JF1339: How To Create $100K Equity In 13 Months Using The BRRRR Method with Sarah Larbi

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Sarah is a Canadian investor who has built up a portfolio of single family rentals. By using the BRRRR method, she has been able to grow quickly, in fact she has created $100k in equity in one of her properties in just 1 year! Sarah has been able to use that equity to re-invest and get more properties. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Sarah Larbi Real Estate Background:

-The Millennial Real Estate Investor, Speaker, Mentor

– By her early 30’s she has seven home portfolio

– Featured in The Toronto Star, 1010 News Talk Radio, and Canadian Real Estate Wealth Magazine

– Host of the “Where Should I Invest?” Podcast

– Inspires young professionals to be property owners and plan for retirement by 50

– Based in Toronto, Canada

– Say hi to her at www.sarahlarbi.com

– Best Ever Book: Secrets of the Canadian Cycle


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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, Sarah Larbi. How are you doing, Sarah?
Sarah Larbi: I'm amazing, how are you?
Joe Fairless: I'm amazing, and I'm glad that you're amazing. Nice to have you on the show. A little bit about Sarah - she by her early 30's has a seven-home portfolio. She's a host of the podcast "Where Should I Invest?" and she's based in Toronto. With that being said, Sarah, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Sarah Larbi: Yeah, absolutely. So not that long ago I literally had nothing to my name; I was finishing school, I had zero dollars, living at home, and I met my boyfriend and he was about $15,000 in debt... I remember going to the bank - and this wasn't even that long ago; maybe like 6 or 7 years ago now - and they were asking us "What are your assets and what are your liabilities?" I had been working for a few years by then, and really realized I had nothing to really show for any of the hard work that I'd been doing.
So I went home literally that night and started googling how am I gonna get rich one day, and how to create assets, and real estate just kept coming up and up and up and up, and I said "This seems like it's easiest of the options that there were available." Stocks you can't really control, business you've gotta be pretty savvy and it takes a lot of time, so I said "Well, it seems like a lot of millionaires are created through real estate investing, so how do I start?"
For the first couple of years it was trying to convince my spouse - I don't know if any of your listeners are in the situation - of real estate being a good idea. He just didn't want anything to do with it for a good amount of time, because it was the "What happens if our tenants are horrible and we've gotta go to the landlord-tenant board?" and "What happens if they trash our property?" He's already got like a pretty full-time job and he didn't wanna deal with all that stuff, so we ended up actually finding a home for his sister; she was our first tenant. Now, they say "Don't rent to family", but in this case it just seemed like the obvious next choice to get in... And she's still there to this day, but it allowed us to get into the market. Then since then we've bought 1-2 houses a year, and so far right now we've got seven, possibly eight - I'm waiting on a confirmation for one actually tonight.
Joe Fairless: Fingers crossed for you. To buy that first property where your sister-in-law moved in, what conversation took place with your spouse that allowed you to really convince him that "Hey, let's do this thing. I've been talking about it for way too long, and now we've gotta make it happen"?
Sarah Larbi: I think it's just about objection handling and just figuring out what all the objections are. In this case it wasn't -- whatever the objection is; sometimes people don't have money or financing etc. and we really did scrape our money together to be able to do something, or to have some money to be able to at some point do something with it... And just really understanding what the objection was, and being able to say "Well, worst-case scenario, we know her enough. Let's do it with her." It was more of a probably back and forth debate for a couple of years, but finally, you know, he was smart and caved in. [laughter] And it worked out well.
Joe Fairless: Thank goodness. He's probably saying "Thank goodness I did cave in." So it sounded like most of the objections were centered around a bad tenant - that's basically what I heard - so once you had the sister-in-law to move in there, then that helped remedy that, it sounds like.
Sarah Larbi: It did. However, what I had to do is strategically figure out who our next tenants were moving forward. For example, the next year we tried to scrape our money together and buy our second property, and didn't wanna have another two year debate, so we ended up actually finding a tenant first, which I ended up meeting her on Kijiji, which is the Canadian version of Craigslist, and talked to her for about three months, figured out what her budget was, what she wanted, what we wanted, to make sure that it matched, and that's actually how we found our second tenant.
Then since then, we've done it differently as well. We usually actually find our tenants prior to closing on the property. House number three, for example, I started putting some feelers out on Craigslist, and one of the tenants needed to move somewhere because their landlord was selling a house, and she was asked to leave within 60 days etc. So we ended up actually buying that house... Because we had that relationship, I was able to talk to her about putting her back to market rents, and then she's still there as well.
So we've really been able to not have those issues with tenants. Of course, there's tons and tons of screening that you need to do, but you also get tenants that I think are so much more appreciative when you're able to work with them, and you find a house obviously for yourself, which works for you, but also you give them a nice home for them to wanna spend many years in.
So what we've found is our tenant turnover is zero, unless people break up, and at that point in time we find a replacement... But it's just been an easier way to coast with the original objection.
Joe Fairless: Where are you buying at?
Sarah Larbi: Toronto, as you know, is extremely expensive. I buy for cashflow, and Toronto is not giving me any cashflow whatsoever, because you're looking at a million dollars for a property, or at least half a million for a condo, which is extremely expensive. But that should not be an excuse for anybody living in an expensive city. If you look out even an hour, an hour and a half, two hours, there's still some really good opportunities.
I'm buying in a town called Bradford, Ontario, which is just a little bit West of Hamilton. The house prices are so much more affordable, and the rent actually allows me to be able to get that cashflow.
Joe Fairless: How far away is it from you?
Sarah Larbi: Let's just call it about an hour and a half.
Joe Fairless: An hour and a half. Do you self-manage?
Sarah Larbi: I do.
Joe Fairless: How do you self-manage an hour and a half away?
Sarah Larbi: It's just about having a good team of people. A lot of the time something will happen and you'll need a handyman, or -- you can see me on video, but your listeners can't; I clearly cannot swing a hammer... [laughs]
Joe Fairless: You're not giving yourself enough credit.
Sarah Larbi: [laughs] Thanks. But having the right plumber, the right HVAC person that you trust, and when you have a solid team, it's just a matter of "Hey, something happened", you make a phone call and get them to take care of it. Everything is done electronically, payments can be sent electronically, and then I'll still do my bi-annual inspections and visits, but at least I can schedule that on my own time.
Joe Fairless: So the moment where you went to the bank was approximately six years ago... You bought your first place five years ago?
Sarah Larbi: Yes.
Joe Fairless: Okay, you bought it five years ago... So you've had multiple bi-annual inspections at your properties... What does your checklist look like for that inspection?
Sarah Larbi: Similar to like a move-in checklist. What you would do when you have a tenant move in - and your folks can google it as well; just any move-in inspection that has the kitchen, and then all the appliances, and you just go through it with the tenant, and you figure out "Does this look like the same as the original? Has there been any damage since?" and then just inspection... So I would say don't try to recreate it, use the original checklist that you did from the start.
Joe Fairless: Okay. As far as the payments being sent electronically, what specific system do you use?
Sarah Larbi: E Transfer. It might be a little bit different in the U.S. But essentially, they would e-mail me the money and I would deposit it electronically in my bank account.
Joe Fairless: Is that set up to automatically draw from their bank account, or do they have to manually push the button to send it to you?
Sarah Larbi: They have to push the button to send it to me.
Joe Fairless: Okay. Is that an option for them, to have it automatically withdrawn?
Sarah Larbi: Yeah, that's also an option in Canada, so then you could do different things - you could get it E Transfered (what I'm doing now), you can have it so that it automatically gets withdrawn...
Joe Fairless: Why wouldn't you do it automatic?
Sarah Larbi: Well, at the end of the day I actually get paid a few days earlier with the E Transfer. I give them the options to do different things, and it's worked out so far for us.
Joe Fairless: So if it was automatic, then it would be a couple days later, whereas if it's not, then you get it a couple days earlier, and that's the only difference?
Sarah Larbi: Yeah, you basically get it instantly. So even if it's Sunday, the banks are closed, or a holiday or whatever it is, the E Transfers go through regardless.
Joe Fairless: Hm, that's magical.
Sarah Larbi: [laughs]
Joe Fairless: So you've got seven homes... It sounded like six years ago, according to you, you were scraping by, and then you got a house, and then you got another and another and another... How are you paying for these homes?
Sarah Larbi: That's a great question. So obviously, the properties that I'm buying are about 180k to about 280k; that's the cost of a home.
Joe Fairless: 180k to 280k?
Sarah Larbi: 180k to 280k.
Joe Fairless: Okay.
Sarah Larbi: Now I would say it's probably closer from 250k to 280k. They're a little bit harder to find at that price originally... But it's gonna be a combination of using the cashflow from your tenants to help snowball the payments, but also appreciation. So one of the things that we've had in Ontario, specifically Southwestern Ontario had quite a lot of appreciation, and a lot of that is also due to the immigration. We have about 400,000 people coming from different countries a year, and a lot of them go to Southwest Ontario - the Hamiltons, the St. Catharines, Bradford including... And so it's really creating such a high demand, and there's not a whole lot of supply - for purchases, but also for tenants.
We've found that in the past five years (and it's still going) that some appreciation on the properties - you're looking at 20%... We don't factor in 20%/year, because you don't expect that to be every single year, but that's definitely helped. But the biggest thing I would also say is if you become a market expert, whatever market it is that you choose - in my case, is Bradford - rather than having a house an hour from each other in different markets, learn a very small segment very well, and you'll be able to really jump on the opportunity.
I've been able to buy a lot of properties that were under market value, and within a year I was able to actually refinance them and be able to use some of that money for the next one, and then if I'm taking a HELOC out, for example, still factor in the cost of the HELOC per month on the new cashflow.
Joe Fairless: I love this, and I'd love to follow the breadcrumbs from first property, your down payment, to now you're making an offer on the eighth, because it sounds like you're buying under market, you're then doing a refinance, get the cash back out, and then you're rolling it into the next one. Is that basically the gist of it?
Sarah Larbi: That's basically the gist of it. Obviously, the first two are gonna be the hardest for anybody, especially in Canada - we don't have $30,000 houses [unintelligible 00:12:18.02] But the first one was actually 129k, which is unheard of; it's very hard to get that now. And it was really scraping pennies. I ended up cashing out some vacation originally, and trying to have second jobs so that I can save as much... So it does take more effort for the first one, and I would say the second one I was still in the same situation. With my job being in sales, I was able to get some commissions, and I would save all my commission checks to be able to create that down payment.
Afterwards, for example the second house I ended up buying for 177k, it got reappraised about a year later for 230k.
Joe Fairless: 177k purchase - did I hear that right?
Sarah Larbi: Yeah.
Joe Fairless: And it appraised for how much?
Sarah Larbi: It appraised for 230k the year after. Right now it's probably about 285k, based on the current market.
Joe Fairless: How much did you put into it in the first year?
Sarah Larbi: In the first year there was just a roof to be done, about $2,500, some railings. Some of the properties are not complete gut jobs, which is great... So that one I put in about 5k.
Joe Fairless: Okay, so in a big picture not a whole lot. So you were all in at 183k, a year later it appraised at 230k... I'm guessing since you appraised it, you were doing something with it; so you did a refinance on that one?
Sarah Larbi: Yeah, absolutely. I do refinances on all the properties, and there has been some mortgage changes and rules starting in January this year, so I made sure that all my properties are actually refinanced beforehand... Because you wanna get money when you don't need money, right? So you have a great deal to figure out how you can get the money, so pre-positioning yourself is definitely really important. So all the properties that we've had so far have been either refinanced with a HELOC, or there were some that we did a BRRRR, so you buy a house, you renovate it, you rent it, and then you refinance, and we've been able to pull 100k in literally 13 months.
But just to go back to your question, the second one is about 280k. The third one we bought was 165k, and then got that reappraised, it was about 230k as well. Now that one would probably be about 260k; it was about a year ago that we got that one appraised.
Then we've bought one for 207k, got that reappraised for 280k... So if you buy under market and you're buying the first day that it comes out because you've got a good team in place that knows what you [unintelligible 00:14:55.22] I think that's what's been able to help us so far.
Joe Fairless: A couple questions, let's see... What was that second job that you took?
Sarah Larbi: I worked retail in a store. Nothing fancy, nothing--
Joe Fairless: What store?
Sarah Larbi: It was called Accessorize Me. It was jewelry, and clothing, and...
Joe Fairless: What are your hours in your day job and what hours did you work at your second job?
Sarah Larbi: Originally, I worked for a photocopier company when I first started, Xerox, and that one was--
Joe Fairless: Not so much anymore, huh? [laughter]
Sarah Larbi: [unintelligible 00:15:24.27] but a good company to start... But I would say like 7:30 to about 5:30 with [unintelligible 00:15:30.24] and then weekends, Saturdays and Sundays I would spend working at the store. Then I got a job [unintelligible 00:15:37.26] afterwards, and that paid a little bit better, as I was going through property number two and half-three (let's call it). That one paid me more commission, it also covered a little bit of a base, and I just worked my butt off to be sure that I was the number one rep when I was there, to get all the bonuses and that kind of stuff. But I used to cash out a lot of my vacations; I don't have to be doing this forever, but at the beginning I'd cash out some of my vacations to use that money towards the down payment.
Joe Fairless: So you don't go on vacation days, and in exchange you get money from your employer... Got it. Cool. I haven't worked at a company that had that, but that's a pretty cool perk.
Let's talk about the increase in values of these homes. That's incredible. You mentioned you focus on a very small segment, and you find under market properties. For example, the 165k purchase appraised to 230k, and now to 260k... Or the other home, 177k, one year later to 230k, to now 285k. So my question is, I'm wondering are they really under market, or are you just in a crazy appreciating market?
Sarah Larbi: I think it's a little bit of both. I think that sometimes you can find something if you're ready to go quickly, but I also think there's an appreciation factor. But in the Southwestern Ontario, Hamilton being a big city, I looked at the town next to it, and I said in Bradford there's like that trickledown effect or whatever it is that you call it when in a city there's a lot of construction, a lot of employment etc., it's gonna trickle out to the other markets.
So I think part of it was being able to quickly act on something when you do see a property that's out, but also working with a realtor that's an investor - that's definitely really helpful... Somebody that's local that has some pocket deals, and just knowing really the market, so that you know when to pull the trigger on something.
Joe Fairless: When a property comes out, what are the main things that you're looking for to determine if it's under market value?
Sarah Larbi: At this point in time you can definitely look at some comparables. And what I'm looking for, my specific market is 3 to 4-bedroom homes, and I do want them at around 250k or less. So when I can buy something at that price -- actually, my most expensive one so far that I bought was 238k, and I'm renting that at $1,600/month. But in terms of finding properties under market, I think it's just having a good team, a good realtor that's an investor, that's able to go and visit things very quickly for you, and make some offers. Sometimes I throw in some lowball offers and they come back at a higher price, but it's still pretty lowball, so... [laughs] [unintelligible 00:18:34.02] at the right place, at the right time.
The last house I bought was originally listed for 265k, then it was 250k, and they had two offers that were exactly what I had offered, I just ended up offering a month later in this case, and they took it because of the timing and they needed to get out.
Joe Fairless: So there might be a listener out there who's a numbers geek, and he/she might be saying, "Wait a second, as you continue to leverage up and do these cash-out refinances, it's great, because you get money back out, but now you've got a bigger mortgage payment that you're paying every month", and with the number that you've just said, 238k purchase price, at $1,600 rent, doing that math... Do you know the 1% rule?
Sarah Larbi: Yeah, I do.
Joe Fairless: Yeah, so it's .67 of a percent, so it's a little higher than half of a percent. So do these properties cashflow? And if so, how?
Sarah Larbi: They do, but Canada is a little bit different, in Ontario. We're not gonna get the 1%. We're not gonna get the 2%, we're not gonna get the 1%, so it's just a different market. So when I look at something that's 238k at $1,600, even though it's .65, yes, it still cashflows. It probably doesn't cashflow as much as the U.S., but when we factor in that there is some cashflow, there is still some appreciation - probably more than in the U.S., for sure, in Southern Ontario - and there's still the mortgage paydown, I'm happy with those numbers.
Joe Fairless: With the refinance approach, as you continue to refinance, pull cash out, if you're making just slightly a little bit of cashflow on each property because of the spread there, would you then in the near term start looking for more cashflowing markets, like the U.S. or somewhere else, where you can build up the cashflow, that way you can match up the equity appreciation with the cashflow that you're getting somewhere else?
Sarah Larbi: Possibly at some point we'll go into the U.S., but I think right now for Ontario it actually works out really well to be in Bradford. For the cashflow, at some point, I'm gonna have to go somewhere else, absolutely. But it's going to be four hours away, it's gonna be twelve hours away, depending there's still some markets, as it gets harder in Bradford. Bradford used to easily have properties at 170k, 190k, 200k... Now definitely we're fighting a little bit more for them, so at some point there will have to be a change of market, but at this point I think I can still find some in Bradford for the next 2-3 years at a reasonable price, for what I look for.
Joe Fairless: Are all the homes separated from each other, from a loan standpoint?
Sarah Larbi: They're all single-family homes, yes.
Joe Fairless: I'm wondering worst-case, the spread on these homes is not much from a cashflow standpoint, so if someone moves out, then you lose your job, your spouse loses his job - and worst case, this will never happen, but just worst-case hypothetically, one house goes under and you have to give it back... Are they connected from a personal guarantee or anything, or are they all isolated?
Sarah Larbi: Some are in corporations, some are personally guaranteed. And the other thing to factor in is the vacancy rates in these markets, like Toronto for example, is 1%.
Joe Fairless: Wow.
Sarah Larbi: So when I for example have a property, I can fill it before the property closes, so I'll ask for like four showings and I'll have ten tenants come through. I'll put it on Kijiji and I'll have like 50 replies. It's a bit of a different market here; there's just so much demand, and very little opportunities for people, so they're a) staying longer, but they're also -- on the last property I had, I had like ten applications to pick from, and you have the ability to be very selective, and you can do it before they close.
If I was in the U.S., I might be a little bit more worried in some markets based on vacancies, but here we're having like an opposite problem.
Joe Fairless: That makes sense. And not to try and create competition for you, but an approach could be a U.S. person who wants to make potentially some good appreciation, do a cash-out refinance quickly in one year and make a good return, go invest where you're investing - and again, I'm trying not to create a lot of competition for you - and then take that money, invest it back where they live for cashflow, and then just keep riding that until the music stops, and then don't do it anymore.
Sarah Larbi: Yeah, absolutely. It's funny, while you were talking I got a text message that I got my eighth property.
Joe Fairless: Sweet, congratulations!
Sarah Larbi: Thank you! But just to go off of that, so I offered on two actually today; one got accepted. One had five offers, and literally went like way above asking price. So you still have to be smart about it, to look at your after repair value and what your repair costs are gonna be, and how long it's gonna take to flip, if that's what you're planning on doing - absolutely.
One of the things that I say is there's not one single way to become wealthy in real estate. There's so many different opportunities, there's so many different ways. I personally have a full-time job that involves a lot of travel, and so does my spouse, so when I look at all the different types of real estate, buying and holding and doing it for the long-term, doing some renovations, doing a BRRR here and there doesn't create a whole other job for me.
In Canada it's important that you get a T4 job to be able to get the best rates, with the best lenders... So I do love what I'm doing, but it's definitely important for me to be able to not have a whole other full-time job at this point in my life, until down the road I'm replacing more of my income.
Joe Fairless: Based on your experience, what is your best real estate investing advice ever?
Sarah Larbi: I would just say don't come up with so many excuses and take action. And even if it's something small, just go do it. You're gonna wish that you would have started sooner. So take action.
Joe Fairless: We're gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Sarah Larbi: Ready.
Joe Fairless: Alright, let's do it. First, a quick word from our Best Ever partners.
Break: [00:24:40.07] to [00:25:23.27]
Joe Fairless: Okay Sarah, best ever book you've read?
Sarah Larbi: I am a big fan of Don Campbell, and he is probably well-known in Canada; I'm not sure if you know him or not, but he writes a lot of books, and one that I would say is the best one for Canadian listeners for right now is The Secrets of the Canadian Real Estate Cycle.
Joe Fairless: Okay. Best ever deal you've done that we haven't talked about?
Sarah Larbi: In December 2016 I bought a property site unseen through my realtor. He's done a few already with me, so he knows what I like... It was 151k, and I was gonna put in about 25k-30k, but just to test it out I put a feeler out on Kijiji/Craigslist and found a tenant that didn't want anything changed, loved the purple bathtub, loved the [unintelligible 00:26:10.18] loved the ugly tiles on the floor, and... Long story short - they literally moved in day one; broke up in September, and we decided to actually renovate that place. That was originally rented for $1,295. We put in about 25k-30k of renos, and now we're renting it at $1,545 and we were able to do a cash-out refi and pull out 100k, and [unintelligible 00:26:32.10] In one year.
Joe Fairless: In one year. I was waiting for the mic to drop, and there it was. What's a mistake you've made on a transaction?
Sarah Larbi: I think the biggest mistake - and I'll talk about Canadian experience - is not using a mortgage broker, because in Canada you need to structure your deals very carefully and using the right lenders at the right time in order to scale up... So I was originally going to the bank and working with the bank, because that's where I was comfortable, that's where I have a checkings account, a credit card etc., and that would have actually stopped me from being able to scale up properly.
When you work with a mortgage broker, they actually know which banks are investor-friendly, which one has the best rates, the best opportunities, but also which strategy you need to use so that you can keep going with different banks afterwards.
Joe Fairless: Best ever way you like to give back?
Sarah Larbi: I don't know if you guys have this in the U.S., but I have a little sister, so I'm part of the Big Sisters, Little Sisters... She's awesome, and I've actually shown her how to calculate some cashflow, look at some properties, I've taken her to some real estate seminars, and I told her when she's 18 she has to buy a property... But I love to help somebody that would never have that opportunity otherwise.
Joe Fairless: And how can the Best Ever listeners get in touch with you?
Sarah Larbi: I do have a website, it's SarahLarbi.com. They can e-mail me at Sarah@SarahLarbi.com, or they can also listen to my podcast, called "Where Should I Invest?" and if they are in Southern Ontario, I actually host a monthly real estate group. Once a month we meet, and this is gonna be in the past, but March 22nd is actually our one-year anniversary and we've got 205 people registered for it, which is really exciting.
Joe Fairless: Wow, that's cool. What's the main attraction for the anniversary meetup?
Sarah Larbi: Well, basically we provide knowledge for like no sales tactics. It's just pure knowledge and networking, and we started a year ago, and we said "Hey, it's been a year. Let's just celebrate, and keep bringing the value." It's just been amazing to be able to connect with like-minded individuals and allow others to connect with one another.
Joe Fairless: Sweet. Well, Sarah, thank you so much for being on the show. Clearly, you've been going above and beyond what's typical in some ways that you talked about... One is getting another job while you had a job to make things happen, to get the first property. Two is creating that meetup that you've just talked about. A lot of people just attend meetups; you create the meetups, you create a podcast, and as a result of those efforts and just that approach, seven homes and soon to be eight homes in approximately five years, at a price point that is a healthy price point from American standards... So that's great, that's incredible stuff, plus the refinances and the different ways you're approaching it - very interesting stuff, so thank you so much for being on the show. And then also, lastly, thank goodness you convinced your spouse to invest in properties, and the tip for finding a tenant prior to closing on a property - that's something that we should all certainly do.
Thanks for being on the show. I hope you have a best ever day, and we'll talk to you soon.
Sarah Larbi: Thanks very much, I appreciate it.

JF1338: How To Build A Passive Income Portfolio with Brian Persaud

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Brian was a medical student in college before realizing that was the wrong career path for him. He would skip class and go to to bookstores, it was there he came across Rich Dad Poor Dad. After reading that book, like many of us Brian had the real estate bug. Years later, he’s a published author, public speaker, and real estate investor with his own portfolio as well as managing properties for other investors. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Brian Persaud Real Estate Background:

-Broker and Owner of Brian Persaud Real Estate Team

He’s covered over 70 real estate topics on his highly acclaimed television show, “Inside Toronto Real Estate.”  

– Continues to share his real estate expertise on shows including HGTV’s “Income Property.”

– Wrote the book on Toronto real estate, a best-seller on Amazon

– Managing single family residential homes to multi-unit apartment buildings, to hi-rise and subdivision development

– Based in Toronto, Ontario

– Say hi to him at https://www.brianpersaud.ca/

– Best Ever Book: Extreme Ownership


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Read Full Transcript

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, Brian Persaud. How are you doing, Brian?
Brian Persaud: Hey! Amazing, thank you so much for having me on.
Joe Fairless: My pleasure, nice to have you on the show. A little bit about Brian - he is a broker and owner of Brian Persaud Real Estate Team. He's covered over 70 real estate topics on his TV show Inside Toronto Real Estate, and he has written a book on Toronto real estate, and he is based in (obviously) Toronto, Ontario. With that being said, Brian, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Brian Persaud: Yes, I was in university, I read this book -- actually, taking a step back... I was in university, my [unintelligible 00:01:56.29] parents want you to become a doctor, lawyer, engineer, so I signed up for like the free med program at UFT; by my second year I realized I had nothing in common with the people that were in my class, and it was like a really tough time because I did not wanna do it at all. So instead of going to class, I would skip out and go to bookstores; I came across a book called Rich Dad, Poor Dad. Have you heard of the book?
Joe Fairless: A couple times, yes.
Brian Persaud: Yeah, so what's the biggest thing about the book? Passive income, right?
Joe Fairless: Yup.
Brian Persaud: So I wanted to get passive income so I could live this awesome life, and at the time, the best way I thought to making passive income is through real estate... So I got my dad to co-sign for a property, and I was making $1,000/month cashflow at the time while at university. And making $1,000/month, it's kind of like you're financially free, because you don't have that much expenses.
So I was going to school, living the life, making $1,000/month just hanging out with my friends [unintelligible 00:03:06.00] So I'm like, "Wow, there's some things to this real estate...", so that's how I got into it. And because I was so young investing into it, it led me to go to real estate clubs, people asked me to speak, I did speak engagements, it got me a book deal, it got me a TV show, I was flipping houses... And then I realized that you know what? Real estate agents make a lot of the money when you're doing the deals, so I decided to become a real estate agent because I was really good at finding really good investment properties. So instead of investing and flipping it, I decided that hey, why not sell it to people and make them make money?
Joe Fairless: And going back to what you said, Rich Dad, Poor Dad book, the primary message is passive income... You've now shifted to active income, so how do you reconcile that?
Brian Persaud: I think for most people, instead of looking to get passive income right at the beginning, you should look up to build a lot of capital, so you could reinvest it, and then get passive income from that. It's very hard for someone who's getting into real estate to develop passive income just from having no seed capital at all. So you have to build up a nest egg, and then you could go after the passive income.
But reconciling it, now that I'm at a point where I've got a lot of passive income coming in, I enjoy the challenge of real estate and I think I would be bored just hanging out in Costa Rica.
Joe Fairless: Yeah, there's only so many trips to the beach you can do. With the passive income that you said you've got coming in, what have you invested in?
Brian Persaud: You know what, a lot of people are like "Hey, get into stocks, get into crypto, weed stocks are amazing, I've got these great stock tips and mutual funds...", and I just invest in buying houses, basement apartments, getting cashflow from them, and kind of sitting back and waiting for it to go up in value. That's the only thing I do.
Joe Fairless: And then when it goes up in value, do you do anything to cash out some of that value and reinvest, or do you leave it there?
Brian Persaud: I kind of leave it there, because I used to sell a lot, and I kind of regretted all the sales that I made... So I just kind of focus on building up the wealth by keeping the properties, focusing on having the tenants pay down the mortgage, and then all I do is just work to be able to get more. And really, it's we in Toronto -- we're able to buy three houses, and with the rental income in 25 years after you pay down that mortgage, you can be making 3k from each property in cashflow. That's $9,000/month. A lot of people could live off of that. You don't need to have that many properties to have the passive income to retire, so I don't really focus so much on the numbers and getting a lot of property; I just wanna get a few really good ones that'll cashflow a lot after I pay down their mortgages.
Joe Fairless: When you define good ones, other than cashflowing, are there other factors that you look at prior to purchasing?
Brian Persaud: Yeah, I definitely look at properties that have upside potential - is it gonna go up in value? Even though when I plug in my numbers, I'm doing it like it's only gonna go up 1% or 2% per year, but I wanna be able to beat that. Generally, the properties where I buy into go up 10%, 15%, 20% (last year they've gone up). So yeah, I want the cashflow, but I also wanna buy in an area that has some good upside potential, and we know how to spot that - where development is occurring, where transit investing is happening, or other big condo builders are building up the area, retail is coming in, Starbucks is coming in, all that stuff. I wanna invest in those areas, but still have cash, though.
Joe Fairless: You mentioned four things just a second ago: development, transit, other condos being built, and Starbucks. Any of those weighted more than the others, and anything else that you look at to see where an area could beat the market for appreciation?
Brian Persaud: To be honest, if you're looking in the area and saying "Hey, this is a good area because Starbucks is invested in there", you're probably late to the party. Starbucks -- the real estate people that work with Starbucks don't take risks on neighborhoods, and they only go after doing a lot of research and the neighborhood is already established, then they come in.
When you're looking at areas that are gonna go up in value, I guess the biggest thing that you have to look at is how cheap is it relative to the neighboring areas that are around it. For example, if you're in an area that is surrounded by million-dollar homes, and that house is only around the $500,000 neighborhood, eventually that neighborhood is gonna start to catch up with the million dollar neighborhood, because folks are not gonna be able to afford a million plus; they're gonna be able to go into the cheaper area and they start driving up the prices, they start renovating in the area, and that also drives up pricing...
So I generally look at areas where it's close to neighborhoods or cities that are going through huge place appreciation. And you can find neighborhoods like that in anything.
Joe Fairless: Yes, you sure can... That's a great tip for everyone when we look at properties. When you think of your portfolio and the purchases you've made, what's been the least favorite investment?
Brian Persaud: When I first started to invest, I wanted to get as much numbers under my belt, saying "Hey, I'm the guy with 30 properties, I have 40 properties." I wanted to be that guy, so I was rushing out to all these weird, small towns in and around Ontario, buying stuff, and those are the properties that had the worst tenants, didn't go up in value at all, because they were in the middle of nowhere, no city was giving that ripple effect of high price growth... And they were so far away they were nightmares to manage, and you either have to pay someone to do it, or you're gonna be driving there yourself to do the work, and if it's like 3, 4, 5 hours away, it's not fun.
So I used to invest in these small towns to beef up my numbers, to tell people (ego-wise) that "Hey, I've got all these properties." Those are the worst investments. In fact, some of those properties after ten years haven't even gone up in value at all, and I can't sell them, and you just kind of have to keep them.
Other people who invested into them, they weren't as fortunate as I was, and they foreclosed on it, walked away and screwed up their credit, because they were impossible to sell. They just don't go up in value and they just couldn't take the tenant problems.
Joe Fairless: When you look at Toronto relative to other markets that you're familiar with, what excites you about Toronto?
Brian Persaud: One of the biggest things about Toronto that's amazing is that it's finally coming in its own as an international center. We produce the best baseball players in the world, the best singers, we have amazing restaurants, the best hockey players, obviously... So around the world we're starting to be noticed, and as a result there is a lot of capital flowing in from other countries. And when you think of cities where capital is flowing in, what comes to mind? Like, for you, when you think of international cities, what comes to mind?
Joe Fairless: International cities where money is coming into it?
Brian Persaud: Yes.
Joe Fairless: I don't know, somewhere in China?
Brian Persaud: I think of cities where money is flowing into it are cities like New York, London, Paris, L.A., Chicago... These are cities where because they're internationally known, people want to bring money here, and as a result, real estate values are gonna go up significantly. I just don't see that in other cities. For example, in Orlando, they don't go up as much as we do, because -- yeah, a lot of Canadians buy there and a lot of Australians buy there, but it's not as well-known internationally, and as a result, the prices don't go up as much. Kentucky - they have amazing music and everything, Memphis, everywhere, amazing places to live, great music scene, good jobs and stuff like that coming in, but they don't have that international demand, and as a result, the prices don't go up as much as they do over here consistently. That's what is really exciting about Toronto - we're a destination for investment.
Joe Fairless: When you think back to your investing approach and you are to give advice to others, what would your best real estate investing advice be?
Brian Persaud: You have to really understand the numbers of things. If you're investing in a market, you wanna be able to look at it on the map or on Zillow or whatever, and instantly know generally how much that property is going to cost - market value - and also renovation costs... You wanna be able to calculate in your head how much it would cost to renovate in a way that you need to be able to either flip it or rent it for the amount that you want.
So that's really important, knowing your numbers, and I think the only way you do that is you have to get dirty analyzing properties on your spreadsheet or on your calculator, going out to see and talking to tradespeople and getting estimates, and after you see enough, you're gonna be able to calculate things in your head. And what happens when you're able to calculate things in your head? You're able to do things a lot quicker, so you'll be able to move a lot quicker than a lot of investors because you see these opportunities and you'll know what's an opportunity and what's not instantly.
Joe Fairless: Any approach that you'd suggest for how to run the numbers?
Brian Persaud: Well, there's two factors in the numbers - there's the cost of the property; in order to do that, you have to know the neighborhood that you're investing into, [unintelligible 00:13:22.01] You're going to have to know what's the renovation costs in the neighborhoods, you're gonna have to get a lot of renovation estimates and you might wanna sit down with a spreadsheet [unintelligible 00:13:33.06] what's the cost per square foot for installation of flooring, and what's the cost for putting in a kitchen; you're gonna have to know all these things, so you're gonna have to talk to the tradespeople who do that.
Then the second step is you're gonna have to know the income, what kind of rents you're gonna be able to get in that neighborhood and what will you be able to push the rents to. The market is not currently saying that you can get rents for this amount, because a lot of the spaces that we rent out, we push the envelope on getting high rents, because we make really awesome spaces. So you're gonna have to know those two things really well.
Joe Fairless: We're gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Brian Persaud: Sure.
Joe Fairless: First, a quick word from our Best Ever partners.
Break: [00:14:20.11] to [00:15:05.10]
Joe Fairless: Alright, Brian, best ever book you've read?
Brian Persaud: Oh man, I read so many books... What comes to my mind -- I guess Rich Dad, Poor Dad, because I mentioned it... But it's so basic. I think we have a lot better books out there, but Rich Dad, Poor Dad is the one that comes to mind.
Joe Fairless: What's a more advanced book that you can think of that's been helpful?
Brian Persaud: A book that I've read just recently that I really enjoyed was Jocko Willink, Extreme Ownership. That is a really great book if you wanna be able to be a go-getter, be a leader; you've gotta read that.
Joe Fairless: What's a mistake you've made on a transaction that we haven't talked about already?
Brian Persaud: A mistake that I made on a transaction - when I'm looking to buy a place, forgetting to put in the appliances in there, and the seller takes them all away.
Joe Fairless: Best ever deal you've done?
Brian Persaud: Real estate-wise, I found a property that was really hard to sell, in a really Chinese-friendly neighborhood; the house had bad feng shui, no one wanted to buy it. We found an Italian couple that wanted to buy it and we made $100,000 in a couple of weeks because everyone was avoiding the property.
Joe Fairless: What's the best ever way you like to give back?
Brian Persaud: I really like to encourage a lot of people on social media. There's a lot of negativity on social media, people complaining about things, so if I were ever to see some people doing anything, I would really try to encourage them, send books their way... The biggest thing we have ever done - me and my partner - is we have sponsored a family from Syria that came to Toronto [unintelligible 00:16:36.29] We were really happy about that, we were proud about that. One of the biggest ways that we can give back is sponsoring an entire family.
Joe Fairless: And how can the Best Ever listeners get in touch with you?
Brian Persaud: You can google me, I'm pretty active on social media - Facebook, Instagram... Just google Brian Persaud and you'll be able to find me.
Joe Fairless: Brian, thank you for being on the show and talking about your investing approach, how you run the numbers, how you identify different areas to invest, in particular making sure that they cashflow, but then look for potential upside, so that the appreciation beats other areas in the market. And things you look for - new developments, transit, other condos... You said if Starbucks is there, it might be a little too late, but look at areas that are next to where there's a lot going on, or just next to really nice neighborhoods, and you might get the flow from the first neighborhood to your neighborhood.
And lastly, buying a lot of properties might be good for the ego, but bad for the balance sheet, so take into account where we're buying the property... So thanks for being on the show. I hope you have a best ever day, and we'll talk to you soon.
Brian Persaud: Thank you.

JF1324: Condo Investing Tips, Strategies, & Advice with Randy Ramadhin

Listen to the Episode Below (23:42)
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Randy has made a lot of money with his condominium investing strategy. More importantly, he’s made his investors a lot of money as well. Joe always tells us to buy for cash flow NOT appreciation. Randy does the exact opposite and will even have negative cash flow until he sells and makes a huge chunk of money because of the appreciation that happened during the hold. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Randy Ramadhin Real Estate Background:

  • Top Real Estate Broker for 18yrs, a Mortgage Broker for 14yrs and recently a commercial property appraiser
  • Published a book by Wiley Canada called “Investing in Condominiums: Strategies, Tips and Expert Advice.”
  • Grew up in  triplex painting apartments/ meeting with tenants, at 10yrs old helped uncles deliver flyers to homes and apartments
  • Based in Toronto, Canada
  • Say hi to him at randy@condoinvest.cahttp://condoinvest.ca/ 
  • Best Ever Book: Money Master the Game by Tony Robbins

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TRANSCRIPTION

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, Randy Ramadhin. How are you doing, Randy?

Randy Ramadhin: I am awesome. It’s an honor to be here, Joe. I’m a long-time listening fan.

Joe Fairless: Sweet. Well, I’m glad to hear that, and looking forward to having our conversation. A little bit about Randy – he is a top real estate broker; he’s been a broker for 18 years. He’s based in Toronto, Canada. He’s been a mortgage broker for 14 years, and recently is a commercial property appraiser. He published a book by Wiley Canada called “Investing in Condominiums: Strategies, Tips and Expert Advice”, so clearly we’re gonna be getting into that

With that being said, Randy, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Randy Ramadhin: Absolutely, Joe. As you just pointed out, I’m heavily involved in real estate, I’m passionate about it, and my objective is to work with my clients and my investors and help them make more money. I think part of that also includes increasing my personal wealth as well. I’m really looking forward to sharing on the interview today some of the things that I’ve done and some of the lessons that I’ve learned.

Joe Fairless: Well, let’s talk about what you’ve done to increase your personal wealth. Where should we start?

Randy Ramadhin: Well, in 2006 I bought my first apartment building, condo-converted it, and that was my first big investment, personally. It was a joint venture, and it ended up being one of my best deals ever. Mind you, I had learned a lot of lessons, I had to go through a lot of trials and tribulations; the market went down soon after we had closed, and it was a little bit complicated to hold and manage it as my first investment deal… But that was one of my biggest deals that I had ever done, and I learned so much. Mind you, with my client roster — I’ve helped a lot of clients as well buy a lot of properties across the GTA. GTA is the Greater Toronto Area.

Joe Fairless: With that apartment building, first off, how many units was it?

Randy Ramadhin: 31 units.

Joe Fairless: A 31-unit apartment building, and lo an behold, the market went down after you closed, which is the exact opposite of what I think you want when you’re doing a condo conversion… So tell us about that.

Randy Ramadhin: That was interesting, because at that time the market was really strong. I don’t know if you’re familiar with the greater Toronto area and my real estate market, but I’ve been in the industry license for 18 years, and we’ve had a bull market consistently for 18 years, but when [unintelligible [00:03:20].05] market crash in late 2008, early 2008, that had directly affected the real estate market where I bought this property, which was in the Niagara Falls area; Niagara Falls is opposed to Buffalo, the U.S. border. When that happened, there was an immediate impact in the local area.

John Deere was a major employer in that part of town, and they closed down their factory. Also, because of the border there was a lot of movement of goods with trucking – that slowed down as well, because the U.S. economy was consuming so much less in terms of goods… There was an immediate impact in the area, so we’re gonna say values overall dropped.

However, the advantage of buying a rental building that had tenants in it is that these tenants were paying their rent; the rents didn’t change, they were always there. We never had issues with vacancy. We had one of the few apartment buildings in that town, and the first condominium converted building in that town. So we had the rental revenue, but prices had dropped.

Joe Fairless: So you had your tenants in there paying you rent, and then you waited till later to do the conversion when the economy picked up?

Randy Ramadhin: Well, the intention when we had first purchased the building was to sell 95% of the building to investors and have a rental pool [unintelligible [00:04:38].01] ended up such that I got engaged, got married during the transaction, and on my honeymoon I got an e-mail from my lawyer saying “You are now the owner of 15 condos.” I thought that was phenomenal.

We came back from our honeymoon, my wife and I, and we have 15 condos in a building of 31, 16 investors, and there we were. Soon after, the market showed a lot of signs of slowing down, but I quickly had to get into the mindset of not just owning one or two properties, but 15 of them, and all the issues that had to go along with not only our units, but managing a rental pool, and a new property manager, with 16 novice investors, and the reach that they had in terms of financing and managing.

That was a very interesting experience, working as someone that created an investment deal.

Joe Fairless: Wow. So I wanna make sure I understand what you just said. So you had a 31-unit building, and you bought it, and then after closing, you opened it up for investors to invest in it, and then you ended up owning 15 units? Help me with that, just high-level again.

Randy Ramadhin: Okay, so let’s get into the specifics. So what this was technically – my partner and I had purchased a building that was 25 years old, and the owner of it had already gone to the city and gotten condominium approval on the building. So it had condominium title status, but it didn’t have the individual deeds; it didn’t become stratified an official condominium, with condominium by-laws and regulations and rules.

So when we purchased it, we worked with our lawyer, we created all those things that create a condominium – the reserve fund, condominium by-laws and so on. It already had a declaration attached to that title, but that was really the actual condominium. So we were doing a simultaneous close. We had purchased this building, me and my partner, all 31 condos basically (this one building) and we were gonna close from the vendor 31 individual mortgages and 31 individual deeds with (the intention was) 31 individual people. So this was the ultimate flip, and it ended up that we had 16 individual mortgages and deeds with other people, and we 14-15 of them.

Joe Fairless: So you bought the 31 units; the owner had gotten the approval but hadn’t done the individual deeds, so you then closed on all of them… And where does the grouping of 15 and 16 come into play?

Randy Ramadhin: Okay, so we had 31 individual deeds, and my intention was we had about 25 individual investors waiting to close —

Joe Fairless: Investors meaning people who don’t live there but want to invest in deal with you?

Randy Ramadhin: Absolutely, because this apartment building already had tenants living in each of the apartments, paying their rents, so they were buying it as a passive investment play. They were small investors and they were gonna buy their first investment condominium (or their second or third) as part of their portfolio, and this was gonna be another one of their individual investments.

Joe Fairless: Got it. So you kept 15 and then you partnered with or sold off 16 of them.

Randy Ramadhin: Correct. And we created with the property management company a pool, which further complicated things, as we found out… And now I’ve learned that pools don’t work, where you’re pooling revenue and pooling expenses. They’re very complicated structures, and now I’ve learned to not do pooling, after talking to a lot of experts in the condominium conversion space. Pooling is extremely complicated, and… Just don’t do them.

Joe Fairless: With those 15, why didn’t you keep all 31, or why didn’t you just sell all 31?

Randy Ramadhin: I would say this was the ultimate zero down investment. The equity that we had created from the conversion we used to close on our 15.

Joe Fairless: That’s what I was thinking, okay.

Randy Ramadhin: So you can imagine a guy – I was 30 years old at the time when I bought the building, I had my first house, I had been working with a number of clients who were buying individual single-family duplexes and triplexes, and my first investment personally (beyond my personal residence) was an apartment building for 1.6 million dollars, at the age of 30 years old [unintelligible [00:08:52].21] that I see the opportunity to bring to the table the half a million dollars in equity to close it with a bank and own all the deeds.

My partner and I – he coached me on this thing… He said, “Listen, Randy, let’s convert it and let’s turn this 1.6 million dollar building to 2.5 million dollars, and let’s use the equity to actually close on your under units and get some cashflow at the end of this.” So I’m expecting when I come back from my honeymoon from Italy to be $300,000-$400,000 in the bank. Lo and behold, buyers backed out. I had to use the equity; we actually closed on the units, but we had no money left. It was all in the units. So it was quite an interesting experience. And we were negative cashflowing too on top this, so it was very interesting… I learned a lot.

Joe Fairless: So you’ve got 15–

Randy Ramadhin: I’ve got 15 negative cashflow condominiums. [laughs]

Joe Fairless: So then what?

Randy Ramadhin: Okay, so after that experience I decided to go in further. A really good buddy of mine bought 100 houses in Prince Albert, Saskatchewan. Saskatchewan is another province in Canada, for the Americans here… And Prince Albert is an interesting town; he bought about 100 houses, and he said “Randy, I’ve got a great commercial building for you, I want you to buy it.”

I saw the numbers, I looked at the market and I said “This is an awesome opportunity.” It had an easyhome furniture rental company in there, let’s go and buy it. He had contracted it at 180k. By the time I closed on it six months later, we got it appraised by a [unintelligible [00:10:14].25] appraiser for $320,000. I bought that building zero down. So I’d become a zero down specialist for not using my own money and closing on deals.

It was interesting, the only thing — because it was a small town, we had to use private money, and which now I’ve learned private money is extremely expensive and it can completely drown you in a deal. It was 18% money from a multibillionaire out of Vancouver, and I remember after the first year — oh, by the way, we had a tenant paying rent in there on one-year renewables; they had been there for about ten years, and they said “Don’t worry about it, we’re gonna be there for a long time to come.” A couple of months after I’d closed on the building, they said “See you later.”

So I had a commercial building downtown Prince Albert, it was about 6,000 square feet, completely vacant, with private money at 18%, and I couldn’t find a tenant in sight. It ended up being about a year before I told the brokers “Sell it, please! Get me out of this deal!” That was an interesting experience… I’ve learned a lot from bad deals; I’ve learned from my mistakes and I can pass it on to others.

Joe Fairless: Yeah, that’s very helpful, I love this. Just going back to the 15 negative cashflowing condos… What did you end up doing with that?

Randy Ramadhin: Actually, believe it or not – I’ve been owning them for more than 10 years now. Those condominiums have ended up being the best investment I’ve had. The reason is they were negative, they were small, never had much equity, and being an active broker deal maker, I had no means or a desire to really sell them, so I just kept them. As I kept them over 10 years now, the mortgage is amortized, I’ve paid down maybe 20% of the mortgages; the real estate values have bounced back to more than what we had initially bought them…

Now, mind you, I’ve sold maybe about five of them. Now I have about 50k to 80k of equity in each single one of them, and I’m refinancing them slowly and pulling out cash to put into more deals.

Joe Fairless: That’s outstanding. Over those 10 years, how much was it costing you out of pocket a month to keep those 15 afloat?

Randy Ramadhin: Well, this is interesting, because I had learned through that experience the benefit of negative cashflow. You’re gonna tell me, “What do you mean, benefit of negative cashflow?”

Joe Fairless: Taxes.

Randy Ramadhin: Absolutely! I am a six-figure income earner in the real estate broker business, and in Canada we can’t earn income in corporations as real estate brokers in Ontario; we have to earn them as T4 income, which is basically employed income. So we can only deduct basic expenses, we can’t defer taxes. I was paying maybe 50k, 60, 70k in taxes if I didn’t have losses, so I learned the strategy of buying negative cashflow properties. I had an average $100-$200 per condominium negative cashflow, and that’s when I learned the power of negative cashflow, and that was part of my new investment strategy over the last six, seven years, where I’ve helped my investors make millions.

Joe Fairless: I was with you until the very last sentence… [laughter] Yeah, please continue.

Randy Ramadhin: So up until 2011 – I published my book in 2011 called “Investing in Condominiums: Strategies, Tips and Expert Advice for the Canadian Real Estate Investor.” It should be known, my co-author and I are the first and only nationally published authors of Tribune Heritage in Canada on the topic of real estate, so we’re very proud of that book. Our publisher (Wiley) is the largest textbook publisher in the world. We got interviewed by Kevin O’Leary, I don’t know if you know him…

Joe Fairless: Certainly, yeah.

Randy Ramadhin: He has a TV show in Canada called Lang & O’Leary, which is a hard-nosed business television show, and Kevin – I don’t know if you’ve watched him…

Joe Fairless: Mr. Wonderful.

Randy Ramadhin: He’s hard-nosed, he goes after every– Mr. Wonderful will literally cut you down on television and tell you how stupid you are. So when we found out that we have a TV interview with him two weeks before Christmas, I started to panic; I had four weeks to get prepared… I was really worried; I was afraid Kevin was gonna make me look like an idiot on national television. So I started doing some research, and lo and behold, at the end of the interview Mr. Wonderful told us “Wow, I guess I don’t see anything wrong with the Toronto condominium market”, and people were shocked.

Soon after, I’d like to say, I was part of the change and the awareness of Kevin O’Leary in real estate. He formed a mortgage brokerage company, he started speaking on the real estate investment circuit and started to have an affinity towards real estate, believe it or not.

Joe Fairless: You mentioned the benefit of negative cashflow, and then you said “helping others make millions.” Are those two separate statements that got merged together?

Randy Ramadhin: No. Actually, up until April 2017 negative cashflow in new appreciating property had been my major investment strategy to help me and my investors make millions. So my strategy was I had a particular ability to find new properties and condominiums that were doing really well and growing, but then I also found freehold properties in the surrounding, outlying areas of the GTA. Obviously, Toronto is a busy urban core with so much development and real estate prices are skyrocketing; prices for condominiums doubled by 2016, since 2011, by the time I had written my book… And it didn’t make sense to buy (from an investor’s point of view) condominiums, so what else makes money? Well, there was an expanding suburban development growth, masterplanning communities… So I started looking at freehold investments, buying pre-construction freehold townhomes and detaches from masterplan builders in the surrounding outlying areas. The returns ended up being phenomenal.

Joe Fairless: Returns – but you said it was negative cashflow… So the returns when you sell are phenomenal?

Randy Ramadhin: Absolutely. Because typically, when you’re buying newer property in nicer neighborhoods, we’re getting executive tenants – there’s very little management; the growth is there, but the cashflows aren’t there, because we’re buying everything in on the price. You can go for cheap and get cashflow and get a whole bunch of headaches and things that are broken and fix it up, or you can buy new, where there’s nothing to fix for the next five years, with a nurse renting from you, or a high-income individual, but it’s negative cashflow ($200, $300, $400/month). But as you hold it every year, it’s growing by 20k, 30k, 40k/year.

So a typical scenario is I would buy a townhome — I bought a townhome in Niagara Falls for 230k preconstruction. By the time we closed on it, it was worth about 320k. We put the tenants in it, $1,600/month, it costs us about $1,200/month, so we were making about $300-$400/month, and now we have it on the market right now for 380k. All we did to buy it was $15,000 with the contract when we bought it three years ago, and we closed on it with 20% of their initial purchase price, which was 230k – that’s 46k – minus the initial deposit of 15k, so only about 30k more into the deal, and we’re gonna be pulling out of the deal $200,000. I did those in abundance over the last five years and made millions.

Joe Fairless: So the type and personality and individual for that situation would be 1) someone who’s got the money to float the property over those periods of time; 2) the market must appreciate in value, and if you’re willing to wait until the appreciation is realized, assuming that it does happen, then you can make a large chunk of money if and when that does take place.

Randy Ramadhin: Well-said, Joe. You got it.

Joe Fairless: Sweet. Alright, what is your best real estate investing advice ever? I’m gonna laugh if you say “Buy negative cashflow properties.” [laughter]

Randy Ramadhin: My best real estate investing advice ever is don’t invest for return on investment.

Joe Fairless: You basically said it. [laughs]

Randy Ramadhin: I basically said “Invest for lifestyle, and overall financial objectives to be achieved.” Overall, which they include not just money. There’s a lifestyle choice here when you buy investment property.

Joe Fairless: What’s the average net worth of your client?

Randy Ramadhin: Half a million to a million.

Joe Fairless: Okay. I was thinking it would be more than that. Alright, we’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Randy Ramadhin: Sure.

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [[00:18:30].23] to [[00:19:33].00]

Joe Fairless: Best ever book you’ve read?

Randy Ramadhin: MONEY Master The Game by Tony Robbins.

Joe Fairless: I love Tony. Tony would definitely disagree with you, by the way. Come on, MONEY Master The Game…? [laughs] There’s no way he would–

Randy Ramadhin: [laughs] How I read into Tony’s interpretation of my strategy is consistently investing on a monthly basis towards an end objective, you will reach your goal… And believe it or not, amortized mortgages are the perfect investment vehicle. It doesn’t matter what the net cashflow return is; you’re chipping away that mortgage over 25 years – it’s paid off. So the more mortgages you get, the more closer you get to Tony Robbins’ strategy of buying consistently weighted returns, consistently investing whatever stock it is, on a monthly basis.

Joe Fairless: As long as you’ve got that money to float and the market appreciates.

Randy Ramadhin: Absolutely, which is why my strategy has changed as of late… Because believe it or not, in 2017 Toronto started to decline, so I’m back to the drawing board on my strategy.

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

Randy Ramadhin: Best ever deal I’ve done that I haven’t talked about… I actually spoke about it – it was the condo conversion. That was THE best deal.

Joe Fairless: Alright, we’ll go with that. That’s fine. What’s a mistake you’ve made on a transaction that we haven’t talked about?

Randy Ramadhin: I’ve lost a deal on a joint venture, $50,000 deposit, and it was because we had used a broker that unscrupulously waived the condition on behalf of us as the buyers, and I wasn’t directly involved in that conversation. That was very bad.

Joe Fairless: When that happens – anything you can do about it?

Randy Ramadhin: Well, I’ve learned now as a real estate broker if I’m not the lead broker with the transaction discussing things with the other broker on the other side, I’m not part of that JV. I’m no longer the silent guy in the back; either I’m in control of the transaction, or I’m not. That’s my lesson.

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

Randy Ramadhin: Best ever way I love to give back is Robert Kiyosaki’s Cashflow Game. Cashflow 101. I hold these cashflow games in local community centers and local colleges, and teach young people – and even older people – about wealth and wealth creation and money management.

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

Randy Ramadhin: You ca e-mail me directly at Randy@CondoInvest.ca.

Joe Fairless: Excellent. Well, Randy, thank you! A very lively conversation. I personally was entertained and enjoyed hearing about your approach. I don’t do that approach, but it’s worked out for you and others, so there you go – there’s different paths for different types of people, and different risk tolerances, and different needs. And taxes are our number one expense. That’s something that we tend to forget.

Absolutely, the way we create the most wealth is usually by mitigating the taxes on what we pay on the income, and so many of us – I’ve been guilty of this in the past – focus on maximizing the income stream of a certain property, but in reality if we’re only doing that and not minimizing the taxes that we pay, then we’re not being as effective as we could.

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

Randy Ramadhin: Awesome, Joe. And just to add to that, if I could add one last thing…

Joe Fairless: Yeah, please.

Randy Ramadhin: If you’re wondering how Toronto can become the condominium capital of the world, and all these condominiums, and they stopped being positive cashflow since 2011 (7 years ago they stopped being positive cashflow), who’s buying all these negative cashflow preconstruction brand new condos? Believe it or not, it’s all these high net worth doctors and lawyers and so on that are looking for negative cashflow strategies as an additional tax deferral strategy to what they’re currently doing.

Joe Fairless: Thanks a lot, Randy. Talk to you soon, my friend.

Randy Ramadhin: Thank you, Joe.

JF1279: Creating Compelling Content For A Great Online Presence #SkillSetSunday with Lyndsay Phillips

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Lyndsay and her company market content for entrepreneurs. Today we get her best tips for business owners and investors who want to grow or start their online presence. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Lyndsay Phillips Background:

CEO and Captain of Smooth Sailing Business Growth, a content marketing company

-Her business gears towards life/business coaches, accountants, authors and other online entrepreneurs

-Say hi to her at http://www.smoothbusinessgrowth.com/

-Based in Toronto, Canada

 


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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.

First off, I hope you’re having a best ever weekend, and because today is Sunday, we’ve got a special segment called Skillset Sunday. With Skillset Sunday, we will help you either hone or acquire a skill that perhaps you didn’t have before, or just get better at it.

In the business or real estate we are either looking for deals or money and/or both, and we’re trying to match up the two. One underlying theme of all that is being a credible and respected source for people to do deals with us, and in order to do that, at least in today’s world, we need a good online presence. That’s why we’re talking to Lyndsay Phillips, who’s the CEO and captain of Smooth Sailing Business Growth, a content marketing company. How are you doing, Lindsay?

Lyndsay Phillips: I’m awesome. How are you doing, Joe?

Joe Fairless: I’m awesome as well, nice to have you on the show. Let’s see… We’re gonna focus our time on creating compelling content as real estate entrepreneurs, and just ways that you’ve helped other entrepreneurs do that. And by the way, Lindsay’s got a podcast, go listen to that. You can find more about it at her website, which is SmoothBusinessGrowth.com. She’s based in Toronto, Canada, so we’re gonna pick up some Canadian as we talk.

With that being said, Lyndsay, how do you help entrepreneurs? And then we’ll go from there.

Lyndsay Phillips: You betcha. Actually, I deal with quite a few businesses and individuals that are in the real estate investing sphere oddly enough, and with content marketing the point is that you wanna attract your target market, you wanna nurture them, build relationships, and obviously acquire them as a customer, or have some kind of partnership with them. So through content  marketing, whether it’s blogs, or videos, or of course a podcast (which you and I both love), social media, e-mail marketing – all of it is content. So to me, all that good information that you have in your head, all that knowledge, the experience – you’re sharing it with your audience in the hopes of attracting, nurturing and acquiring those customers.

Joe Fairless: So we’ve got these platforms, these different options, and as entrepreneurs — and I consider every real estate investor an entrepreneur, because we are… So as entrepreneurs, how do we decide which one to dive into, and then what should our approach be?

Lyndsay Phillips: I know that’s such a huge question, because people can get so side-tracked by what’s hot and what’s popular, but when you stop and think about it, think about those ones that kind of went to the wayside, like Blab and Meerkat, and — does anyone use Periscope? I have no idea. [laughs] But think about where your target market is. Those people that are like your perfect client, or think of a handful of clients that you have currently and find out where they’re hanging out. Are they watching videos? Are they on Instagram? Maybe some of them don’t even bother with Twitter.

So you wanna know where they’re hanging out and where they’re diving into resources and finding the information that they want. Those are the places where you want to invest the most of your time.

Joe Fairless: Okay, that’s very practical and that’s something that we can all do. I love the way this is going. So we have decided where we’re going to put our time and effort based on where our target market is, and if we don’t know where, then just go talk to someone who is in our target market and ask them what they’re doing, and ask a couple more people and you’ll get some ideas. Then what do we do?

Lyndsay Phillips: Check all your competitors…

Joe Fairless: Oh, yeah.

Lyndsay Phillips: …those that are your industry leaders. See where they’re getting the most action and where they’re getting the most support and engagement with their audience. Don’t be afraid to [unintelligible [00:06:08].20] and steal, I always say. [laughs]

Joe Fairless: Once we do that, once we’ve identified it, then what’s the approach?

Lyndsay Phillips: You wanna connect with them, and especially to me, in real estate investing there’s a huge amount of trust. It’s people’s hard-earned money… When people are sharing money with other people you wanna feel safe and secure, and you wanna trust the other person in regards to that they really know their stuff.

To me, one of the biggest ways to establish that element of trust is definitely through video, whether it’s live Facebook, where you’re connecting with them right off the cuff, live, obviously… But even just through videos on YouTube and sharing your knowledge. Even if it’s a how-to, or answering some of the biggest questions, video is really impactful, and don’t be afraid to get into it. I know a lot of people hold back… [laughs]

Joe Fairless: So video is the best way, in your opinion, to connect… Some people don’t have the personality for video, and it’s just incredibly awkward; it just doesn’t portray them in the best way.

Lyndsay Phillips: Fair enough. Honestly —

Joe Fairless: I’m not saying they’re ugly, I’m just saying that they don’t come across very well on video.

Lyndsay Phillips: Yeah, and you know what? I have a client who is in Idaho; she’s in the tax business, in tax coaching – she’s very, very quiet; she knows her stuff inside out, but she is so quiet… So her first videos, I’m not gonna lie, they were kind of painful to watch… [laughter] And I felt that way when I started my videos. I was so nervous and I felt so uncomfortable… And you just have to know that the first few that you do are gonna suck, and it’s okay.

Even the greats [unintelligible [00:07:59].08] I always prefer her videos, because they are impeccable, and it’s intimidating… But if you look at her first couple of videos, they are in her kitchen, in front of her computer. She started somewhere, right? You have to have a starting place, and you will get more comfortable.

Now this client of mine that was super shy and awkward, she’s on the stage and she is killing it. My coach says to me, “You’ve gotta suck it up”, and just know that the first few are not gonna be great. You can take them down later when you get better ones. [laughter]

Joe Fairless: So you’re saying “Just power through it.”

Lyndsay Phillips: Oh yeah.

Joe Fairless: Okay, alright. Power through it.

Lyndsay Phillips: It’s the only way you’re gonna get through that. And if you can fast-track your business and if you can connect with people faster, you have to get over your own fears and just push through it.

Joe Fairless: When you are doing the videos, what is the frequency that you should be doing them?

Lyndsay Phillips: I think it’s better to do weekly, because then people get used to seeing it; you’re gonna connect with them on a quicker level… Versus if you only do a video let’s say once a month, they’re gonna forget about you within that month period, and then also – and here’s a really good tip – if you’re not pushing out social media content on a regular basis, whether it’s video or otherwise, if you’re not consistent, you’re gonna drop out of the news feed of those people that are your ideal clients. It’s gonna be out of sight and out of mind, and Facebook will sort of pull you out of their algorithm so to speak, because they’re gonna know that people are not engaging, they’re not commenting, because there’s nothing there, so they’re not gonna bother pushing your stuff on people’s feed.

Joe Fairless: When clients come to you, what’s the main thing they pay you to do?

Lyndsay Phillips: That’s an interesting question, I’ve never been asked it that way before. They feel stuck; they know that content marketing is important, but they don’t know where to start. They feel overwhelmed with all the options, and they don’t wanna learn all the techy stuff behind the scenes… So they will create a blog, or – we have copywriters, of course – create the video podcast, whatever it may be, and we take care of the rest. So we publish it, we optimize it, SEO it, promote it… So it frees up their time and they don’t have to deal with the nitty-gritty and the behind the scenes, the nuts and bolts of it all.

Joe Fairless: So you consult with them along the way, but then also help create the content, where applicable?

Lyndsay Phillips: Yeah, so we help create the strategy… Especially clients that are overwhelmed and they’re just starting out with me, it’s like “You don’t have to do it all at once right up front. Let’s start with this”, and then after we get kind of get rolling over the next couple of months, then we’ll add this on. And then it also helps me as their partner understand their business, their clients’ pain points, their unique selling propositions, their branding, their voice. And it’s only gonna get better over time.

So you don’t have to do it all at once. Start with something, and then get consistent, so that you’re putting content out there on a consistent basis, and then you can build on that.

Joe Fairless: Yeah, instead of trying to be a little bit everywhere, you wanna start with something and be consistent with that one thing, do it well, and then move on? Is that what you’re saying?

Lyndsay Phillips: Absolutely. I was mentioning one of my clients earlier, and he did a podcast show and that was where he started. And he grew his audience like tenfold, and then he started doing a live Facebook on Fridays, and it grew, and he ended up creating an opt-in because of it, so he grew his e-list dramatically. Then he kind of went into the blogs and videos after that, but he really built an amazing audience through his podcast. So you can start out with one thing, get really good at it, build a following, and then as your business grows, you can extend and tweak your content marketing plan from there.

Joe Fairless: What are some mistakes you see entrepreneurs make? And in particular, you said you’ve got some real estate people… What are some mistakes real estate people make whenever they’re creating their content?

Lyndsay Phillips: I’m not gonna point out my clients’ mistakes… [laughter] But I do see a lot where — there’s a few things that always come up, and one is where their social media platforms are not matching their website. So their branding and their image and their message is not consistent throughout all platforms. And if there’s any confusion out there, if people are confused about who you are and what you do and your brand is not recognizable, then you’re gonna get forgotten and you’re not gonna grow your business as quickly.

The second point is to lack consistency with social media. Again, if you’re hosting really great for a week, and then a couple weeks go by and you haven’t done anything, because it’s kind of like “Oh, I’ll get to that when I have time” – which we all know we said somewhere…

Joe Fairless: Yup.

Lyndsay Phillips: …then a) you’re not top of mind for people. And plus, think about it – if someone’s going to your Facebook page to check you out and you haven’t posted anything in a couple weeks, they’re gonna wonder how successful you are at your business. They’re gonna wonder “Hey, if I buy from this person, are they gonna even be around for support?” All these doubting questions are coming up in their mind, so they’re gonna be less likely to reach out to you. It has a huge impact.

Joe Fairless: So consistency in both being on the platforms with your messaging, as well as with your publishing, right?

Lyndsay Phillips: Yeah, absolutely. And the third one that I get a lot is the content that you are putting out – make sure that it’s not all about you, it’s not all promo, product, salesy stuff. You have to give information away to show your expertise and for them to trust you, so that they feel that you are customer-driven, do you know what I mean? You’re not just looking for the quick buck and the buy.

You really have to be careful about how much promotion you put out there. And your content that you’re putting out on social media doesn’t always have to link back to your website. That is really key, because posts that you do that are just like a quote graphic, or like an inspirational little blurb, or even just some funny thing that happened to you during the day, whatever, those are the most shareable pieces, and that’s what will extend your reach beyond your specific circle that you have right now.

Joe Fairless: Can you elaborate on that, maybe give an example of what you mean?

Lyndsay Phillips: Sure. I call these ‘snackable bites’. Let’s say you have a blog on your website – or it can even be a podcast, whatever it is. You might have within that blog a few really cool tips, or little tiny strategies, or a quote, or a statistic, and if you post that by itself, without linking back to your blog, without promoting your blog, it’s just like a standalone tip… I could say [unintelligible [00:15:14].25] I’m trying to think of something… Just be like “Make sure you are consistent with your social media to ensure that you get increased exposure.” Let’s say that’s just a standalone statement. But if you make a really nice graphic with that, and it’s a statement that maybe is a little bit more impeccable than the one I just said, and the way you say it really resonates with someone, or it’s just a really inspiring quote, or just something that’s really quick — again, if it’s snackable bites, meaning that someone can sink their teeth in really quickly and share it. They don’t have to read a big article, they don’t have to do anything specific or go anywhere…

Joe Fairless: I like that.

Lyndsay Phillips: They are really, really shareable. So you don’t always have to link back to your website, you have to mix it up.

Joe Fairless: What’s a program or software – if any – that you like to use to create those nice-looking posts and graphics?

Lyndsay Phillips: You’ve asked one of my favorite questions, because I’m a bit of a tool nerd. [laughter] I love, love Canva, because if you get the paid version, you can actually import your fonts, you can import your branding colors and have like a branding pallet, so that everytime you make a graphic, you know it’s gonna be on brand, it’s gonna reflect what you’re all about, and match your website and all that good stuff.

They do have pictures within it, like photographs that you can use, but they’re really expensive. I use Photospin; it’s cheaper than buying iStock photos.

Joe Fairless: PhotoSkin?

Lyndsay Phillips: Spin. It’s like $50/month and you can get all the graphics you want. It’s got really cool fonts in there, and texts, and graphics… You can go crazy; it’s actually really fun to work with.

Joe Fairless: That’s really helpful. So Canva is one tool, and you use the paid version… Approximately how much is that, do you remember?

Lyndsay Phillips: I think it’s like $10-$14/month, it’s super cheap.

Joe Fairless: Yeah, super cheap.

Lyndsay Phillips: But if you don’t use the paid version, you can still use your branded colors, you just have to know the hex codes. It’s just more time-consuming, that’s all.

Joe Fairless: So Canva, Photospin… You said you’re a tool nerd, so what other tools are helpful for you?

Lyndsay Phillips: I love social media scheduling tools such as HootSuite, I do like Social Champ. I just got into RecurPost, which is almost like Meet Edgar… So Meet Edgar and RecurPost are different in that you pre-schedule your social media so that you can plan your month ahead, and preschedule it all, and then sit back for the next couple of weeks, so to speak… But Meet Edgar and RecurPost will actually keep the post that you preschedule in a category of library, so that it will repost that material let’s say three months down the road, so that you’re recycling the content that you’re already putting out there, you’re reusing it.

Joe Fairless: Love it. And you said that is RecurPost.

Lyndsay Phillips: Yeah. I just signed up for it like two weeks ago, so yeah, I’m just diving into that one now.

Joe Fairless: Before you signed up for it, what were you using?

Lyndsay Phillips: Social Champ, but I liked the idea — because I’ve got so much content already over the past few years… It’s like I might as well stick it in those “libraries” and recycle through it and reuse it, especially if it’s evergreen, right?

Joe Fairless: Oh yeah, and Google loves that.

Lyndsay Phillips: Yeah, absolutely.

Joe Fairless: Anything else as it relates to optimizing our content marketing that we haven’t discussed that you wanna mention?

Lyndsay Phillips: Optimizing… I think honestly using a project management system or even using your calendar and getting on a routine and a schedule when it comes to your content or your social media… If you don’t put it in your calendar, honestly, it’s not gonna get done.

Joe Fairless: What do you use to organize that?

Lyndsay Phillips: For my team, we use Teamwork Projects. We have templates, and every month it’s like “Okay, first you create the content, then you make the draft, then you make the pictures, approve it with the client” and then we pre-schedule it to post in WordPress, so forth. So you can get on a routine and it reminds you of all the different tasks that you need to do that relates to your content marketing, so that you don’t have to reinvent the wheel each month. It’s automatically set up as a template.

Or even just having those reminders, to make sure you write your blog this week, because next week you have to write the post for it. But you don’t have to have a project management tool. Even if you put those tasks within your calendar and stick to it, like it’s an appointment with yourself to create that content, it’s really crucial. That time is a huge investment and has such a big impact on how people view you and how many new clients you can attract.

Joe Fairless: Lyndsay, how can the Best Ever listeners get in touch with you and learn more about what you’re doing?

Lyndsay Phillips: They can check it out at SmoothBusinessGrowth.com, and of course, I have a Start Here page for those that aren’t quite clear on what content marketing is, how it all works and what elements they can start diving into.

Joe Fairless: Well, we’ve got to be consistent across all platforms, where our message and branding is consistent. We’ve got to be consistent with our publishing – we should start with something and then do it consistently, and then go to something else. And along the way, within that first platform, a good tip is to have what you call the ‘snackable bites’, which are incredibly shareable; it might not link back to our website, it might just be an inspirational quote, or something else.

Some tools to build that something else in would be Canva and Photospin, and then to republish articles and to schedule out you use RecurPost. And to manage all that stuff, it could be a calendar, or Teamwork Projects is what you all use.

Thank you so much for sharing your insight and your approach. I hope you have a best ever weekend, Lyndsay, and we will talk to you soon.

Lyndsay Phillips: Alright, thanks so much.

JF589: How She “Syndicates” Mortgages Through JV Deals

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Rent to own may sound familiar, and today’s guest puts these deals together. She is able to JV with other investors while taking on all the management. The A to B and B to C transaction is all wrapped in this nice deal, and she has seen it beginning to end. Hear how she does it!

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Amina Mohamed real estate background:

  • Residential and commercial mortgage agent and real estate investor
  • Focused on syndicated mortgage investments
  • Has done 50+ residential mortgages and also does commercial mortgages
  • Also assist people with joint ventures and is based in Toronto, Canada
  • Say hi to her at aminas-ms.ca
  • Best Ever book: Pitch Anything with Oren Klaff

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JF205: Discover Canada’s New and Improved Version of the MLS

Finding listings on Canada’s current realator.ca is so yesterday. Today’s Best Ever guest shares with you his newest technology and why it’s needed for all the Canadian investors out there.

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Tarik Gidamy’s real estate background:

–        Co-Founder and Broker of real estate tech start-up, TheRedPin.com based in Toronto, Ontario

–        Over 16 years of experience and has facilitated and sold over 5,000 condos and homes

–        Built and developed some of North York’s finest high-end custom homes

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