I don’t wanna live with my parents at that age.” How did you think about that as a 27-year-old?

Melanie Bajrovic: Sure, it had its ups and downs… Also, my family background was Serbian and Bosnian, so it’s very much a culture thing that, you know, you stay with your parents until you get married, or [unintelligible [00:08:28].07] so it was very normal in our culture as well. But I was just — I don’t know how to explain… People ask me that all the time, they think “Man, you really missed out on so much” or “Is that good? All your focus now is work, and money, and investing in real estate”, but I was so hungry for it that it didn’t bug me. I just wanted so bad to secure myself financially; I wanted to make sure that no matter what, I’m gonna be able to do whatever it is I wanna do. No one’s gonna tell me no, and I’m gonna be able to just provide whatever I want for myself, and that was stronger than anything else, than any night out, partying with friends or whatever. Of course, I worked every major holiday, event, Halloween, St. Patrick’s days, whatever you wanna call it, but I was banking it, so I didn’t mind. It truly wasn’t like a huge sacrifice at the time. My wants were bigger.

Joe Fairless: Why do you think — and this is more of a philosophical question, so there’s really not a right answer… But why do you think some people want financial independence but don’t go to the lengths that you went to, working 80 hours, plus going to school, living with your parents (although perhaps it’s a cultural thing, so it’s not as shocking, but still…)? Why do you think that is?

Melanie Bajrovic: Like I was kind of explaining – it’s either just having that want that is so powerful to you, inside of you, for whatever reason… Maybe they don’t have that; maybe they’re like “I don’t know, I’m fine. I don’t need that much. I’ll always have a job, I’ll be okay…” Nothing drives them to the point of insanity, like “No, no, no… No way, Jose! I need to have my own stuff!” It’s either that, or plus, they just didn’t develop that discipline perhaps.

And again, I grew up with a family — my grandparents practically raised me; came from Yugoslavia in 1970 with nothing, with four kids, didn’t know a lick of English, knew nothing about the country or the system, the banking, or anything, and they made it, they survived, and I grew up with them, watching them work like dogs, they did whatever it took. They were in the bar industry too back in the day, and just stuff I saw them do and go through… No matter what, they just made it happen, went to work when they didn’t feel like it, three in morning, cops call, vandalism – it doesn’t matter what it is, they just get up and go, there’s no other option. So I was brought up with that, and maybe that’s where the discipline comes from potentially, that other people don’t have. That’s gotta be the only thing I can think of.

Joe Fairless: Yeah, the immigrant mindset where you’ve been exposed to your extended family – they didn’t have anything when they came to the country, and you saw that, and you wanted to replicated what they created based on their hard work, it sounds like. Is that fairly accurate?

Melanie Bajrovic: Absolutely. I saw what’s possible if you truly hustle, if you want something and get after it, you can really have it… So I felt “Whoa, sky is the limit then.”

Joe Fairless: I also think that anyone who is driven, who lives with their parents until the age of 27, will do whatever it takes to create that financial independence, so that they’re not… So maybe there’s also — if we’re not an immigrant, or don’t have — well, I guess we’re all technically immigrants in some form or fashion, but if we aren’t a generation or two removed from being immigrants, then maybe we just go live with our parents until we’re financially independent, and then that will really drive us to do something things.

Now I wanna talk specifics about this commercial real estate property… You said you’ve got your restaurant and bar; did you have a restaurant before purchasing the property, or did you create one as a result of buying this property?

Melanie Bajrovic: No, I never had my own bar or restaurant, but because I’d been working for my family for a long time, I ended up managing their entire business – and it was a big operation; 25 employees, for example… They went away a lot; they went back home to Serbia, former Yugoslavia, they took a lot of trips; I was the manager, I dealt with everything, so after years of dealing with all that, I thought “Alright, I know what it takes, I can do this on my own.” I didn’t wanna work for my parents necessarily… I didn’t wanna work for anyone my entire life; I was always an entrepreneurial spirit, I had other little side businesses of my own from the age of 16. So I always knew I wanted to be an entrepreneur, and it was just around that time that I was sort of done with it. I’m like “Okay, I don’t wanna do this anymore. It’s time for me to create my own. I need to do my own thing”, and I was ready.

So that’s at the age of 27 – I just started looking around for opportunities, for properties; I knew that the only thing I knew hardcore how to do was the restaurant business, the bar industry, so that’s where that decision came from. I found a great property for that, and started my own business from there.

Joe Fairless: So you bought the property and you created the business within the property.

Melanie Bajrovic: That’s right.

Joe Fairless: How much was the property?

Melanie Bajrovic: I paid $550,000. It’s a 20,000 square feet property. The building itself is 5,000 square feet. And it was a bar previously, so it was set up… It was super old, so I had to do a lot of fixing up of the place, but it had a bar, it had a kitchen.

Joe Fairless: And that was five years ago?

Melanie Bajrovic: Yeah, 2013.

Joe Fairless: That was five years ago… And what would you say it is worth today if you were to sell it?

Melanie Bajrovic: I’ve had some people kind of looking at it, and some commercial agents asking me if I’d be interested in selling, and it looks like the going rate around now is between 950k and 1.2 million.

Joe Fairless: Congrats on that. How much did you put into the property?

Melanie Bajrovic: That’s the best part about this deal… The way I structured it was some creative financing by using other properties as collateral. I was able to pick it up with hardly anything down up-front. It was really like a crafty deal.

Joe Fairless: Will you elaborate on that?

Melanie Bajrovic: Yeah. One of my best mentors is my uncle; he is a huge financing guy and he really helped structure that deal… But I just leveraged the other properties, all as collateral… And I think it was 5 points to the banker, and it was a good rate. I had to pay closing costs, sure… I mean, maybe when all was said and done it was less than $20,000 that I had to put upfront.

Joe Fairless: Wow. And then to get it to be functional and ready for the first customer to have a beer, how much money did you put into it?

Melanie Bajrovic: Interesting story about that. I purchased it (I believe it was) March 1st, and it ended up falling on a Friday. I was adamant that I wanted to open up for business immediately. This other restaurant that I had purchased it from – they had gone downhill, but they still had the doors open… And it was really rough, but I thought “I don’t wanna wait… If there are any regulars or customers still coming to this location (which I saw there were, circling in and out), let’s open the doors right away.”

So you wouldn’t believe me – I had a team, I had already hired girls and doing interviews elsewhere; I did some at my parents’ restaurant, letting them know that a new bar is opening up, screening people… So I had a team, I took an SUV truck, went out and bought kegs, cases of beer, I had another girl buy a bunch of food… I had everyone who was opening up with me come at this very time, and the lawyer ends up giving me the key at like [4:30] PM on a Friday – I literally drove from the lawyer’s office, came there, unlocked the door… Everyone rushed in, swept, mopped it, a quick little thing, put some food and the beers in the fridge, and I opened for business right away, that day.

Joe Fairless: Wow.

Melanie Bajrovic: I did my renovations and things little by little by staying open. I did a lot of stuff overnight, but overall, because I did it little by little, it’s hard to give you a number right now. At least 10k in the very beginning, and then I did more – I redid the bar area, I redid furniture, I redid the booth area… But all one by one.

Joe Fairless: Yeah. So 20k to close approximately, 10k at the beginning, so that’s 30k, and the way you’re talking about this, it sounds like maybe another 20k over the last 4-5 years?

Melanie Bajrovic: For sure. We’re not counting all the repairs I’ve had to do [unintelligible [00:16:17].24] Yeah, I’d say another 20k, for sure.

Joe Fairless: And then if we were counting those repairs, approximately what would that be? [laughs]

Melanie Bajrovic: Oh, man… Something breaks every week, so I don’t know how to tell you this one, but… Oh gosh, at least 10k/year. One year my HVAC went, and that was 10k by itself, never mind any compressors, or fridges and coolers and stuff… But let’s call it at least 10k-15k/year.

Joe Fairless: Got it, okay. Fair enough. So no more than around 50k, not including ongoing repairs and maintenance, but just improvements – about 50k all in to close, and now it’s worth approximately 950k, up to over a million.

Melanie Bajrovic: Yeah.

Joe Fairless: That’s incredible. Now, if they were to buy that, I imagine they’d be buying the bar and the restaurant, which would be a little sticky, since you’re the owner of it…

Melanie Bajrovic: Right.

Joe Fairless: So how would that work?

Melanie Bajrovic: Well, are you talking about the price, or…?

Joe Fairless: Yeah, if someone were to buy the property from you…

Melanie Bajrovic: I would include the business.

Joe Fairless: You would include the business. But you’re the one who’s running the business, yes?

Melanie Bajrovic: Yeah. I split it up into two corporations. One company is the tenant, which I happen to be the president of, and the other company is the real estate holding company that I rent from. So it is funky, because I’m both, but it’s set up in two different corporations. So if I were to sell, I would sell everything as is. Of course, I’m not gonna rip the bar out or rip any equipment out from the kitchen. I would just include all that in the price, and I’d sell it with the business, for sure.

Joe Fairless: In order to get this deal, you did the creative financing. Your uncle helped mentor you, and you leveraged your five properties and used them as collateral, and that allowed you to have less down than what’s typical… Let’s go through a hypothetical scenario – you get a really good offer for, let’s say, 1.2 million, because I think that was the high end of the range, yes?

Melanie Bajrovic: Yeah.

Joe Fairless: Okay, so you get a really good offer and you decide “Yeah, let’s do this. I’m gonna sell”, and then you take the profits from that money and you go to buy something else. In order to buy something else, you are told by the lender that you need to use your other properties as collateral in order to guarantee this loan. Would you still do that?

Melanie Bajrovic: I would. If it’s a great deal and I see a ton of potential that it’s gonna make me a lot of money — again, I’m certain in my capabilities that I’ll make sure whatever the business is, whether it’s just commercial rentals, my own business… I’d have to look at the situation, everyone will be different, but yeah, I would do it again, absolutely.

Joe Fairless: Cool. And obviously, you know the reason I’m asking, because it could be a domino effect; if something goes wrong, then boom – everything gets wiped away and now you’re starting from scratch, whereas if it was isolated and you weren’t using this collateral, then it wouldn’t be a domino effect.

Melanie Bajrovic: But it’s just a matter of doing the deal or not, if it’s a yes or no; yeah, I’d still do it, but making sure all your ducks are in a row  and you assess the risk.

Joe Fairless: Based on your experience, what is your best real estate investing advice ever?

Melanie Bajrovic: Oh, boy… So I thought about this a lot, and one of the biggest in terms of single-family homes, if you’d like to discuss that, was really renting out your property to maximize your profits and your passive income. I think this component gets overlooked a lot. People are just really trying to make some quick money, get it occupied, but it’s so gravely important; it’s one of the biggest lessons I’ve learned so far, and I can really get into some details.

Joe Fairless: Yes, please.

Melanie Bajrovic: After setting your rent, learning how to do all that property marketing, conducting the showings, getting to know people, it’s really processing the application and screening the tenants – that’s one of the most important parts. I skipped it once; I can get right into that. So I didn’t verify these people – and this was like my fourth house, so I’m really embarrassed by this story…

Joe Fairless: They were really nice, and they gave you their word that they would pay, right?

Melanie Bajrovic: Absolutely! It just felt awesome… You know, when you just feel great vibes with people… They were wonderful people, so I wasn’t worried at all. I tried calling the previous landlord, but I just couldn’t get a hold of him, or something. All I did was call their jobs, and I learned, “Okay, fine” they were employed, but I didn’t do the proper background checks, credit checks, previous eviction notice checks – I didn’t do any of that stuff… And I got screwed royally; I hope I can say that word on your show, sorry…

Joe Fairless: People have said worse.

Melanie Bajrovic: Yes, okay! So they were literally con artists, I learned later…

Joe Fairless: Oh, wow, even better… Convicted con artists who then conned you. [laughter]

Melanie Bajrovic: Yes, yes! So what they were doing out there – amongst plenty of other things, I learned later – is they were posing as landlords in Toronto, and it’s a huge market there, so you get a ton of people coming out… And because it’s so competitive, people are throwing money at them, like “Here’s a deposit! Here’s a deposit!” So they were doing showings, taking all these deposits, and they fled the city.

Joe Fairless: On your property?

Melanie Bajrovic: Not on mine. That’s what they did in Toronto, I learned later. So because I didn’t verify stuff, it just turned out to be such a nightmare. I didn’t triple-check after the first month to make sure that the checks have cleared, didn’t check the second month; third month, finally, I’m like “Oh, this looks funky in my bank account”, so I looked at it – bam! I just see that nothing ever cleared, no payments went. They didn’t even get the utilities in their name; I didn’t do that afterward either, which is a big one now… I call utilities, just to make sure “Hey, did these tenants put it under their number? What date is it starting?”, blah-blah-blah… I didn’t do any of that.

I was $6,000 in debt because of them at this point, and now I can’t even kick them out; she’s pregnant, so… [laughter] Yeah, it was a disaster. By the time it’s your court date – it’s like three months later, and it cost me so much money, and they were mean to me… It was just brutal. Big mistake.

I was technically lazy, and I was just trusting without verifying. I don’t mind to trust people, but verify. So I really wanna make sure that everyone out there – please, God, don’t ever skip this step! Don’t be lazy, don’t overlook anything. They could be the nicest people in the world; you just never know.

That was the only bad experience. Every other tenant, I did everything right; I screened everyone properly, did all the checks, and 5, 6, 7 years later, still in my homes; beautiful, they take care of that property like it’s their own. One tenant just repaved the driveway, doesn’t ask me for a penny… It’s like their house. So you can have great experiences too, so don’t be scared off by it, but I’m just saying – don’t ever skip that step!

Joe Fairless: Trust, but verify. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Melanie Bajrovic: I’m ready!

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:23:01].21] to [00:23:42].07]

Joe Fairless: Best ever book you’ve read?

Melanie Bajrovic: The Seven Spiritual Laws of Success, Deepak Chopra.

Joe Fairless: Best ever deal you’ve done that we haven’t talked about so far.

Melanie Bajrovic: Oh, man [unintelligible [00:23:51].07] it’s gotta be my first, first house; it was awesome. It was a great deal. I got it for a super low price. It was an estate sale, and everything was just great.

Joe Fairless: What’s a mistake you’ve made on a transaction that we haven’t talked about.

Melanie Bajrovic: That we haven’t talked about – I would have to say maybe just not asking my banker for a lower rate.

Joe Fairless: Best ever way you like to give back?

Melanie Bajrovic: That’s truly the reason why I wrote my book and created a program, so I can just give knowledge, mentor others on how they can do all this, too. It’s giving my experience to helping fast-track their journey and impact other’s lives. That’s the best way I can give back.

Joe Fairless: And how can the Best Ever listeners get in touch with you?

Melanie Bajrovic: Absolutely – on my website, melaniebajrovic.com, anywhere on social media… I’m on all the stuff: Twitter, Instagram, Facebook, YouTube, LinkedIn – I’m all there at @thewealthybarmaid.

Joe Fairless: Melanie, thank you so much for being on the show. Thank you for talking about your journey, how you were able to save money through hard work from 12 to 27, some sacrifices – or perceived sacrifices; that is certainly debatable, because what exactly you are sacrificing to then gain… So perceived sacrifices you made, living with the parents – clearly not as social of  a  life as other 23-27-year-olds, because you were working a whole lot… Even though it was at a bar, which could be fun… But then also the approach that you took for the creative financing on your first commercial deal, and the risk assessment that you thought through from a collateral standpoint, using the first five properties as collateral. Some might not be comfortable with that, some might be comfortable with that, and it’s just interesting to hear your thought process for why you were comfortable with that.

Thank you so much for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Melanie Bajrovic: It’s an absolute pleasure, thank you so much.

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Edna Keep and Joe Fairless

JF1232: From Subsidized Housing To Multi-Millionaire Investor with Edna Keep

From nothing to $47 million in real estate using other people’s money. Edna tells us how she has been able to own so much real estate without investing much of her own money. Hear how she got her start, and what she did along the way that took her business to another level. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Edna Keep. How are you doing, Edna?

Edna Keep: I’m doing great, Joe. How are you?

Joe Fairless: I’m doing great, nice to have you on the show. A little bit about Edna – from a single mom at age 16, living in subsidized housing, to a multi-millionaire real estate entrepreneur… She has purchased over 47 million dollars worth of real estate using other people’s money, so we’re gonna stay focused on that, certainly.

She’s based in Saskatchewan, Canada. With that being said, Edna, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Edna Keep: Sure. As you already mentioned, my background – I kind of started when I was 16 years old, I had a child and it kind of limited some of my options, like a lot of people said. I was also a C student during school, so I never went on to university or anything like that… So our claim to fame is we’ve been able to purchase 437 doors, or 47 million dollars worth or real estate, using other people’s money. I think that my biggest ability to be able to do that is my background as a financial advisor for 15 years.

Joe Fairless: Okay. Let’s start with the financial advising and then we’ll work our way into the real estate, because it’s related… How did you get into that without a college degree, and then how did you achieve success in that field?

Edna Keep: Well, I actually started studying to be a financial advisor part-time while I was working as an office administrator. Years ago you were able – in my province, not everywhere – to get into studying and even working at it part-time without having a degree. So I studied and then I got my designation, which was certified financial planner, all while I was working at it part-time.

Joe Fairless: And then you mentioned your background with that is what helped you become the real estate investor that you’re at now, the level you’re at now. Can you elaborate on that, how that helped you?

Edna Keep: Sure. We took our training through the Rich Dad education group, which a lot of people do, and it was excellent; we learned so much. And I just started working at it, and we had set a goal of having 50 doors in five years, we thought. $5,000/month, which is kind of what we were led to believe, if we could get $100/month cashflow per property, we could have our $5,000/month goal. We were able to do that in 18 months.

How it came about is people just started asking “How did you do that? We’ve been doing this for three years, we can’t get that.” I realized then that it was my ability to talk to investors that I’d been trained on for 15 years raising capital for mutual funds. And we talked about it a little differently, but really the big thing is getting to understand what your clients are looking for, what your investors need, and I think most people in the real estate world – and even now because I train on it – a lot of people think “Well, why would people give me money to buy real estate?” Well, it’s not just them giving you money; you’re providing a very valuable service, and that is helping them get into real estate without them having to study it for years and years, taking a lot of the risk for them.

In our case, what we do is we partner with our investors. So we bring them in, partner with them, and they’re silent investors, but we know how to make sure that we talk their language. A lot of people think in real estate that if you tell the returns that we’re able to get, that every investor will be all over it, but it’s not true. Investors are more concerned with getting their capital back, they’re concerned about the return OF their principle before they were able the return ON their principle. And it’s like anything, if you start talking 25% returns, it scares people off.

Joe Fairless: Agreed. And with the first 18 months, because it sounds like that’s where you were able to really establish your track record in real estate… You said you were bringing in at least $5,000/month in real estate. Can you elaborate on what you purchased and how that was made up?

Edna Keep: Sure. Our very first purchase was actually a condo. We were quite fearful when we started. We were scared of tenants, and toilets, and just about everything. So when we were going around shopping with our realtor, he took us to some rental properties that actually had just been condominiomized and told us they were for sale… And it just so happened that my oldest daughter had just moved into one of them, so I said to him “Is that one for sale?” He goes, “Yeah”, and I said “Well, I’ll take that one then, because my daughter is a tenant and I know she’ll be a good tenant.” [laughs] So that took a little bit of the fear away.

We ended up buying the one right next door, because Donna had got to know the couple right next to her, and they lived there for 17 years, so we were thinking “Oh my gosh, there we go – we don’t have to worry about two tenants. They lived there for 17 years, they’re not going anywhere. So that was kind of our start, and we got that to happen.

Then our third purchase, which was really where other people’s money started coming in – we were able to talk a lady into leaving the down payment of the property in with the property. We got what was called “cash back at close”, I don’t know if you can do that anymore. Then we paid her an interest rate. So we talked to her two or three different times and really liked the property. She was still working on it; we wanted to make sure we got it, but explaining to her what a vendor take-back was, which is really partial vendor financing, and how it could work to her advantage, it made sense to her, so she invested in her own property, and we still own that property today. We make over $1,000/month on that one property. It’s an uptown duplex. The payment is less than $400/month, I think taxes are $50; all the utilities are separated, so the tenants pay them. So that property alone got us $1,000/month.

When we first started, we were taught if you can get $50 to $100/door, buy it; all day long, buy it if you can do that. So we bought a couple more like that after that, and then we bought a 24-unit. So in one purchase, we basically doubled what we already owned, and that’s how we got to our 50 doors in 18 months.

Joe Fairless: How much were the first two?

Edna Keep: The first two were 129k. You know, it’s funny that a person still remembers… There’s other properties we bought I don’t remember what I’ve paid for them anymore, but those first two – 129k. And you know, in the market that we were in right at that time, Saskatchewan had a really big boom between 2002 and 2010. We bought that in 2007, and within the first year we were able to refinance – or at the end of the first year, because we got a one-year mortgage… We were able to refinance and pull all of our money out of those deals, too.

Joe Fairless: How much did they rent for?

Edna Keep: When we first got them, they offered a rental pool, which was another thing that kind of made sense to us, because we were such newbies and we were scared of being stuck with these all by ourselves… And they were offering $700/month rent. I found out that my daughter was actually paying $740 rent, and I thought “You know what? We’re not gonna go in the rental pool; we’re just gonna collect the $740/month rent ourselves.” But that went up very quickly, and we’ve actually had those units rented out as high as $2,500/month when they were furnished. Right now they’re not furnished just the way that things are going in the market. They’re both two-bedrooms and they rent for — one’s at $1,400 and one’s at $1,200.

Joe Fairless: How do you know if you should furnish or unfurnish a condo?

Edna Keep: You know, that’s a good question. At the time for us it was, again, 100% about the market demand. There was a lot of employees moving into the city; the city was expanding a lot. There was just a need for it. People kept asking “Hey, do you have any furnished units?” and we went “Yeah”, and then we made them furnished.  [laughter]

Joe Fairless: Smart. Because clearly, the rent discrepancy is incredibly large with furnished versus unfurnished. Did you buy the furniture or did you rent it?

Edna Keep: We bought, because we found that going on Kijiji and different places like that, we could get some really nice leather furniture, which is what we like to have, because then you don’t have to worry about cleaning them all the time; you just wipe them down.

We found that we could get some really nice leather furniture for way less than if you bought it brand new, so that’s what we did. Then we would buy the beds brand new, because we always thought that that was important… But that’s what we did – we saved ourselves a lot of money. We could maybe furnish a two-bedroom place like that for $5,000.

Joe Fairless: Let’s talk about 47 million dollars worth of real estate… You said it was 437 doors, which is approximately $107,000/door. So those are higher price point units, relative to at least what a lot of people buy. What’s the business plan with a unit that is worth 107k? Are you buying it for roughly that amount, or is there a different business plan in place?

Edna Keep: Well, we’ve been buying now for ten years, so some of them were less and then some of them were more. The very first apartment building we bought, we paid $75,000/door. Right now, the average apartment building in our sweet spot, which is kind of the older buildings,  -1968 to 1980 – are selling around 120k to 150k/door right now. So it just kind of shows you what’s happened over the last 10 years.

The prices that I give you – some of them have increased a lot, and some of them we’ve purchased just in the last couple years, and our markets actually dropped a bit in the last couple years, so I just value it at the same price we paid for it. But our business model is we go in and we’re always looking for undervalued buildings that give us an opportunity to force appreciation, either through rent increases or renovating so that the properties are back up to more modern, because a lot of people just let their buildings run down.

Then the other key when we’re working with investor capital is to do that as quickly as possible so we get the investor capital back to them, and then we can use their money all over again.

Joe Fairless: You cash them out after a certain period of time, or are they long-term equity owners with you?

Edna Keep: We give them equity ownership, but we still try to get their money back as quickly as possible, because we don’t share in cashflow until the investors are fully paid out.

Joe Fairless: Got it. And what type of structure do you have in terms of when you enter, just the overall preferred return or ownership split, things like that?

Edna Keep: Our general MO is 60% to us and 40% to the investors. That’ll change up or down, depending on what our hold time is. For example, right now we’re working on one where we know we can get 75% of their principle back at the end of the first year, so we’ve only offered 35% ownership out to the investors. Because even after they get all their money back, they maintain their ownership, their cashflow, their equity appreciation, all that sort of stuff, and then of course, their profits if we sell. So yeah, a lot of it will depend on what our plan is with the building.

Joe Fairless: How do you get 75% equity back after the first year?

Edna Keep: We’re buying in some areas that the builder went in and built some really nice condo units expecting to sell them as condos, and he wasn’t able to sell them. Instead of renting them out — well, he started to rent them out, but he did a terrible job. It was really a case of a builder trying to be a manager; they didn’t know what they were doing, they were just kind of looking to stop the bleeding, so they were moving people in, charging them $800/month rent, brand new buildings, covering all the utilities, and they were just hurting.

So we actually got those buildings under agreement for sale, and what we were able to do with them, because the builder is in trouble and we kind of have a middle man who’s helping out the guy who invested with the builder, helping them out getting them sold… So what we do is we go in and we work on the appreciation of the building. We get it fully-tenanted at good rents. He was renting them at $800-$850/month; we’ve got $1,200-$1,250/month, and they’re paying all their own utilities. Sometimes we’re able to furnish those units, and then increase the rent to $2,300-$2,400/month.

So that’s our sweet spot. We know we can do this so fast it’s unbelievable. But we found out through just talking to the local people that a lot of them didn’t even know they were for rent. They thought they were only for sale, because that’s how they started out being… So once we started marketing properly, it only takes us a year to get everything up and running and smoothly running, and we’ve done it in a few different areas already, with the same builder.

Joe Fairless: So instead of selling the condos, you’re renting them.

Edna Keep: We’re renting them, yeah.

Joe Fairless: But what’s the big liquidation point where you’re able to return 75% of the original money that was invested?

Edna Keep: Well, because of the price that we’re able to buy them for is a lot less value than what we’re able to finance them for, once we get them full. In one case, Joe, there were three rooms rented out of twelve in one of those apartment buildings.

Joe Fairless: Wow. What are you able to buy them for per unit?

Edna Keep: They were built in 2014, so they were almost new, so we paid $127,000/door for them.

Joe Fairless: And what did you rent them for?

Edna Keep: The unfurnished ones go about $1,200-$1,250/month and they’re all two-bedrooms, and then if they’re furnished, it’s anywhere from $2,000 to $2,500, depending on demand.

Joe Fairless: Okay, so you’re renting them – let’s just say it’s unfurnished – for $1,250/month, and you buy them for $127,000… So how do you get the 75% of the money back after year one?

Edna Keep: The very first building that we did this with, when we bought it we paid 1.54m, and it was appraised at finance at 1.9m, so that’s how we get it back so quickly.

Joe Fairless: You’re doing a cash-out refinance.

Edna Keep: Yeah.

Joe Fairless: Got it. That’s what I was missing.

Edna Keep: Well, it’s not exactly a cash-out refinance, because we’re buying it under an agreement for sale, so we buy it at a certain price, we increase the value, and then we actually finance it for the first time with an actual lender. The agreement for sale is still a financing term, it’s almost like a vendor take back; they’re holding all the financing until we can get it to worth the value it should be.

Joe Fairless: With the structure — and I know it varies, it sounds like, for deal-to-deal, depending on what the deal looks like… You do 60/40 in a lot of cases; 60% general partnership (you all), 40% limited partner investors… Do you take an acquisition fee or asset management fees or anything like that?

Edna Keep: We will do a small acquisition fee upfront just to kind of keep everything running, but we pay a property manager to manage; we don’t do the management ourselves. But we don’t take a management fee during the time of the hold… Once the investor is fully paid out, that’s when we get our share of cashflow and all that sort of stuff. In the meantime, we’re kind of building up our sweat equity.

Joe Fairless: Makes sense. And what’s the acquisition fee typically?

Edna Keep: Generally, 1%-2%. When I’m working with my students, what I tell them is “You’ve gotta make it work for you.” At the beginning we didn’t take any acquisition fee because we were making good money and it wasn’t a focus. Our focus was long-term wealth. But here we are, ten years later, the whole long-term wealth is totally taken care of, so now we focus more on giving away higher ownership to our investors and taking the acquisition fee upfront. So I tell everybody “It’s your choice. If you give away more of your deal, you can charge a higher acquisition fee, and if you wanna own more of it, then charge less of an acquisition fee.” Generally, anywhere between 1% and 2%.

Joe Fairless: What is your best real estate investing advice ever?

Edna Keep: Take action. There’s so many people out there that take all the classes, and all the classes, and all the classes, and go to all the events, but they never actually pull the trigger… And you know, you can’t be successful 100% of the time; there’s always gonna be mistakes, but you don’t take them as “Oh my gosh, that was a mistake!” That was a learning opportunity. And just keep moving forward.

So educate yourself – absolutely; work with a mentor if you can, and then take action.

Joe Fairless: You mentioned earlier raising capital for mutual funds helped you understand what people need and how to have conversations with investors… What are some tips that you can give to the Best Ever listeners as it relates to raising funds for their projects?

Edna Keep: First tip – show the investor how they’re gonna get their principal back before you start talking to them about the return on their money. Second tip, don’t talk too high. Sometimes we know we can make 40% a year on our return, but you tell an investor that who’s not familiar with what we do, and they’re gonna automatically say that that’s too high a risk for them. Go ahead and tell them a lower return and go ahead and deliver, because then they’re locked in with you for life.

The other thing is treat those investors like gold, and they will invest with you again and again and again. I see people make the mistake all the time of — if something is not going exactly right, they don’t report, and then people, because they know (they know what’s going on in the market, especially if it’s a market condition, which usually it is), they think you’re sticking the head in the sand and they all of a sudden start thinking all these terrible things are going wrong, when really a lot of times if you’re just staying in contact with them and letting them know what’s going on, then the trust is never broken. But if you ever break that trust, they won’t come back and your whole business model, if it’s predicated on that, it will never work; you’ll spend all your time looking for new investors.

Joe Fairless: What are some specific examples or ways that you treat your investors like gold, other than the most important thing, delivering on the projects? Any tactical things outside of the project that you do with your investors?

Edna Keep: Well, the reporting is a big thing. We report quarterly. Then once a year we get together in a group and we usually have all-day meetings for two or three days and back-to-back we’ll talk with specific investors, report to them live, and then have a dinner together where all the investors can hang out together. Birds of a feather like to flock together, and they like to know that there’s other people out in the world doing the same thing they are, which is really trusting other people with their money, and when you can bring them together like that, we find they really appreciate it.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Edna Keep: Sure!

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:21:22].07] to [00:22:10].02]

Joe Fairless: Best ever book you’ve read?

Edna Keep: Why Do A Students Work For C Students, And B Students Work For The Government, Robert Kiyosaki.

Joe Fairless: Best ever deal you’ve done that you have not mentioned?

Edna Keep: That’s one of my favorites! We bought 144 units all at one time, four apartment buildings, small town, 3,000 population, raised 1.2 million dollars (it was about 40k/door). Two and a half years later we refinanced out, had everybody paid back, ourselves and our partner, got a $75,000 acquisition fee, got our partners paid out in 2,5 years, went on to buy two more buildings. At refi, we each got a $400,000 payday, and we make 10k/month in cashflow.

Joe Fairless: What’s a mistake you’ve made on a transaction we haven’t talked about?

Edna Keep: We’re currently living through one. We bought one building and we paid the same price six months later when we bought another building. It was the same seller, so we had a good experience with him, but we went into a market where we were increasing our rents when we should have been decreasing our rents. We just missed that window, we weren’t paying attention good enough, and we ended up with a whole pile of vacancies all at once, so we ended up putting money into our deal, when we’ve never had to do that before.

Joe Fairless: Are you putting it in along with your investors, or is it just you, or is it just the investors?

Edna Keep: In the ten years we’ve been running, we’ve only ever had two cash calls, and they’ve both been market-related. One with a partner, who’s kind of in control of the money, so I didn’t have a say on it. This one, I own almost 50% of the deal, so I just went, “If I’ve gotta put in 100k, and I’ve gotta put in 50k anyway, I may as well just put in the full 100k, save my reputation with the clients and just ride it out.”

Joe Fairless: What’s the conversation like with investors during that situation?

Edna Keep: I just stay in touch with them all the time, and I’ve told them, I’m not really sure — lots of times we’ll get that building full, and then next thing it starts being vacated again. So our plan is we’re just gonna sell it. We’ve had it for three years, it hasn’t performed for us, so we’re just gonna put it on the block and sell it. We’re not gonna sell it at a loss, we’ll hang on to it because it’s not costing us any money right now, we’re breaking even on it, but we can’t get it to the point where it works like it should work.

Joe Fairless: What’s the best ever way you like to give back?

Edna Keep: I love sharing my knowledge with other people. We’ve been able to build a really nice lifestyle in ten years, and I love sharing that with other people, teaching them what we did, what worked for us. I run a mastermind and I have a couple programs, and I just love seeing the light go on for people going “I did exactly what you told me I could do!”

Joe Fairless: And how can the Best Ever listeners get in touch with you?

Edna Keep: They can reach out to me on my website, and that’s EdnaKeep.com. Or they can e-mail me at Edna@EdnaKeep.com.

Joe Fairless: Edna, thank you for being on the show and talking about your experiences, the lessons learned as you’ve scaled your real estate business and company, the way that you structure  deals with investors, the types of fees that are charged, as well as the types of opportunities that you’re working on, and what happens when things don’t go right, the cash calls and how do you approach that from a communication standpoint, as well as tips for raising money for projects for the Best Ever listeners, those three tips – one, show how investors will get their principal back; two – be conservative, and three, treat investors like gold and they will invest again and again and again.

Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Edna Keep: You’re most welcome, Joe. Thank you very much for having me.

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Best Real Estate Investing Advice Ever Show Podcast

JF1114: How To Do A Successful Land Development Deal with AJ Hazzi

When the opportunity to buy a piece of land presented itself, AJ took his first step into the world of developing. It was his first development and he was successful with it, profiting about $1.4 million over a 5 year span. Hear exactly how the deal came about, how he was able to envision the sub-division on the land, getting the planning commission to agree to re-zone, and why he decided to also become a new home builder for the development. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet:

AJ Hazzi Real Estate Background:
-Founder & Associate Broker at The Vantage West Realty Kelowna
-Portfolio includes development property, resort property, rentals, fix and flips and cash flow properties
-The #1 recommended Kelowna real estate agency by Barbara Corcoran
-Winner of the Kelowna Chamber of commerce Young Entrepreneur of the Year award
-Based in British Columbia, Canada
-Say hi to him at www.vantagewestrealty.com/
-Best Ever Book: Millionaire Real Estate Investor

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Joe Fairless:  Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

We’ve spoken to Barbara Corcoran from Shark Tank, Robert Kiyosaki, author of Rich Dad, Poor Dad, Emmitt Smith (he plays football and he does development), and many others. With us today, AJ Hazzi. How are you doing, AJ?

AJ Hazzi: I’m doing fantastic, thanks.

Joe Fairless: Nice to have you on the show. A little bit about AJ – well, we’ve got the winner of the Kelowna Chamber of Commerce Young Entrepreneur of the Year award. He is the founder and associate broker at the Vantage West Realty Kelowna. His portfolio development property, resort property, rentals, fix and flips and cash flow properties. He’s based in British Columbia, Canada. With that being said, AJ, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

AJ Hazzi: You’ve got it. Well, I got into the business when I was 19 years old and I became a real estate agent shortly thereafter. This was just going into that boom that we had from 2002 all the way up into 2008. I caught the bug early and was just really feeling that I had found the right business for myself, because I hadn’t experienced any downturns yet, so I was collecting real estate as fast as I could get my hands on it, doing a lot of flips to try to build up my capital.

By 2007, I had about 15 doors and was doing pretty good; then, obviously, the downturn happened and [unintelligible [00:02:21].13] a couple knocks, but weathered the storm pretty good because the bulk of my portfolio was all cashflow stuff. Like I said, I still have my real estate company here, a property management company, and since then I’ve been doing a lot of development stuff, buying some multifamily apartment buildings, that kind of thing.

Joe Fairless: What is your project right now that you’re focused on?

AJ Hazzi: I’ve got a few different projects. We’ve got a small lot subdivision, 13 modern green-built homes near the city center; we’ve also got 14 villas at the golf course [unintelligible [00:02:50].26] and I’ve got some projects downtown, some work/live lofts that we’re building, 10 units down on South Pandosy Village.

Joe Fairless: Why the evolution from buying existing properties to buying dirt and then building the properties?

AJ Hazzi: It wasn’t necessarily that I switched. I still purchase regular residential property. I’m just all about trying to add value anywhere we can add value, and there were certain pockets and certain opportunities that came to me that warranted a good, hard look, and at this stage in my career the access to the capital needed to do these types of things is there, and that’s why we’ve gone that route. But the bread and butter stuff, the multifamily, the duplexes, the houses – all those things are still a focus.

Joe Fairless: It’s one thing to want to add value by identifying an opportunity to build, it’s another to actually execute on it. How did you find the team members to surround yourself with since you hadn’t done it previously?

AJ Hazzi: You just hit the nail on the head there; you need a team, 100%. You can’t do it all. A gentleman that I know worked at a consulting firm, and these guys helped developers put together plans specifically, all the way through project management. So my first project there would be a small lot subdivision. I was foolish enough to think I could project-manage it myself, and I had these guys do the engineering side of it and the consulting side, and then I project-managed it. I would never do that again. I always wanna do a project manager… Give up the 8% and let somebody else do it.

Joe Fairless: What were some specific lessons learned when you did the project management of it? And what development was it?

AJ Hazzi: The subdivision I did up on modern way. One of the things that stands out to me was in negotiating the contract for the underground services. In the proforma they did for me they had sort of given me a number, which was 100k, for putting in the shallow utilities and the deep underground utilities. So me not knowing how it all works, I didn’t negotiate that contract well. I called somebody that I knew, I had them come out, and then in the end there were all these types of loose ends as to who is paying for what in terms of materials and rental of equipment that was needed, all the contingencies… We ran into everything – rock and water and all the things that you can run into, and there were no contingencies built into the contract, of course, because everything was fairly loose, because I didn’t really know how to write an MCD contract at the time. That’s why you hire a project manager.

Joe Fairless: In my mind that’s half experience, but the other half is having an attorney who has experience with those types of contracts and makes the clauses are in there.

AJ Hazzi: For sure. And you can get some boilerplate agreements for sure, and you can hire an attorney to go through it, but I don’t think anything is gonna replace the know-how of somebody who’s managed successfully multiple projects from beginning to completion. That’s invaluable.

Joe Fairless: Let’s hone in on one of these developments. Which one do you wanna pick?

AJ Hazzi: Let’s stay with the one we’re talking about.

Joe Fairless: Okay, what’s the size of it?

AJ Hazzi: 13 lots. It was a three-acre piece that I rezoned and carved into 13 50×120 lots, and we went through and not only created the lots and built the street, but we pioneered Kelowna’s first green street, which was kind of a different thing… There’s no curbs and gutters; we use these little bioswales… It’s a very funky street. But now we’ve actually went and became a new homebuilder as well, and we’re building right through to the end product.

I’ve hung on a little longer to this project that I had initially intended to – I was just gonna sell lots – and then when I saw where the market was going I thought “Why not become a new homebuilder as well and just build the end product?”

Joe Fairless: Okay, so let’s start from the first time that you had the idea to buy the piece of land, the three acres… It wasn’t zoned what it currently is zoned, because you said you went to rezoning; what was it that attracted you to this lot and what was it zoned for when you purchased it?

AJ Hazzi: It was currently zoned agriculturally. There was a house on the property that was totally dilapidated. It was brought to me by a friend of mine, actually. She mentioned that her grandparents had passed on and they were gonna look to settle the estate, and she came to me and asked me if I wanted to sell it on her behalf. They also told me that there was another realtor that was offering them an amount for the property and I essentially said “Yeah, I think I’d be interested in doing something with you guys on this”, and then I called my friend who was the consultant, and him and I signed a sheet of paper, we stood there at the lot, drew where the road would go, and pasted off and figured out whether or not this thing could be curbed into 13 lots. Then we went down to the city and we said “This is what we’re thinking about doing”, and brought in the planning department into the picture at this point, and they all said “Yeah, we’d support that”, and away we went.

Joe Fairless: What’s the key to get support with the planning department on a rezoning?

AJ Hazzi: You wanna understand what their goals and initiatives are and give them something that meets their goals. You can look at the official community plan of any place and you can look at what the initiatives they’re trying to achieve — if they’re trying to densify an area… You wanna go with the grain with the OCT, in my opinion. There are people who wanna reinvent the wheel… My opinion is to find parcels of land and give the city what they wanna see there in the future.

Joe Fairless: And they were looking to make it more dense, correct?

AJ Hazzi: They wanted to increase their tax base in certain areas. That area was future zoned for regular residential homes, so we were just sort of accelerating that. They’re getting frontage improvements and development cost charges… There’s a lot of benefits to the city when development happens, so provided you’re not asking for something that’s outside of their plan, you can usually gain support fairly quick.

Joe Fairless: Did you two go to them and say “We’d like these 13 lots?” or were there more or less initially?

AJ Hazzi: No, we got exactly what we were after?

Joe Fairless: And why did you have 13 lots, 50×120 versus two lots or 26 lots?

AJ Hazzi: It really just comes down to — two lots, the proforma wouldn’t have worked… At the time, we were thinking “Okay, $150,000 a lot (this is going back five years now; they’re over 200k), 13 lots – that’s 1.8 million”, and we figured it was gonna cost about a million too to develop it, and we just sort of did the rough math and figured out what we could pay for the land and still make a decent margin. So two lots wouldn’t have done it, and 13 was the maximum that we would have gotten based on the minimum parcel sizes, so we just went for the max… But it was still inside their by-laws and their rules.

Joe Fairless: The minimum parcel sizes according to that county or that municipality…

AJ Hazzi: Yeah, we were taking them to R1, and we looked at the minimum parcel size for R1 and figured out once you take away the road how many lots you can get.

Joe Fairless: As far as taking away the road, that’s where your buddy was coming into play, right? Because that would be a tough thing for me to pencil in…

AJ Hazzi: Yeah, we’re staring at this thing – it’s covered in trees, there’s a mound in the middle… We were looking at it and he’s picturing the mound gone and the trees gone, and he was telling me “Okay, we’re gonna have this S-bend road that’s gonna go in, it’s gonna have a cul-de-sac right up at the top, right towards that tree off in the distance…” He’s seeing it, because he’s done this before [unintelligible [00:09:46].17] I said “Okay, that sounds good.”

On a piece of a paper, when you draw it, like 300 feet wide by 1,000 feet deep, and I go “Okay, so I’m gonna have about a 700 foot deep road; okay, that’s about seven-tenths of my piece of paper…” You know, you can kind of pencil it out and you can visualize it if you’re looking at a two-dimensional piece of paper, but when you’re standing on the lot – having one of these guys that’s got the experience, who can look at something and say “Okay, this is how it’ll look after we’re bringing these big machines through…”

Joe Fairless: With not having done it before, how do you have a checks and balances between you two to make sure that what he’s saying is accurate? Because everyone makes mistakes.

AJ Hazzi: For sure, and there were mistakes made. The amount of fill that we brought in initially was based on some calculations that he had done, and in the end I ended up having to truck a whole bunch of that fill out… It was a huge trucking cost because the calculations were not exact, but it’s never gonna be perfect; it’s development, you don’t know what you’re gonna run into, but somebody with a good track record, someone that you trust, that’s not going anywhere, they’re not fly-by-night…

I put a lot of faith into the engineering, and in the end it worked out great… But were there some missteps along the way? 100%. Luckily, a good market… We absorbed them.

Joe Fairless: You said you did the first green street in that area… What made you think of doing that and what were the additional steps that needed to be taken in order to pioneer that?

AJ Hazzi: Initially we were trying to figure out how to create a way to get the cost of the road down, and there were some projects in Victoria that had done these curbless, gutterless roads that were narrower, so less asphalt, no curb and sidewalk for it either… So if you’re doing these plantings and these little bioswales — your landscape material is more, but it also added a nice aesthetic, because the properties all appeared to be 15 feet deeper and had these really nice landscape berms in front versus having curb and sidewalk… It’s kind of like a zero edge road.

I saw pictures of it, it’s gorgeous, plus it’s also less expensive to produce, so we said “Okay, we’ve gotta get the city on-site for this.” So we went down and we started talking to different council members and different people from planning and just explained our idea and asked if they would support it. Many were in favor, and when we had enough of them on-site, we decided to put it in front of council and go for it.

Joe Fairless: Do you have pictures of that on your website?

AJ Hazzi: Not on my website, but I can send you a photo.

Joe Fairless: Okay. I’ll give you an e-mail address later after we get done, and then we’ll post that in the show notes link so the Best Ever listeners can check that out.

And then the last question and then we’ll move on because our time is limited – the numbers, that little detail… How much did you acquire it for, what was the all-in price and where are you at now?

AJ Hazzi: We paid 630k for the property back in 2012, and it cost us about 1.3 million dollars to develop it (some cost overruns over the initial thought process), and then we sold the land component for 2.6, so we’re up to 200k per lot now in the land component… So we got 2.6, which was better than our initial proforma. And then on each of the homes we are at a 10% of build cost to the developer as well; we’re building homes in the 600k-800k range for the most part, so there’s a 60k-80k edge for each property as well.

Joe Fairless: Very cool. So you sold the land for 2.6. All-in you’re at about 2 million to get to that point, and then for every house you’re making about 60k-70k… Ish.

AJ Hazzi: Yeah. I think the total profit on the project is about 1.4.

Joe Fairless: Over about five years?

AJ Hazzi: Yeah, it’s been a five-year project.

Joe Fairless: Got it. What is your best real estate investing advice ever?

AJ Hazzi: Best real estate investing advice ever is to — actually, I looked at the question and there’s sort of three answers to this. Number one, you get what you negotiate. Don’t be afraid to ask for terms other than price. It’s not always about the price. Sometimes you can get very favorable terms. I’ve gotten myself into so many deals that I had no business getting into because I didn’t have the cash, but I gave the person the money and I got the terms that I wanted.

Number two, don’t do what everyone else is doing. Don’t follow the crowd. What everyone’s doing is usually the wrong thing.

Number three, you can protect yourself by always buying for cashflow. All the mistakes that I made were always based on speculating, versus investing in cashflow-producing properties.

So I have multiple things…

Joe Fairless: No, it’s great. One follow-up question on that, and then we’ll go into the Lightning Round. you said you can get better terms and you get what you negotiate… You said you got into deals where you didn’t have any reason to be in the deal, but you just got the right terms. What would be an example of that?

AJ Hazzi: Sure, there’s one recently. We have a commercial property in a very high traffic area here in Kelowna, and the price they wanted for the property was a little rich and it had been sitting on the market for a period of time… I did some investigating, found that these guys owned it nearly for cash and was able to strike up a win/win deal where they vendor-financed the lion’s share of the down payment required to buy this property. My total cash outlay should have been half of a million and it ended up being 150k. I was able to get into a property for essentially 7%-8% down, versus having to put 35%, which is what you would typically have to do on a property like this.

That deal, for example – it’s going to be a great holding property. We’re eventually gonna move our business and our office there, and it would have been too cash-intensive at the time for us had we not negotiated the terms… But most people would never think to ask that, so it’s out on the market for days.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

AJ Hazzi: Let’s do it.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:15:27].22] to [00:16:29].15]

Joe Fairless: Best ever book you’ve read?

AJ Hazzi: The Millionaire Real Estate Investor.

Joe Fairless: Best ever deal you’ve done that you haven’t mentioned?

AJ Hazzi: 18-unit apartment building. Bought it for 1.6, put 300k into it, refinanced it for 2.7, got all of our money back plus 200k, and the thing cashflows 10k/month.

Joe Fairless: A mistake that you’ve made on a transaction?

AJ Hazzi: Speculating on condominiums in pre-sales at the end of the market. Lost 300k on two units. Never speculate, that’s the bottom line.

Joe Fairless: What’s the best ever way you like to give back?

AJ Hazzi: I like local charities, local causes, supporting local sports teams… That kind of thing.

Joe Fairless: And how can the Best Ever listeners get in touch with you or your company?

AJ Hazzi: Send me an e-mail: info@ajhazzi.com.

Joe Fairless: AJ, thanks for being on the show. Thanks for talking through the anatomy of a ground-up development deal, the challenges… 13-lot, three-acre piece that was rezoned, and your whole process that you went from start to finish, with the numbers, as well as your best ever advice, a 1-2-3 punch: you get what you negotiate, don’t follow the crowd and protect yourself by always buying for cashflow; never, never speculate.

AJ, thanks for being on the show. I hope you have a Best Ever day, and we’ll talk to you soon.

AJ Hazzi: It’s been my pleasure! Thanks, Joe!

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JF1033: Buying Properties With $0 Out Of Pocket!

From Africa to Canada, she can buy and teach her methods across continents! After starting with buy & hold properties, Thembi realized she needed money sooner than they could provide.  When she began with Rent to Own, she never looked back!

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Thembi Bheka Real Estate Background:
-Founder of Real Estate Real Riches, an education platform for individuals in Africa to invest in real estate
-CEO and Real estate investor at Infinity Housing Solutions
-She came to Canada from Zimbabwe with $5 in her pocket
-Mentor with Kelowna Community Resources, a government organization to help immigrants
-Based in British Columbia, Canada
-Say hi to her at http://realestaterealriches.com/
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.

With us today – Thembi Bheka. How are you doing, Thembi?

Thembi Bheka: I’m doing great! Thank you, Joe, for having me today.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Thembi – she is the founder of Real Estate Real Riches, which is an education platform for individuals in Africa to invest in real estate. She came to Canada, where she currently resides, from Zimbabwe, with five bucks in the pocket. She is the CEO and a real estate investor at Infinity Housing Solutions, as well. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Thembi Bheka: Yes. Hello, Best Ever listeners. I hope this will be the best ever show for you. I came to Canada, as you said, in 2001; I trained as a registered nurse. However, during that time I realized that I wanted some financial freedom and I also wanted some time to spend with my children. I started investing in real estate in 2008.

When I started, I started as buy and hold, basically buying properties for the long term, and I realized that wasn’t going to give me what I needed quite fast… So I transitioned into what they call rent to own and agreements for sale.

Joe Fairless: Are you doing rents to own now?

Thembi Bheka: Yes, I do mainly rent to own and agreements for sale, which I believe in the U.S. is known as seller financing.

Joe Fairless: Okay, and what is it called in Canada?

Thembi Bheka: Agreements for sale.

Joe Fairless: Agreements for sale, okay. Cool. You’re from Zimbabwe, right?

Thembi Bheka: Yes.

Joe Fairless: What is the program that you have? Do you have something with people who live in Zimbabwe to help invest in real estate?

Thembi Bheka: Yes. So what I have is a training platform where I help people in Africa to find out how to get properties with no money down, using seller financing, which is also agreements for sale, as I said… Because what I found [unintelligible [00:04:22].14] and people would just stay forever until they’re 70 years old before they even own their first home, trying to save money. And most of the banks, even if they are banks, do not qualify easily as you would anywhere else in the world.

That’s when I realized that there was a need, there was that gap where we could bridge the financing gap between individuals who are selling and individuals who need to buy a home.

Joe Fairless: Let’s talk about the last agreements for sale/seller financing deal that you did. Can you tell us the number son it?

Thembi Bheka: Yes, it’s actually what I’m working on right now; it’s three properties, all with one seller. This is in Canada. The seller needs 182k/property for a townhouse, and he wants really no money down. All he wants me to pay him is this one, which is listed with an agent, and he wants agent fees for that one, which is going to be about 20k.

It rents for about $1,400 in the area. Currently, the mortgage is $600/month and condo fees are about $300, so I will be cash-flowing probably about $400/month, and I’m not putting any of my money.

Joe Fairless: So you’ve got a seller who’s got three properties, each of them $182,000, and he’s agreed to sell them to you for no money down… What type of financing terms do you give him?

Thembi Bheka: I’m taking over the mortgage from the bank. He has a mortgage already at the bank, so basically I am getting in and taking over the mortgage. They agreed to extend the mortgage for another three years, so we have a five-year term with that mortgage.

So I’ve been taking over the mortgage, the property taxes, the interest and the insurance, and just getting into this property.

Joe Fairless: And why is this a good deal for him?

Thembi Bheka: Because he just wants to get out of the property. He’s tired of dealing with tenants.

Joe Fairless: But why wouldn’t he sell them traditionally? Because there is no equity in the deal?

Thembi Bheka: There is equity… There’s about 25k in each property, but once you pay the realtor fees and you pay all these legal fees and you pay the cancellation fees for your mortgage, he really was gonna walk out with nothing. So this is a good benefit for him… At least he doesn’t have to go through the pain of trying to sell it. And the market is not great right now in Edmonton – this is a property in Edmonton. The market is not that great for him to sell.

It could stay for six months without finding a buyer right now… So this is a fast way for him to let the property go.

Joe Fairless: And how do you give him the confidence that you will pay the mortgage in particular, so that he doesn’t get foreclosed on and hurt his credit?

Thembi Bheka: Our company is a reputable company; we’ve been doing this for a long time, so that also gives us the confidence and it gives anybody the confidence. But even then, we do have an agreement with the lawyer.

We don’t just sign this in the backyard, we sign it in front of the lawyer. We have an agreement which obliges me to do this; if I don’t do this, he could go after me and sue me.

Joe Fairless: Okay. And that is for all three properties?

Thembi Bheka: For all the three properties, yes.

Joe Fairless: How did you come across him?

Thembi Bheka: He called me from my website. I have a website which I haven’t advertised forever, and I just got a call a couple of weeks ago… He actually said, “I only have one property and I need to sell it because I’m tired of managing the tenants and it’s empty right now. Then as we got to speak, as I got to know him more, I found out that he actually has three, and then he was willing to let me take the three as a package.

Joe Fairless: What is his situation where he doesn’t want to just continue to sit on these properties? What’s the life circumstance?

Thembi Bheka: He’s tired. As an investor sometimes – especially if you buy without the right fundamentals, it is easy to get tired, especially if you don’t have the right training of what kind of tenants to put into your property… You get all these tenants who come and trash the place. Then you clean it up and then another tenant comes and trashes the place and you clean it up…

Without a good knowledge and without a basic foundation of where you’re going to go, it’s easy to [unintelligible [00:08:42].25] and it’s easy to get tired. That’s why you need a solid foundation in real estate and solid education, to be able to screen your tenants properly.

Probably what has happened with him is he’s just had all these tenants coming, trashing the place and leaving. This property is newly renovated; he just renovated them and he didn’t put anyone in them. He probably just decided “I do not want to deal with a tenant anymore. I am just exhausted with this and I want out.”

Joe Fairless: Wow, what a find. Congratulations on that one!

Thembi Bheka: Thank you!

Joe Fairless: Tell us about your least favorite deal that you’ve done.

Thembi Bheka: It’s the first property I ever bought, in 2008. I bought it because it was pretty. I didn’t look at the numbers, and I didn’t screen the tenants. I didn’t know anything about screening the tenants. I just got it and said, “Oh yeah, I’ve got a property and somebody’s looking for a place to rent. You’re in!”

What happened is those tenants stayed with me for five years, and I never did any checks. I didn’t know that you’re supposed to go check the property. After five years I went in, because they started not paying rent, and I kept giving them longer and longer periods to extend… I think it was after six months of not paying rent that I went in and the place was a mess.

Joe Fairless: How so?

Thembi Bheka: It’s funny, because when I went in, Joe, I went in with a potential renter. I advertised it to say, “Oh, I have another property if you wanna come and see…”, before even looking at this property. First of all, you come by the door, there’s garbage everywhere. Garbage!
I’m like, “Oh, this is embarrassing. I should clean up the garbage real quick before these other potential tenants come in.” As soon as I finish cleaning up the garbage, the potential tenants come in, and I open the door, and this smell… I can never get rid of it even up to now… It hits me! I can smell it just talking about it! It just hits me in the face.

I didn’t know what it was, but it turns out that when you have many cats and they just pee in the house for five years, it really gets it in a mess. The smell was so bad… We had to rip out everything. So I learned a lot…

Joe Fairless: Yeah, I’ve been in a similar situation when we were doing due diligence on an apartment community and there was a hoarder who had just stuff stacked to the ceiling in some cases, and not only did they have cat pee and poop everywhere, but they had dead cats, two of them, that had been decomposing in the closet. It was just a terrible, horrific scene. And the smell – holy moly…

The inspector would not go in there until he got a hazmat suit. He literally was in a marshmallow suit with a visor and the head gear and everything whenever he went in to inspect it.

Thembi Bheka: Wow… That’s probably your best deal.

Joe Fairless: [laughs] We did end up buying it, but they had to get it fixed before we ended up closing. So this 2008 pretty property – how much did you buy it for?

Thembi Bheka: 285k.

Joe Fairless: And where did you end up with it?

Thembi Bheka: I still own it up to now, and I’ll tell you what it’s worth – 240k.

Joe Fairless: Yeah, it happens sometimes, huh?

Thembi Bheka: Yeah… And I have put in at least 10k in that property. As I said, I just bought because I had [unintelligible [00:12:14].02] real estate you can be successful, and I just didn’t think of the fundamentals.

Joe Fairless: How do you run the numbers now when you look at a deal?

Thembi Bheka: I calculate basically what the mortgage is going to be, and everything… When I calculate my mortgage, I put in a buffer because we know that interest rates go up and down, right? Right now our interest rate is kind of very low, about 2.5%.

Joe Fairless: 2.5%?! Oh, man… Lucky you!

Thembi Bheka: Yes. So when I calculate a property, I don’t calculate with 2.5%, I calculate with 5%. I put in a buffer for that, because I know they’ll go up. Then I add in the property management, which is something I never used to do before. So I add in the property management, the vacancy rate, which I calculate for one month’s rent (which is 8% vacancy rate), and maintenance fees, because the property needs to be maintained, and I usually put 10% for maintenance fees.

So I add in all those as a buffer… Not that it’s gonna happen, but just in case it happens, I have some money in the bank.

Joe Fairless: With the interest rates being as low as they are, and then you’re projecting 5% — why are you projecting 5%, unless you’re doing a variable versus a fixed interest rate on your properties?

Thembi Bheka: I try to go variable as much as I can.

Joe Fairless: Oh, really? Why?

Thembi Bheka: Because long-term research has shown that when you go variable, at the end of the day – usually not just in a year, but over 25 years – you actually make more money than when you go fixed. And I also like the fact that I don’t have to be tied down too if I have to get rid of the mortgage or cancel a property.

Joe Fairless: I remember interviewing someone – I forget who it was, but he talked about how it does make sense to do variable interest rates in certain scenarios, and it’s interesting that you’re doing it in every scenario when you can.

Thembi Bheka: Especially right now, with the way the economy is. The rate is so low, it makes sense to do variable. But having said that, I do have a [unintelligible [00:14:21].14] creeping up, sometimes I could lock in, but usually, I try to go variable.

Joe Fairless: Do you find that you’re at a competitive disadvantage sometimes when you’re making offers on properties and you’re running the numbers in this way where you’re doubling the interest rate, and others probably are not running the numbers that way, therefore they might be able to pay more?

Thembi Bheka: Yes, I do, but it makes me sleep at night. For me the most important thing is having sleep at night and spending time with my children. What I found, especially with the first property where I just assumed things were going to stay constant [unintelligible [00:14:59].21] fees will never go up, I found myself being stressed, not even being able to pay a property manager because I don’t even have the money to pay a property manager upfront. So I’d rather have a big buffer, than have less.

Joe Fairless: What is your best real estate investing advice ever?

Thembi Bheka: Start with your why. In any transaction, when you have to do with a seller or you have to do with a buyer, just find out what is their big WHY. Why do they want to sell this property? Instead of focusing on the financial aspect, you’d be surprised how much you can [unintelligible [00:15:30].24] when you focus on the why.

Joe Fairless: Can you tell us a story of when you have focused on the why and it has helped the transaction?

Thembi Bheka: This property of land – 10-acre land – which I made an offer on and it was 450k… The realtor had listed this land and he kept saying “Oh, the seller wants the money, the seller wants the money.” Then I asked if I could meet with the seller, and I spoke to the seller and I asked him “So what do you need the money for?” He says, “I just wanna put it in the bank account.” Then I explained to him that “You do realize that when you take this money upfront and you put it in the bank account, you’re going to [unintelligible [00:16:07].01] capital gains, and also you’re going to be getting very little interest.”

What happened is I gave him options to say, “Well, maybe what I could do is I could give you just a little bit upfront, and then pay you over a certain number of years, that way you don’t have to pay that much in capital gains.” That seller was so happy and I ended up getting the deal.

Joe Fairless: Beautiful! Thank you for sharing that. That should be in everyone’s tool kit that’s for sure. Regardless of what type of deal we’re working on, we should always have that conversation.

Thembi Bheka: Exactly.

Joe Fairless: Now, are you ready for the Best Ever Lightning Round?

Thembi Bheka: Yes!

Joe Fairless: Okay, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:16:49].26] to [00:17:41].17]

Joe Fairless: Best ever book you’ve read?

Thembi Bheka: The One Thing.

Joe Fairless: Best ever deal you’ve done?

Thembi Bheka: I guess the three deals I just spoke about – the agreement for sale deal.

Joe Fairless: What’s a mistake that you haven’t mentioned so far that you’ve made on a deal that comes to mind?

Thembi Bheka: Using emotions when dealing with tenants.

Joe Fairless: Best ever way you like to give back?

Thembi Bheka: Teaching other people to invest in real estate.

Joe Fairless: And where can the Best Ever listeners get in touch with you?

Thembi Bheka: RealEstateRealRiches.com.

Joe Fairless: That will be in the show notes page, so Best Ever listeners, you can click on the link and check out her website.

Thembi, thank you so much for being on the show and sharing your experience starting from scratch, coming from Zimbabwe to Canada… You started out as a registered nurse, and then decided that you wanted to focus more on long-term wealth and spending your time how you wanna spend it.

Then the properties – the three properties that you’re working on right now, with the seller who is just tired and wants to get away from the deals, and the value exchange that each of you are providing… More so he’s providing to you than you’re providing to him, but I think if we were to ask him, he would say you’re providing a lot of value too, because it’s a peace of mind.

Also, talking about the agreement with lawyers that you have in place so that he could come after you if you don’t adhere to what you said you would do; that’s an important part, I’m glad that you mentioned that… Because when people hear that story, initially at least, I think “Well, what’s the catch?” So it is drafted up and there are some repercussions if you don’t live up to what you will be doing.
Also, the 2008 pretty property that stunk really bad after five years of tenants living there, lessons learned and then how you run the numbers now with the interest rate padding, the vacancy, the maintenance fees… And start with the WHY questions that you want to know for every transaction – Why are they selling? And you gave the wonderful story of how you were able to work yourself into a deal with a little upfront and money over a period of time, versus more money upfront.

Thanks so much for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

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Kim Ades and Joe Fairless



Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff. With us today, Kim Ades. How are you doing, Kim?

Kim Ades: I’m great, how are you?

Joe Fairless: I am doing great as well, nice to have you on the show. A little bit about Kim – she is the president and founder of Frame Of Mind Coaching and Journal Engine software. She has been recognized as one of North America’s top 50 most influential women in real estate. She is an author, speaker and mother of one, two, three, four, five kids, and she’s based in Toronto, Canada. With that being said, Kim, do you wanna give the Best Ever listeners a little bit more about your background and what you’re focused on?

Kim Ades: Sure. Right now I coach people, I coach the highly-driven population, those people who typically have four things in common – number one is that they are highly driven and they have incredible goals that they wanna reach. Number two is they’re good people, they wanna make a positive difference in the world, they tend to get involved in charity communities, they donate, those kinds of things. Number three is they are big livers, so they wanna have the best of everything: they wanna have a nice home, they wanna have a nice car, they want to travel to nice places, they want to have great health, great relationships etc. And number four is they’re frustrated, overwhelmed, stressed, exhausted and find themselves bumping up against the same problems over and over again. That’s what I do, I work with those people.

Joe Fairless: Sweet. Well, let’s talk about your real estate background, and perhaps that will bring to life the coaching stuff in more context. Tell us about your real estate investments from beginning to where you’re at now.

Kim Ades: Real estate investments are very simple – I used to own property, as a landlord. That was years ago when I was first married in my first round of marriage, when I was 20. I started young, and over time I’ve still just been purchasing my own properties, without mortgage etc. But my involvement in real estate is not really so much focused on my real estate investment; I’m not anything extraordinary more than any other average person, but I was really interested in what is it that makes a real estate professional better than any other real estate professional. That’s how I got involved in the real estate industry – I studied what makes a top performer. That’s where my career brought me to really getting involved in the real estate career and going out to all the conferences and events and learning what drives real estate professionals.

Joe Fairless: Alright. I certainly want to get the answer to that question, but I do wanna back up a little bit… You said you have been buying properties without mortgage – why without mortgages?

Kim Ades: I’m not a big fan of debt. I prefer to purchase and be clean and clear, and then whatever it is that I do with those properties in terms of rental income or my homes over the years, it just has felt a lot better. I love living debt-free, it’s a good way for me to live without any additional stress or headaches.

Joe Fairless: Okay. And you’re an active real estate investor now?

Kim Ades: Yes, absolutely.

Joe Fairless: And are you investing in Toronto or other areas?

Kim Ades: Primarily locally.

Joe Fairless: What’s the last deal you did? Not necessarily when you did it, but just what are the numbers on it?

Kim Ades: It’s a little bit personal; it involves some players, so I’d rather not get into the details, but I’m involved in some family investments etc.

Joe Fairless: Okay. You told me before we started interviewing, you’re like “The harder the interview, the better”, so I’m bringing it.

Kim Ades: You’re right… I didn’t think we were gonna go into my financial situation [unintelligible [00:05:43].09]

Joe Fairless: Every interview I ask the guest “What’s the last deal you did? Tell us the numbers on it”, and 99% of the time they tell me. How about a deal that wasn’t the last one, but maybe a previous one, just to give us the numbers so we have an idea of what you’re buying.

Kim Ades: A while ago I bought investment property in Ottawa; they were a single vendor of apartments, and at the time we had mortgages, but low mortgages, so they were covering the mortgages. Then we sold them for about a 20% profit. When you own a few over time, it kind of adds up.

Joe Fairless: Alright, I can tell by your short responses when I ask those questions that’s not a territory that you wanna focus on… So I do wanna know – and I’m sure the Best Ever listeners are curious – you mentioned you were studying what makes a real estate professional better than other real estate professionals, you went to conferences… What were the insights that you got from that investigation?

Kim Ades: Well, normally you would think that a really great real estate professional is one who has really strong real estate related skills – maybe they are good at building rapport, maybe they are good at closing the deal, maybe they’re good at identifying different options available on both the buyer and the seller side of the equation… Well, what we discovered is that all of that is very important, but it’s not critical. Really what’s critical is if a person has a high degree of emotional resilience. What does that mean? As a real estate professional, if you lose a deal, what do you do when that happens? And even as an investor, what do you when you lose a deal? What do you do when a deal goes south? What do you do when you’re actually losing money on a deal? What do you do? How do you bounce back from that? And the person who has the ability to bounce back with greater speed and agility, that’s the person who’s going to be much more likely to succeed.

Very often when we interview possible real estate professionals to represent us, we wanna know about their wins; my recommendation is don’t only ask about their wins, ask about their losses and what they did with those losses. That’s interesting – people are uncomfortable with that? That’s okay. But the losses are where we really learn how a person has the ability to take a bad situation and turn it into an advantage.

Joe Fairless: On that note, let’s talk about a deal for you that didn’t go according to plan, how did you handle it? Can you tell us a story of it?

Kim Ades: Absolutely, I can tell you a personal situation; it wasn’t real estate oriented, but I mentioned to you that I used to own property when I was young, with my first husband (I’m remarried now). One of the things that happened to us is we owned a company together, and as our marriage unfolded, I ended up selling my shares. I didn’t know much about tax law or anything like that, and I made a huge error in the way that I sold my company, and a couple of years after the sale I ended up getting a call from our government (CRA) letting me know that I owed them $300,000 in taxes… So not quite the real estate story you wanted, but still, definitely an investment that kind of blew up on me, and it was a scary time. But luckily, I had the money, so I just paid it off and right after that I just really scaled back. I stopped going to get my hair done at the hairdresser’s, I learned to color it myself. I just took care of things a little bit differently and stopped living very frivolously, and just kind of scaled back until I recalibrated and kind of felt more comfortable again, but it took me a couple of good years until I got back on my feet after that.

Joe Fairless: I know we have some Canadian listeners; in fact, it’s about 7% of the audience that lives in Canada – what was a specific mistake that you made, so that they don’t make it?

Kim Ades: There’s a way that you sell your company where you get a $500,000 tax exemption from the sale of a company, and I didn’t sell it that way, so I didn’t get that benefit, so all of it was taxable. I didn’t know, and because I didn’t pay that on that amount for a few years after that, not only did I incur a tax bill, I also incurred a bill on the money that wasn’t paid.

Joe Fairless: Alright, so your recommendation would be to speak to an accountant before you do that?

Kim Ades: Yeah, speak to an accountant, and even a tax lawyer would be really helpful. Don’t just sell your shares… Understand what you’re getting into and make sure you’re taking the right steps from a legal standpoint and understand what the tax implications are. Taxes are a big deal.

Joe Fairless: Taxes are our number one expense.

Kim Ades: Yeah. The other thing I would recommend on the business side of the equation – we’ve been audited here, and I was so happy about how squeaky clean our books were professionally speaking, that the revenue agent – she took our books for close to nine months and just sat on them. We would kind of review and say “Hey, what’s up? What’s happening? Can we get an update?” and finally she came back and said “I don’t see anything wrong here, it’s all clean.” There was not a single adjustment that had to be made… So really, keep clean books – that’s another recommendation.

Joe Fairless: Congratulations on that, by the way, the squeaky clean part; that’s a challenge of most investors and just most entrepreneurs in general.

Kim Ades: For us, there’s two things: pay your bills fast, and make sure to be on top of your collections.

Joe Fairless: I wanna go back to what you said – you said the difference between real estate professionals and the best of the best real estate professionals is a person who has a high degree of emotional resilience. That reminds me, just simple stuff – it’s gonna be a little ridiculous, but I’m on a softball team, and when someone has an error in the field, I can tell the people on my team… I don’t even have to know them and I can tell which ones are successful in business and which ones are not, because the ones who are not successful, they moan, they complain and they let the error that someone else made just upset them for about seven or eight more pitches, whereas the people who are successful in business, they’re like “Okay, that happened. We can’t do anything about it now, so let’s just move on to the next pitch”, and it’s such a metaphor for what you’ve just said, emotional resilience, because we have to just be resilient enough – as you said in your $300,000 example – to just take your lumps, get it done and then move on.

Kim Ades: Yeah, you have to move on, and the faster you move on, the better. I will also say that if you can do something with your experience, turn it into a positive, somehow then not only are you just moving on, you’re leveraging it, you’re winning from it. You’re not just losing and learning a tough lesson, you’re actually winning.

Joe Fairless: So know what just happened, identify what you can do to mitigate that from happening again, and find an empowering meaning within that learning experience.

Kim Ades: Yeah, and again, not just find an empowering meaning, but use it to your advantage somehow. The idea is there’s always a silver lining, but a lot of people aren’t used to looking for that; a lot of people just assume it just simply doesn’t exist, and I will tell you that that’s not true.

I’ll give you a perfect example, it’s a business example… Years ago, we used to own this software company, and we went to our first ever trade show and FedEx didn’t deliver our booth. We were a little bit upset, because it was our first trade show, so how do you show up to a trade show and have a booth with no actual booth? There was nothing there. So what we did is we went to Walgreens in the states and we bought a Bristol board and some markers and some tape and we made a sign; the sign says “FedEx didn’t deliver our booth, so now we’re forced to give you 50% off just to attract your attention.” Man, there were line-ups at that booth…

Normally, when you go to a trade show, you go just to show up and say “Hey, we’re here”, but we didn’t do just that. We sold product right there on the floor, and that was unheard of in that scenario. So don’t only just take your blow, say “How can we turn this into something good?”

Joe Fairless: Boy, I think you’re gonna find a lot more booths that say “FedEx didn’t deliver our booth. We’re offering 50% off” after this episode airs. [laughs] I think everyone’s gonna conveniently forget their booths and just knock on FedEx and UPS, those poor companies, after hearing this. That’s a great idea.

Kim Ades: Right. And if you do and it works, please send me an e-mail and let me know.

Joe Fairless: [laughs] Take some pictures. Kim, what is your best advice ever for real estate investors?

Kim Ades: Best advice ever is don’t be afraid to walk away from a deal, that’s number one… And really, don’t be afraid to walk away from anything, because there’s another opportunity right around the corner. Don’t think this is the only thing and the only one, don’t get attached to any particular outcome. Now, that concept is related to all of the coaching that we do, whether it’s a particular outcome in a relationship, in a business arrangement, if it’s a particular outcome with a real estate investment or a product that you’re building – whatever it is, don’t get attached. When you remove your attachment, all of a sudden you’re able to think of grander solutions, you’re able to solve problems with greater ease, and you’re able to see new opportunities as they arise, instead of really keeping your eyes peeled on this one idea. That would be my greatest piece of advice.

Joe Fairless: How do you know that there’s another opportunity around the corner?

Kim Ades: There are so many of them you can’t see them. You don’t have the capacity to see all the opportunities that are coming at you every minute of every day… So it’s not “How do I know?”, it’s “How do you open yourself up to what’s coming at you?” That’s really the question. There’s an unlimited amount of opportunities, we just don’t have the capacity to see them and embrace them.

Joe Fairless: And how do you have someone embrace that philosophy? Because it’s still not a “Okay, I got it”, it’s still “Believe me, there is more opportunity!” How do you know “Well, you can’t see them, but there’s more.” How do you have someone embrace that?

Kim Ades: How do we teach people to look at things that way? Number one is we look at their history. So there’s a philosophy; the philosophy is this – we always look for evidence to support our beliefs, so when we believe there’s just one opportunity and if we blow it, lives get blown out of the window, then that’s the belief we live by and that becomes true for us. If we believe that there are lots of opportunities, then they just show up. But one of the things we do is we help someone look backwards and we say “Look at all the things that have happened and let’s look at how they showed up.” We’ll start to show people that they have been involved in a huge number of opportunities over time, but they never thought of it quite that way.

We start to show them the evidence of the opportunities in their own lives up until this point. And opportunities can look like “Hey, where did you meet your spouse?” It could look like “How did you end up buying that car?” It could end up like, “How did you meet your best friend?” or “How did you start this business?” or “How did you buy this house?” or “How were you introduced to this particular idea?” or “How did you get to this dentist who really did a great job for you?” and you’ll notice that oddly enough a lot of things are lined up for you perfectly and serve you with a million opportunities. We just don’t think of it that way.

Joe Fairless: Yeah, unless we’re forced to look back and then reverse engineer how we got to that point. That’s really interesting.

Kim Ades: Right? The other thing is look at how so many awesome things happen to you all the time, every single day, that we just take for granted. Like this morning – did you have a hot shower? You probably did, and you don’t kind of stop and take notice. Or if you go into a building and you go up in the elevator, do you know how much planning went into that elevator for you, how many people were involved in creating the building, creating the structure that allowed you to get into that elevator that day? We don’t think of getting into an elevator as an opportunity, but it’s pretty massive.

Joe Fairless: Great perspective, that’s for sure. One thing that I do with my fiancée before every meal is we mention something that we’re grateful for, so that it triggers that in our mind; it would be something like a hot shower, or an elevator, although I haven’t specifically mentioned those two things. Now I’ve got two more things to add to my list.

Kim Ades: I can give you an endless list of lists.

Joe Fairless: Yeah, I hear ya. Are you ready for the Best Ever Lightning round?

Kim Ades: Let’s go.

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [00:17:57].11] to [00:18:51].00]

Joe Fairless: What’s the best ever book you’ve read?

Kim Ades: It’s a book called “Ask and it is given”.

Joe Fairless: Best ever personal growth experience and what you learned from it?

Kim Ades: Coaching. I learned that I am responsible for the way I feel and everything that happens to me.

Joe Fairless: Probably my number one takeaway from attending Unleash The Power Within with Tony Robbins – exactly what you just said. We are in control of the emotions that we have; it’s very empowering to think of it that way.

Kim Ades: It’s a game changer.

Joe Fairless: What’s the best ever deal you’ve done?

Kim Ades: Best ever deal I’ve done… This house, the house I live in.

Joe Fairless: Why?

Kim Ades: I was supposed to buy it, and then it got pulled out from under us and we ended up buying it afterwards at a lower price than our original offer.

Joe Fairless: Did you have to wait a couple of years, or was it in bankruptcy or foreclosure?

Kim Ades: No, it was a matter of maybe a month or so… A month or so later, with a new agent. Things had changed, and we found a bit of a loophole that allowed us to get us a lower price.

Joe Fairless: What’s the loophole?

Kim Ades: The loophole was the size of our balcony. Our balcony is oversized, and apparently because it’s oversized, it had to be ripped down, so we asked them to pay for the tear down theoretically, and they took that amount off the top of the price.

Joe Fairless: Do you still have your balcony?

Kim Ades: Yes, I do.

Joe Fairless: [laughs] What’s the best ever way you like to give back?

Kim Ades: Coaching. It’s just what I do.

Joe Fairless: What’s the biggest mistake you’ve made on a particular deal?

Kim Ades: Yeah, I mentioned that one. The biggest mistake was not knowing tax law.

Joe Fairless: Where can the Best Ever listeners get in touch with you?

Kim Ades: Best place is FrameOfMindCoaching.com. There’s all kinds of information there, there’s audios, there’s blogs, there’s testimonials, and best of all, there’s an assessment that you could take that will allow you to assess your frame of mind right here, right now.

Joe Fairless: Kim, thank you so much for being on the show. Thanks for talking about and educating us on what makes a real estate professional better than other real estate professionals, that is if the person has a high degree of emotional resilience. We have to learn from it, find an empowering meaning and use it to our advantage somehow. You gave the perfect example of the FedEx delivery – it didn’t come to your trade show booth, so you have a sign on the booth that said “We’re offering 50% discount to attract attention because we didn’t get our booth delivered by FedEx”, as well as if we are second-guessing if there are other opportunities, then let’s be honest with ourselves and take a look at how we got to this point, how we have accomplished certain things that we have in our lives, whether it’s a significant other or some sort of business thing, or as you said, maybe how did you get your car, or your best friend… And then look at those through reverse engineering as opportunities.

Thanks so much for being on the show. I hope you have a best ever weekend, and we’ll talk to you soon!

Kim Ades: Thank you!


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Best Real Estate Investing Advice Ever Show Podcast

JF992: How to Develop and Scale Your Team #SkillsetSunday

Are you a one-man show? You may collect all the checks, but you’re not going too far. Today you will learn about how to build and develop a team, but more importantly, why you should have a team.

Best Ever Tweet:

Shawn Casemore Real Estate Background:

– CEO of Casemore and Co Inc.; A global consulting firm for CEO’s and businesses
– Author of “Operational Empowerment: Collaborate, Innovate, and Engage to Beat the Competition”
– In past two decades worked with organizations such as Pepsi Co, CN Rail, Tim Hortons and Spectra Energy
– Published over 1000 articles, booklets and resources on improving individual & organizational performance
– Based in Ontario, Canada
– Say hi to him at www.casemoreandco.com 

Click here for a summary of Shawn’s Best Ever advice: http://bit.ly/2rW8o5Y

Made Possible Because of Our Best Ever Sponsors:

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how to develop your real estate team


Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.

I hope you’re having a best ever weekend. Because it is Sunday, we’ve got a special segment for you – Skillset Sunday. By the end of our conversation today with our Best Ever guest, you will know how to develop your team better than how perhaps you’re currently developing your team, and creating your team better than how you’re currently creating your team.

With us today we’ve got someone who has 17 years of developing his own team, and he currently helps entrepreneurs develop their own team. How are you doing, Shawn Casemore?

Shawn Casemore: Hey, Joe. Thanks a lot for having me.

Joe Fairless: My pleasure, and nice to have you on the show. A little bit more about Shawn – he is the CEO of Casemore & Co., a global consulting firm for CEOs and businesses. He’s the author of “Operational Empowerment: Collaborate, Innovate and Engage to Beat the Competition.” He’s published over 1,000 articles on improving individual and organizational performance. Based in Ontario, Canada. With that being said, Shawn, do you wanna give the Best Ever listeners a little bit more about your background and your focus just to add some context to our conversation?

Shawn Casemore: I’ll try and stay as focused as possible on your audience, Joe. My experience was about 17 years in different corporate environments, different companies, different [unintelligible [00:03:40].21] different sectors, and I always had a team, since the age of 23. I’ve had unionized, non-union, two people working in remote locations, up to 95 people in one location… That experience of over 17 years lead me to wanting to launch my own business, and what I’ve specialized in and what I’ve kind of found that my specialty is is in helping entrepreneurs/business owners understand how they can get more out of their team. And when we say ‘team’, I realize some of your listeners may have not had employees, or maybe some that just have a team of folks that support them to run their own business from a marketing standpoint… So what we’ll talk about today and some of the tips I’ll share really addresses your own employees, if you have a team in that regard, or if you have multiple teams in your business, but also if your team is not so much full-time employees as it is contractors that support you, these tips, techniques and ideas will be applicable.

Joe Fairless: Yeah, I undersold what we’re gonna learn… It’s not just about team development as you said, it’s how to get more out of our team – even better. So it directly applies to the bottom line. How do we wanna structure this conversation, how do you wanna lead it off?

Shawn Casemore: I guess we could start with this – if you could give me some of the challenges you think your listeners face (one or two challenges), what I can do is probably tie that back to their team and how to overcome those challenges.

Joe Fairless: Okay, cool. One would be people who are looking for deals – so it could be a fix and flipper… Someone who buys a house, fixes it up and flips it to someone else. Their challenge might be either finding enough deals or finding the right contracting partners, so the people who are doing all the work. Those would be a couple challenges I could think that they have.

Shawn Casemore: Let’s start there. So in this case let’s look at the team. I’ll address both of these, but we’ll start with the contractors. The team – if you’re gonna be successful in fixing and/or flipping, obviously you need a team of different contractors, although you might have a general contractor. You need that team to support you, so they need to be able to drop everything and come running when you need them, although in their own business they might have to sustain other business and other customers, which means they’re not always there for you. The cost is always a factor – the more you pay them, the less profit you have. And the last thing would be when you look at your contractor as a team, you’re trying to get on the same page. This is your bread and butter; to them it might just be another job. So how do you get more to that relationship?

Step one – when you think about any contract at your business, and by contract I don’t specifically mean a general contract, but any way that you pay an hourly or by job basis, you have to realize those folks have their businesses and have their own priorities, and therefore you need to somehow make your business their priority. I’ll say that again, you have to make your business their priority. Now, the logical ways that we’ve seen this done, even if you watch some of the shows on TV, is that the investor goes out and they beat up on the contractor, they yell and scream and rant and rave and threaten to pull business… That looks good for TV and that’s why that’s on TV, but in reality that’s not the way it works.

So you have to figure “How can I make things in my business just as important as their business?” You can do that obviously through leverage – the amount of business you give them – but more importantly you wanna make them feel like they’re a part of something. For example, when you’re going out to take a look at a property, you bring your contractor – we’re talking like a general contractor – with you. Do you involve them in the decision-making? Do you actually give them the chance to take a look at situations and provide potential solutions, and when they do, do you thank them for it and you take some of their advice?

I see it in myself, I’ve been involved in real estate now for probably only about 5-6 years as kind of a side venture, something I enjoy, and really to build that team when I’m kind of a solo investor, it becomes trying to ensure that other people who support me, although they’re not an employee, they feel like this is also their business. That comes back to building a relationship, which includes things like trust, honesty… And you’ll find that a lot of contractors will be very receptive to that, because everybody else treats them like crap, so they’re happy to work with those who actually treat them like a human being, respect their ideas and viewpoints, and treat them as if they’re part of your business.

Joe Fairless: I love that. Involving them… One thing that I do with my team – I’m not a fix and flipper, but I have teams for my company, and I always make sure that I mention it’s not MY podcast, it’s OUR podcast. I have that mentality because it truly is ours; it’s the team, it’s not just me, and I think that has a psychological benefit as well. What do you think?

Shawn Casemore: Absolutely, it does. It really comes back to — I think in business sometimes we end up running over those who support us, and maybe inadvertently, because we’re so busy, we’re so fixated on the next deal, the next opportunity, cash flow… Those things absorb, I’m sure, much of the time of your listeners. But the problem is in doing that many of us, because we’re so focused on those things (they call it stress), we can come off as jerks, and then that inadvertently can be then thrust upon those who support us. And notice, we’re talking about a contractor here, but if you had employees on your team, the same thing can happen; you’re focused on cash flow, you’re focused on sales, you’re focused on the next deal, but that stress then when you turn to answer some questions of your employee or your contractor comes out that you’re a little bit of a jerk… And then what do they think of you? They think you’re a jerk, so are they gonna stand behind you, are they gonna be there when you really need them? The answer is no, and you’re probably gonna wonder “Hey, why is that? I’ve given them a solid job and I’m paying them for years, I’ve been trying to include them as a team…” So it becomes very difficult for the entrepreneur or the investor in this case to have a couple different mindsets going on. Number one – the business mindset, which is “the next deal, cash flow, profitability”, but also the separate mindset that is “Hey, in order to be successful, I can’t do this alone. I need people, be it employees or contractors or otherwise”, and people are receptive to other people. People are receptive of being treated fairly, being treated honestly. In fact, I can actually warm people up a little bit if I start to maybe go that extra mile or if I drop off a coffee. When I’m [unintelligible [00:10:09].04] I always try to grab some coffee for the guys.

Here’s a funny situation… I had a contractor and his team working last summer on this property that I had, and it was a really hot summer day, which believe it or not, despite the snow [unintelligible [00:10:20].25] I’m coming in, I’m rushing in, I’ve got a few minutes to stop by and see how it’s going and move on to the next thing, and I think “You know what? If it were me, here it is Friday at [3:30]; I’m hoping they’re gonna stay and finish the job”, so I stop and grab some beer. I brought it back and I said, “Hey guys, I hope this is okay.” I can tell you the contractor that lead that job became my friend immediately. Instead of bringing stuff to my house after house, dropping off stuff… “Here, I forgot to give you this. Here’s a deal on that…” Suddenly, he’s my best friend, and all I did was take a moment to step out of my agenda, my schedule, and start to think about them as people and realize “Well, what would I want if I were them? It’s a hot Friday afternoon, I’d want some beer”, right? It’s that mindset.

Entrepreneurs and investors need to focus on two mindsets: the business mindset and mode, but there’s also the people mindset and mode, which oft times is very similar to how you would deal with your customers. We’re suggesting you deal with contractors, employees with a similar tone and ideas that you would with your customers.

Joe Fairless: I imagine that the principles that you teach and work with your clients on through your consulting firm are similar principles that we as real estate investors can employ, so what framework do you use with your clients, when you’re working with them to get the most out of their team?

Shawn Casemore: Typically, what I would do is — every team is different, every organization is different. For example, I was just speaking with a client this morning; we are working with kind of a subset of a small group of people in the organization. We identified some very minor changes to something, and this morning we sent that out to the broader team before it went live and said, “Hey, give us your feedback. What do you think?” and interestingly enough, out of about 15-20 additional people this went to, two were just hands-down “This is crap, this is not gonna work.”

Joe Fairless: Fire them. Nah, I’m kidding… [laughter]

Shawn Casemore: Well yeah, but [unintelligible [00:12:17].14] they’re senior people, they’ve been around for a while. So the fun thing was leading up to this, everybody in the subgroups I was working  with said “Oh, there’s gonna be some barriers, there’s gonna be some problems”, and I said “What will they be?” “Oh, can’t tell you.” Well, it became very clear what they are – some senior people that realistically are just at a point in their career where they don’t wanna change.

Now, the one mindset is, as you suggested, Joe, fire them, get rid of them; they’re not gonna accept change, I don’t have time for this. But on the flipside you’ve gotta realize they’ve got – how many decades of experience here? This may be a matter of “I can invest a little more time with them to convince them”, but also on the flipside, “What am I maybe missing here?” So rather than let my desire say “Hey, screw them, let’s just move forward with this. This isn’t necessary”, I’ve gotta invest a little bit of extra time.

When you go back to “What’s the framework?”, step one is understanding that everybody on a team is an individual; they’ve got their own life experiences, which includes their personal experiences, their own work experience, their own ideas, and everybody wants to share those ideas and experiences. Some people will speak up and slap you upside the head with it, and the next person might not say “Boo!”, but everybody does have that information. So if you wanna create a stronger team and a better business, you need to really understand that everybody’s an individual, and deal with them on an individual basis to get the most out of them, to get these ideas that help them feel like they’re part of something. When you create an environment where that happens, powerful things begin to happen, people begin to feel happy at work, which we all know means they’re actually more productive, they start to share ideas more frequently, which as an entrepreneur we can’t think of everything.

So it really starts as simply as understanding that everybody is an individual, has their own ideas and viewpoints. Some of them might not be valid because they don’t have all the background that I do or others do, but a lot of people just wanna be heard. If you can listen to them and start to capitalize on some of those ideas, you’ll build a very, very strong team.

Joe Fairless: How do you treat everyone as an individual and hear their ideas, while still scaling a company?

Shawn Casemore: Here’s how we’ve handled it in the past – we put in layers of management. So your team starts to grow and you say “Well, I need a general manager to manage this team” or “I need a supervisor for this group.” And that’s okay, but the problem is when we hire those people, we usually pick the best person. You’ve heard that old saying, you get the top sales person and you make them manager of the sales department, now you’ve got two problems – number one, you’ve [unintelligible [00:14:39].03] your best sales person, and number two, that person may not be a good people person.

If you’re gonna put these layers in, you wanna pick leaders who are people-first, who are good with people… Because I can train any skill, I don’t care what it is. It might take me time, but I can train a skill, I can develop somebody’s skills. I can’t make everybody good with people. So when we’re adding these layers, that’s what you wanna consider, that’s step one.

But on the flipside, let’s say you’re not gonna have layers. You’re still small enough that you can scale for a while before you put leaders into place… You need to calendarize some time where you’re only dealing with your people, whether it be contractors or otherwise. This isn’t a stop by a property and just “Hey, how’s it going? What’s new?” If you’re gonna do it that way, schedule time to spend time with people. Make a point and realize it that as a business owner, as an entrepreneur, the people that are in this business are as important if not more so than me, because they’re making it happen. I may be putting the  deals together and shaking hands, but they deliver… So I really have to invest some time.

I tell leaders all the time: “Stick it in your calendar every Friday to spend the afternoon or the morning going around and just talking to people.” You might not hit everybody every Friday, but make a point of doing that, and what you’ll find is you’re able to better understand everybody as an individual, therefore when you’re positioning things, ideas, viewpoints, asking questions, you can position it from a perspective that they personally appreciate.

Joe Fairless: Let’s say we have a remote business… A lot of real estate investors have remote team members. Let’s say we follow your advice on scheduling time with our remote team members; we just jumped on the call, they say “Hi”, we say “Hey, how’s it going?”, we do the initial pleasantries… How do I approach that call? What questions do I ask?

Shawn Casemore: Well, step one, don’t have a call. If you look at the technology we’re using today, Joe, Zoom, Skype – there’s all these tools out here today that allow for face-to-face interaction. So preference number on  – and you can use mobile for it – I have a face-to-face interaction. Because think about any call you’re ever on; if somebody calls you, what are you typically doing?

Joe Fairless: I’m picking my nose right now while you’re talking.

Shawn Casemore: You write notes, you’re answering e-mails, you’re trying to type quietly so nobody hears… So if you get them face-to-face, you’ve got their attention, even if it’s for a short span, and you get a better feel for where their head’s at; are they really interested in this or not? It goes back to the old saying, body language is the most powerful communication tool we have, and yet in today’s highly technologically driven world we’re missing that piece. We’re wondering, “Why do I have to send 32 e-mails to get the point across?” Well, why didn’t you go see them? That would have saved you a lot of time.

So if you’ve got a remote team – and I have the same in my business today – I schedule time (if they have Skype, or Zoom, or something) where we get face-to-face. Maybe it’s only once a month, maybe it’s once a week, depending on how important that person is to the business and how frequently you can interact. And I can change that. If we start at once a month and that’s not enough, I pull it up to once every two weeks, and I set this [unintelligible [00:17:33].25] with the individual that “Look, I think it’s important that we stay connected. I prefer face-to-face, because it allows for both of us just to have a more meaningful conversation” and if they push back and say “I don’t want that, because I’d rather be at home in my PJ’s right now”, tell them “Just put a better shirt on and let’s go face-to-face. Give me the chance to give it a try first.” Face-to-face is key with those remote people to ensuring that you’re having a valuable dialogue.

Joe Fairless: Okay, alright. We’re seeing them electronically, via Skype or something, or we’re in person. Now what questions do we ask? How do we structure that conversation?

Shawn Casemore: It depends on their role. You start with pleasantries; that might sound so simple and stupid, right? You say “Hey, how’s it going? What’s new?” but the change that I would suggest a lot of entrepreneurs make when they ask that question is to actually pause and wait for an answer… Rather than just “Hey, how are things? Great! Anyways, here’s what I need from you…” – that’s typically how that conversation goes. So we’ve got in our mind going into this, “Hey, I’m spending 10-15 minutes, maybe 20, just trying to find out what’s going on in this person’s life”, so if they focus heavily on business, I’m gonna go there with them, but I’ll ask them how are things going personally. If they focus heavily on the personal side of things, I’m gonna go “Great! How are things going in your job? What’s going on right now?”

So it’s just that time to have a dialogue, and there doesn’t have to be a fixed agenda. The point is if you’re an effective leader and you’re dealing with people just like you would with a customer, you’re gonna change your approach. Think about this again from a customer standpoint – if you’ve got a customer that’s pounding his or her fist on the table, demanding answers, do you sit back and crack a smile and light up a cigar? Probably not, right? You’ll get them the answers quickly. Same if you have an employee that’s direct like that, I’m gonna respond directly. Or if I’ve got somebody who’s more thought-provoking and they wanna sit back and analyze things, I’m gonna mimic the same, because that’s how I break through that barrier of the fact that “Hey, I’m human just like you. Yeah, I’m your boss, but I appreciate you, I care about your ideas and viewpoints” and that starts to open up people to providing new ideas, being more creative and more supportive to my business.

Joe Fairless: So far what I’ve written down for takeaways for how to get the most out of our team is 1) make your business their priority by going the extra mile, making them feel like they are part of something, and/or involving them in the decision-making process. Another is don’t be a jerk – pretty simple. A third is to get feedback for what you might be missing. When you use that example of sending it out to 15 or so people, a couple of people who have been there for a while said “What’s going on? I don’t like this” – well, what might you be missing? And the fourth is everyone on the team is an individual and they want to share their experiences, and scheduling time with them in person as much as possible. I don’t think it’s “as much as possible”… I think as much as it’s required to get you your sweet spot probably, and then if you can’t do in-person, then do it via Skype or Zoom or something like that.

Anything else that we haven’t talked about that you wanna mention, that will help the Best Ever listeners get the most out of their team?

Shawn Casemore: I guess the last point I would bring up Joe is the idea that, again, if you realize that everybody’s an individual, you have to realize that recognizing people, thanking them has to also be individual. For example, let’s say you’ve got a few people on your team and you have a great year and you do the cliché send them all a jacket or give them all a ball cap. That’s fine, but if you’ve ever received the jacket from maybe a business you were working in at some point, some people love that jacket, some people would rather have the cash, some people didn’t like the color, some of them got their names spelled wrong… So when you look at recognition or just thanking people, that also has to be individual, so sometimes that’s a matter of with you, Joe, because we’ve got a great rapport and we get along well, think very similar, you may be a similar personality as me – I know I can pick up the phone and give you a call, and say “Hey, Joe, I really appreciate your hard work in that” and I send you a gift certificate for Dunkin’ Donuts, or something.

Somebody else, I’m gonna see them on the site, so I’ll go over and give them a pat on the back. Somebody else, I’ll drop some beer off to him. If you really think about that recognition and thanking people is also individual, because that’s the only way I can make sure it’s valuable to the person. If you do that, again, you’re gonna find people are more appreciative and more supportive of you and your business.

Joe Fairless: I know you’re gonna say it depends on the individual, but I still would like for you to tell a story of one of the best ways that you’ve seen or done personally the individual thank you approach.

Shawn Casemore: Personally, my experience has been — and everybody disagrees with me on this, or pushes back… But my personal experience has just been walking around, going to see people and just thanking them. Now, I’m not gonna say the same thing every time; I’m gonna change it up based on the situation. But hands down, most people just want a thank you.

Again, that thank you will vary depending on the individual. If it’s a shy person, I’m not gonna go over and pull them up in front of the team and make a big announcement, because that’s gonna piss them off. I’m gonna go talk to them at their place at work, their desk, or get on Skype with them and say, “Look, you put a lot of effort into that – notice I’m being specific about my thank you – and it was done on time, and that’s the best we’ve ever done… Just wanna tell you, I really appreciate that. I know you put some extra hours in to get this done.”

It’s that personalization that is absolutely key, but again, it’s just that face-to-face recognition. Most people, if you give them money, they just want more. That’s something I can use once in a while, but taking time out of my day when most people recognize as an entrepreneur you’re busy — so if you take time in your day to specifically go see somebody and say “I’ve got nothing else on my agenda, I just wanted to stop by and say thank you”, people are probably gonna be shocked at first, and after a while come to desire that kind of feedback, which again is a good thing, because you can build on that. You can start to take that to “I’m thanking you, and by the way, what other ideas do you have? How might we replicate this success again?” You just start with thanking them on a one-on-one basis.

Joe Fairless: Shawn, thank you for being on the show and talking about how to ultimately get the most out of our team, but it’s deeper than that… It’s also how to have a more enjoyable relationship with our employees, so that we all achieve larger things together. Because when we’re implementing the tactics that you mentioned – that I recapped already, other than that last piece of thanking the individual – then we will enjoy ourselves much more than if we are doing the opposite or not doing it at all, I promise you that. No one likes being a jerk, I don’t think, and asking ourselves better questions like “What else might I be missing?” and having conversations as much as is needed to reach that sweet spot of efficiency with our team members, in person or where we’re seeing them – that’s something I don’t do, and I will test it out and see the change in the results.

I have a daily call with my team at 8 A.M., Monday through Friday. They’re all local, but we don’t do Skype, we just get on the phone call, and I don’t see some of them very often in person. So I’m gonna implement that.

And then also making your business their priority – when we step outside of ourselves and we step in someone else’s shoes and we make it their priority, then ultimately our priorities are gonna be addressed and then some. I love your example of just paying $20-$25 for a case of beer to the contractors and all of a sudden guaranteed you’re making your money back that you invested in that case of beer and then some. Plus, you just feel better. I mean, come on, we’re on the journey together, why not enjoy each other’s company?

So thanks so much for being on the show… Where can the Best Ever listeners get in touch with you?

Shawn Casemore: Again, thanks Joe for having me. The best place to find me is on the web, www.shawncasemore.com. You’ll find a lot of tips, resources, everything there about how to further develop your team. Also, you can google my name and you’ll find me on virtually every social media channel out there.

Joe Fairless: Excellent. Well, Shawn, thanks for being on the show. I hope you have a best ever weekend, and we’ll talk to you soon.

Shawn Casemore: Thanks, Joe.

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real estate pro advice

JF846: Buy Out of State, Because Your Surrounding Market May Be a TERRIBLE Investment

He bought homes not only out of state, he bought outside of his country! Today’s guest is a Canadian who fancies the long-term buy-and-hold wealth strategy. Be sure to understand his equation for purchasing a home and why he decided to purchase outside of his own country.

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Jeff Rombough Real Estate Background:

– Associate Realtor at The Real Estate Company/Mortgage Specialist at the Mortgage Resource Company
– Currently owns and manages 27 doors with rental incomes of just over 32K per month.
– Started investing in 1992 with $12,500 and has grown portfolio to over 4 million dollars
– Based in Calgary, Canada
– Say hi to him at www.Romboughproperties.com
– Best Ever Book: How to Win Friends and Influence People

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes.

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JF828: NOTHING Out of Pocket Lease Options with Big PAY DAYS!

Lease options are all about matchmaking, and it’s on a whole new level when you have nothing out of your own pocket. Our guest is able to create passive cash flow streams and massive pay days, even a hefty consideration on the tenant buyer’s option deposit, and he does so with a high energy team that supports the tenant buyer in purchasing the property within the term. Hear it and learn!

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Jon Simcoe Real Estate Background:

– President of the Canadian Association of Rent-to-Own Professionals
– By beginning of 2017, he has raised over $17,000,000 of private capital for real estate projects
– Best known for the tenant-first rent-to-own strategy, and uses other strategies to help his joint venture partners
– Nominated for the Canadian Real Estate Wealth Awards Joint Venturer of the Year 2016
– One of the youngest Canadians to ever retire
– Based in Alberta, Canada
– Say hi to him at http://www.lionopportunities.com
– Best Ever Book: The Art of Raising Capital by Darrin Weeks

Click here for a summary of Jon’s Best Ever Advice: http://bit.ly/2hgbQX8

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple.

Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes.

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Best Ever Show Real Estate Advice from experts

JF826: How to Stay HIGH and Produce During a Hard Economic Times

When we mean high, we are not talking about the herb! Our guest has an incredibly positive attitude and has proven to be honest even in the toughest times. Hear how he made it difficult decision and what he’s doing now to stay ahead of the curb during this rough recession in Canada.

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Benjamin Loates Real Estate Background:

– Real Estate Agent at Realty Executives Leading
– One of the top realtors in Spruce Grove
– Professional skateboarder
– Based in Alberta, Canada
– Say hi to him at www.haroldsellshomes.ca
– Best Ever Book: The Bible

Click here for a summary of Ben’s Best Ever Advice: http://bit.ly/2gOndp4

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple.

Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes.

Download your free copy at http://www.fundthatflip.com/bestever


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Best Ever Show Real Estate Advice from experts

JF824: The 5 Reasons You Are Not Scaling Your Business and 5 Keys to Push to the Next Level

It’s time to take all your plagues that keep you from growing your business in real estate and throw them out the window! One of our favorites, Trevor McGregor, is here to share what five roadblocks stop real estate investors from growing. He also has five keys that you can apply today to turn your operations up a notch.

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Trevor McGregor Real Estate Background:

– A Master Coach with the Tony Robbins Group
– has done over 10,000 hours of coaching
– Based in Vancouver, Canada
– Real estate investor who has done fix and flips, buy and holds and wholesaling
– Visit him at www.trevormcgregor.com

– Listen to his Best Ever Advice here: https://joefairless.com/blog/podcast/jf320-the-three-ss-of-real-estate-investing-that-you-need-to-know-skillset-sunday/

Click here for a summary of Trevor’s Best Ever Advice: http://bit.ly/2gvgLAe

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple.

Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes.

Download your free copy at http://www.fundthatflip.com/bestever


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JF684: 3 Steps to Turn an OPEN HOUSE Into a ROCK CONCERT!

Marketing and event expert Louie La Vella is here to share his techniques to creating the hype you need for your next open house! He shares his success on branding, pre-selling, and staging. This is an episode you will not want to miss if you’re serious about creating a large following!

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Louie La Vella Real Estate Background:

– President of La Vella Nightlife and Events
– 20+ years in nightlife consulting
– Author of Nightclub and Bar Marketing: http://amzn.to/2a0fb5u
– Based in Toronto, Canada
– Say hi at http://louielavella.com

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors.

We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

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