For this week’s Follow Along Friday, we have a special guest on, Trevor Mcgregor is Joe’s life and business coach, coach to other high level investors, and a high level investor himself. Trevor’s focus with himself and his clients is on our mindset, as his mentor, Tony Robbins, told him: success is 80% mindset and 20% action. Trevor will give us some insights on how to be strong and mentally prepared for any bumps in the road. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“If you condition yourself incorrectly, you may freak out when things go wrong”
Trevor McGregor Real Estate Background:
Business and life coach for real estate investors
has done over 10,000 hours of coaching
For 25 years he has started and grown successful enterprises, including his real estate investment firm
Real estate investor who has done fix and flips, buy and holds and wholesaling
Trevor has been a business and personal coach of Joe’s for years. Today Trevor tells us his 5 step process for making a connection with a call to action at the end. As investors, we are not really in the real estate business. Rather we are in the relationship business, and Joe has successfully closed deals using this process.If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Made Possible Because of Our Best Ever Sponsors: Are you looking for a way to increase your overall profits by reducing your loan payments to the bank? Patch of Landoffers a fix-and-flip loan program that ONLY charges interest on the funds that have been disbursed, which can result in thousands of dollars in savings. Before securing financing for your next fix-and-flip project, Best Ever Listeners you must download your free white paper atpatchofland.com/joefairlessto find out how Patch of Land’s fix and flip program can positively impact your investment strategy and save you money.
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, Trevor McGregor. How are you doing, Trevor?
Trevor McGregor: I’m outstanding, Joe. How are you doing?
Joe Fairless: I’m outstanding as well, and nice to have you back on the show. Best Ever listeners, you know Trevor McGregor, and that is because you are a loyal Best Ever listener. But if you’re listening for the first time, then let me just tell you… Buckle up, my friends, because we’re about to be educated in an actionable way. I hire him as my personal business and performance coach, been working with him for five years now.
Trevor is, like I mentioned, a business performance coach, strategist, consultant and speaker. He has mentored many of the people who I know, and has previously worked for [unintelligible [00:03:15].10] Do you still with work with the Tony Robbins Group?
Trevor McGregor: No, I’m out on my own now. I’ve spent half a decade with Tony Robbins as one of his top master platinum coaches, and now I’ve gone off and I’m supporting more real estate investors all over this beautiful blue planet, Joe.
Joe Fairless: Well, there we go. And to support us today, Trevor is going to talk to us about a five-step process in order to engage people on a deeper level and have a call-to-action at the end. Basically, we can make more money by connecting with others and doing so in a meaningful way, through this process – we’re gonna go through the five steps and Trevor is gonna walk us through it.
So what’s the best approach for how we should start the conversation, Trevor?
Trevor McGregor: Well, thanks, Joe. It’s great to be back. I love your show, and I appreciate the opportunity to come back and support your listeners… Because as I coach real estate investors all over the U.S. or Canada or Europe or Asia or Australia, one of the questions that I get over and over is “How do I get brokers to really listen to me? How do I get property managers to react to me? How do I get appraisers to go out there and do what I need to do, or general contractors?” So I’m often finding myself talking about, “Well, how good of a communicator are you in real estate?”
The number one thing that we must remember is – we can take a look at it from the Tony Robbins perspective… If you go to his business mastery, you’ll stand up in front of everyone and he’ll say “What business are you in?” And if you, or me – because I’m also an active real estate investor myself – if we answer that question “Well, I’m a real estate investor”, Tony will then ask us another question about “Well, what business are you REALLY in?” The answer that we’re looking for is “Well, we’re in the communication business, we’re in the connection business, we’re in the relationship business.”
So I’ll go back to what I was talking about, that the number one way that I see people like you or I or anyone listening to go to the next level is to really take a look at how they’re showing up and communicating with everybody that they speak to each day. Does that make sense?
Joe Fairless: It makes a lot of sense. I’m 100% on board. I believe that relationships are the key to business, and quite frankly, life, and having meaningful, strong relationships, with value-add approach is the best approach, and then everything else will take care of itself.
Trevor McGregor: Absolutely. So if we all agree that we’re in the relationship business, people have then asked me “Well, how do I cultivate better relationships? How can I get people to really give ME the deal, or give ME the best rate, or support ME in my property management, or handle MY project?” And really, I talk about a communication style, and today for the listeners I’m gonna go over five key steps to talking to anybody, anywhere, anytime, about any topic related to the real estate game.
We’ll get into those five steps in just a minute, but again, I wanna start off by really asking the listeners to think about how you’ve been showing up, whether it’s with your general contractor, or whether it’s your lender, whether it’s anybody in your team of professional pillars, and rate yourself right on a scale of one to ten. Joe, I’ll put you on the spot as your coach and I’ll ask you, and I think you’re a phenomenal communicator… Where would you rate your ability to see where you started out in real estate out on a scale of 1 to 10, and maybe where you are today, just from doing so many conversations?
Joe Fairless: And help me understand how I’m rating it… So when you say “Think about how I’ve been showing up and rating it”, what specifically am I using to determine the rating?
Trevor McGregor: Well, let’s say when you first got started buying your first revenue property, when you’d call up a broker or you’d call up anybody, how good of a communicator were you on a scale of 1 to 10, versus how Joe Fairless is today?
Joe Fairless: I’d say six is relative to where I was versus where I am. Six is where I was, and now nine… And that’s relative to where I was versus where I am, not necessarily relative to everyone in the world, because if I did that, then my nine would probably be like a six or a seven.
Trevor McGregor: Absolutely, and I love that. That’s a perfect analogy, because you’re a different person today than you were many years ago. So for everyone that’s listening, you’ve gotta really understand where you are today, and then ask yourself “Who do I need to be and how do I need to show up to get better, so that I too can maybe move from a five or a six up to a seven, an eight and a nine?” This process that I’m about to give you is gonna help everyone do that. Are you ready to dive in, Joe?
Joe Fairless: I’m ready.
Trevor McGregor: You bet. So I want your listeners to perhaps grab a pen and a paper, and I’m gonna give the five steps in the form of an acronym, and that acronym is called RAPID. And what I thought we’d do is give everybody the opportunity to learn what each letter stands for and then we’ll go through how to apply it in a real estate related conversation.
Joe Fairless: Love it.
Trevor McGregor: The first letter is for the word Rapport. Because again, in relationships, nothing happens without a certain level of rapport. So when you think about speaking to someone, before you get into the meat and potatoes of the conversation, have you created rapport? So if you’re asking “What is rapport?”, well that is where you create commonality, or you find something of similar interest. Maybe you’re from a certain town and they’re from a certain town, or maybe you’ve got kids and they’ve got kids, or maybe you work with a similar company and they work with a similar company. Whatever you do, you’ve gotta kick off the conversation by establishing rapport, because that also builds likability and it also establishes trust. Does that make sense, Joe?
Joe Fairless: Yup.
Trevor McGregor: And most people think that once you establish rapport, you’re good to go. But if you don’t hold rapport throughout your entire real estate conversation, you’ll lose the other party. So again, it’s not something you do one time and you say “Thank God that’s over”, you wanna carry the whole rapport right through the call. So that’s the first part of the RAPID process. Are you ready to go to the A?
Joe Fairless: Yup.
Trevor McGregor: The A stands for the Agenda. What most real estate investors do is that we find that they don’t table what the outcome is for the conversation, or they don’t table what the outcome is for the call, or they don’t table the outcome for what the e-mail is meant to ask. So again, we always wanna ask “What is on the agenda? Are we talking about finding deals? Are we talking about a certain type of deal? Are we talking about a certain neighborhood? Are we talking about a certain price point?” So you really wanna communicate to whoever you’re talking to with the outcome in mind.
If you’re looking for a multifamily property in a certain neighborhood, at a certain price point, at a certain classification, you’ll absolutely want to state that so that the other side knows with clarity what it is that you’re seeking, and most people don’t do that. They forget to table what the outcome is for the call or for the conversation or for the e-mail. Does that make sense to you, Joe?
Joe Fairless: Absolutely.
Trevor McGregor: So once you’ve established rapport, you then wanna say “The reason for my call is…” or “The purpose of my e-mail is to verify…” or “I’m sending this text because I’m curious about…” Once that’s on the table, you will just find a more succinct conversation between you and whoever you’re communicating with.
So from that point we go to the P in RAPID. The P is the fun part, Joe. It stands for Probing. Probing is really nothing more than asking powerful questions. So what most people do is they show up in a real estate conversation and they start saying “Okay, here’s what I want, here’s what I need. Can you get me this?” instead of asking powerful questions upfront, which elicit significance in the other party. So if you’re just meeting with somebody for the first time, instead of telling them what you’re looking for, ask them “So how long have you been a broker? Wow, that’s great. What’s the best part of being a broker? Wow, you’ve probably seen some different economic cycles over the years, haven’t you?” And just engage and enroll and compel them to share a little bit more about their model of the world or their story, before you start darting them with the questions of what it is that you’re looking for.
So maybe Joe share with us, have you done that more often to strike up better conversations with people in your tribe?
Joe Fairless: Well, it’s really interesting and I don’t think it’s a coincidence… I interviewed Chris Voss recently, and he is a former lead FBI hostage negotiator, and he wrote the book Never Split The Difference. He was responsible for seven years for — every American who is kidnapped overseas, he was the lead negotiator to help resolve that situation, and he wrote a book about it and how it applies to business.
One of the things he said, which aligns with what you’ve just said, is when you ask the questions, How and What are very powerful. I was going to mention that, but then when you gave your two examples, you used How and you used What – those were the two words that you used… So it’s so true that when we ask these questions, using the word How and What are the best two words to start out those questions, because people like to talk about how they’re doing stuff, or what components or what aspects of whatever they’re doing is — what’s involved with that. If you ask Why, that could people on the defensive a little bit.
To answer your question to me, yes, I do, and now I’m gonna be more focused on the How and What questions because of what you naturally did and what Chris was talking about, too.
Trevor McGregor: Yeah, you’re spot freakin’ on, and I love that, Joe, because it’s the absolute way to get to a connection and a communication and a vibration and a frequency where you’re both on the same page. Questions really elicit emotion, and our emotions are gonna dictate the quality of life. And if we go Tony Robbins on this, I’ll just share with the listeners, after having a sneak peek into Tony’s world for half a decade as one of his top coaches, it was fascinating to watch him in a business meeting or even in an intervention, where Tony literally asked a number of questions before he’d even share his thoughts.
In fact, we go back to watching him in a business meeting, and Tony owns 33 companies that do five billion dollars a year in sales – yes, that’s five billion… And we played a little game as coaches – we were asked to come up with how many questions do we think Tony asks the average person when he meets them in a 30-45 minute meeting, and we all guessed it would be around 30, 40, maybe 50 questions. And when we rolled back tape after tape after tape, Tony Robbins asked no less than 120 questions before ever deciding which route he wanted to go with his decision. So it just goes to show you that probing and asking questions are the key to understanding and appreciating what’s going on for the other party, and to also gain the information that’s gonna help you make a better decision in your real estate dealings.
So that’s outstanding, and thanks for sharing that. That’s just absolutely outstanding. So from that point, once you’ve probed them and you’ve got some of that information, now we move to the second-last letter, which is the I, which is Identifying the opportunity. That’s where you go “Well, Mr. Broker, based on what I heard you say, I’d like to perhaps have you send that document over” or “Mr. General Contractor, based on the price you’ve given me verbally, I’d like you to put that on paper and send it over.” Or you could do that with an appraiser, you could do that with a lender, you could do that with anybody in your professional pillars.
Then from that comes the D, which is the Decision. The decision is whether you’re gonna move forward and work with that person, or whether you’re gonna go and tour property, or whether you’re gonna perhaps borrow some money from them… And we always say that the D is also standing for the Decision with a Deadline. And Joe, you know this as well as I do that most real estate investors when they’re going to make a decision they’ll do it, but they’ll leave it open-ended. And what we try to teach and coach and mentor and train on is you wanna timestamp it. You wanna make that decision with a deadline.
It might sound something like “Great, so based on everything we’ve discussed today, let’s continue to move forward. Send me the documents, I’ll read through them, and then let’s get back on the phone two days from now at two o’clock on Thursday. How would that work for you?” And by time-stamping it, you’re closing that loop. And again, so many real estate investors fail to do that. Do you find that as well?
Joe Fairless: Sure, yeah. I could see that.
Trevor McGregor: So really, you wanna build rapport, agree to an agenda, probe them, identify the opportunity to move forward, and then decide and create a deadline for what the next step is or what the call-to-action is. Again, those are some of the things that I know that once a real estate investor follows that syntax or that script, in that order, they’re able to absolutely get to their outcome, the other party feels like they’ve been able to add value, and it’s a win/win for everybody in the business.
Joe Fairless: On the rapport part, one thing that comes to mind is there’s no excuse not to have the necessary information in order to build rapport if you know about the meeting in advance, because of LinkedIn, because of Google, because of Facebook, because of the person who introduced you to this person – you can ask him/her about who you’re meeting with… So there’s all sorts of ways you can find some talking point that you two can at least attempt to connect on, or multiple talking points that you can at least attempt to connect on. So on the rapport thing, definitely you can set yourself up for success initially… So my question is what if you get thrown in a meeting with someone and you can’t do that research? You don’t have time, because you didn’t know you’d be meeting with this person.
Trevor McGregor: Great question, Joe, and that does happen a lot. I love that you shared that – Facebook, Google, LinkedIn are all great places to do your preliminary homework, but if you go into a meeting and you’re in somebody’s office, you wanna have what we call sensory acuity. Sensory acuity is nothing more than a Tony Robbins term for being present and looking around the room and looking for clues, because he says that there’s clues in every room. Perhaps you see a picture of the person’s family on the desk, perhaps you see a copy of Success Magazine on their credenza; perhaps you see they’re big into fishing and they’ve got a big fish on the wall on a big plaque.
Often times there are conversation starters in there that you can absolutely use those clues to get the rapport going and create that commonality. If you like fishing, say you like fishing; if you don’t, don’t bring it up. But if you see that they have kids in the picture and you say “Hey, is that your family there?”, you might then talk a little bit about your family and how your kids are the same age, or they play the same sports. There’s always something to go to, Joe. Does that make sense?
Joe Fairless: Yeah, it does. And if we don’t happen to be in that person’s office – say we’re at some random event, then however we got to that event, meaning why we’re attending whatever the event is, there will be something there that we can at least start the conversation with. “How did you like that last panel?” or “What were your favorite parts about X, Y, Z?” or “How do you know so-and-so?” who perhaps kind of pushed you in front of this new person who you didn’t know you were gonna meet… There’s all sorts of different ways, and I think using How and What questions in the setting that you’re in would be helpful, too.
Trevor McGregor: Yeah, you’re absolutely right about that and you bring up another good point, which is an introduction from another person – “Hey, I got your name from Joe Fairless, and I’m reaching out to you today because…” or “I got your name from this broker/I got your name from this property manager/I got this name from a general contractor.” And once you start sharing names, it already automatically brings people into their sphere of influence because you’re familiar with someone else they know. So again, that’s another huge point, Joe. Great job.
Joe Fairless: And then the other question I have is on the P part, the Probing and asking the powerful questions… You mentioned the Tony Robbins example, 120 questions before he makes a decision on something. I know on the surface that sounds pretty ridiculous, and definitely he doesn’t ask 120 questions before he makes any decision on anything, so how do we determine – “Okay, I’ve asked 75 or however many; I think I’m good on the questions, now let me move on to the I”, versus “Okay, I need to keep going.”
Trevor McGregor: That’s a great point, and we don’t need to go Tony Robbins on it. We just have to remember that if you’re not asking enough questions, what’s preventing you from adding one or two more? So maybe you ask a broker five questions when maybe you should have asked six or seven, that would have really elicited a better answer, or given him significance, or let him share his wisdom or his passion or his knowledge. People absolutely love being asked questions, and very rarely will somebody ever say “No, I’m not gonna answer that”, because what the brain does is the brain prepares to answer questions based on this, and I’ll even play this with you – Joe, can I ask you a quick question?
Joe Fairless: Sure.
Trevor McGregor: Yeah, so your brain now says “Sure” and has given Trevor a permission to go ahead and ask. So it’s not that we have to ask 75 or 120 questions, it’s just remember that questions are the key, because they also hold potential power that when we move to the I in Rapid, which is identifying where you’re gonna go, or you’re moving to the D, which is of Decision, but you’re doing it with more certainty, you’re doing it with more clarity, and you’re doing it with more confidence.
Those are the big three C words that if you have a conversation, you’re really looking to transfer to that person certainty, clarity and confidence that you’re a real estate investor that is ready to do a deal, or ready to borrow capital, or ready to hire them as a property manager. And again, we call that perceptual positioning. If you have a weak conversation and you don’t transfer certainty, you don’t transfer clarity and you don’t transfer confidence, they’re gonna give the deal to somebody else or they’re gonna say “Well, let me think about it”, and they’ll try to skirt around you and go give the deal to another party. Does that make sense as well?
Joe Fairless: Yeah. I love that Agenda comes before the questions, because let’s assume that there was no agenda, so let’s assume you didn’t say there’s an A in this acronym, and instead it was just Rapport to Probing – so you build rapport, then you ask questions; I’d be like “What the hell is our destination? Where are all these questions headed?” I would go bonkers and it would not be a good situation for anyone, because I love when people know what they’re looking for when they’re talking to you, and they’re approaching it the right way and say “Hey, ideally we can identify blah-blah-blah” or “The ideal outcome for this is blah-blah-blah.”
When I have calls with people, I start out — well, depending on the situation and who I’m talking to, but if it’s a vendor, I’ll always say “Okay, so what’s our outcome for this call?” That way I know how to navigate the conversation, and then when they ask the questions, then I can say “Okay, is that inside the territory of what our outcome is, or is that outside?” If it’s outside, not relevant, then let me bring that up, and we’ll move on. If it is inside the territory that’s relevant, then let’s keep on going down this path until we get to the I and D in this. I love that.
Trevor McGregor: Yeah, Joe, you bring up a really strong point there, and it also speaks to how you might talk to your own team. So let’s say you’ve got real estate investors on this call, or listeners listening to this or watching this that have a team of people underneath you, and let’s say you meet with them every Monday morning at nine o’clock. You will absolutely be able to use the same process. So when you go into the boardroom or you go into your meeting room, you’re gonna establish some rapport and say “How is your weekend? What’s going on, what’s happening in your family?” and all that stuff, and then you will move to the A and you say “Great, now let’s get started, folks. The outcome for today’s meeting is we’ve got 45 minutes to cover point A, B and C.” So you absolutely set the outcome for your own internal meeting, so that you guys aren’t bantering or wasting time or doing watercooler chat. There’s an agenda, and then you can probe them with who’s handling it, what’s going on, what are the different properties or the different accounts or whatever you’re talking about, identify action items, and then set the deadline to follow up with each other. So again, RAPID is the number one thing that business owners or real estate investors can use to absolutely go further faster.
Joe Fairless: It’s also a process — I think you could use a lot of it in e-mail, too. I recently got introduced to someone from a mutual friend, and the introduction was kind of cryptic and vague, and this person who was being introduced to me, he said “Hey, let’s jump on a call” and I’m thinking “What are we gonna talk about? I have no idea.” So I e-mailed and I said “Friend of this person that’s a friend of mine, I’d be happy to talk to you, but just for some context, what’s your ideal outcome for our call?” and then, if the outcome is something that perhaps I could give him a document or something, then it’s gonna be a more effective use of my time to send him a document, versus spend 15, 20, 30 minutes of my time talking about something I could have e-mailed them. So this is also something that we can apply towards e-mail.
Trevor McGregor: It is absolutely that as well, and you bring up another great point. Build a little rapport, “Hey, I got your name from Jeff, and here’s the reason why I’m sending you the e-mail, here’s my outcome, that’s the agenda”, ask your three questions, invite them in RAPID or identify that you’d love for them to reply, and then you’ll get that information back and you will decide whether to move forward or not.
So text, e-mail, business meeting, networking event – this is where it’s at. And again, this is what you can use to really optimize and maximize your conversations. And if there’s one thing that I’ll add to it, a little bonus distinction, Joe, is you’ve gotta put yourself in the other person’s shoes as well. So let’s say it is a broker, who could give you the deal or give someone else the deal, you’ve gotta remember what is it that they’re looking for in you? And again, brokers are looking typically for two things from us as real estate investors. Number one, do we have the capital to do the deal, and number two, how quickly can we close?
So again, in your communication, if you have to plan some seeds to say “You know what, my team and I have the resources to move forward and we can do this very quickly”, again, that’s part of the clarity, the certainty and the confidence that just might get you the deal instead of your competitor. Does that resonate with you?
Joe Fairless: Sure it does. How can the Best Ever listeners get in touch with you?
Trevor McGregor: You bet. As always, I invite anyone who wants to reach out to just simply go to www.coachwithtrevor.com and enter your details, and I’d be happy to jump on the phone and have a conversation with you about anything, anywhere, anytime real estate-related.
Joe Fairless: Trevor, thank you for being on the show, talking to us about the five-step process for connecting with others in a meaningful way, that produces results. One is build rapport, two is have an agenda, so communicate the outcome, three is probing, so asking powerful questions, four is identifying the opportunity to move forward, and five is having a decision so if you move forward, then here’s the deadline. So a decision with a deadline. Those five things build to RAPID, which is the acronym for this.
Thanks for talking to us about that, for sharing that with us. I hope you have a best ever day, and we’ll talk to you soon.
Trevor McGregor: Thanks very much, Joe. Take care.
– Founder of the “Match Method” and HouseHarmony.com, realtor and investor
– Team is in the top 1% of our market, built and sold a brokerage and a few other endeavors
– Put together $30 million dollar fund to buy real estate in America
– Based in Vancouver, BC
– Say hi to him at www.househarmony.com
– Best Ever Book: The Saint, The Surfer and the CEO
Made Possible Because of Our Best Ever Sponsors:
Want an inbox full of online leads? Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.
Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.
With us today, Joel Sherlock. How are you doing, Joel?
Joel Sherlock: Fantastic, my friend. Thanks for having me.
Joe Fairless: My pleasure, and nice to have you on the show. A little bit about Joel – he put together a 30 million dollar fund to buy real estate in the United States. He is also the founder of Match Method and HouseHarmony.com. He is both a realtor, as well as an investor. His team is in the top 1% in his market, which is Vancouver, and he has built and sold a brokerage and he’s done a couple other endeavors. With that being said, Joel, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Joel Sherlock: Absolutely. Our real estate team is based in [unintelligible [00:03:09].00] and our fund is based out of the Vancouver area. Basically, the [unintelligible [00:03:13].10] is right between Vancouver and Calgary, it’s kind of like Canada’s Napa region. Lots of wineries, fresh water lake… It’s a beautiful place to be.
I started very simply, I bought a terrible little condo, fixed it up while I was in college, sold it at a profit because the guy I had bought it with fell in love and wanted to move in with her, so I sort of stumbled into flipping real estate, and it’s been a beautiful love affair ever since.
Joe Fairless: Well, I’m curious… I wanna jump right into the 30 million dollar fund where you put that together to buy real estate in the U.S. Tell us about that.
Joel Sherlock: You bet. My background’s in finance, so I was always a numbers guy. That first accidental flip, I ran the numbers, I was going to school to Canadian Securities, which is like a stock broker. My father was in the financial services… I’ve always been a numbers guy. And for me, always in my career I was looking for patterns, deals, systems automation… I was always a big fan of that.
There was a time in our market where the Canadian market had slowed down and a lot of the Canadian investors were looking down South. I’m from Winnipeg originally on the East Coast, and all the East Coast guys are talking about Florida, all the West Coast guys were talking about Arizona. So there were a couple of doctors that I had done a lot of deals with in our market here, and some of them had gotten down, they’d gotten deals in Arizona, some of them had gotten down and not gotten deals… And I was asked by a couple of them to come down, and I thought, “Hey, it’d be good to get away and play a little golf, hang out in the sun, and I can throw my 2 cents in wherever it’s needed.” But that first trip we went down, we went into 75 homes… It was at one of the lower points of the Arizona market, and it was mind-boggling to me… As we were going through these homes, people were talking about “The last sale was 750k, loan balance was 695k, and it’s listed at 350k and we’re talking about an offer of 210k.” In the Canadian system, that was absolutely just mind-boggling, so I think for the first 20 homes I was just purely in shock.
Then the next 20 I’m going, “Hold on… What’s it cost to rebuild this? Okay, well, what’s happening to the rental market?” We had a checklist. I always love to invest in markets that have great demand, reasonable job growth or reasonable second home markets, and vacancy rates that are very low. They were talking about phenomenal prices, and we’re buying less than replacement cost in a market that has an exceptionally strong rental market. So I thought, “Well hold on, this is a great opportunity!”
So we came back to Canada, and the thesis was simple – we were gonna buy property… At the peak, that market was taken at 35,000 starts, so there’s great demand… We’re gonna buy property cheaper than replacement value, and we’re gonna rent it, hold on to it until the market comes back, and the only variable was when that would be; we had no idea.
The demand was much larger than I expected, so we put that fund together, a traditional GP/LP structure. I had some help on that one from a mortgage company and a couple of investment guys, so there was a group of us, and then off we went. It was a brilliant experience. I definitely wish I had sold everything I had in Canada and bought more real estate down there, but my hindsight portfolio is almost perfect.
Joe Fairless: Yeah, exactly. You brought in 30 million dollars… Can you tell us some numbers about how it performed and any details on it?
Joel Sherlock: You bet. So the interesting part for us – when we brought that money across, we secured 214 doors; we’ve got 10-11 now, and then a couple under contract. So we are liquidating everything we have down there. Looking back at the numbers, we brought the majority of that money across at par, and that’s important as a little bonus.
Joe Fairless: And for anyone who’s not familiar with that terminology, can you elaborate?
Joel Sherlock: The money came across dollar-for-dollar, which was very unique at that time – Canadian dollar to American dollar. We started with a 10% cash-on-cash yield [unintelligible [00:07:43].16] rentals, and then as that market really picked up, we had crazy units in downtown Scottsfield that were $85,000-$90,000, and then our rehab costs — and they were just simple two-bedroom one-bath, townhome units… Our rehab costs were 8k-12k. We started out getting $1,100/month, then we got $1,200… By the end of it we were getting $1,400-$1,450/door. So the returns were fantastic on those.
Some of the things we had a little bit further outside of town in [unintelligible [00:08:18].01] stayed in that sort of 10-11 range.
Then we saw incredible appreciation in the latter three years, and then about 18 months ago we started having a conversation… With the way the dollar was — the Canadian dollar at that time was like 1,27 for every U.S. dollar, and we thought “We could hold this another year and we could see another 10% appreciation, but if the currency corrects 10%, then we’ve held it a year for nothing.” So the decision was made to sell it, and then the dollar got a little weaker, so we got 1,30-1,32 were some of the peaks that we saw. So that was another 32% bonus on top. All in all, it was a phenomenal investment for us.
Joe Fairless: What was your role? You said you had some team members that went in on the GP side with you… What was your specific responsibility?
Joel Sherlock: A lot of the team management, definitely capital raising in the beginning, and then a lot of watching the market fundamentals and deciding when should we really exit some of these things. I learned a lot about the structure of those funds and sort of that GP/LP relationships from my two partners, and now I’ve been very active reinvesting some of that capital into markets that we’re working in now.
Joe Fairless: What are those markets?
Joel Sherlock: Again, it’s a little bit dependent on the investor. Funny enough, we had a couple buildings that financed the legal cannabis industry, so just a real estate play into that market… We’ve got a group of investors who are really focused on investing into commercial assets, looking at mixed use buildings – three levels of retail, one level of residential on top. Two of the guys are getting into some small development… So really it’s kind of investor-specific, and then I’ve just been helping and investing on the side in some of those deals.
Joe Fairless: And as far as the actual cities that those are in, do you have any cities that you’re focused on right now?
Joel Sherlock: Definitely Vancouver, Kelowna, Calgary… Still active in Scottsdale, we did do a couple deals in Nevada, we’ve been looking at Oregon, Washington; [unintelligible [00:10:38].15] surprisingly enough is a beautiful commercial market if you can get your hands on any commercial property, because they put a boundary around [unintelligible [00:10:48].11] and there’s been a really large demand for commercial growth there.
Joe Fairless: I’d like to learn a little bit more about the GP/LP structure on the 30 million dollar fund. How was that structured?
Joel Sherlock: So traditional GP/LP (General Partner/Limited Partner), like the investors are limited partners and then the general partner is kind of the guy who manages the operations. The 2 and 20 refers to 2% management fee for capital under management, and then we take a 20% yield, so we participate in the lift, if you will. After we’ve made an 8% yield for the investors, we participate in 20% of the rest. So they get 80% of the upside, we take 20%.
Joe Fairless: After they receive their 8% preferred return…
Joel Sherlock: You bet.
Joe Fairless: And that 2% management fee – it’s basically 2% of capital under management, so that’d be 30 million… 2% of 30 million – is that paid annually?
Joel Sherlock: That’s paid annually, correct.
Joe Fairless: And then as far as distributions to your team, did you receive that monthly, or is that paid every 12 months?
Joel Sherlock: It was actually a European waterfall, which is a little bit unique. It meant that we didn’t participate as the GP until everyone had gotten their full investment back, and their 8%.
Joe Fairless: Okay, so you didn’t get the management fee until they got their money back and their 8%?
Joel Sherlock: Management fee, we did. The 20%, if you will… In traditional private equity there’s the two models: there’s the European waterfall where you get paid once everyone’s got their money back, and there’s the American waterfall where every time there’s a disbursement or every time there’s a profit made, the GP takes a piece.
Joe Fairless: You’ve gotta create a Canadian model.
Joel Sherlock: [laughs] Exactly!
Joe Fairless: So the 2% management fee for capital under management – you said that’s 2% annually, but as far as distributions go for that 2%, did you all receive it monthly, or was that quarterly, or was it every 12 months?
Joel Sherlock: Quarterly.
Joe Fairless: And when your team submits distributions on this fund, was it quarterly as well to your investors?
Joel Sherlock: No, so it was upon exits.
Joe Fairless: Oh, upon exits. Okay.
Joel Sherlock: Yeah, and then the rental revenues were distributed quarterly.
Joe Fairless: Okay, I’m with you. And the rental revenues would go towards their 8% preferred return?
Joel Sherlock: Correct, it goes towards the total return.
Joe Fairless: That makes sense.
Joel Sherlock: So yeah, all in all it was certainly a home run and we’re actively hunting for the next market, the next opportunity. I’ve been down into Mexico, we’ve looked at a project in Belize… Those ones all have significant downside risk, which is one thing we always like to manage. It’s good to make a return, but we wanna protect that initial capital the most.
Joe Fairless: So the last question (I think) on the GP/LP – how much of the 30 million did the general partnership invest alongside the LP?
Joel Sherlock: The GP would have made up I believe seven and a quarter, seven and a half million. That’s always one thing that’s always been very important, and if someone’s looking at investing into a fund, make sure those general partners do have some skin in the game.
Joe Fairless: So that’s 25% of the 30 million the general partnership put in… And then on top of that 25% there was basically a 20% fee that the general partnership received after the 8% preferred return was paid and the money was paid back?
Joel Sherlock: Not a 20% fee, a 20% share of upside.
Joe Fairless: Share, yeah, sorry.
Joel Sherlock: So they get 80% of the return, and of course [unintelligible [00:14:42].13] we participated in our percentage of that.
Joe Fairless: The overall raise from outside investors then would be roughly 22.5 million, because the general partnership put in 7.5 of the 30, right?
Joel Sherlock: So the GP – we owned LP shares for that.
Joe Fairless: Yup.
Joel Sherlock: So we were investors in the fund and we got our 8% preferred return and our 80% of the return above that for our LP shares.
Joe Fairless: I get that, I’m just saying, besides the general partnership people, when you co-invest, the 7.5 turns in the limited partnership, but besides that, it’s 22.5 million that you’ve basically brought in outside of what the general partnership invested as LP.
Joel Sherlock: You bet.
Joe Fairless: Got it, okay. So since your role initially was capital raising, what can you tell us about how to raise capital, 22.5 million dollars? How do we do that?
Joel Sherlock: I have a very strong thesis, and something that is completely defensible because everyone looks at risk differently. Number one, make sure you’ve got all of your numbers together, make sure you’ve got all of your research done, and make sure your thesis is completely defensible from every angle.
Joe Fairless: And then when someone asks you “What type of risk is involved? What’s the downside?”, knowing that you have looked at it from different angles, how do you answer that question?
Joel Sherlock: I don’t try and hide from risk… I don’t believe that when you’re selling an investment trying to hide that risk or minimize that risk — I actually wanna balloon it up. We would tell people that the Arizona market’s taking an absolute beating, and it may be years for it to come back, and there’s no guarantee it ever will. So for us, not that you wanna talk people out of investing, but the last thing you want and the most stressful part of working with investors is when an investor is worried about their capital and checking in with you on a very frequent basis.
We didn’t wanna talk anyone into investing, especially Canadians investing in a market they’re not in and don’t totally understand, because that whole scenario down there was so foreign to what has ever happened in Canada. You know, the number of defaults…
Joe Fairless: That’s a great quote…
Joel Sherlock: Yeah…
Joe Fairless: “Don’t talk anyone into investing” – I really like that quote; that’s a great philosophy.
Joel Sherlock: Absolutely. Especially when it’s real estate, the investor pool is massive, and there’s some incredible resources out there, and different websites, and you can put your deck out there, your thesis, and it’ll draw great people in. But just sift through those people and take only the best ones, because you are essentially going to be partners and married to that person, especially with a long yield like that, for quite some time. It’s different than taking an investor for a flip deal and you’re together for three months… It’s a little bit different.
Joe Fairless: The fund was about like eight years or so?
Joel Sherlock: You bet. Just under.
Joe Fairless: You’re the founder of Match Method and HouseHarmony.com. What are those businesses?
Joel Sherlock: As I’ve said before, I’ve always been looking for patterns, and so many people were talking about going to Arizona, so “Okay, we’ve gotta figure that one out.” In a real estate practice, and also in my own investing practice, I noticed that the majority of people were selling homes to buy something else. Unless you’re a first-time home buyer or selling your home to buy Apple stock (and now Google stock), most people would be selling their condo to get a townhouse, selling their three-bedroom home to get a five-bedroom home; selling their 10-bedroom home to downsize into a 5, or selling in Kelowna to go to Vancouver, or selling in Arizona to go to San Diego… Whatever that would be, they’re selling a piece of real estate to make a move, either up, down, lateral, different town, something.
So we trained all of our guys and we developed great dialogues to get information, and then “What do you have and what do you want?” In a hot market, people would say “Oh, I’d love to buy a penthouse in that really exclusive building. If anything ever comes up, let me know.” Both agents would just scribble that info down and “I’ll set up a search for you, and I’ll call you if anything comes up.” But you’re missing 50% of that equation. So we would let people know that “Hey, [unintelligible [00:19:04].20] let me know what you have to sell if I find you this penthouse, and what I might have is somehow who has the penthouse and wants to get on the waterfront.” That person has the waterfront, and going to the penthouse.
Those were great dialogues, because people would always say, “Oh, that’s interesting… I have a home on the waterfront. It’s half an acre, 4,000 square feet, and I want this much money for it”, and our agent would furiously scribble notes down… And then once a month we would sit down – we started once a quarter and we brought it forward to once a month – and play a big game of go fish, essentially. We would share that list with other agents in the office, and it was so successful that we brought in agents from other brokerages.
I had always thought, “Wow, scale gives this thing so much power, because the more listings we can bring in, the more matches we can essentially find.”
Joe Fairless: It’s really smart, and it’s an obvious need, and you solved it. That’s great, thanks for telling that story about it.
Joel Sherlock: And then it gets really interesting, so when I would finish a flip, I would attend our open houses, I would list it with one of our brokers, and people would come around from the area, and people always come in to get “ideas”, and I would always ask “Oh, where are you?” and a lot of times they’re like “Oh, I’m just down the street and I need to rent on my house.” And there were times when it was like, “Oh, well why don’t you buy this one and I’ll buy your house?” So I would sell my rental and get my next project with that strategy – you buy mine, I buy yours.
HouseHarmony is essentially the evolution of that. What we did was we built a dating site for house deals. Now agents can come in and put that list in, what your client has, what your client wants, and it’s private unless your client has what I want. Unless there’s a match between you and me, I’d never be able to search that inventory. But once there’s a match, it [unintelligible [00:21:06].06] both the brokers and say “Hey, you guys should talk, because Joel has the penthouse and wants to go to waterfront, and you have the waterfront and want to go to the penthouse.”
Joe Fairless: Joel, what is your best real estate investing advice ever?
Joel Sherlock: That’s on fundamentals. We look at job growth in the city, vacancy rates historical, I always look at pricing, and then there’s supply and demand cycles, so look at what drives demand and how much supply is coming on the market.
Joe Fairless: I wanna make sure I have written down the things you look for: job growth, historical vacancies, pricing, and where the market is in the cycle.
Joel Sherlock: And new starts.
Joe Fairless: New starts, supply and demand.
Joel Sherlock: You bet. And actually, we want unemployment as well.
Joe Fairless: Any specific metrics that come to mind in terms of — okay, job growth, what percent are you looking at? Or you’re just looking at an uptick, or looking at a three-year, five-year projection?
Joel Sherlock: In job growth we also look at job diversity, and the reason for that is you look at a market like Fort McMurray, Alberta – a huge percentage of their employment is in oil and gas. So when oil and gas is strong, their market is red hot, and incredibly strong. Double wide trailers are renting for $4,000/month. But oil is cyclical. It’s guaranteed to be cyclical, it has been for decades. So when oil low, not many people wanna be paying $4,000/month to be in Fort McMurray. So for me, I just don’t like that kind of risk, because sure, when it’s hot you can make a solid cap rate, but when it’s slow, you make a very round number as a cap rate, like perfectly round in a circle, and those frighten me.
Joe Fairless: Let’s talk about new starts real quick. Is there a percentage or a number that you look at, or how do you quantify if it’s a good or bad thing with new starts?
Joel Sherlock: Again, that’s just more new starts adds to the supply number, and so big supply is not a problem if you have massive demand. Big supply is a problem if there’s huge amounts of supply coming on. We look at months of inventory, so like “How much is the market eating every month? If everyone stopped listing today, how many months of inventory are on the market right now?” If it’s less than six months, that’s a seller’s market. But if there’s 14 months of inventory coming down the pipe, that’s something that would certainly slow me down on that market.
Joe Fairless: Are you ready for the Best Ever lightning round?
Joel Sherlock: Hit me!
Joe Fairless: Alright, let’s do it! First, a quick word from our best ever partners.
Break:[00:24:06].07] to [00:24:51].26]
Joe Fairless: Best ever book you’ve read?
Joel Sherlock: The Saint, the Surfer and the CEO. I thought I would pick one that’s not like “The Millionaire Real Estate Agent”. Gary Keller’s stuff is amazing, but so many people talk about it.
Joe Fairless: [laughs] Yeah, I like it. Okay, I got that written down, I’ll check it out. Best ever deal you’ve done?
Joel Sherlock: I would say that the first time I ever sold my rental and bought my next flip with that match method… I thought I was a genius.
Joe Fairless: What’s the best ever way to find people who have 22.5 million dollars?
Joel Sherlock: Best way to find people who have 22.5 million dollars? Just be open for every conversation and be passionate about what you’re talking about. I could talk about real estate every day all day, because I love it. It’s not work to me. If somebody said, “Hey, let’s go and raise some money for a lumber mill”, it’s like, “Oh, gosh… Okay…” I would be terrible at it. I cannot sell anything I’m not passionate about, and I’m passionate about real estate.
Joe Fairless: Best ever way you like to give back?
Joel Sherlock: Great question. I sat on the board of a children’s charity in Vancouver, and we have a medical needs, disabilities children’s camps, it’s called the Zajac Ranch – amazing work, incredible. I love to be involved in that, I love giving back.
Joe Fairless: Thinking back on the deals you’ve done, what’s a tactical mistake you’ve made on a deal?
Joel Sherlock: Not enough due diligence. Blinded by excitement.
Joe Fairless: What aspect of the due diligence was not enough?
Joel Sherlock: Taking pressure from — there was another agent on the other side, and on the surface it’s like “Hey, that’s a great deal. You’ve gotta make your mind up quick, because we’ve got a bunch of people looking at it.” So we just ripped through the due diligence really fast, and it was a big house, there was a lot of value to it – it was a flip that we did – and luckily we got our money back, but it was just a far larger project than we initially thought and our traditional due diligence scenario would have found out.
Joe Fairless: Where can the best ever listeners get in touch with you?
Joel Sherlock: SherlockAndAssociates.ca is our real estate site. I’m far more active on HouseHarmony.com. Facebook, Twitter is @Joel.Sherlock, Instagram – same… So really any of those sources, we’re active on all of them.
Joe Fairless: I thoroughly enjoyed our conversation, Joel… Holy cow, this was like taking an MBA class in real estate investing, raising money, as well as just as you said, investing on the fundamentals and talking about what you look for in markets: job growth, job diversity, historical vacancies, market cycle, pricing, the new starts and unemployment. The majority of the time we talked about the 30 million dollar fund, where you and your team raised 22.5 million dollars from outside investors, and the types of fees that you charge within that structure, as well as the type of returns and how you approach the overall business plan, why you saw what you saw, and then how it turned out. It sounds like you’re pretty much wound out of that, so congrats on that fund. I’m really grateful that we had our conversation, and I know the Best Ever listeners are, as well. I hope you have a best ever day, and we’ll talk to you soon.
It’s time to take all your plagues that keep you from growing your business in real estate and throw them out the window! One of our favorites, Trevor McGregor, is here to share what five roadblocks stop real estate investors from growing. He also has five keys that you can apply today to turn your operations up a notch.
– A Master Coach with the Tony Robbins Group
– has done over 10,000 hours of coaching
– Based in Vancouver, Canada
– Real estate investor who has done fix and flips, buy and holds and wholesaling
– Visit him at www.trevormcgregor.com
Do you know where we are headed? Whether you do or don’t, the market will require millennials and their families…prepare for it! Our guest is always on the lookout for job growth, gentrification, and opportunities. You have to hear this show!
Canadian-based real estate investor, researcher, author and educator
Founding partner and Senior Analyst of Real Estate Investment Network and Cutting Edge Research both of which have entered their 22nd year of providing unbiased research and analysis on the Canadian real estate markets
Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session. Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.