**Transcripts are auto-generated.

Erwin  

Greetings, my fellow real estate investors.

Today’s show we have someone who’s built a $100 million commercial real estate portfolio in Calgary, Alberta. But he’s now since pivoted to microdosing His name is Greg capstreet. And this is the truth about real estate real estate investing show for Canadians and I hope you’ve had a wonderful summer. So before we get to Greg, judging by how slow the markets been, well, I know I can tell many of you took time off. I know so many of my clients to take time off to enjoy the weather travel. Summer hard as it’s called. My name is Erwin Seto or I’m in real estate the four time Realtors Of The Year Two investors and host of this over the top successful podcast right at the top in the space ranked number 81 In all business in iTunes across the world. But yeah, the good times still continue to roll for investors. It’s not easy though I’m an investor myself. These elevator rates they certainly are a pain for everyone. But long term investor has still fared exceptionally well. I had this one I once one collected retired earlier this year from her day job. So she wanted to take some profits off the table on her student rental property in Welland Ontario to enjoy herself travel and strategically pay less tax tax via capital gains because she’s no longer earning a job income. 10 years ago, we helped her buy a turnkey student rental directly from the builder. The house was designed with the future in mind as a design the basement to meet the building and fire code for basement apartment, which in that included the Ruffins for a future kitchen. There is no kitchen in the basement kitchens or you know your classic fire hazard. It’s your it’s where a lot of fires can originate. And there was no kitchen in the basement.

And also just for at the time based on apartments were not legal. But again, this was 10 years ago in the city had all my clients I have several clients about same property. Several they all signed an affidavit to prepare by the city that they would not create separation between the downstairs and upstairs by adding locked locking doors. 10 years later, these turnkey student rentals were are still in high demand as the location is just about 40 minutes from campus. The house is on the newer side and more modern and finished than its competition. Hence, our clients have always been successful renting them out. And even though we’re currently in a tough market for tenant properties, tenant two properties are not selling so much these days. But because of property cash flows,our client was able to successfully sell this house for more than two times, but she paid for it. So the return on average assuming a 20% down payment is it’s it’s it’s it’s good. It’s a 500% or an average of 50% per year straight average. The great thing about renting to students is that they graduate school and they move out then allows which allows us landlords to rent the house at market rates. And with the tick the numbers actually, over 100,000 I think we’ve had about 800,000 new international students in Canada over the last two years, rents have just skyrocketed near colleges and universities. My client, of course, is ecstatic to walk away with over $300,000 in profits in just 10 years. She’s had a professional property manager as well. So the investment was as passive as it gets. If you follow the market as closely as I do, like I mentioned, tenant properties are not selling in this market right now, unless they’re priced a lesser price the best. And then the more negative the cash flow the property, or if the tenant or the rents the rents are low. From you know, just like some of my properties. I’ve had rent property, I’ve had tenants for like, you know, eight, nine years. So those rents are low. Those properties are harder to sell at the same time on so that’s on the macro level on the macro level. Our economy shrank, hopefully saw the news just last week they came out our economy shrank by point 2% in the second quarter of this year. At the same time, the expectation was to grow 1.5% So we’re not technically in a recession yet, but it’s pretty much inevitable provincial economists believe that we’re going to be in a recession for q3.

I look around I know people are feeling the pinch spending is way down the Conference Board of Canada released that Ontarians are spending like 8% less compared to last year. So many homeowners believe including myself, the Bank of Canada is done raising rates. And last time, the Bank of Canada paused and raising rates that was an early spring in the buyers went gangbusters for at least two months.

That it really didn’t that okay, sorry, but before they did another increase, so maybe we see the same action this time, because the long term economic fundamentals still screaming housing shortage, builders aren’t building. Immigration is talking to us at a fast tilt. Colleges and Universities need those international students to make budget. So I don’t see how any of this changes. But we’ll see. We’ll see. And while sales and rental properties have been slow, on the flip side, tenant showings even in August, even in August, when tenant showings are typically slow. Tenant showings were a big demand as vacant units, were they would they would they would have about 10 or 20. Something showings in a week or two. And rents continue to decline. So rents Klein, yes, because who can blame housing providers as all the operating risks in operating costs and interest rates have gone up, property taxes are going up insurance going up?

To my properties, insurance is renewed with my my broker switch to provider? I don’t think that’s under control. But under the new provider, each of those properties is $500 higher per year per year. Yeah, so that’s yeah, that’s that’s a that’s close to 20% increase on my insurance, you better believe it became these recorded. If you’ve a great insurance person out there, please send them my way. In the end, it’s the tenants all suffer the worst from this from this, honestly, probably excessive immigration, inflation. And in general Canada’s economic condition. This is one of my worst fears realized. Hence, you know, I put my money where where I thought it needed to go, which was to buy each each of my kids a house, so that they would be able to afford to be able to get into the housing market when they were old enough. Of course, these conditions are really, really sad. Prices accelerated way faster than I ever would have expected. But that’s the situation that we’re in. So but if you have kids or worried about your own retirement, I think that’s pretty much everyone, one or the other, or both. I can’t recommend enough owning a quality income property, probably a few more than that. And if you’re interested in learning how my clients, like my client just made 500% return in 10 years, how my clients do it, how my wife and I, and my wife, Sherry, and I invest, and you want to join our monthly Iowan meeting.

This one, they’re online only. And on Tuesday, September 19, my team and I will be there to share the latest in the market at both a high level and on the street level, including sale prices, renovation budgets, rents, what is the best neighborhoods to invest in, where our which is actually where our clients are investing in. Plus, we’ll have a special guest in gray Brook who in they happen to be one of the larger developers in Ontario, Karina invest in their projects, I believe cherries invested our money in about two or three projects just this year, as past does not predict the future. But my returns have been exceptional, and even better than the passive. All we do is just transfer money in right in Science Center exciting contracts. So if you want to learn how to invest like a developer, or at least understand how developers make money, so that you can, you know, evaluate your own development projects going forward, then you will want to be at this meeting.

And then the following Saturday on September 23. We will be we will be hosting the RMS renter in the Niagara region in averaging in my opinion still has been upside thanks to the now recent correction where prices have come down significantly, plus new investment via the new hospital. And the government is not in friendly investor friendly yet. So you want to learn about how to invest in these areas before the floodgates open and all investors rushing. So fingers crossed. Fingers crossed for my clients. One of my most successful clients who has been a pet guest of the show, hope fingers crossed that we were able to see his triplex conversion. So if you’re a real estate geek like me, you know, our friend, our friend and client has converted a single family home into three units under one roof within the same building envelope. So no edition, no garden suite, anything like that. Now Matt, my opinion is maximizing one’s investment, while tripling the housing on a single lot. I love it when our clients or money learn, learned earn a world class return and are also part of the solution in creating more housing that can Canadians desperately need. Make Money do social good. You really ticked up my opinion. Even the angry mortgage guy Ron Butler agrees. I’ve gotten many DMS texts comments on YouTube, about everyone’s appreciation for Ron telling it like it is you

As the guest of last week’s episode, I do share many of his opinions. Some I don’t. I’m just not nearly as vocal about it. I wonder if more people would infer that it was instead of often walking the line and being bit more political and not trying to offend anyone, but yeah, I agree. Anything’s Brent. Sorry, Ron says, but yes, our governments have screwed this up royally at all levels. It’s a sad state of affairs that buying houses rental property is a better investment than most businesses. Right? You. I remember, I went to business school, businesses generate more economic benefit than a rental property does. So the way things are going right now, that’s the sad state of affairs. But there’s two more years until our next federal election. By the end our interest rates should be much lower than they are today. There will be past the recession is my guess, and the lack of housing will still be a problem.

Oh, I’m such a bummer onto this week’s show. As always, I look forward to bring you a variety of guests to share their unique experiences and journeys. Today, we have an old friend Greg captured back on the show to share what he’s up to. After dominating the influencer scene. He’s helped. He’s hosted conferences over multiple days with like massive, massive speakers, like the Dalai Lama.

And he’s owned a is owned a while at the time it was worth $100 billion of commercial real estate, largely in Calgary, Alberta. But that was a while ago, and he’s since gone through dark times, both economically and personally.

That he invest in Calgary, Alberta, of course, you’re gonna go through dark times,to Now, fast forward today, he’s sharing about his current personal interest in finally aligning with his personal passion, which is curing mental health via medical psychedelics. Yeah, this topic is a little bit different than the usual note, Greg and I are not medical doctors. So none of this should be taken as medical advice. So please speak to your own health professional. Greg does share about it his own out of body experience, it’s flashing back to his childhood trauma, allowing him to understand his adult his own current adult insecurities so we can actually address them. This episode is not for everyone. But again, understand Greg is really bright. And he’s made a lot of money. Unifor. So I always like to listen to these folks what they’re up to. We have, we’ve had many hardcore real estate guests. On the show. Greg, again, has been a guest on the show before. So if you want to hear more hardcore things around real estate investing, and you know, when he did, he spoke more about hosting a three day conference with folks like Brendon Burchard and the owner of virgin

Richard Branson, like ease and making millions of dollars as an influencer. Go back to the previous episode, Greg, or one of the other 300 episodes I’ve had with hardcore real estate investors in conversations. But if you’re interested in being on the bleeding edge of where medicine is going, where we think medicine is going, or you want to better understand how you’re how you’re better understand yourself, or your own childhood trauma shaped who you are today. And again, this is going to likely be the next best thing after cannabis. Then you will enjoy this episode. Again. Greg is a smart dude. His website is a light mint.com That’s a play on the word alignment. Enlightenment, alightment.com. Please enjoy the show

Erwin  0:40 

Greg, how are you?

Greg  0:42 

I’m good. Let me I’m just trying to get my air pods connected here.

Erwin  0:47 

Sound okay. Sure the army can be all right. All right. Yeah. Are you doing all right, what’s up? What’s going on? What’s gone down? Summer. My kids are at camp overnight camp this week. So Jerry and I are empty nesters for a week. Nice. weird feeling. Are you taking advantage? Yeah, we’re golfing tonight. We got on Sunday. Just us to watch the watching. Just half a King Richard gets a really long movie last night. Haven’t seen it. Was it good? Yeah, I think so. We had this long because I was really unhappy with the whole Will Smith slapping Chris Rock thing? Yeah. Yeah. So I just felt the backburner than just like, like going through Netflix. There’s nothing else that was interested in me. Yeah, that was a whole weird situation. But talking about anyway, yeah. People that are injured, right. People are getting over trauma. What the hell happened?

Greg  2:12 

Yeah, well, actually, yeah. The whole Smith family is an interesting. Yeah. In the world of topic of psychedelics and stuff. Will Jada Smith or? Yeah, there’s a cheetah. Yeah, not the wife. But the to remember who was somebody so there’s a huge psychedelic conference that happens put on by maps, which is like the sort of grandfather of sort of legitimate science behind psychedelics. They did a conference in Denver, and last month and 13,000 people, the biggest conference ever, and one of the kids was there, and I remember which one it was. But anyway, they basically were on stage being interviewed, talking about psychedelics and how Jada, the mom introduced the family to psychedelics. And

Erwin  3:06 

that’s

Greg  3:08 

how it’s all sort of like, psychedelics have been big in sort of all their journeys here last few years, so I

Erwin  3:15 

wonder if it’s helped their healing process for for that very public. Event? I would. Yeah, that was just so bizarre. Anyways, yeah, she cheated on I went with a younger rap artist, right. So I’m guessing that was part of the underlying issue.

Greg  3:35 

Yeah. And I, I don’t follow the stuff that happens like or what? You know, it’s like the Kardashians. I can’t I can’t name the Kardashians and Kim Kardashian. I don’t know who they are. It’s just such nonsense, but you know, but at the end of the day, they’re just human beings trying to have a human experience. Yeah. Made a lot harder by being in the spotlight, I guess. But yeah,

Erwin  4:01 

we all got shit. We all got shit. That’s to say to my friends on the weekend, you know? I think it says I always say it partly is just being the self deprecating and being humble. As I say I am crazy. My clients are crazy. My friends. My form buddies are crazy. We’re all crazy. Which actually leads me to the point that we’re actually crazy is that normal is crazy. Yeah, everyone it was crazy. There is no normal so very, very very true. That’s I don’t like the name psychedelics I think needs to be needs to be more health based. Yeah, like it sounds like like narcotic and recreational to me again, I don’t have enough context, you know, just just like just like I don’t like the term cryptocurrency like, yeah, like it’s like I think of it as hard asset. There’s a triptych about it. Hey, when are you doing too far into it? Anyway? So I loved your email. Let me just bring it up. I closed everything else. Yeah, I loved your email. So what do you love about it? It’s It’s so true. That, I guess that like I see it in forum. I see it in yo, like, we’re all damaged. We’re all we’re all. You know, I’ve seen it in like, like Steve Jobs is a biography. Right? Yeah. So chip on his shoulder, you know, Tiger Woods, massive chip on his shoulder and living up to his parents expectations, all sorts of things right. Now watching Tim Richard, you can see how what his daughter’s had to deal with. Right? Yeah. How have you seen it? No. He saw the

Greg  5:50 

trailer. It looked it looked interesting. I mean, if it’s if it’s true to life, that’s the that’s the question I always have is like, how much of this is characterized to make a better movie and stuff, but you got to think to have to have you know, both of your daughters come out to be two of the top athletes in the category in the world. Now, there’s definitely there’s got to be something different going on in that family.

Erwin  6:15 

The doctors approved the movie as well. Yeah, yeah, they had, they had to watch it and approve it before it’d be released. But just, it seems consistent with what I’ve read about how superstars are raised. I really enjoyed. I’m a sports fan. So I really enjoyed Andre Agassi’s book as well. Have you read that one? No. Do you like sports?

Greg  6:38 

I like sports, but not like you. I mean, I’m not super into sports. Yeah, I watch them. But I like I don’t Yeah, I don’t really follow them really, really intently.

Erwin  6:52 

What I what I find fascinating is how they were raised by their parents. I’m trying to find a book on Walter Gretzky and Wayne, but it seems pretty consistent. Like the parents are just over the top. Right in the Richard he had he had Child Services called on him, which I’m not surprised.

Greg  7:13 

I’d be curious about the Walter Gretzky because I mean, everything you see, you just you never hear a story that Walter Gretzky was overbearing or difficult or noxious or you driven by ego, like it just so I’d be super curious to really know what the behind the scenes that I became, I think a lot of it has to do with Gretzky was given a gift that was just unreal. And, you know, it’s possible to nurture that and in a more positive, supportive environment, as opposed to kind of the driving relentless environment that I think most sports stars grew up in. But yeah, but yeah, I think you’re right, that would be an interesting one to read. Yeah, that’d

Erwin  7:56 

be interesting. Because that Tiger Woods information only got it because of, because it was such a big story. And so you know, there was enough money in it for folks to go do a proper interviews of people surrounding it. In the tire in the woods fairly pissed off enough people that people would talk. Yeah. Versus Gretzky’s like, you know, high up on a pedestal, you know, squeaky clean didn’t pass off anyone? Yeah. Love the email, because, you know, I see it. Yeah, we all do for freedom. It’s tough these days, too, with high interest rates. So people are being squeezed, they don’t really have the freedom that they expected. Oh, I’ll preface that by saying my clients are doing fine. Seriously, because my clients, you know, they can take profits. And they can be extremely comfortable. And they still have all their freedom. Right? Versus I speak to people who are who are limited now in what they can do because of they’re saddled with negative cash flow properties. Right? Yep. I’m sure you’ve heard that before.

Greg  9:02 

Never. I don’t know anything about that.

Erwin  9:07 

The fear. You know, like I said, like jobs. I think you have a massive chip on his shoulder being adopted. Right, just the way he treated his his biological father when he met him like this. Is this Yeah, odd. And that he himself had like an orphan daughter. Like that was messed up. Yeah, you can’t say these people are healthy. Jobs.

Greg  9:33 

You look at a lot of people in the very top echelons in almost any category. And there’s a there’s a huge shadow cast and, you know, in each of their lives, typically, I mean, there’s a lot of, you know, healthy, fully aware people that are super successful, because it’s coming from the right place, but I would say that, more often than not, that’s not the case. So, so yeah, I mean, we can be talking about whatever you want. How long will it be before this comes out? Like, when would this actually hit? I have

Erwin  10:05 

some leeway Do you want so quickly? Or we’re probably around seven weeks right now.

Greg  10:11 

Okay, I’m probably not that far. But I mean, so what I’m doing right now as I’m working on, like a site brand, like a kind of what I’m what I’m going to be focusing on, and the site’s not ready and all that, but it should be, you know, I’ll get it together in the next couple few weeks. So

Erwin  10:33 

I can release it. Just let me let me know we can release it then.

Greg  10:37 

Yeah. Okay. So we’ll talk about stuff. And I’ll, you know, I can mention stuff and website and that if they go like, if you went there right now, it’s like, placeholder, but

Erwin  10:47 

yeah, totally fine. We can just, this is

Greg  10:50 

good, because it puts a fire under my ass to actually get things done.

Erwin  10:54 

You have? You have 10 days, Greg. That’s right.

Greg  10:59 

So we can Yeah, we can take it wherever you want. I mean, we can talk about real estate. I can talk a little bit about Calgary. I mean, it’s, you know, I saw that I haven’t listened to it yet. And I wanted to get to it. I just didn’t. The one with with Calvert. This just

Erwin  11:17 

because just released. Yeah, I

Greg  11:19 

know. I saw it, I saw it come out and I was gonna listen to it, I didn’t get a chance. Because it would have been good to hear a little bit more, because they would have gotten a lot more deeper than what I’m typically looking at. Would have been just give me a quick update. But I mean, it’s, you know, anecdotally, it’s, you know, it’s it’s interesting. I mean, Calgary is definitely doing a lot better right now. It’s just it’s, it seems we’re in a position where we seem to last, like the

Erwin  11:42 

residential market. Yeah, for sure.

Greg  11:46 

Because I don’t want to have to. Yeah, I mean, I don’t I don’t, I can’t quote you a bunch of numbers and stuff like that. But that’s okay. But But it’s interesting. Yeah. So we can take this wherever you want. We talk about real estate, we talk about business, we can talk about coaching, trauma, psychedelics, whatever you want.

Erwin  12:05 

That’s another name for psychedelics. health industry. What more specific than that?

Greg  12:14 

Well, do you want to make this episode about the what? Second name of psychedelics? And like, do you want that to be sort of like part of the

Erwin  12:24 

was part of him? is largely Dr. Right. Yeah. And they’ll always throwing questions in which I’m curious.

Greg  12:33 

Yeah, I think I mean, what we can talk about is maybe, you know, around what the email was, and just how, over the years, I mean, I’ve been through a lot of different things, had businesses and built a big portfolio and scaled it down and learned a bunch of painful lessons along the way, and that, you know, a different a bunch of different things that I’ve done over the years, have sort of brought me back to being a little bit more connected with myself and being a little more authentic and being driven less by the wrong things, I guess. Okay. And for a lot of people that I mean, psychedelics is obviously a hot topic these days are so many people interested in it. We’re edging towards legalization, you know, so what does that actually mean? And for people that are curious about it, you know, we can talk a little bit about that. And because I find it doesn’t matter where I am, or who I’m talking to, if, if I mentioned psychedelics there, they start to lean in and they start asking questions like, well, what is it really? What’s it about? And then it’s, it’s a lot about trying to unlearn sort of, like the myths and the things that

Erwin  13:44 

yes, if the show, I think will work that in in terms of when we talk about your journey, for example, because you speak incredibly ambitious, yeah. driven. So we can talk about like the journey and then talking about your reasoning for like, What drove you then? Yeah. And then you can analyze it like, Was that right? Wrong? Good, bad. Yeah. And talk about your coaching in the truck now and then actually, laterally into psychedelics.

Greg  14:07 

Yeah, because what I really want to do is, is, you know, add value to the show, not just have like, an hour conversation about me, but

Erwin  14:15 

but people will take your journey for themselves. Yeah, okay. Let me because especially, I always have new listeners. So they’re like, Yeah, I went on 100 doors like I was there before to actually speaking for myself. I went on 100 doors kicked in into their, their homes and like, raise your hands. Yeah, and we don’t lose money. Seriously, when people are talking about the shit all the time, it’s like, it’s one of the things I love about yo, is because entrepreneurs I find her on much more. Their mission is very different. I want change the world add value to microphone, my customers, my employees, real estate, to find a much more capitalist. Yeah, tendency to raise rents. Or just oh, they don’t have rent control. I’m just gonna raise rents and make all this money increase like Then increase my cap rate and all that sort of shit and then take all this money. Great. What did you help? The society?

Greg  15:09 

There’s a huge there’s a human equation in there. People forget

Erwin  15:14 

a spreadsheet and like, yeah, seven cafe, I seem to raise everyone’s rents by 20% and I make this much money. Yeah. We’re human human component completely skipped.

Unknown Speaker  15:28 

Yeah. So how much? How much time? Do

Erwin  15:30 

we have an hour to get your book filled till one to 18? Okay, already? Yeah. Very Hi Greg, what’s keeping you busy these days?

Greg  15:44 

What’s keeping me busy? My family. Actually, we just got married in May. And so I’ve been with with my wife now for four years. We got married out in Tofino on the West Coast, Vancouver Island, it was spectacular. It was both of our second times around, so we kind of did it the way that we want it to, as opposed to, you know, all the pressure of like, what’s what a wedding is supposed to look like? So it’s a very small gathering, you know, like 2022 or 24 people, family and send just a bunch of really close friends. And it was it was fabulous. It was I mean, if anybody that hasn’t been in Tofino, it’s a very, it’s a very magical place. And it was very meaningful, because we actually, the officiant of our ceremony was a dear friend of mine of ours, his name’s Dr. Dan angle. And he’s the very first person that ever introduced me to the world of plant medicines, psychedelics, and he’s become a really good friend of mine. So we had a very, it was right on the beach, everybody in bare feet, it was sort of a, I would call it a bit of a modern hippie wedding. It was, it was amazing. But it was nice to be in a space and like, be grounded in what, you know, what makes us happy, and who we are, as opposed to trying to do it for, you know, the cameras and the video and all that kind of stuff. So, anyway, so that’s, and so we’ve got my son Cooper’s 15. And then we’ve got two daughters, that are eight and five, ln Anna, and so it’s summertime. So busy. Lots going on. And, you know, for me personally, like I’ve, I would say that over the last several years, I’ve been going through what you could call an initiation. And just going through a lot of retrospective thoughts and building sort of the next stage for me. And so yeah, so we can talk a little bit about that today.

Erwin  17:55 

Oh, interesting. Because as we’re catching up before we’re recording, like your wedding is almost kind of like your second wedding. Because you said how you how you described it as being the way you want it much smaller than the original than then but the majority of people do on their first weddings. And with current day meetings, it seems kind of like a an analogy for your career. Right? Because when I think Derek had Yeah, absolutely. I think of you know, best selling author. With your with your book about RSP investing because base everyone, everyone from my generation investing knows I read your book or hones in your book, right. And, you know, you hosted enormous conferences, you spoke on you spoke on stage where there are hundreds and 1000s of people in the audience and like your, your further for the real estate space. Like you’re one of the biggest folks, especially if like for young Canadians, like even on the North American stage. You are one of the most successful folks were you know,

Greg  18:57 

if you say so. I don’t know. I mean, we we had a we had a big training business. I mean, if we go back, I don’t know, 10 years, maybe a little bit more than that. I mean, I started in the mid 2000s, early, early 2000s, I sold my business that I had. I built up a business over my 20s and sold that in 2000. The year that I turned 30 and turned my attention to real estate and that was in 2001 and just focused hard on real estate, acquiring the Alberta real estate market was was pretty quiet back then. And then over the course of the next few years, you know two or three that kind of thing. I started just acquiring tons of property. And people started asking me how are you doing this? Like, can you teach this and one of the things about me is when I go into something that I’m I’m really a student of whatever I go into, so I go deep into the rabbit hole. I really tried to understand it and learn it. And so I just started teaching friends and people that had heard about me at little tiny You know, I’d get 20 people together and teach them about real estate and started building a business around training, got put on a few couple of couple of big stages in 2004 and five. And at the time, of course, Alberta was the economic Tiger. And so I’ve kind of got lucky with that, that I owned all this property. And the market absolutely just took off. I mean, I remember in 2006, the stat in Canada or in Calgary, sorry, was the average sale price in Calgary increased in 2006. By by 52%. So if you so if you owned a house that was 200,000, you the next year, you owned a house that was worth 300,000. So you can imagine what that did to like balance sheets. And you know, and rents were like, basically, effectively zero commercial rates, Calgary had the lowest commercial real estate, they can see in North America, like Office rates were 0%, you could not rent an office space and Cat and Cat Calgary. And so you know, it was a rocket and oh, 708 continued to drive, of course, our training company expanded. We were doing, you know, big events, the big event that we are sort of known for that I did was with Richard Branson, the Dalai Lama, Stephen Covey, Matt Mullenweg. I mean, the list goes on it was. And it was interesting, because that event, and oh nine was kind of the start for a lot of the big guys you see out there today. So for example, a vision from Mindvalley, if you’re familiar with Vishen, Lakhiani, that was one of the visions first talks was on my stage, or Brendon Burchard. Nobody knew who Brendan was before that event. And then that sort of started him on his trajectory. And so I was working with a lot of really amazing people. And then, of course, oh, wait, oh nine happened. And at the time, you know, we had a portfolio of $100 million in real estate. And when something like a wait, oh nine comes, having a big portfolio is not anything to brag about at all. Because it just turns into a headache management company. And so that’s what happened. And so we got, we got hit pretty hard, it was very painful. Had to divest of a bunch of properties, and like, we were into raw land, and we were international and, you know, expanded probably too quickly. And I think believed the belief and PR of Alberta is going to be the greatest place ever forever. And in hindsight now, we know that’s not the case. And but it’s funny, because like the conversations that you and I could have about Alberta today, you couldn’t conceive those in 2007, you know, that, that Alberta would basically be lagging most of the real estate market. So. So yeah, so we built a big company, we had to downsize that divest some properties, but the training company was supported the operating of the of the real estate. So that’s the one thing that I would say is, had it not been for my training company, we would have probably had a really big, you know, it would have been a dumpster fire. On the real estate side. I mean, it was hard enough, but the operating income from the training company actually support the real estate. And I think that’s where a lot of real estate investors get in trouble is they start to believe their own PR, their properties are cash flowing. You know, you see it all the time that, you know, equity, you know, why would you leave equity in your property, it’s just dead. It’s just like, Why would you leave that money there, like, borrow it out and buy another one? And that all works when things are going well, but I mean, you know, we’re seeing another iteration, it’s a different version, and much less painful. But we’re seeing yet another iteration right now in the market of what happens when you assume that a certain set of assumptions are going to remain true forever. And so for a lot of people that obviously is interest rates, right? We, anybody who just started in real estate in the last 10 years has come to believe that typical interest rates are two and 3%. And that’s not how it works. And so what we’re seeing right now, I mean, this is we’re at what 22 year highs now, for the Bank of Canada rate. But that’s only 22 years. I mean, that’s not you know, that’s not the entire history of of money. And so, it’s been interesting to watch. And for me, I mean, the training company, one of the things that the flip side of the training company, for me, the the frustration was that I was coaching, I mean, I was coaching, you know, hundreds of entrepreneurs and investors. And there was only a small portion of them that actually really took action and followed through and did what they needed to do. And it got for me frustrated to the point where I didn’t feel right coaching someone and having to come back to me every three months and basically report back and nothing had changed since the last time we talked. And I took that very personally, because they felt accountable for their outcomes, which, you know, in some ways is not really healthy for a coach. I mean, I can only do so much, right. And so I just decided, you know, this is a lot of a lot of stress, I’m dealing with a lot of things with real estate. And so I shut the training company down, basically retired in 2013, because I wanted to get back into running real businesses. And so at the time, I was winding that down. And I started a veterinary company, and decided that I wanted to get back into service business dealing with, you know, like consumer clients. And so we started a veterinary company, a mobile veterinary company, and that went really well. We built that up over the course four years and sold that in 2017.

Erwin  25:45 

But medicine was a small personal interest of yours, too.

Greg  25:50 

Yeah, I loved animals. And so I saw it as the veterinary space, I saw it as an opportunity. Because if I could apply my business acumen to my love of animals, I could sort of bring together my skill set with my passion. And that’s what I did with that company. And the vet companies, or the vet vet industry is challenging. It’s it’s been consolidated. I mean, there’s one company, for example, that owns almost 2000 veterinary clinics. Now, in North America. The veterinary clinics in Calgary, more than half of them are owned by a single company. And so when that starts happening, innovation and you know, creativity just sort of go out the door, because now it’s a big corporate draw. And so we sold in 2017. And then 2018, I got separated. 12 year marriage, we got separated and divorced. And then I sold the business, of course. So I kind of went from having a very clear, solid sort of view of what my life looked like, you know, I’ve got this, you know, I’m married, and I’ve got this, and I’ve got this business. And I basically wiped all that away. And that was in 2018. And it was a scary time for me because I just became untethered to, you know, I didn’t have an identity anymore. I didn’t have a relationship, I wasn’t really sure what I was going to do. And so that’s sort of like, I would say, plunged me into a significant valley of introspection on my own life, and turning inward. Finally, because I had always had this sense that there were things that were driving me that were not healthy. But I couldn’t ever put my finger on it. I wasn’t really sure why. And so I started to do a lot of research into different things. So I started to pick up breathwork, for example, meditation, I did Transcendental Meditation, which, for me, didn’t, didn’t, didn’t click, I tried all these different things. And I mean, breathwork, I really enjoyed that I became certified as a breathwork. Instructor, and started doing more of these sort of internal processes. And one of the things that happened for me was, I mentioned Dr. Dan before, I met Dan, about five or six years ago now. And Dan is one of sort of the world’s sort of leading authorities in the world of plant medicine and psychedelics. And for me, or when I, I had never touched magic mushrooms in my life, I’ve never done cocaine, I never will never done heroin or any of that kind of stuff. I mean, I did some cannabis, I probably smoked cannabis, maybe twice when I was in my teens or 20s hated it. And so I’d always been counter or against drugs of any kind. And I was like, the I was a success story of the 80s war on drugs. You know, if you’ve, you’ve seen that commercial with, you know, this is your brain and it’s an egg, and this is your brain on drugs. And they crack the egg open, that that sort of campaign turned an entire generation against. You know, this, this idea that mind altering substances are just bad for you, they’re going to rot your brain, they’re going to make you kill yourself, whatever. And so, Dan gave me a new perspective on that. And when I started doing the research, I realized that what what we call psychedelics or plant medicine has tremendous potential for really two things number one, helping us understand and go back and and, first of all, identify and process and heal some of the things that that upset us or that drive us the traumas of our past. So that’s kind of one thing is it helps us heal and become more connected back to ourselves. And then the second side of plant medicines, psychedelics is it’s tremendously mind expanding in terms of creativity and innovation and ideas and things like that. And so I started

Erwin  29:50 

just to pause you there. I want to remind a little bit because I do want to expand on this as well. But before we get into kind of like the solution, like you Yeah, coached hundreds of hundreds of successful entrepreneurs and real estate investors. Because I believe it was you that said like real estate investors are really are just entrepreneurs in the real estate industry. Right? That absolutely, yeah. So what what was driving them? And I don’t have a better term for it? Was it right or wrong the way it is driven? Because you and I have exchanged some emails about this as well, like I, I’ve had friends tell me, I have a decent understanding of myself. Yeah. I’ve looked inside myself understand, like, what what largely went drives me. And you know, any Asian, or anyone with overbearing parents knows, like we were, we were conditioned to make our parents happy. Right. So I see that in a lot of myself, like, I actually see myself competing with my parents, both on on the financial level, and as a parent, right. So I understand that about myself a lot. That’s, that’s part of what drives me maybe a lot of what drives me. So my question

Greg  30:58 

is, and that’s not just an Asian thing, by the way, I mean, maybe the stereotype, but that’s not that’s not just an Asian thing, like, parents have an extraordinary impact on not just our upbringing and stuff, but the trajectory of our life, and in in ways that most of us don’t even realize, and like, I would include myself in that category as well. And so, so yeah, so to your point, one of the frustrations that I would have is, like I was saying before, is that, like, I would lay out for someone, here’s what they need to do, they would go away, and they would come back, and they wouldn’t get it done. And I would and I couldn’t understand why. And to be honest, at that time, I would say, if you asked me that question, I would have told you well, they’re just not committed enough. They’re not serious enough. They’re there. They don’t have discipline, they don’t have willpower. And it’s, if you think about it, like, you know, like the ocean, right? Like, it’s all of these things at the very top that we explain as the reasons why we do or don’t things, you know, you know, it’s like motivation, all of these superficial things, but what’s going on? Deep beneath the surface, there’s, there’s, there’s a, there’s a force that’s going on that largely we don’t see, that pushes us so think of an iceberg, right? I mean, iceberg is a great analogy, like what you see poking out of the water. Those are the things like discipline and writing a gratitude list and an action plan, and affirmations and having a business plan all these things that we that we we focus on. But no matter how much willpower you have, or no matter how good your plan is, they’re not going to move that iceberg what’s going to move the iceberg is all of that substance and material that’s beneath the surface that very few people ever dive under to see what’s going on. And so that’s kind of how I would how I would answer the question of like, what was driving these entrepreneurs, and me, and I’m using myself as kind of like the primary example here, but I wasn’t really sure I thought I knew and like consciously, I thought I, you know, I thought I knew what it was and you ask 100 entrepreneurs, and this would be this would hold very true for real estate investors as well ask 100 entrepreneurs or real estate investors? What’s your number one core value? Like why do you really do all this stuff? What is it that gets you excited, and that you’re really trying to accomplish and achieve what’s the value you’re after? And if I ask, you know, listeners to think about that, what’s the one thing that they’re that they’re, they stand for? They’re all about 98% of them are thinking right now of freedom. It’s about freedom. And every time I did did a talk, that’s what they would always say is that’s their best what they’re really seeking. That’s what they want. And one of the things that I came to learn was that as much as entrepreneurs consciously will tell you that freedom is what they’re really after. What I’ve started to realize both of those coaching clients, and especially about myself is that when I said that freedom was my number one value. That wasn’t actually true. The reason that most people seek freedom is because they’re actually seeking control. And by having freedom. That means nobody has control over you. Right? If I have ultimate freedom I get, you know, you’ve heard it before I could do what I want, what I want, where I want with who I want, whatever I want. That’s, that’s trying to like cut the thread of control from you. And most of us as children when we’re growing up, control is one of the fundamental issues that we struggle with. And so if you look at and fast forward as somebody grows up into, you know, an adult and they start a business, they tell themselves, they’re really after freedom, but what typically they’re afraid of is they want control. They’re afraid of giving up control, because quite often they have trust issues. They have abandonment issues. Use, they were taught as children that they can’t rely on other people. So they have to only rely on themselves. And what happens is these lessons that we learned in childhood. First of all, most of us don’t realize that’s what’s happening because our brain is such a powerful force at helping create blind spots are things that our ego doesn’t want us to see, because they’re so unbearably painful. So. So an example would be in this, one of the things that I’ve said for for many years is that most business problems that you have, are just personal problems dressed up in a suit, they’re really not business problems, per se, their struggles that you’re having as an individual, but quite often, you don’t even see the struggle you’re having, because it’s a subconscious issue. So as an example, let’s say, as a child, when you were growing up, you grew up in a very chaotic household, like your parents weren’t structured, you didn’t know when dinner was going to be, you would come home and your parents weren’t there. Or another night, you might come home, and there’s 50 people in the house, and you were supposed to be going to hockey that night, and your parents forgot to take you. And so chaos and unpredictability became the way that you, you know, learned the world. As you grow up, there’s going to be a lot of manifestations of that chaos that show up in your life. And so one example might be, there’s a lot of people that continue to put themselves in financial pressure or challenges or stress or risk. And on the surface, they it’s because they’re trying to like build a big empire and take risks and be this swashbuckling entrepreneur. But the truth is underneath is that that’s the only place that they feel that they have control is when there’s chaos all around them. And I know it sounds counterproductive. But these are the sorts of challenges that I saw over and over and over another one might be, for example, growing up, if you if you learned that you can’t trust other people, and that people are eventually going to abandon you and those kinds of things. Fast forward to, you know, you’re 35 year old, 35 years old running a business and you’ve got six employees, and you go to your forum, or you go to your mastermind, what’s the problem all my employees, I mean, I just can’t, they’re, they’re terrible, you can’t find good people, people that, you know, they’re not loyal, and all these things, if you really look deeply at that challenge, typically, the problem isn’t the employees, it’s that the, it’s the employer, you have a struggle trusting other people, or you have this, this predetermined expectation that people are going to screw you. So you therefore are protecting yourself and your relationships are all built on a killer be killed mentality. So you can imagine how healthy a business you know, culture is going to be if that’s the, that’s the programming, that’s the operating system that’s running you. So these are the kinds of things that I started to see. But I, I couldn’t, I didn’t have the context or the perspective to really understand what was causing it, and more importantly, how to fix it. And nowhere was this more true than in my own life. I mean, I had a lot of these same struggles myself. And so when I started down this path of sort of self realization, and really understanding what drove me, again, I used a bunch of different tools, breathwork, cold plunge, things that would sort of bring me present, and plant medicine and psychedelics became one of the one of the tools, the technologies that I used. When I started

Erwin  38:38 

doing this, I want elaborate where you are in this space, because we’re, we’re talking about like, 2018 ish around, then you’re sharing your journey. Yeah, see your life, life changes, marital changes. Just just because I wanted to provide a little more context what you sold the business, you’re sold the veterinarian business. Did you have anything else going on? Do you still have did you still have your part of your real estate portfolio? Like, oh, yeah, I

Greg  39:03 

so I’ve owned real estate the entire time. I didn’t sell it all off. You know, went from a nine figure to an eight figure portfolio. But I but I still have real estate and still do today. It’s not a huge part of my day to day. I mean, I focus on you know, I’ve got a commercial office building for example. So you know, when when we’re trying to deal with a tenant or whatever there that’s all that’s a much bigger effort than typically for a residential like for one of my houses, for example, and we’re trying to rent out you know, a basement suite you know, renting Oh 5000 square feet of office space on a five or 10 year deal, quarter million dollar, you know, that’s a much bigger focus point, but it’s, it comes in fits and starts and so all along. I’ve been doing that but it’s not a full time thing. It’s more of a it’s more of a part time. I don’t like to use the word passive but like, it’s not a it’s not I don’t focus on it every day. So at the time, I sold the veterinary business I was doing so and consulting, business coaching for a couple of different companies. And then I really started into this path for myself and created a ton of space, you know, personally, so I wasn’t, I didn’t have a business that I was running, the real estate was there to, you know, that was, you know, providing income, things like that. But I just decided I want to get, I want to get in touch with myself and what’s really driving me because I’m moving into the second half of my life. And I want to do the second half differently than I did the first and I want to be coming from an authentic place of what, you know, what drives me. And so that was in 2018 19. And then for the next several years, I did a whole series of different experiments, I would say,

Erwin  40:48 

this is like your full time gig. Now I was working on yourself. It was and

Greg  40:51 

again, I was doing some some some coaching consulting, I got involved actually be like, because psychedelics and plant medicine became such a powerful force in my life. And I saw the the healing possibilities and the power, the extraordinary abilities that could bring, I actually co founded a psychedelic company in 2020. And that became sort of a full time focus for, you know, the course of, you know, almost a year. And then I parted ways with my partners on that. And more recently with my, my wife, my wife is a trauma sensitive, she’s certified trauma, trauma sensitive yoga instructor. And so she’s opening a studio now in Calgary, to pin focused on on women, particularly coaching women. And so we’re opening a studio there and you know, I’m, I would say I’m looking at, it’s sort of like the second generation of coaching and consulting for me that I’m moving into that I’m doing now, which is taking all of the business acumen experience the stuff that I used to do in terms of coaching, but applying the knowledge of that underlying operating system, so that I can help an entrepreneur or an investor actually pinpoint what’s really going on, beyond just the superficial story that they’re telling themselves. And so that’s, you know, that’s what I’m doing now, and with my wife with the studio. You know, psychedelics and plant medicine are on the path to decriminalization and legalization, and what I see.

Erwin  42:32 

So here’s our guide. So I just get there, I think, I think the trauma thing even needs to be worked out even more because from, from my experience, like what you’re saying, like people, like I’m asking my mastermind for years. And again, those conversations are still very tip of the iceberg. Yeah, I see, I see people who are incredibly motivated by money and like scale, and like building building bigger, better, whatever, you know, my 2 million businesses to get to 10 million and then once I’m at 10 million need to be 30 million when I’m 30 million, it’d be 100 million. Yeah, I need all these clients and employees and whatnot. And again, like, like very tip of the iceberg stuff. But in my experience, for example, is with my my forum. For my listeners benefit, I belong to a private organization of entrepreneurs, minimum requirements, a million US and revenues. I get a lot of value, both in discussing business problems, but also a lot of introspection stuffs. And I should derive a significant amount of value more trying to under under an Earth. My my underlying issues to understand myself and what drives me. That’s why I think I think it’s a I see it myself, I see and others. So I want to spend some more time on elaborating more on trauma so that for the listeners benefit, so they can look into their own lives to understand what better drives them. And if they’re in mindmint, like is, are they truly in alignment? Yeah, like before, we’re just before we’re before we’re recording, I haven’t shared how there’s a whole bunch of people out there who started investing, argue that we’re speculating. And now they have assets, speculative assets that are now infringing on their on their freedom, wouldn’t want them to wish on anyone. But I think my point where I want to go is I want people to better understand who they are, what they’re doing. And if that’s in line with who they really are, like, for example, when we were trading emails I’m talking about like Dimitri Buterin, whose journey Russia is similar to yours. When he exited his third business. It’s when he went full work full time work on himself. Yeah, yeah. Do you know what?

Erwin  44:46 

Yeah, demons. Demons are very good friend of

Erwin  44:48 

mine. Right. Yeah. Right. Yeah. So your journeys are very similar.

Greg  44:53 

Yeah, I mean, I just to be honest, I would say that I mean, that’s a huge compliment to me because Diem is such an extraordinary human being. He’s very Be wise, obviously very successful. And I didn’t, you know, give birth to a child that, you know, co invented the the cryptocurrency industry. But you know Dima is amazing. And yeah, he just decided that self realization and self actualization was his life purpose. And so if I

Erwin  45:20 

wait until, until like, I’m not sure age, but I think he’s closer to high 40s, or closer to 50, or something like that. But my point is, people shouldn’t wait that long to take action.

Greg  45:32 

If if there was one thing that I could do go back in time and talk to my 25 or 30 year old self, it would be to go back and start this journey. Back then, rather than waiting until sort of a crisis of an existential crisis happened, where, you know, I was divorced, and I sold my business wasn’t sure what I was doing next, and just felt completely lost in the world. And yeah, I think the trauma is a, it’s really interesting, because I mean, for me growing up, and even I can remember being on stage, and I would tell stories of my childhood, and you know, like, kind of the backstory and origin story and all that. And I would gloss over my child. And I would basically say, you know, I had a fantastic childhood, my parents been married, like their high school sweethearts, amazing parents would give the shirt off their back. Nobody ever hit me, I was never abused, I had a great child. In fact, it was like, you know, it was pretty boring childhood, because there’s nothing really traumatic ever happened to me. And it’s crazy, because it was so boring that I don’t even remember most of my childhood. And I remember thinking that like, I normalized that, that that was normal, that I couldn’t remember my childhood. Because it was just there was nothing to remember. And anybody that has gaps in their memory of legs, for example, you know, I mean, a lot of people now when we talk about this, and they’ll say, Yeah, I don’t remember anything before I was about 10 years old. Or I don’t remember anything like, in elementary school, I remember, like, you know, when I was four and five years old, and then I don’t remember anything in elementary school, and then Junior High starts, and then I can remember them again. And people just write that off to I guess, there was nothing to remember. And really what it is that what I’ve come to learn is that gaps in memory of experience of things like that, especially childhood, those are, that’s a classic marker of trauma. And so what’s typically happening is if you go back in time, and you look what’s going on, as a small child, something was going on that was causing you so much pain, that your ego or your protective self, I mean, egos a terrible word that we get thrown around. Because we think of ego as conceit and like being better than other people or arrogant ego really is a better way to explain it is protective. So you have this part of your psyche that is designed to keep you alive. It’s that simple. That’s your protective self. And your protective self. Its job is to keep you away from the things that it’s afraid or you’re going better, it could kill you that you can’t take. So when you’re a small child, and you go through an unbearable experience that as a small child is so painful, typically what happens is your protective self will essentially exile that memory and create a blind spot, so you can’t even remember it consciously. And I know this from personal experience, because when I started doing, you know, I did a lot of therapy, I was going to, you know, psychologists and things like that. And it was like, you know, talk therapy traditional. And it was, you know, I would start to uncover a few little things here and there. But it wasn’t until I actually started doing psychedelic assisted therapy where these huge awakenings or realizations came to be and it’s because your psyche is so brilliant at hiding them from you, because at the time, you as a small child cannot, you don’t know how to deal with the pain. It’s so unbearable. And so for example, if you’re in a situation where you’re five years old, and your your mother says something to you, that makes you feel like they don’t love you. Well, they are you’re basically their, their God in your eyes in that moment, right? And if they don’t love you, or you internalize that is there’s something wrong with you. Right, it might just be that your mum was in a bad mood in the at the moment and you were in a really vulnerable state and you reached out for compassion and for a hug and for love and your mum was on the phone and she’s in she’s just said Just shut up. Just leave me alone for a minute. I’ll be off in a minute. Just something as simple as that. that, that four or five year old child could internalize that to mean that they’re not lovable. Because their mother doesn’t love them. And that’s all it would take. And then that can start the seed of a very, very difficult journey. I mean, I know it sounds crazy, because the problem is most people think of trauma, as these big, difficult, horrible things that happened to us these overt things. So for example, being abused or molested or witnessing a horrible violence, or being in a war, or those kinds of things, right, the loss of a parent when you’re a child. And those are all, you know, obviously, very traumatic experiences. But I call those overt experiences or trauma experiences. But there’s a second part, because you can look at trauma in two ways. One is trauma is bad things that shouldn’t happen to you. So those are the things we just talked about, right? Like rape, and molestation, and abuse and violence and all of these things abandonment. But there’s a second way to look at trauma. And that is, trauma is also good things that didn’t happen to you. So there was a void of things that needed to happen in order for you to have a healthy relationship with yourself or with your parents or with the outside world. And when those things don’t happen, those traumas can be just as disastrous as being, you know, raped or going through violence or the loss of a loved one when you’re a child. And that’s hard as

Erwin  51:41 

parents don’t hook their kids.

Greg  51:46 

But again, to like to put a point on it, or when like, You’re laughing about it, like it’s no big deal. Like it’s a joke, right? It’s a stereotype of Asian families. There’s a lot of Asians that grow up, that are debilitated by that very thing. And you know, not to get too serious about it. But a lot of people laugh at away or joke about it, because it’s just all it’s, what’s the big deal. I mean, my mom didn’t hug me. Who cares, really, that the problem is, that’s the adult looking back and using as an adult. Today, I have the ability to know that my mom didn’t hug me it’s not because she didn’t love me, it’s just because that’s just that was her upbringing. We normalize it, we have excuses to make for it, when we’re adults. But the problem is, when you’re a child, you don’t you don’t understand any of that. And when you start peeling the layers back of these things that happen to us, and sometimes we’re aware of them, and most of the time we’re not, you start to realize the depth at which they cut, and how in how embedded they really are. And so, I mean, I can remember, as an example, I was I did a a journey with IDI died. I mean, I’ve psychedelics in plant medicine is something that I explored a lot. And I’m, you know, I’ve actually become now like, I’m certified as a psychedelic facilitator, and transformation coach. And the reason is because I’ve gone through the experiences, and I have unlocked so many parts of my life that explain why I was. So for example, I can remember, one of my experiences was I was doing, it’s called San Pedro or watch Houma. And it’s mescaline. And I can remember going through the experience. And it was the first time that I realized that as a child, I never felt safe. And I couldn’t even explain where that came from. But I got it I got in contact with that emotion, which which was in me, which was in my body. And that made me then start to ask questions. Well, why is that? I had another experience. What am I Alaska journeys, and I was taken aback, too. So this is, this will maybe give you a good example of what I’m talking about. So when I was about eight years old, a friend of mine, one of my best friends on the street, we were at his house in the basement, and we were playing this game. And I mean, it’s, it’s like the kind of stupid thing that you would see on tick tock now, and maybe they even do it, but we, we called it the pass out game. And all it was is basically hyperventilating. And so what you would do is, one friend would stand in front of the other, the friend standing in the front, and the other one would be behind them, they would start breathing in and out as fast as they could, as deep as they could. And then at one point they would breathe in and the friend behind would bear hug them from behind and hold on to them as hard as they could. And the friend in the front would pass out. Right it’s hyperventilation is really not anything. But for kids. It’s like this weird like this. And sub somehow this game had like, been passed from Kid to Kid to Kid. And like, even today, I talked to people that are like, oh, yeah, I did that when I was little too we call it this or that. Anyway, so this experience for me, I’m standing in my friend’s basement, and I pass out. He lets me go, I fall forward, because I’m literally passed out on my feet, I fall face forward, smash my face into the unfinished concrete floor in his basement. And I’ve always known this story, because of course, I ended up having to go through a whole series of dental appointments. And even today, I’ve got implants in the front leg, my bottom two of my bottom teeth, because they broke out, they snapped off halfway up. So the roots were exposed. I mean, it was a tremendously painful thing for an eight year old to go through and then going going to orthodontics and all this stuff. Now, intellectually, I’ve always known that story. I’ve always known that I did this and broke my teeth and everything, but I’ve always intellectualize the experience. I’ve never really understood what it meant to me. So now, this is a few years ago, I’m in an Ayahuasca experience. And I drink, and I go in the, you know, the medicine sort of comes on. And I’m transported back. And if you’ve never done medicine, and this maybe sounds a little bit crazy how it works, like with time, travel, everything, but I’m literally like, taken back to when I’m eight years old. And I can see myself in my iOS experience, I can see myself standing there with my friend on the ground, and I’m sort of up on this on the ceiling, like kind of a third eye watching this experience. And I watched myself as an eight year old pass out, fall forward, smash my face, I see my friend run upstairs, because he goes to get his mother as a sister, I can remember who was home. And I’m watching myself, and I’m feeling the feelings that I had an eight year old, but in my sort of adult experience, and I watched myself wake up after you know, 30 seconds, and there’s a big pool of blood around my head. And so I wake up, I’ve got blood dripping off me. I look around, I’m disoriented. I’m in excruciating pain. It’s an unfinished basement with like concrete floors, and you know, those like burgundy posts that hold up the foundation? And oh, you know, in basement suites,

Erwin  57:28 

we have them here on basements. Yeah,

Greg  57:30 

I mean, I look around, and I don’t know where I am. And it’s this, like, dark. There’s like a couple of windows with a little bit of light. And I’m all by myself. And I look around, and the pain that I experienced is just unbelievable. And in that moment, I look around, and I create two stories in my head as an eight year old. Number one is, I am not safe in this world. I’m not safe. And the second one was, I can’t trust anybody, because I look around and there’s no one there to help me. And so when this experience sort of played through my third eye, in ayahuasca, I came back out, and it was like, Oh, my God. That’s why. And then I could start to connect the dots of why all these things in my life. were true, and why I told certain stories to myself about the way the way the world was. And so trust became a huge issue for me, in my life, trusting other people. And again, I would sort of then also connect that dot. And I’m not saying that everybody has this kind of experience that leads to being an entrepreneur and wanting freedom to be their number one value. But now it becomes obvious why I didn’t want to have to rely on anybody else in my life. It’s because I couldn’t because I didn’t trust anybody. And I can’t rely on anybody else. So you can imagine the impact if you’re eight years old, if that becomes your truth. And that became my truth. In that moment, you can imagine how that informs all the decisions and the journey through the rest of your life. And so that happened to me, and I came out of it. And that took a lot of integration for me because it was like, everything that I believed about why I did things was untrue. And I always thought it was for the good things because I want to, you know, I want to build a big business and I want to do this and I want to do that I want to give back and I wanted to do that. And you know, I realized that really wasn’t what was driving me. And it was this. It was this fear. And I think at the end of the day, that’s one of the things that’s one of the mantras that I use all the time in my own mind that I’m talking to them when I’m talking to myself. The mantra is for I love not fear. Because what I find and again, we can we can apply this to almost every, you know, category, especially when you look at government, politicians, things like that. But celebrities, I mean, it doesn’t matter who you’re looking at. But most of the worlds they in most decisions that people are making, you’re coming from a place of fear, and not love. In other words, they’re afraid that they’re going to be judged, they’re afraid, they’re not going to have enough. They’re afraid that they’re irrelevant. They’re afraid that they’re not going to be seen as a success. And that sort of journey. And this was that journey was probably four years ago, that started to change the way that I saw the decisions that I made to start becoming aware of when am I coming out of fear, as opposed to love? So am I doing this because I’m trying to impress somebody? Or am I am I doing this? Because I’m actually terrified that I’m, you know, that there’s going to be some consequence if I don’t? Or is it coming from a true sense of love, love for myself love for the people in my life, and love for the community at large. And so that’s kind of that’s a really good sort of example of how these things happen in our lives, and we grow up. And we have no idea how important or how impactful that experience might have been. And so what plant medicine and psychedelics tend to do, and there’s obviously there’s research out

Erwin  1:01:28 

there, out there. Yeah. Yeah. Two questions, and they really, they are the same thing. Knowing what you know, now, what would you have done differently? Or the question to be What are you teaching Cooper about this? What are you teaching your 15 year old son about this?

Unknown Speaker  1:01:46 

So two questions. So what would I? What would I have done about that experience?

Erwin  1:01:52 

There’s no knowing what you know. Now, having gone through that four years ago, like well discovered that four years ago, how would that change your 25 year old, your 3030 year old self?

Greg  1:02:03 

I think for one thing I would have uncovered, I hopefully would have uncovered that truth, much earlier in my life. Like, for example, if you when you’re eight years old, and you learn the lesson that whatever lesson, it could be that somebody learns, right? That

Erwin  1:02:25 

that’d be mortified. That was my son. Like, that’s what the world was?

Greg  1:02:30 

Well, let’s see. And to put a point on that, too, is none of this was my parents fault. No, it wasn’t right. And so I don’t blame my parents. But at the same time, most of us want to be Allegiant and loyal to our parents. So we don’t want to look at it and say, What did our parents do that contributed to where I am today? Right. And that’s, that’s a big sort of entanglement that people get in this work. But if I went back, like, if you let’s say that, like, you’re, you’re a woman, and you watch your mother get get separated and divorced, and then she starts dating a series of violent men. Terrible, you, you could quite easily develop the truth that men are bad, right? Well, if you go through the rest of your life as a woman, believing in your heart, that men are bad, but you don’t know that that’s the story that you’re telling yourself, you can imagine that you know how that’s going to impact your life. But if that woman waits until they’re 50, or 60, and then uncovers that truth, well, they can then start to change the path they take going forward. But if they would have done the work when they were 25. And were able to uncover and unwind some of these truths that they learned, well imagine how much different their life would look. So that’s I’m sort of answering the question that if I was 25, and I was doing this work, I probably would have uncovered a lot of these stories much earlier, which would have allowed me to make much more authentic decisions to who I truly am, as opposed to being driven in fear. So in terms of what I tell my son, Cooper, he’s aware of everything that I do. He knows, like, if I go to an Ayahuasca ceremony, he knows where I’m going. We have very open conversations. I mean, Cooper, and I have a very good relationship, I believe. And there’s not much that he won’t talk to me about. And we’ve had the conversation about, you know, drugs and medicine and psychedelics and plant medicine, all that. And he knows that if he ever has any questions, he can come to me and I’ll be honest with him, I’m never going to prohibit anything. I’m never going to tell him don’t you do that? Because, you know, you tell a teenager that all that does is fuels their interest in curiosity, and, and my goal with him is to try to educate them as he wants to be educated. You know, I don’t sit him down and like run lectures on plant medicine and psychedelics and stuff but what I have taught him, I think the most important thing that I’ve taught him has it as a child growing up is of how important it is to just be yourself. And it’s going to be difficult to do that, especially as you get into your teen years is to is to basically just walk your own path. Don’t do it for other people. But Cooper’s, that’s what he does. And he struggles sometimes with that, because sometimes friends turn away from him because he’s not willing to cave in to peer pressure and things like that. But I’m super proud of him for doing that. And, you know, years ago there i another vision that I had was kind of this parable of the difference between an owl and a fox, and we don’t have time to go into it. I’ll tell it told that to another day. But really what it comes down to is, are we all have an inner owl? And the owl like, what, what question does the owl ask? Right? Yeah. And this is, I mean, it’s a kid story. But the owl is always asking who? And so it’s a way of thinking that your inner owl is always asking yourself, Who are you going to be? Are you going to be yourself? Or are you going to be accepted? Because that’s the fundamental decision that children start to learn, they have to make from very small in childhood, because they start having to do with their parents as well. They want to be accepted. So they say things or do things they don’t really feel like are who they are, but they do it to be accepted, rather than to be themselves. And as a parent, the more that you can give your child, the container and the space to be themselves as opposed to doing the thing that gets them accepted. You’re putting that child on a very healthy path as they grow up. Because in this in today’s society, it’s very difficult to be who you truly are, and not worry about being accepted. And most of us go through 2030 4050 years of life, working to be accepted, only to come to a point where I realized what the hell am I doing. And that’s typically called a midlife crisis, or an awakening, or whatever you want to call. And it’s crazy, because we spent 40 years going through our life. And then we spend the next 40 years trying to like, unwind all the things we’ve been doing for the first 40 years. And so, you know, that’s what I would do is go back to my 25 year old self and try to, and try to instill the lessons in the work to be who you are, as opposed to doing it for external reasons. And that’s, that’s kind of like one of the paradoxes of life is that most of us are doing things, the purpose for which is outside of us, you know, as much as we tell ourselves a story, oh, I’m doing this for me. And it’s really what I want. Nobody’s building a 30 or 50, or 100 million dollar business for themselves. Like that’s, I mean, that’s just ridiculous. You don’t need a $50 million business to be, you know, to be at peace with yourself. So anytime you’re looking outside of yourself, for something that’s in itself, an indicator that, you know, there’s some work to be done there.

Erwin  1:08:08 

This is fascinating shit. The listeners enjoying this as much as so let’s get into let’s get into the medicine. Now, one thing I want folks to understand is that, like, for example, I follow them Tim Ferriss stuff, and he’s been talking about this stuff for a long time, but also, the, but you always talked about micro dosing, because there’s a difference between abuse of substances and micro dosing, probably a fraction of a small usage for actual medicinal purposes. Can you elaborate on that just again, so we can educate the audience?

Greg  1:08:42 

Yeah. So very, very briefly. So first of all, you’ll hear me you won’t hear me talk about these as drugs, I will only refer to them as medicine because that’s just the language. That’s my, that’s my perspective of it. Really, the difference to me, between drugs and medicine is intention. Intention is a very important part of anytime you start to go down this path, looking at whether it’s micro dosing or macro dosing, whether it’s psychedelics, or whatever it is, it’s all about intention. And when you look back in the history, back then it goes back into the 50s and 60s of research going into using MDMA, LSD, magic mushrooms, for therapeutic, beneficial reasons. So for example, in the 50s, in Saskatchewan, they were doing research on curing alcoholism, using psychedelics in the 50s. And the 60s came and everybody knows what the 60s was all about, right? Like free love and make love not war. And it was all like the it was the renaissance of the hippies and psychedelics were became a huge component of society, and the government at the time realized they were losing control of society because Nixon tried to send a whole bunch of young kids to Vietnam. And a lot of them basically said no. And they didn’t like that. So that was one of the reasons that Nixon declared war on drugs. And it’s been a horrific experiment, failed experiment. I mean, the War on Drugs has created a massive incarceration problem, disproportionately against minorities, and indigenous people. I mean, that’s a whole nother conversation. But the point is, they shut down all the research that was going on with these medicines. And only recently has the government started to open the door here in there with possibility. And there’s now a ton of real like, it’s a boatload of research now that shows that these medicines when they’re used with proper intention, in the right container, and with the right integration after that, the results that they have for anxiety, PTSD, depression, pain management, even OCD, eating disorders, suicidal ideation, these medicines are having not just incrementally better results, but like multiples. So for example, one of the most recent studies that PTSD study with MDMA that maps is working on right now clinical trial, long story short, they did these, these were treatment resistant PTSD, victims, they basically tried everything else, and they could not get away from PTSD, they, you know, suicidal ideation, everything else, they went through the clinical trial. And a year later, 69% of them were cured. Now, they don’t like using the word cured. But basically, they had no markers for PTSD 69% of them a year later. Now, you look at this positional treatments, the traditional treatments, or are going to be in the 10 to 20 30% range, maybe. Meanwhile, a whole bunch of those people would have sadly, committed suicide, but you know, within a year later, so the point is, I’m trying to draw attention to the fact that this, this isn’t just about taking drugs and feeling good and having fun, right, there’s this is going to be I think, this 10 years from now we’re going to look back, psychedelics are going to become one of the staples in the mental health fight to all of the conditions that we’ve got, you know, the second, this, this, the psychological world hasn’t really changed in 40 or 50 years. And how many people do you know that are on SSRIs, and antidepressants, it really doesn’t help for the most part, it might make make life a little more manageable. But there’s so many side effects. Now we’re seeing case after case now where somebody does psychedelics in the right context and setting and they have one or two treatments, and their depression is gone. And science is having a hard time explaining it. So in terms of like, psychedelics, for the rest of us, psychedelics, the word itself, is it comes from it was the name, the name comes from it, what it what it means is manifesting the mind. And really what it means is starting to uncover what’s unseen, in your, in your mind or in your psyche. So back to your question about psychedelics and micro dosing and stuff like that. Micro dosing, the theory is taking a very, very small dose, which is typically between 1/10 and 1/20. Of what would be called a macro dose. So a macro dose would be like, if you were to take mushrooms, for example, a macro dose means that you’re taking enough that your vision is affected, your thoughts are like it’s you perceive like things are different.

Erwin  1:13:48 

You’re high.

Greg  1:13:50 

You’re high. Yeah, that’s that’s how you you’re in an altered state. A micro dose is taking a substantially like an infinitely small amount of that. So like, let’s say, if you’re taking three grams of mushrooms as a macro dose, then that would be 150 milligrams of four micro dose. And the idea of of microdose is that you shouldn’t actually perceive that you’re that it’s there. Like, they call it sub perceptual. But, but what they’re finding is, and again, there’s various studies on this, and there’s some people are saying microdose is placebo. But I know personally, and from my experience, and a lot of people that I know that micro dosing, certain medicine, certain medicines, can help alleviate things like anxiety, depression, negative thoughts, sleep problems, you know, sleep issues, things like that. So there’s micro dosing, and then there’s macro dosing, and there are two very different sort of things. And you can do it with different kinds of medicines. Most people like I think that become curious about psychedelics, they start with micro dosing because it’s, it’s, it’s a lot more accessible so quickly. sample, when you’re microdosing, you can drive a vehicle you can go to work, you can do interviews, you can go on sales calls, like nobody’s gonna really notice that you’re it because you’re not high. There’s, it’s it doesn’t affect, it doesn’t impair your judgment or your abilities. But what’s interesting is during the day of it, you won’t really notice anything. But the next day, this is where the power is, if you look back at the day before, and you look at some of the interactions and things you did, you can start to realize that wow, you know, I ran into that neighbor of mine, who I can’t stand, they always drive me crazy. And somehow, like, they didn’t bug me yesterday. That’s really weird. And when you start to realize it, you notice that the micro dosing is having an influence on you. But it’s not a perceptual one. But But what typically happens with the medicines is they make you more compassionate, they make you more aware, they make you more grounded. And so they have these positive implications. And again, it’s different for everybody. Some people will try micro dosing with, let’s say mushrooms, and they don’t really feel anything, they don’t notice any changes. And you can, you can play with the dosage in that you took the most common things to microdose are mushrooms and LSD. Some people might microdose other things like some people microdose, Ayahuasca or mescaline or other things as well. But mushrooms and LSD are the two most common ones. I know a lot of people, for example, that use LSD, and they’ll use it in very small doses. There are studies now showing that if you use a small dose of LSD, and we’re talking about, you know, maybe 20 3040 micrograms, which is, which is very, very, very small amount of medicine, that it can really expand your creativity and innovation. So I’m working on a project right now with an associate of mine, of offering a program to executives, at high level companies, that are a bit that’s based on creativity, innovation. And this is one of the tools that we’re looking at utilizing, because what it does is it opens up the channels in your mind, it tends to break the patterns that you have the way you think. And it connects new synapses in your mind. And neuroplasticity is a real thing, right? And they’ve shown that when you when you undertake, let’s say like a, like a full journey of of mushrooms. There’s rewiring that actually happens inside your brain and like different different threads are now being connected that weren’t otherwise connected. So you can see things differently. You can think of things differently. So I don’t know if that answered your question. But I mean, this in itself could be a, you know, another conversation. But what I would say the fundamental is psychedelics are becoming now mainstream. It’s why you’re reading about them all the time. It’s why we’re on the cusp of legalization in the US we’re expecting next year, MDMA and LSD, MDMA and psilocybin are going to be decriminalized and legalized to the point that psychiatrists and psychologists will be able to start implementing them into therapy. And that’s why we’re seeing this massive wave is because the science is saying and proving how powerful these things are. And so to bring it back to entrepreneurs, and investors and things like that, the fact that entrepreneurs tend to have my thesis and again, this is something that I observed in a lot of my clients. My thesis is that entrepreneurs have a disproportionate amount of trauma in their past than the average person. And in part, for reasons we talked about before, that’s why they became an entrepreneur. And that’s one of the reasons is because they wanted to break away from feeling like they were under control, or that they had to rely on other people. That’s why people that become entrepreneurs typically get stuck. They can’t get past that point of being the technician in their business. But they are more comforted by the fact that at least that way, they’re not relying on other people. And so, for entrepreneurs and investors, if that’s true, that there’s trauma, there’s things that are holding them back, or that are causing them to make decisions that may not be the healthy decisions. That’s why looking at understanding psychedelics, and plant medicine, as maybe a tool to consider can be a very, very powerful thought. And again, I’m not I also want to put it make it clear, I don’t see psychedelics as a magic pill. Like it’s not like you take the pill, it fixes your problems and you move on. But what it does is it it sort of pulls the veil back and allows you to see the stuff that you’ve never been able to consciously see before. And then the work starts, that’s when you can decide, okay, well, I’m going to investigate this belief that I have, figure out where it came from. See if it’s true, and maybe I can install a new thought or a new belief and And that’s been the story of the last five years of my life is doing these very things. And all I can tell you is is I mean, a lot of people that know me from 510 years ago, and I sit down with them, I haven’t seen them. And they’re like, man, you’re so different. Now what happened? It’s like, well, I don’t really anything different. I’m just more of who I am now. That’s, that’s how I feel.

Erwin  1:20:20 

Greg, I think that’s a great place to leave it. Over time, thank you so much for being generous with your time. Now, I’m not a doctor. I don’t know if if you if you, you can, you know, I always feel like I have disclaimer, everything. But I’m not a doctor. This is not medical advice from me. Where can people learn more about this?

Greg  1:20:40 

Yeah, and I’m not a doctor, either. I mean, I’ve done a lot of work I’ve done I’ve done a lot of training and things like that. But at the end of the day, you know, medical, and this is something you know, that I’ll mentioned very briefly, like if somebody is on antidepressants, or they have, you know, a family history of psychosis and things, there’s, there’s a lot of counter indications that mean, you should not pursue this. But becoming educated, educated is really the first first start. So, I mean, if anybody is interested in learning more, I mean, I’ve got a couple of things, I wrote an overview of micro dosing and like, what is it? Why would you do it? What are the benefits? What are the risks, that kind of thing. It’s just a free download, if somebody wants to learn about micro dosing, and then I also wrote a PDF, and it’s called psychedelics for the rest of us. And this isn’t for people that want to be journeying to Peru, every two months, and going on a on a, you know, 14 day deatta in the jungle, but it’s for the people that were trying to live actualized fun, healthy, productive lives. Is there a place for psychedelics in that world, and I know, I believe for some people there are. So that’s another download, it’s a little bit more generalized, it talks about psychedelics, a bit of the history, the different kinds of medicines, some of the risks and all that but it’s basically it’s intended to be a primer of is psychedelics, something that I should start paying a little more attention to. And, you know, people can download that from my website, the website is the company is the name is alignment.com. So it’s kind of a combination of alignment, and light. And really, what it comes down to, is, when you become aligned with who you truly are, that’s when you can allow your brilliance to really shine from within. And so that’s what my coaching consulting company does now. So it’s called a light mint. So a li ght m en t.com. And you can start start the journey there. There’s resources there. And I’m gonna be starting, I’m gonna be doing a podcast, this fall sort of on some of these topics, because I get so many questions about I’ll get you on there. And then we can talk about your

Erwin  1:22:59 

baby, I can do a Laker dose journey before I before I come on. And for my listeners benefit understand, I think there’s about three at least 300 companies that are pursuing this all in just Canada alone. The yeah, there’s just no one no one really talks about no one hears about it, but I have friends in the industry. And there’s a ton of investment going into this. Just again, you know, just because of the times now, not a lot of people talking about it with the, with the way the economy is, but yeah, they’re there as well.

Greg  1:23:26 

In 2020, and 21, there was an explosion of money that went into psychedelics, partly because people saw it as cannabis 2.0. And if you missed cannabis, this is your second chance. It doesn’t work out that way. So it’s been a tough place for the capital markets for psychedelic companies, a lot of psychedelic companies have gone broke, because they’re having a harder time figuring out how are we going to monetize this thing. And I don’t necessarily think that’s a bad thing, because I don’t really see, you know, these medicines, largely, especially if you look at like iOS, or mushrooms or or peyote, mescaline, these have been used by indigenous cultures for hundreds or 1000s of years. And some of these companies are trying to figure out, well, how do we extract this molecule, that molecule to make a better molecule, and then we can patent it and sell it? I’m not sure that that’s the right path for this space for the medicine because, you know, my belief is we don’t need to improve on the medicine. That’s just a typical human Western civilization construct of how do we take something magical, and make it better?

Erwin  1:24:29 

And then capitalize on? Yeah,

Greg  1:24:32 

1. But yeah, and I was involved in that space, because, you know, we founded a company we got we got some financing from a public company. And so I went down that path and learned a lot about it. But yeah, I mean, anybody that’s interested in hearing more about my story, or whatever, or learning more about what we’re talking about microdosing just go to the site and get on the list and, you know, I’ll send you sort of education every now and then I don’t sell a lot of stuff. That’s not my thinking. More so I just love talking about this because it’s it’s changed who I am. It’s allowed me to live a lot more healthy, aligned whole life, and I’ve watched it do the same for so many people that I love. And so I just love kind of spreading the message.

Erwin  1:25:17 

I like mint.com Greg Simon, thank you so much for doing this. I thought this was Thank you. I hope the listeners enjoy

 

 

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**Transcripts are auto-generated.

 

Erwin  

Hello everyone, welcome to the truth about real estate investing show. My name is Erwin Szeto host and producer and whatever else there is to the show. I am a full time realtor Of The Year Two investors than investing since 2005. done alright, we have a large number of successful clients that we have over 350 clients, we’ve helped them amass somewhere around $280 million worth of real estate. And among our clientele, we have about over 45 self made millionaire real estate investor clients. So those are investments that excludes their principal residences. We have a special treat for you today in my new friend Bruce Firestone. He’s a second generation commercial real estate investor developer. He’s very successful and extremely experienced. He’s built 1000s of homes, dozens of office buildings and shopping plazas. Bruce is best known for the founding of Ottawa as NHL franchise the Ottawa Senators are mortal enemies of Toronto fans were mortal enemies with everyone who’s who was more successful than us. Yeah, whatever.

 

Erwin  

He had to build their arena as well. He’s former chairman and part owner of the CFL Ottawa now call the RedBlacks. They were called the Roughriders. Back then, which was kind of weird because we had two teams out of like nine teams that were all called Rough Riders. He’s kind of a legend in the Ottawa community. He’s even a member of Ottawa, US Sports Hall of Fame. Before we get to Bruce, what a fascinating real estate market to be a part of, it really depends on people’s situation, if they bought right if they hold that have a lot of cash. You know, it really depends on what situation they’re in, quick update the entry level vacant or owner occupied properties. They make up the bulk of transactions these days. I think I mentioned last week visiting a friend of mine, there across the street neighbour that request trust scrubbing. This was in Georgetown, Ontario. So that’s north Milton. Think exactly part of the GTA anyways, they’re across the street from them, was asking 1.6 million for a four bedroom house backing onto Metro space, and it’s sold for 1.7 million. So it’s over $100,000 over mark over asking in 30 days, so there’s still a lot of business going on. So it’s not dead for everyone. tenanted properties these days are scaring away buyers. I’m hearing all this all of this from my own team. And I reached out to my old school investor specialists realtor friends in Barrie, Oshawa in downtown Toronto, everyone’s basically having the same experience that we are here. Now in real estate. Every day buyer investors are taking the summer off. Investor sellers, there’s more of them than ever, even of quality turnkey properties. But if they are tenanted they’re likely sitting for now, unless they’re priced appropriately, let’s do the best deal out there. They’re like they’re sitting. The market changes quickly though. And also I’m talking about like, I’m recording this August 18. Right, we’re in the middle of the summer, interest rates are high. So I like to get higher pitch on that in the second. Half the market changes quickly. And I’m anticipating a busy September October, as investors returned from vacation, they’re gonna see all the great deals available. sellers who can’t afford to hang on, they’re gonna be selling, but much depends on what the Bank of Canada does. The bond market anticipates right now, based on what the bond market’s doing, they’re anticipating a 29% chance that rates will be higher by point two 5% in September, and a 71% chance that the overnight interest rate by the Bank of Canada will be higher in December. So it’s either going to come in September, or it’s gonna come in December or a month after that. But the market overall does expect there to be rates to be higher 25% higher than it is today. And then after that, that that should be the peak based on the bond markets doing those already. Many are already feeling the pain. And they’ll feel even more as rates go up. But expect the rhetoric from the Bank of Canada to pivot as they’ll start saying, like, we’re now expecting the pause. And they may even start alluding to the eventual rate cut, which we’re just right now expected to be late 2024. And then once that happens, once the rhetoric changes, and you’ll see more buyers into the market, I’ve had conversations with some of our listing clients. Listing clients means like their clients who have properties listed for sale, the conversations are all around. But if their plan is to sell then really needs to happen this fall, it has happened September or October, or else there’s a chance that they’re holding that property to the spring. So, you know, Terry and I are holding all of our rental properties. So we can hold this whether or not other people can hold. The nice part about my clients properties is that they’re all houses, as in house. It’s not a condo, and they’re on land. They’re not up in the sky. They’re on land, as they are typically rented somewhere between 3000 to $4,400 a month somewhere plus utilities, so they generate significantly more rent than say a single family home would or let alone a condo And that really helps cash flow and weathering the storm. On the flip side, for those who were of the more preconstruction persuasion is just brutal out there, prices are down 20% or more depending on where depending on what some buyers are fire selling, giving up their deposits, which can be 15 to 20% or lower in returning the units to the builder for giving up in forgoing also the deposit which can be 15 20%. The builders then in turn, can go sell that property to the open market. I literally have a friend that mentioned that shared it with me the other day. That’s exactly what they did. They they bought a property directly from the builder for truly much what the buyer while the previous buyer walked away from less about 20%. So yeah, so this is really bad news for anyone who’s trying to sell via the assignment market. As FYI, they are competing with the builder. And it’s it’s already bad enough to be competing with the number of assignment sellers out there. investing in real estate is tough enough when researched and done professionally with skill and sufficient capital. But when folks skip steps or they’re not educated properly, they take their eye off cashflow, and speculate that words worked for a really long time, like since the like early 90s. But not in today’s market. Many of you invested in single family homes between the years 2020 and 2022. Are they’re really hurting if they never properly researched what what the highest and best use strategies were or how to actually like find ROI and balancing cashflow and markets that are more affordable, where you actually can find cashflow using strategies that cashflow. Well, they’re feeling the pain right now, what’s sad is that many of them made mistakes. Unfortunately, they got really bad advice from watching television or false influencers and condo salespeople, you know, follow salespeople that are doing their job, their job is to sell condos, you have to understand what their motivations are. And there’s a lot no novice coaches out there. I think it’s difficult to call yourself a real estate coach when you have like less than two years experience as an investor yourself and having no previous coaching client experience. Anyways, I hope for you and my 17 listeners, that you’re getting educated and networking with actual successful real estate investors. So if you’re looking for great quality and great value, I am biassed, obviously. But our online, I run meetings in our in person inside the property, our mastermind tours are simply outstanding. That’s the feedback we continue to get. That’s why they all have their all traffic quite heavily. We get hundreds of people register for our island mastermind, are in meetings, which are all online. And our in person tours, they all sell out there we sell out at our Tuesday, September 19 meeting, which is a virtual IP meeting, my team and I will be sharing the latest in the market. From a high level like a macro economic level and also at a street level update with sale prices for specifically two properties that we that we target for investment purposes, what kind of renovation budgets, we’re seeing the rents that we’re getting, and also, of course, the best neighbourhoods to invest in. And these just happen to be when we get all this client from information from working with our clients. Plus, we have a special guest and one of the larger developers in Ontario, cherry and I invest in their projects directly. And we’ve been provided exceptional passive returns. So you don’t want to miss this. The following Saturday, September 23, we will be hosting the island mastermind tour in the Niagara region. Niagara region, in my opinion has big upside thanks to the recent correction, new investment in a hospital that’s supposed to open up pretty soon, I think. And the government there currently is not investor friendly. But when they do pivot as they’ll need to do can because we’re currently in a housing crisis. I’m willing to bet that we’re going to have different leadership at the federal level in probably about two years time. And so you’ll see a lot more pressure coming from higher levels of governments on municipalities to be more investor friendly. Because, yeah, we’re in in a housing crisis. So allow the private market to do something about it. And when they do, when they do pivot, you’ll see a whole flood of investment. But as a sophisticated investor should do, you should get ahead of the rush. At least get ahead on the education part, not do what everyone else is doing. If you wanted to do what everyone else was doing, maybe buying pre construction condos and mutual funds and not getting rich. To register. If you’re receiving my emails, you are good to go. You will be informed of when we have events when we announce new podcast episodes when we have new deals available. If you’re not receiving my emails, then you’re missing out on over what 10,000 plus of the eye winningest investors are doing out there in Canada because they’ll have an information advantage by being on my email list. If you would like to become to have a better information advantage simply go to www dot truth about real estate investing.ca Again, it’s www dot truth about real estate investing.ca enter name and email address on the right side and you’re good to go. Information is power. information was shared with our 45 plus something self made real estate The Millionaire investor clients is even better up to see at a future event. On a personal investing front, I’m often asked what are we currently buying during this housing market correction? The answer is sadly, nothing. We’re holding our residential rental properties. We’re happy with our portfolio the size that it is. And we’ve actually got our capital and our time and our our bandwidth kind of tied up as we bought a new business, which is an accounting practice. It’s sort of based out of Ottawa, but they actually have no physical office. The owners are located in Ottawa, all the staff and the accountants they all work virtually across Canada. We closed the deal about a month ago. Cherry is as you can imagine, really busy but the transition while I’m being that supportive husband in the background, running around and driving the kids that our camps and extracurricular activities. I’ll share more about the new business that costs us more than our house. Hence, you can appreciate why we can’t I can’t get my four Plex had loved to still be able to buy that four Plex, but when the decision came down to four Plex or buying a new business, well, you can guess who won on to this week’s show. The Ottawa Senators recently dominated the hockey headlines as has been reported they sold for around $1 billion US dollars. US dollar so sold for over a billion Canadian that’s safe to say well, Bruce and Firestone is no longer the owner of the Ottawa Senators. I’m sure he’s proud of what he started that has since ballooned into a massive financial commercial success. Imagine that the SENS had kept the future Hall of Famer defenseman Zdeno Chara, are you the fans know exactly who he is because he beat the crap out of us every time we were in the playoffs. But anyways,

 

Erwin  

if the sands have kept them, they probably would have hoisted the Stanley Cup by now and well before the leafs. But I digress. As I mentioned before, Bruce has built a 1000s of homes, dozens of commercial plazas and office buildings. For fun and to give back to the community. Bruce was the entrepreneur in residence at the University of Ottawa Business School. Telfer School of Management, prepares Wikipedia. Yeah, Bruce has a Wikipedia profile. Unlike almost all my other guests, Bruce was a university professor and as he does have his master’s in engineering and PhD in urban economics, Bruce now focuses more on coaching real estate investors today these days as he finds the work really rewarding. So he’s here today to share the journey of his own super successful career. He has some tips on how to be a successful leader or CEO, how he overcame much opposition to build an NHL arena on farmland, what his everyday investor coaching clients are doing to create extra cash flow in their portfolios. There’s one particular commercial, industrial land, co sharing garden shed workshop strategy that is particularly fascinating. understand all those words fit into one property. Pay particular part two attention to that that investment strategy that I just mentioned, as the property is actually now for sale for several millions of dollars. So yeah, from startup, blue collar investor. Now he’s going to be a multimillionaire. To connect with Bruce, you can find his information on his website, www dot Bruce M, the letter M. Bruce M. firestone.com. Please enjoy the show. Hello, Bruce, what’s keeping you busy these days?

 

Bruce  

Well, or when I’m so glad to be on your show. And I’ve heard so much about you. And when I got to know you a little bit, I realised how much you’ve accomplished in such a short period of time. These days. I’m focused mostly on coaching and consulting work. I coached about 2500 people in the States and Canada, a few overseas because mostly in the States and Canada. And I got into it about a decade ago. And I’ll tell you a little story. My dad before he passed away, everyone said, you know people should never retire. What are you gonna do sit around watch TV all day, that would be terrible. And I hate golf. So I’m not going to go. I gotta go. And so I was getting ready to retire from the University of Ottawa where I was the entrepreneur in residence, I was turning 60. And I wasn’t sure what I was going to do next. So I actually hired a life coach and she she was fantastic. I worked with her for a number of months. And towards the end of that period, she got to know me better. She said, you know, Bruce, I think he’d make a good coach. You know, you build 1000s of homes, dozens of office buildings and shopping plazas. I built an arena, you know, where they call it the Canadian Tire centre where the Ottawa Senators play, you know, I’ve got some education and background in real estate, you know, so she said, why don’t you do real estate investment and business coaching? Well, I kind of liked that idea. You know, for my third act of my life, and when I hear a good idea or whether it’s mine or not, doesn’t matter. Within a day or two, I probably had a primitive website up and I you know, I had you know, Bruce Firestone real estate investment and business coach, you know, call me if you, email me reach out If you need some help, and about 2500 people over the last decade, you know, not all one on one, but some of its one on one one on to some, you know, times groups of 2040 5060 70, that kind of number. And I’ve super, super enjoyed it. And when I got into the coaching thing or whatnot, I was wondering where I could make a contribution. You know, if you have a real estate portfolio, and you’re thinking about reducing costs somehow, I don’t know improving insulation, you know, reducing your energy costs, I wouldn’t be the right coach for that. So what I did instead was I said, I’m going to focus on the revenue side of this business, because not a whole lot has been done on the revenue side of the business, in terms of real estate anyway, in the last 30 years, or maybe longer. So I’ve been focused very heavily for a decade doing research and work and experimenting with what I call animation, not Disney Animation, but animation, which is adding new revenue streams to real estate projects, new and, and old. And it’s been a tremendous ride. And we we’ve changed cap rates, and we moved them up and we’ve changed lives. And I’ll give you a quick example, if I may, please. Yes. All right. So my wife and I own a triplex, we own some real estate and one of them is a triplex. And this young woman Her name is Maya came to see me and she wanted to rent an apartment, she was a single mom, she’s a yoga instructor, and she had one child, a lovely young woman in her mid 30s, I think, when I looked at her earnings, she was making about $42,000 a year as a yoga instructor back then. And you know, I said to her, my, it’s just not enough money, you know, half of your your earnings are gonna go in rent, you still have to pay for food, and you know, free clothing and whatever else you need for your kid. So I said, I probably can’t rent anything to you. It’s just I wouldn’t be doing you a favour. And then I thought about it for another few seconds. And I said, Oh, my God, you want to come in the backyard with me? Or something I want to show you and she she said, Sure. So we go in the backyard. And we had this about 850 square foot detached garage in the backyard. And it was quite nice. You know, it was big, it had high ceilings, it was insulated, had electricity at a heat. And I said to her that we went through it. I said, Maya, do you think you could run your own yoga studio? And she said, I don’t know. I said, you probably would make more money doing that than just working for somebody else, you know, you know what my students call A J. OB, they don’t call it a job they call a journey of the broke. And I learned that for my students. And so I said, maybe you could consider that. And then if you were making decent money, then you know, maybe you could afford to pay more rent. So what I did was we rented her the workshop, and she set up her own yoga studio, this would have been 2017. So about six years ago now. And sure enough, the next year, you know, she cleared over $100,000, which is a big change in her personal circumstances. So we rented the workshop to her and an apartment. It was a one bedroom apartment, but still. And so you know, you know, Mr. Rich Dad, Poor Dad, Robert Kiyosaki, right? He says, your houses or your apartment is a liability because it takes money out of your jeans and your job or whatever you have, you know, a duplex or whatever it might be in real estate terms is an investment because hopefully it put some money in your jeans. But if you think about it, am I had a workshop, which was the asset and she had the apartment, which is the liability, you put those two together in a live work condition. Then I said, Well, this is great. And then I guess I’ve got my real estate licence. So I’m armed a dangerous. You know, I realised you can search MLS in Canada, the United States for detached garages. So a lot of my clients that people I’m coaching now they’re looking for properties that already have or can have a detached garage in the back. And they’re doing this live work condition, which is very popular. And I don’t have to tell you or any of your listeners or viewers, there’s been an explosion in side hustles I think millions, maybe even 10s of millions of people in in the States and Canada have side hustles. And so if you can provide kind of a live work situation. That’s a powerful combination. That’s a form of animation. And it also happens to drive up our cap rate up a little bit.

 

Erwin  

To agree with you more our own clients are we’re feverishly looking for detached two car garages with a with a healthy parking pad underneath it. And because we’re converting them into apartments,

 

Bruce  

yeah, you got it then I mean, you don’t need any coaching for me.

 

Erwin  

But what’s interesting is you have like, bring decades of real estate experience on enormous scales. Like I can’t even wrap my head around building a hockey arena. meant at NHL standards.

 

Bruce  

That’s you know, it was easier than you might think. Okay, sure. Because even back then Even back then this is now 25 or 30 years ago, even back then, or when I was thinking about animation, and we did some things with the Canadian Tire centre back then was called the Palladium. But if you’ve got five or $6 million a year, we’ll change it to, you know, the Zeto arena, if you want to name it, but back then when we were designing the palladium, what we did was we wanted to really optimise the revenue potential. So we did some things that really made a difference. And I’ll give you some examples. What we did with the building was we took the Canadian Tire centre, the plating, and we put half of it in the ground. So when you walk up to the plate, and it’s more human scale, so from a architectural point of view, and from an urban form point of view, it’s kind of a little bit more human scale. But that means it’s not like Rocky, if you remember rocky running up the steps, right or at the Philadelphia spectrum back in the day, you know, where you have to go up, you know, I don’t know, 50 steps or more to reach the front door, you can put the front door basically at a grade you can roll right in. By doing that, you have what’s called a double loaded condition, which means you can have stores that face the inside restaurants, merchandise, you know, bars, nightclubs, whatever that face the insides when the arena is live, you know, people on the inside can approach that store. But on the days when it’s dark, you know, they have doors to the outside a window in the world, so to speak. And so they have far, far more volume, right. So the the retail operations are all around the Canadian Tire Centre at grade, they’re double loaded. And so they’re busy, not just when there’s a game on or concert, they’re busy also all the time that they’re open. You know, that was sort of one thing. And I think we were one of the first arenas maybe to do that. Or maybe we were the first I don’t, I’m not sure, but we were among the first. And we did some other very simple things. Like for example, I talked to our architect, his name was genome Zeti, who had done the palace of Auburn Hills in Detroit for the Detroit Pistons. And I talked to him about architectural signage. And what I mean by that is I wanted you know, because he was a genius. I mean, he was brilliant. I asked him, Where do we put signs? You know, like, if you have a score clock, you put a sign next to it, right? So it draws the eye. And I remember getting a call a few years after the Palladium open from Tony divaris, who was running what was then called the Mighty Ducks of Anaheim. We all get NHL reports, and we share them amongst the owners and staff. And Tony calls me up and says how was it possible that the little Ottawa Senators in a small town like Ottawa, you know, are outperforming the Mighty Ducks of Anaheim, in probably the richest County, the United States Orange County. And, you know, we were outperforming them in many ways, and signage was one of them. So I said, Look, Tony, why don’t you send your crew up here and spend a few weeks with us and we’ll show you what we’ve done. And we did some other things too, which I can claim no credit for whatsoever. But Gino was Eddie was walking around, went on his first assignment to build an arena or stadium he had not done that before. And this was with the owners of the Detroit Pistons. And he went to the Joe Louis Arena in Detroit and he looks up and he sees you know those sweets, you know, the private sweets that you see in so many stadiums today? Well, he says why are the people who are paying the most money the furthest away from the ice or the court? And the the owners of the piston said, Well, I don’t know us always the way it’s been done. And the reason they hire you like this, I think ruin you like new stuff. The reason they hired Gino was because he had never designed an arena or stadium before. They didn’t want to go to people who had already done it because then they would get what was already done. They wanted the owners wanted something different. So

 

Erwin  

fresh, a fresh set of eyes, someone with no context, someone know exactly

 

Bruce  

what it was. He immediately pulled out his sketchbook and great architects carry sketchbooks with them everywhere. I mean, yes, computers and tablets and everything else is fantastic. But the sketchbook is still a really important part of what say somebody like Mr. Resetti would do, pulls out his sketchbook and he says, What if we had a ring of sweets, 12 rows from the court or the ice and another row, you know, maybe 2426 seats up from the ice and a final row at the top. And what he did with that was he completely reinvented the stadium and the arena design business because what we did, for example, here in Ottawa was we had 142 Private suites that we leased to 142 Different companies, you know, Royal Bank of Canada, you know, bail Canada, I mean, the people who have resources, and you know, they would pay, I don’t know $200,000 a year plus food and beverage and anything else but they would have a lease of $200,000 a year say and if you multiply that I gotta use my calculator. But if if you multiply 140 times 200 times 10 years those were the 10 year leases, it means you have like $284 million in committed monthly recurring right revenues. You know, CMR is the holy grail of any business technology service, real estate doesn’t matter, committed monthly recurring revenues. So if you have $284 million of committed revenues, just from those suites, you can finance a lot of building.

 

Erwin  

I see. Got it. So if you can demonstrate that you can generate so much revenue.

 

Bruce  

It’s much easier to go to a lender and say, Well, yeah, by the way, you’re not really financing. Bruce, you know, my credit score, maybe it’s seven or 800. I don’t know, your financing the Royal Bank of Canada, Bell Canada and a bunch of other Rogers communication, you know, and they go, Oh, this is great. Where do we get get? Can we give you the check now?

 

Erwin  

Was that what it was like? No, it was that easy to get money. Gets us the show is about truth about real estate investing. And a consistent message from developers, like you have a extensive development experience. consistent message right here from developers and even see in the media is how much how expensive it is to develop. Versus in the States, for example, reading your Wikipedia that you face is significant resistance just to build the arena.

 

Bruce  

Yeah. First point. I mean, we talked about the arena in the second, but I’ll give you an example. One of the young men I coach in North Carolina, had to do a rezoning to get one of his projects unlocked. And he went to the town north. And he calls me up and said, Look, I’m here in town, and they want me to file an application. And I said, I hear you. I think it was a zoom call. I said, you know, in Canada, most cities and towns when you apply for a rezoning, it can take one or two years, it can cost several $100,000 To do a rezoning when you add up all the studies and fees. What are you facing down there? He said 500 bucks, and it will take six weeks. Okay. Yeah, they just I mean, so what I’m getting at is, in many parts of the United States, not all I mean, there’s their towns that where it’s very, very tough to do a project, Portland, Seattle, Boston, there’s towns that have just processed just as that as we have in most cities in Canada, but there are many, many, many towns in the United States where you file a minimal fee. The town does most of the work themselves, the planners do it. They show up in front of Council. It’s a very informal kind of process, and they approve your project a few weeks after you’ve applied if you’re in Canada, projects can take a decade to get through the process. And if you want to know why we’re not producing enough affordable housing and not enough industrial space, that’s why

 

Erwin  

let’s go to the winner phrase as an example. Like how, how long did it take from the beginning of the process to actually shovels getting in the ground.

 

Bruce  

So we bought the site. We bought 600 acres of land in Canada, which is the west end of Ottawa, and we needed about 100 acres for the building itself. We applied for a rezoning. And it was approved by the city of Canada, which doesn’t exist anymore. It’s not just Ottawa but it was approved by the City of Ottawa and the regional Miss pouty of Ottawa Carleton. In votes, I think about 25 to one, I think there was one counsellor who was not not in favour, but the rest were so it was quite a strong vote. I met with the premier of the province of Ontario at the time, his name was David Peterson. He was a liberal Premier, I don’t belong to any political party, you know, I never have. And so I met with Mr. Peterson and he, you know, I asked him for for three things. One, I said, we have to build a new interchange, Mr. Peterson on the major highway in Ottawa, which is called the Queen’s where the highway 417. And I said that it’ll be about a $35 million cost. I think that’s something that the province should do, because the day after interchange is completed, you know, whoever builds it, they have to give it to the province. So I can’t finance that, right. Be like me putting a mortgage on your house or when you probably wouldn’t be too happy with me. So he said, Well, okay, that’s one what’s number two? I said number two is we’re going to go down to Palm Beach in December. This is December of 1990. And we’re going to tell the NHL all kinds of great things about me and about the City of Ottawa and how much we love hockey and about the province of Ontario and Mr. Premier, I’d like you to come with us said okay. You said I’m not going to agree to anything until here, all three of your requests. I said I understand. So the first one was the interchange. The second one was coming down to Palm Beach and in December Palm Beach has better weather than Ottawa or Toronto. So I thought he might enjoy that and we would use his company on in the presentation. The third thing I asked him, as I said, we expect to go through the process of like in Ontario, you go through a municipal process, but then there’s the provincial process as well which is separate and different or can be and I said I’m not asking For any shortcuts at all, we’ll do all the studies that are required and we’ll go through all the hoops. I’m just asking the government of Ontario and the various ministries to give it a priority. I said the Palladium is Ottawa Carleton, Ottawa was sort of Honda motorcar plan. It means as much to Ottawa as getting a new automotive plant, you know, in southern Ontario. I mean, it’s it’s important for us and I think for our community, but those are the three asks, and right away, David was, you know, he never smoked in public, but he was smoking in his office, right. And he was smoking cigarettes. And he said, You got a deal. But that was great. And my one of my attorneys was there with me, Jerry Dennison. We took a note, and we exchanged notes. Then what happened was, I think in the fall of 1990, Mr. Peterson, called an election two and a half years early, oh, boy, no premier has ever done that before. And I can tell you, if the province of Ontario lasts another 200 years, no buddy will ever do.

 

Erwin  

So a year and a half into his term, he caught an election. He did,

 

Bruce  

and two and a half years early, and the people of Ontario punished him and his party. They were very high in the polls. But as soon as he called the election, they dropped like a stone. And the NDP under Mr. Ray, Bob Ray came to power I think they had 34% of the votes. So between the NDP, the liberals and the conservatives, it broke down perfectly, so that the NDP could become the first and maybe the only time the government of Ontario. And so Mr. Ray had, I don’t know 10 910 11 NPPs from the Hamilton Wentworth area. And when we applied for a franchise, there were a bunch of cities competing. Ottawa, Tampa, Hamilton, the walk Seattle, Portland. Yeah, the two that were successful was Tampa and Ottawa. But Hamilton was one of them. Applying it, Mr. Ray met with his Hamilton caucus, what can I do for you, because he had one MPP, one lonely MPP in Ottawa, like nine or 10, or 11. In Hamilton, they said, Put the, you know, spoken in the wheels of the Auto franchise, and oppose the construction of the Palladium. So that’s what happened. And so we went through a 13 and a half week Ontario Municipal Board hearing against our own provincial government. And, you know, when the franchises were granted to Firestone and Ottawa, and Phil Esposito and Tampa, I remember getting a call from Phil Esposito, he said, a famous Hall of Famer in the National Hockey League. And he said, Bruce, if you got to hear how I came back to Tampa, I got a call from the governor of the state of Florida congratulating us, what can we do to help make a new arena happen and all this cool stuff? How was your research? Not quite the same, Phil, we got a lawsuit from our government.

 

Erwin  

That really accelerated Hamilton’s ability to get an NHL franchise.

 

Bruce  

Not at all. You know, what is really, really ironic about it is we did go through a 13 and a half week hearing, I was on the stand being cross examined for three and a half girl and days. And we want to do it at this age. But I was much younger than of course. And what’s really ironic about it is I am a great supporter of having nine NHL teams, Canadian teams in the NHL, I would like to see that team in Hamilton, I’d like to see one return to Quebec City. And I been a supporter for 30 years. And it’s much much smarter. I thought for Mr. Ray, and for Ron Joyce, who was representing Hamilton to build bridges to me, because I’m inside the tent. If you understand what I mean, let’s say you had a private golf course. And I wanted to be a member, you know, if I knew somebody that was close to you, or when, and he or she spoke highly of me, maybe you would consider me as a manager,

 

Erwin  

right? rising tide raises all ships, right?

 

Bruce  

I would think so. So I just thought it was very petty and cost us millions of dollars, legal fees, and planning fees, millions. And you’re able to laugh about it now. Well, it’s 30 years ago. Now, what are you going to do? If you’re going to be an entrepreneur you are and you would know this? You have to have a short memory.

 

Erwin  

So I don’t know how to ask this. But dharma centres are in the news a lot lately. You know, like Ryan Ryan Reynolds was it wasn’t part of the bid process. A lot of other celebrities were part of that process. Yeah. What can you comment on? You know, we’re discussing before we’re recording it recently sold for just over a billion, like, what do you think about that? Is you exited? you’ve exited quite a few years ago?

 

Bruce  

Yeah. Well, I actually did a little spreadsheet. You know, we bought our franchise for 50 million US dollars, and we paid for it in 1991 and went to about a billion this year. 2023. So that’s about a 10% compounded interest over that time. And you know, 10% is The compound is pretty good number. You know what Albert Einstein said about compound interest, right? It’s the most powerful force in the universe. I don’t know if that’s true, but it’s powerful. So So it went from 50 million to a billion in professional sports franchises. A billion dollars is considered to start a franchise, like the Washington commander’s just sold in the NFL. Just Sold for six or a little over $6 billion. I mean, so a billion is a starter franchise. It’s like training wheels.

 

Erwin  

I don’t know if it wasn’t the most fun journey either. Have at least fan so it’s painful. I can’t imagine what it was like for you.

 

Bruce  

Oh, well, wait a second. If you’re a Leafs fan, I can help you out with that. When was the last time the Leafs won the Stanley Cup?

 

Erwin  

That’s what was it the 40s 60s 1967

 

Bruce  

before I was born, yeah. Wait a second. When was the last time the Ottawa Senators won the Stanley Cup? I know. I know. Yeah. 819 27. So when Lee fans and I sympathise, I’m not kidding, Toronto has the best fans in my opinion in the league. And I love Audible fans. They’re great. But Toronto fans are with their team. They travel with their team their back that team, they bleed blue, they don’t have red. In their veins, they bleed blue. One of my son in laws is a passionate belief fan. And we’re rivalling with my grandmother where there she wears a Sans hat or leaves. But all kidding aside, audible fans have waited

 

Erwin  

even longer. Can you comment on what you thought about the sale? Was it worth it?

 

Bruce  

I think it’s excellent. One of the things that I’ve said many times, I don’t know Michael andlauer, who is the prospective new owner, personally, but I know many people who have talked to him and know him well. And they speak very, very highly of him. And there are only probably three responsibilities that an owner really has. The first one is to set goals. The new owner of Las Vegas, Golden Knights said that he would want his team to challenge and win a Stanley Cup within six years. And they won the Stanley Cup this year. In their sixth year he set that goal. When I acquired the expansion franchise, the SENS I set goals. The first year I wanted to get 22 or more points. That’s not very many points. But the reason I set it at 22. And we ended up with 24 is because the worst ever team was the Washington Capitals, I think in 19, early 70s. Anyway, who got 21, I didn’t want to be the worst ever team and we got 24. So we avoided that. The other thing is I said we will make the playoffs within five years. And in our fifth year, we did. And I said we will challenge for a Stanley Cup in seven to 12 years, which we did, we got to the finals, and we challenged with a cup. Unfortunately, we did not win it. Great team, you had a wonderful team, they opportunities I thought to win. And unfortunately, they were unable to do it. So setting goals. I mean, whether you’re the CEO of Facebook, or Google or whatever, you know, set goals is very important. So that’s number one, job number two is to have a very, very close relationship with the fans, not just with the fans, but the business community, the sponsors, the political community, and by political I mean the small political community. That is a very, very important function. And I’m sure Michael will have an excellent relationship with the fans and the greater community. Because the living beating heart of an owner in the building every day, or almost every day is very, very important. All right. So that relationship is crucial. And the other thing, which certainly the Golden Knights have demonstrated abundantly, clearly, is to have little or no tolerance for poor performance. This is a cutthroat business. When it comes to competing on the ice off the ice, the owners of major league sports teams, most of them cooperate very, very, very well with each other, whether it’s off the ice or off the court off the pitch off the field. But when it comes to competition on the field, every owner will lie to you. They’ll say oh, yeah, you got to take everyone off my hands. You know, we’re giving MJ even though he’s got one leg. He’s gonna be your best player

 

Erwin  

I saw Moneyball. I saw Moneyball. For listener, pets movie.

 

Bruce  

Yeah. Yeah, it was great. But off the ice, they will cooperate. But the Golden Knights and American owners generally are tougher. Americans generally are tougher in technology and in real estate and banking services. They’re tough business men and tough business women. They’re a no nonsense they will not accept poor performance. In Canada, we tend to be a kinder gentler version of our American cousins. And that might serve you quite well in some respects. But in a professional sports, not so much.

 

Erwin  

The number three was a little tolerance for us. You mentioned there’s three responsibilities for an owner.

 

Bruce  

The third one was has no very little tolerance if not a tolerance for poor performance, whether it’s a coach or general manager, a train or a ticket taker, somebody serving you the beer, a player, I mean, there’s no loyalty at all. They want performance, and they want it now.

 

Erwin  

So as you’re just as we were talking about the three responsibilities, I was actually already in the real estate world, would you say these responsibilities are in your real estate world in terms of your brokerage or portfolio, your developments? I’m guessing it’s something similar? Well,

 

Bruce  

the real estate world today is very, very difficult. I mean, we’re going through a time where interest rates have doubled, or even tripled, where we’re coming through a pandemic, where lumber prices, I think, doubled or tripled, supply chains were disrupted. You know, I’m doing a little bit of development manager work, basically, for friends of mine. And to keep me busy. I’m helping a local vet veterinarian, build a small 5400 square foot clinic a property you already own. So we’re into the third year now trying to get our site plan approval. So that’s really big. Yeah, I won’t bore you with all the details, because we’d be here for a couple hours. But, you know, you know what a critical path schedule is, right? Yeah, well, you cannot build a critical path schedule, when on the construction side, your supply chain is bumped up, you just can’t. We’ve got a number of buildings, my wife and I are developing couple of downtown. And you know, you can’t get your HVAC system functioning, because you’re waiting for deliveries from China or the United States. And they say, Yeah, it’ll be there in six weeks. And then, you know, three months later, you’re still waiting, what are you gonna do, you can’t open your building, without heavy ventilation and air conditioning system. So

 

Erwin  

sorry, purchase deposit their failures is a critical path critical path has actually caused people in our community to go bankrupt, like, for example, like flippers, right, under percent, they couldn’t finish on time, for whatever reason, Labour like not being their materials not showing up on time. And then they ran out of cash. You know,

 

Bruce  

I’ve had many, many, many people ask me to coach them in the typical flippers, and I refuse that I will not do because everybody flips until they flop and almost everybody fails. So I’m not interested in that at all. That’s not a model that I think has legs. I think the

 

Erwin  

general thing is like there. In your experience, do you have extensive experience? Is there fast money in real estate? Because that’s what people want. That’s what people see on HGTV and they want to be a flipper.

 

Bruce  

Yeah. Oh, my gosh, I’m so glad you brought that up. Or when what do you see on HGTV is wall to wall BS? It is wall to wall BS. You know, I know some of the people who do those shows. And they leave out, for example, the fact that the crew, most of the crew are not paid to do that show, you know, if you and I are doing a project, we’re good, we’re gonna pay our labour referring to you, because you’re such a star. You know, they won’t do it for me. And the other thing is, many of the materials are donated. No, it’s like, if you were sued on a sports cast, you know, you get a little bit of a, you know, you get a bit of a commercial from it, when they say you know that these guys bought it for 750,000, a put $75,000. And it’s now valued at 950. And left out $200,000 Or costs. And also, they show that they did it in five weeks. Well, certainly during the pandemic, and even now, even the most minor renovations taking five months, if not nine months or longer. We did like I said, we brought one historic building back that had fallen on hard times is not a big building three storeys, it was supposed to take a year and a half. And it was about a two and a half million dollar budget for the rental. Well, we’re now close to you know, two and a half years into it. We’re like at least a million and a half dollars over budget. So it is what it is right? It’s becoming very difficult. And going back to your statement about how difficult it is to build not only on time, but also on budget, you know, certainly in Eastern Ontario, it is now costing $600 a square foot to put up a 30 or 40 storey concrete, multi res tower. And when you do the economics on the cap rate, it just isn’t working. Comes out maybe you break 4% Maybe. And if you’re if your interest rates are six, seven or 8% forget you’re gonna lose money gobs of it, so don’t do that.

 

Erwin  

Right, which is what leads us to the conundrum that we’re in like builders have stopped stalling continue to grow in terms of population.

 

Bruce  

Oh my gosh, yeah. Right. Yeah. So what I’m doing is

 

Erwin  

again, because as a guest you have a lot of context like your second generation investor per your bio, know how accurate it is. Can’t believe everything you read on the internet. But have you ever seen it as challenging in real estate in your extensive career. And

 

Bruce  

after that I did a little walk before we did this, it just clear my head. And I said, I bet you everyone asks me that. So I got a story for you on that too. All right. All right. I got five kids and one of my daughters, but half double. Okay, she paid $345,000 For this nice half double. Sorry, explain what a half double is? Oh, yeah. So you’ve got a house and it’s got two halves. You know how duplexes usually like this house that split down the middle into tiny houses, but it’s really a house that split into so she bought half of the half, okay. And she paid $345,000 for it. It was a three bedroom, two and a half baths, single car garage, half double. And when I walked onto the site with with near him, that’s her name. I said, Mary, this is the one you’ve got a bunch is why this one dad, because we’ve looked at a number together. And guess when you walk down around the back, and the ground sloped away. And down at the back, there was an existing big window, and the door was a walkout condition. You know what that is right. And I said, I mean, it was just a basement. There’s nothing there. But I said Miriam, you’re gonna buy this because you’re going to have the house up here. And you’re going to have a one bedroom apartment down here with a walkout condition. The door already exists for the lockout don’t already exist. Got it. It was a walkout basement condition is that this is the one you’re going to buy her. And so she did. She put in $5,000 in the bank of mom and dad put in 120,000. She puts her hands on her little hips. And she says to me, yeah, but it’s still 5050. Right that. And I said

 

Erwin  

to her, she was the American tough negotiator.

 

Bruce  

I’m gonna get into trouble. But I said, Miriam, that’s girl arithmetic. And she burst out laughing. And I said, don’t worry about that. I said, we’re joint tenants that we show up as owners as joint tenants, which means that after I pass away, and her mother passes away, we’re simply deleted from land titles, you’re going to end up owning 100% of it. So don’t worry about that. Oh, she’s on 100 presented us it? Yes, you will, honey. Yes, it well, I don’t lend money to my children, you know that I don’t want to have a commercial relationship with my kids. So anyway, what happened was, so she bought it. And for another $80,000, we put in a one bedroom apartment. And she rents that for some some amount of money. So she and her husband and their two children are able to live in our own house after paying for everything, including mortgage and internet and utilities for about six or $700 A month after taking into account the rent. Now that’s a pretty good deal. And 2022. So last year, she gets it appraised at $807,000. Up from you know the original price, which was 345. So she calls us Dad, let’s sell it, let’s sell it. I said, but I mean, in five or six years, it’s gone up from whatever, to whatever. I said, Why would you sell me Can you imagine when you’re my age, what it will be worth. And when you’re young woman she can’t ever imagine being 71. You know, that’s too hard to imagine. But it’s someone that you will be, you know, and as long as I’m on title, and as long as I’m alive, you’re not selling? Well, what happened this year is the appraised value of her home dropped by 10%. So it’s now valued, I think at about 735 cents down. So now she’s upset. But wait, she gets her mortgage renewal after like five years, which was like 2.9% or something like that. They want over 6%. Now she calls me up crying on the phone. And I said Marian, there are many reasons to cry in this life. There are there there are tough times. But this is not one of them. You have two beautiful children husband you love you have a lot to be thankful for the fact that your mortgage rate just doubled is not a reason to cry. We got to figure out how to do it. And she’s willing just to hope to facilitate. I said, Wait a second, if your dad teach you to buy high and sell low, no, that we’re not doing that. And I tell this to all the people I coach now this is a story that’s going to have it’s going to grow in and change I’m sure over the years. But I said what we’ll do is we’ll change the amortisation rate she had a period she had, I think 17 or 18 year amortisation, she wanted to pay it off that we extended that to 30 years to reduce her payments. And we renewed for three years at 6% or whatever. Because she’s just gonna have to grin and bear. And then the other thing that happened was the basement apartment became vacant, and she was able to raise the rent from 1200 to $1,600 a month. And in addition to that, she picked up a few more hours at work, so she had a little bit more revenue coming in. She sped out her payments a little bit more and she raised the rent and that’s what people are doing because everybody in Real Estate right now is in a box. And you asked a great question. I’m 71 years of age. This is the toughest I’ve ever seen. And I’ve been through the recessions in the 70s 80s, early 90s 2008 2009. This is much more difficult. I understand that. But don’t try to over look for solutions.

 

Erwin  

Where do we go from here?

 

Bruce  

Well, I think animation is one of the things that’s really really important. One of the things I’d like to do with Miriam is I’d like to, there’s a company here in Can I mention the company’s name? Is that okay? As long as you’re okay with it? No, I’m fine with it, because I’m giving the plug I suppose. But they’re, they do fabulous work. They’re called North Country sheds. They’re based in a little town called myth, false myths. Smiths falls. Outside Ottawa, right? Yes. Not far north country sheds, okay. It’s called North Country sheds. They make these beautiful workshops that are unbelievable. They’re like almost style workshops with metal roof that lasts at least 40 years, I’ve got a few of them and, and some of them are over 40 years of age, and they’re still very surface serviceable. And so what I’d like to do is I’d like to put one in the backyard of Miriam’s place, as well as a bunch of other properties, and create a live work condition right where you could have, you know, the yoga studio or if you’re RMT registered massage therapist, you’re a physiotherapist, you’re a hairstylist, you’re running your nail book, you’re running a coaching practice, you’re a realtor, whatever. And so North Country sheds builds these things. For under $20,000 like $40 a square foot, you can’t build anything for $40 a square foot we talked about a concrete building, you know, 40 storeys high as $600 a square foot all in 40 bucks a square foot you all you have to do is put down the gravel pad, they charge 250 bucks to deliver it, they’ve delivered as far as Thunder Bay, for goodness sake, I don’t know if you know where Thunder Bay is. But

 

Erwin  

even that’s like five hours for you or more, isn’t it? Oh my god. Sorry, Thunder Bay is on the list like the left side of the lake, Winnipeg.

 

Bruce  

I’m trying to Winnipeg. And they probably charge more than 250 bucks to do that. But still, they are fantastic. And so let’s say you bought something for $20,000. And you put, you know, maybe a propane heater in there, added the electricity, you can rent that thing, you probably know that you can now put a workshop in your backyard, that’s 166 square feet, right without a building permit. So you could probably get 166 square foot, the workshop. And you could probably rent that for probably $650 a month. So if we just multiply 650 times 12, you could probably get about seven or $8,000 in revenues from a building that will probably cost you when you put the heat to it. And electricity probably cost you about 20 or $25,000, including the gravel base. And your cap rate would probably be something like about 20% on that. That’s an animation, right? And unfortunately you asked is, in my opinion, real estate is get rich, slow. People always ask me, you know, can you help me get rich fast, Bruce and I always go I’m so glad you asked me that? Because the answer is no. Because if I knew that I would do it for myself. Real Estate just get rich, slow. But one more thing I should have. About 10 years ago when I got into this coaching practice, I did a little bit of research on the 100 richest families in Canada, and 61 out of 100 had all or substantially all of their wealth invested in real estate, almost two thirds and they must know something. And you know real estate has a number of different returns, which I’m sure everybody knows you hope to make some cash flow returns. You hope that it over time it will go up in value and you hope that your tenants will help you pay your mortgage down. So you have three different types of returns. And the wealthiest people in Canada figure that out. They’ve been doing it in Europe for hundreds of years in England for hundreds of years in Asia and Japan for probably some of them a couple of 1000 years. The Holy Roman Catholic Church has been for at least 2000 years

 

Erwin  

yeah the the golf course I was playing it last week. I won’t name it because I don’t think it’s accurate. I haven’t I haven’t fact checked it but I was told that the Western family and Mike Leach and own it and and this is the last year it’s an operation it’ll be it’ll be a construction zone next year starting

 

Bruce  

Yeah, golf courses are an environmental nightmare. You know you have to put water to it. You have to cut the grass you have to put insecticide fungicides fertiliser, they consume a lot of energy and resources and they pollute our waterways and plus on top of that I hate golf.

 

Erwin  

However moving on

 

Bruce  

I’m gonna get some bad email now. All the golfers might wonder my son was a very good golfer he he’s gonna kill me if he hears this

 

Erwin  

And it’s actually funny because just to continue on the Gulf vein for just a second, like you’re a big hockey fan, like a lot of hockey, law hockey players enjoy hockey as well. Like it seems to be lost skill transfer between the two.

 

Bruce  

Yeah, there’s no question about it. I played lots of hockey as a younger fellow, but I’m no good at golf. So really, that wasn’t a very fair statement by me because I’m really bad.

 

Erwin  

Going back to the bunkie. Now I’m on their website. And this sounds amazing. Fantastic. And you already have clients doing this putting in shop? Oh, yeah,

 

Bruce  

absolutely. I can tell you that. One of my favourite new business models is to buy some industrial land. If you have sent you a gun for screens, there are one type up another one go to long yards, long yards, just the way it sounds long. yards.com Oh, no. Try calling long yards.ca Okay, let me try that long, long LNG yards. dossier should should be able to see it

 

Erwin  

should play by the.com. There we go. I think.

 

Bruce  

I think he does have the.com but maybe something happened. I don’t. But anyway, this is a young

 

Erwin  

hours more than storage. Yeah.

 

Bruce  

So let me explain. The model is very simple. You buy a piece of industrial land, you cut it up into small yards because every contractor needs a place to put his or her equipment loaders, dozers, trucks, dumpers, whatever, right. You can’t park here, but you can start to see what’s going on here. So these are small contractors who need a yard. And this is young Chris Long, who’s the founder of long yards, right? It’s last name is long. And this is this is one of his locations in Canada. He’s got a few in the United States as well. So what you do is you Oh, if you want to play that one, how long is it was a minute and 40? Well, we could play that one.

I started long hours because I was a contractor. I didn’t have enough space in my house. House. Like a junkyard I had three trailers, tools, equipment everywhere, light bulb went off, Hey, how come there’s no storage for the big stuff. We love to offer our clients a high level of service with a lit up facility, text OpenGate cameras read watch everything all the time, a locked in screen in yard. And they always know that their possessions are safely locked away. It just creates such a better environment for your business knowing it’s in a professional atmosphere, not at home. From offering loading docks, a small business community that helps each other shared offices, mailboxes, and it’s allowed many businesses here scale and seek growth. We’re seeing this business expand everywhere through Canada in the States. Most of our colleagues with long as it’s our business focus entrepreneurs, real estate investors, they know the cap rates, they know what’s involved. You want to know that the money you’re putting in is working for you long years, and it was storage. That’s what we do. We put their money to work and get you a great return. And we’re in control. We’re seeing this business, expand everywhere through Canada states. We can take vacant land that’s sitting, not doing much and turn it into income producing plan. You buy a piece of property, you throw up some fencing, with a good brand and a good marketing package. We can help your facility get filled up, you’re quick to market. If you’re interested in long hours as a partner or investor or looking at your own location, please reach out to us at info at longer stock COMM And we’d be happy to work with you.

 

Erwin  

All right, that was a Chris was me coming on the show for promoting.

 

Bruce  

But I’ll tell you Chris’s stuff backstory if that’s okay. Herman. I think your listeners and viewers will enjoy it. So Chris came to me when he was a young man, he was a carpenter making $18 An hour and he was a single dad became a single parent when he was still I think, a teenager and he brought up a beautiful young daughter, who’s now of course, well into her teen years. This is about a 10 acre industrial site in auto, the one that you just showed. And I say, Chris, you’re gonna buy this. I got no money. I said, Well, okay, we’ll figure it out. It was a, you know, a difficult time. And, you know, we’re in a difficult time, but there’s opportunity, even when there’s a recession, right, there is opportunity. This particular 10 acre industrial site was owned by a couple of men from Syria. And they had some, you know, some urgent needs I suspect family needs and so I went to them on behalf of Chris as his coach and as his realtor and his case as well. And I said, would you sell this to Chris and would you give him 90% finance you know what seller take back finance.

 

Erwin  

I’m sure your listeners benefit the seller is providing the financing. Yeah, let’s see aren’t the bank in this in this case?

 

Bruce  

They are the bank just with Chris You know, making 80 bucks an hour be hard to go and borrow half a million dollars from a Chartered Bank. Right. So they agreed they wanted to monetize Never Land. So I said, Chris, we got to find you about $50,000 worth of equity to buy this place. And he was doing some work for me on a bunch of Philips and I was adding some micro suites and basement apartments and stuff like that for me. And I said, I’ll just give you an advance on the work you’re doing anyway. So he was able to put a little bit of capital together and close the deal. And then we borrowed from a private lender, about a million to 1,000,003 to put the gravel down the fence again and all the technology that you saw there, and as fast as he could build those contractor yards, he could lease them. Well, so by that time, he had about 1.6 or 1.7 million invested in it. And we got it reappraised at 3.6 because the cash flow was so strong. If he calls me up super excited. He said, Prince, can you imagine me? You know me a millionaire? I said, Yeah, again. He said, Well, there you go. And now he’s living in Florida. He’s remarried. He’s got a bunch of more kids. And and he’s building them all over the state. So it’s a great success story. But what I was gonna say is these business models changed, right? That was the original model that Chris used the contractor yards model, but now and you saw in that video there, see cans there. And now there’s going to be these workshops that I talked about, and North Country sheds, right. So you put them in there, you rent them to the people who have a yard. So now they have a little office, they have a see, can they have a yard? They’re good to go? Sorry, sorry,

 

Erwin  

let’s see can

 

Bruce  

see containers, right, like, you see, oh, trucks, they’re, you know, they’re come across on the big ships and shipping containers. And so they come in 20 footers, or 40 footers, and you see them on the rail cars, too, they stack too high.

 

Erwin  

For listeners benefit, we generally import way more than we export. So we have a lot of sea containers. A lot of extra shipping containers in Canada. Shipping today. Yeah. That’s super cool. But but even Yeah, shipping containers, I think, I think they’re around like four to 6000 to buy. But that’s like that’s like stock, there’s nothing done to it. You still have?

 

Bruce  

Yeah, well, let’s see, can a shipping container and that’s a good way to refer to it. You can get them if you buy them in bulk for three or three and a half 1000 Oh, hell a lot you can do with I mean, you rent them to your clients and make a little bit more money. And then we’re gonna do the same thing with the workshops.

 

Erwin  

This is amazing. And then who’s using the workshops, these are small businesses or just people just want to a workshop, like build their model car or whatever.

 

Bruce  

Let’s say you are heating, ventilation and air conditioning guy, okay? You’ve got all kinds of equipment and inventory, you’re going to store it in the yard. You can’t put your loader or your dozer or your dumper in your driveway in suburbia, the bylaw officer, the ordinance enforcement officer be knocking on your door within a couple of days, neighbours will complain. So you got you got to have it in the yard. And then you want to have some of the material of the weather, you can rent a sea Canada shipping container and you put material in there and keep it away from the weather. The next thing you’re going to ask is, gee, I need an office, right? I’ve got a couple of maybe I got an admin, I got a bookkeeper, I got an accounts receivable person, where am I going to put those so you have these little North Country sheds, you can just put, uh, you know, on 166 Square feet, if they have, you know, 60 square feet, you can easily put two or three people in there. And if you buy some of the bigger ones that North Country sheds has, you can probably have four or five staff in there. The other thing that we get asked for now a lot is can I move a tiny home in there and live there? Yeah, I was gonna get to that. Well, the answer is so far. No. As you know, cities everywhere are really bogged down by and constrained by some planning rules, which are obscurely difficult. And, you know, I do speeches all over the States and Canada, like I said, a few overseas. I’m not the most popular guy in cities and towns because I recommend they burn their zoning codes. There was a study not by me, but by the University of Chicago, that if the planning rules and the zoning rules were as relaxed as they were in 1965 and 2009, the US economy would be 40% Bigger. That works out to 80,000 US dollars per family per year. That is an unimaginable increase in public welfare before we started this conversation on and recorded and we were talking about you know, Star Trek and and unlimited energy and basically free money. 40% is extraordinary. 40% of all buildings built in Manhattan could not be built today because of their zoning codes. I’m not saying that we should have people living next to an armaments plant because they blow up every muscle on or next to oil refinery. because they light on fire every once a while, or a fireworks battery, you know, I get that or an avatar, or chemical plan. Sometimes they leak and they would kill you. So there there are very good reasons to have zoning rules, but not to prevent, you know, like one of my daughters, she has literally a cabin in the woods a tiny house. And right next to her, maybe 100 feet away, she has her workshop, she runs her own business, very successful fashion business. You know, she has a tiny house and she has a small workshop. Well, there’s no reason why we can’t have that.

 

Erwin  

Yeah, it’s just yeah, well, we I know why it’s NIMBYs don’t like them. And then they vote and, and they’re motivated. Wow, this is fascinating stuff. Do you know the owners in North Country sheds as well. I do, again, probably want to talk to them.

 

Bruce  

Just listen, if if, if any of your your friends want to know more about this model, that probably nobody knows this model better than I do reach out to me at anytime you’ve got my email address, that’s the best way to get ahold of me. I’m on that 24/7. So they can reach out to me and I’ll be happy to put them in touch with whomever they need. Okay.

 

Erwin  

Okay. First, we do have a number of listeners. Do you want to share? Should we share your email? Should we just share your website?

 

Bruce  

share by email, that’s fine. You know, I get a lot of email, but I can handle that. And what I can handle is I can have handle a lot of phone calls when you have about 2500 clients. If everybody called me once a day, you can imagine how much work I get done. So I asked people to either text me or, or even better email me, so I don’t mind sharing it. It’s Bruce at Bruce M. firestone.com. So Bruce had Bruce and you got to put the M in there. Bruce at Bruce and firestone.com. That’ll get to me. I mean, I love hearing from people I hear from former students of mine from 20 years ago, many of them very successful. And it’s just one of those things that gives me great joy, to be honest. So first,

 

Erwin  

I want to I want to really go over this workshop, garden shed strategy again. So this is what you’re seeing people do successfully in like an area all over all over North America.

 

Bruce  

Yeah. So all over North America, and many, many jurisdictions not gated communities are. But in many jurisdictions, many cities and towns are the states and Canada, a home based business is legal. Right. So let’s say I was a young mom and I had one kid and I had a workshop in the backyard, I could run a small daycare there. In Ontario, they changed the Planning Act to allow workshops or sheds in the backyard, up to 166 square feet without a building permit. And if you’re going to build something bigger, you need to go get a building permit, you can do an awful lot with 166 square feet. And of course, like I said, if you need something that’s two or 300 square feet, I’ve got some of that are 850 square feet with a building permit. And they are fantastic. So home based businesses are illegal in most jurisdictions. Again, if you live in a gated community or a condominium, they have a lot of rules. And so condominiums you can’t really animate them, or at least not very easily. And gated communities have, you know, homeowners associations, and they have a lot of rules. So probably the lot of the animation ideas that we’ve talked about on this call, don’t apply in those two circumstances. But for everybody else they probably do.

 

Erwin  

And then try to get into the nitty gritty a little bit. Do these

 

Bruce  

have washrooms. So in the case of my daughter, for example, what she’s got a beautiful little tiny home, it’s very small, but she’s got the tiny home here, and she’s got a workshop here. The workshop has power, heat and air conditioning, but it does not have water, and it does not have a bathroom. But the tiny house does. So she has to go use the bathroom she just wants. So that’s why it’s a live work condition. And that’s why it’s a home based business. You got the home and you’ve got your workshop or your backyard office or whatever, but you need to go the bathroom you just you go to your apartment or your house.

 

Erwin  

Somewhere you mentioned like you had an early triplex example, we had the laneway garage or get the garage in the back is yeah, it was quite a big one to for these. The workshop shed strategy, do you have a name for this strategy?

 

Bruce  

I just call it the live work conditioning. Our conditioning is hugely popular. And like I said, and you already knew this, you could search MLS in the States and Canada and filter by for properties that already have backyard garages. And you could convert them into a coach house, a little backyard coach house, but it’s very, very inexpensive to create the workshop. And then a coach house is much more expensive, you know, because you got to connect it to the water system and the sewer system and then you know, Coach houses are not cheap. I’ve just building one now and one of my properties and it’s like 330,000 bucks for a two bedroom coach has

 

Erwin  

for us as I mentioned earlier that we’re targeting has was detached garages to car because we’re able to do that for you’re able to do those conversions for like 110 to 130.

 

Bruce  

Yeah, well, that’s very, very good 110 to 130 is excellent. If you can do that, that’ll that’ll pay for itself. But if you were to convert it to a workshop, it would be a lot less.

 

Erwin  

Yes, of course, then which why, which is why? It’s the first time I’ve heard the strategy of sort of, I’ve heard of the strategy for like Pure Storage, in terms of like offering just really just a storage shed to your tenants for maybe a few 100 bucks.

 

Bruce  

But I like that strategy, too. But the workshop is one step above. And like I said, we’re

 

Erwin  

in between now we’re in between the tiny home and garden suites and distortion.

 

Bruce  

If you have somebody like baya who’s running a very successful yoga studio neighbourhood studio in her backyard and has an apartment, she’s likely to stay quite a long time. There’s something else you need to you need to know about that.

 

Erwin  

Being an Ontario lock, you’re the one there tends to stay longer.

 

Bruce  

No, but there’s something that you need to know. Are you ready?

 

Erwin  

Yeah, I’m ready.

 

Bruce  

I have a legal opinion from a very well respected lawyer on my computer somewhere. When I did that least remote work for the studio in the apartment. We did it as a commercial lease for the backyard workshop with accessory residential. And I was explaining Wait a second, I explained to Maya, I said, Maya, this is a commercial lease, you are paying HST on this. And HST for a building owner is your best friend. But wait a second, it gets more interesting. If it’s a commercial lease with accessory residential, it is not covered by the Residential Tenancy Act. And the reason for that is this is a carve out that the Planning Act or the Residential Tenancy Act, excuse me, has created. So let’s say Erwin, you and I owned a $300 million industrial building somewhere. And we had an site superintendent department so that he or she, they could look after a building, but then we find out our site superintendent is an alcoholic drug taking fiasco, you can walk in there and escort him or her them off the property and five minutes, because you can’t have somebody who’s dealing drugs or doing drugs, looking after a $300 million asset that they just, you just can’t say for everybody. It’s not safe. And it’s a bad idea. And it does happen. I’ve had that situation exactly happened to me, like one of my properties. And because it was considered excessive residential, there’s no over holding provision whatsoever. So I said, my, if you do not pay your rent, you know, it will not be a four to six month process and an end 12 For you to you are going to be leaving, I’ll give you 15 days. And she said I understand. So I said you’ve got to be really committed to this because you don’t want to be an entrepreneur, unless you’re really committed and she was super committed. And she has been super successful. I think this year she’ll break 130,000 an income. You know, there’s some things that your listeners and viewers will have to learn. And they should get their own legal advice because I’m just a lowly engineer.

 

Erwin  

Engineer. Sorry, this is I want to keep harping on this on this on his live work condition, dear killing my apologise, naturally need to learn things. Can you

 

Bruce  

one of the things I don’t know you will know new for little over an hour but I really respect the fact that you’re drilling down and you’re looking for the detail and you want to make things where the people are most successful in business and you know this Erwin is somebody who finds a model maybe this model and they just repeat it’s like making sausages you know this the people who make the least and I’m guilty of this make the least amount of money is you do whatever you want. Like I’ve been Aki guy been a university professor and then a real estate developer a real estate coach, what the hell am I right?

 

Erwin  

And science fiction author? Apparently? Not apparently you are.

 

Bruce  

Oh, for sure. First Book was actually made into a short film by the way. No kidding. People been asking me for the other book. I’ve written any books over at the but the one I wrote about the sands in the National Hockey League. It’s called don’t back down. They want to turn it into a TV series but I said not until I die. Oh yeah.

 

Erwin  

You don’t want to see it.

 

Bruce  

I don’t. I’ll leave that to my kids and grandkids to decide what to do with that.

 

Erwin  

That’s too bad. Last Last sports. Sports stories have been making making Netflix and like the recent movie.

 

Bruce  

This was the same guys who did Letterkenny I don’t know if you know that series.

 

Erwin  

I’m pretty sure many love fans and hockey fans would like to see it but yeah, okay, sorry. Just go back to the labour condition. Do you have any examples you can share from like the Ottawa area like what it costs to deliver it in what you’re getting for rent for for for Workshop? Yeah, I’d

 

Bruce  

be happy to do that. So my wife and I, we own something called the barndominium.

 

Erwin  

That’s our website.

 

Bruce  

A lot of the stuff that I do you know, if people say do you have a website and Facebook page, you know, Instagram, Snapchat, just in my smile I built, it’s got to be 25 years ago now, one of my friends, he’s a developer had this beautiful, beautiful Amish style barn, if you know what I mean, it’s huge ceiling height, 30 feet. It looks like a church in some ways. As beautiful and his name was John colletta. He’s now passed away. I said to him, because he was going to develop that. So what are you going to do with this bar? And I said, I got to these three young guys, they’re gonna come here with a high Oh, knock it down. Said what? Such a beautiful building. Yeah. I said, How much are you paying them to knock it down and take the stuff away? I have about 3500 bucks. I said, How about I bring a crew down myself. And I do it for free. He said, Bruce, are you crazy? That’s a lot of people think so. He said you got a deal. So I went with my crew. But we didn’t knock it down. What we did was we dismembered it. And we lettered and numbered each piece, right. And I had a property about 12 or 13 kilometres away beautiful property with a lake on it and all kinds of cool stuff. And so we laid down a concrete pad and we rebuilt this thing. And it was really it’s huge. It’s like 4500 square foot feet with a 330 foot ceiling height. And, and we had a large screen TV in there. And my kids, it was a playpen for my kids. Basically, I had my summer office there, my cottage there, we own the lake, some about 165 acres in total. So we had this beautiful bar, and, you know, large screen, we used to watch the Blue Jays and whatever. And the kids would have sleepovers like for 35 Friends, right? So it’s fun. And we can have dances and parties in there. And one of my daughters got married, and their kids have a nasty habit of growing up. And now they do. And so it sat empty for I don’t know, 567 years and kids weren’t interested anymore. You know, my oldest son’s living in Australia with his family and one daughters in Toronto. I mean, you know, they’re all over the place. So I said to my, well, what the hell are we gonna do with it, it just sitting there empty. So we decided this was before the pandemic began, based on, you know, my own experience that we would turn it into about 10 workshops that we did. And they range in size from 200 square feet, which is tiny to 400 square feet, 800 square feet, I think the biggest one is 1000. And oh, my God, as fast as we could fit them up. People came and read it, though. I mean, it’s incredible. If I had 45,000 square feet instead of 4500. And it’s this most wonderful community, we got an old dude in there, he makes cigar box guitars, you know, with a cigar box guitars, he buys these cigar boxes, they’re actually it makes guitar, it’s a thing. And they’re beautiful. And oh my god, they sound beautiful. So he makes cigar box guitars. I’ve got a young fella His name is Ahmed he is he makes in designs and builds his own kitchen cabinets and bathroom cabinets and instals them very successful woman in there who’s a fashion designer, another woman in there who makes handmade soaps and sells them to stores across Canada, the United States. I mean, I got a group in there that trains dogs, actually, they train the owners. But anyway, they do dog training. I mean, we’ve just got a wonderful group and timber frame are in there a carpenter in there, and we just have a hobbyist in there who’s just got more stuff than he knows what to do. So the demand for these workshops was off the charts. And so for a 200 square foot, you know, workshop, we could I think 600 bucks a month, plus a contribution to power plus a contribution to cleaning. Parking is free because we get lots of land. So that works out to, I don’t know, 30 or $35 per square foot per year gross plus contribution to power. And we have in our lease because we don’t have them separately metre. If one of them has maybe exceptionally has a lot of power needs, then we can raise their we can change their rent. Now the next thing that happened was sure enough, a lot of these people asked whether there’s apartments nearby that they could rent, because it’s a fabulous community. And unfortunately, there aren’t any, but we have rolled a few tiny houses onto our property. And guess what we do they, you know, because we got lots of land 165 acres, they can live on the sites. And they don’t pay much for that. But they roll their own tiny homes on the site. If they have one or they go buy one. And they can roll it on our site. They can hook it up to our power and our septic system and our well. I think they pay like 500 bucks plus HST to park and so that’s kind of the model. It’s very simple, and we just love it. I like visiting them because they’re such neat people and they run very successful businesses. Oh, we have we’ve got a registered massage therapist there, too. She does a RMT work.

 

Erwin  

How many people do you think you have living on the property now?

 

Bruce  

Right now. So we’ve got 10 workshops, and I think four of them are currently living on site. And there’s at least one or two more who would like to so I might buy a couple of times. In fact, I actually contracted for a couple more tiny homes with local company, small living company. So we might have two more this year.

 

Erwin  

Purse had no idea the conversation would go here.

 

Bruce  

Christian, as Bill Vogel asked me to do it, and I was happy to do it. Your reputation precedes you. You’re an amazing individual.

 

Erwin  

Oh, I appreciate it. You have way more stories than I do.

 

Bruce  

I’m also about twice your age. So there you go.

 

Erwin  

Do you have extra time? I know we’re over time. Do you have time?

 

Bruce  

Well, I do have something I have to do at 1230. So I’ve got you know, eight more minutes or something like that. I got a little bit of coaching. I coached a couple of guys in Long Beach, California, who by the way, are doing this workshop model

 

Erwin  

Madhavi back, but I do want to ask you about you. So you’ve been you’ve probably been exploring AI longer than pretty much anyone else in the real estate community. Yeah. Talk to me about AI.

 

Bruce  

I wrote a trilogy on it. It’s called Quantum entity and quantum entity. There’s a trilogy. The first book is we are all one. And the second book is American spring. And the third book is I can’t remember. That isn’t the title. I can’t remember. I just can’t remember right now. Let’s see. i Oh, yes. The third one is called the successes. It’s a trilogy. And it’s about a young man looks a lot like you actually. He lives in Toronto. And he’s a brilliant mind. He’s a physicist. And that’s one of the

 

Erwin  

comparisons and yeah.

 

Bruce  

Well, he’s very handsome. And he’s a neat kid. In my mind, he does look a lot like you like the character I had in mind. I mean, I’m watching him on the screen here. He takes what’s called the iPhone 40. This was in Britain 10 years ago, right? So he takes the iPhone 40. And he hacks them. And he adds something to them, which is a bit of a surprise. And so what happens is, you get your brand new iPhone 40. From quantum computing Corp, that’s his company, cucc, quantum computing Corp, you get your, and the moment you boot it up, this kind of apparition shows up out of phone, it’s sort of like, kinda like what Mark Zuckerberg was talking about with the metaverse, but it just sort of pops out of the phone. And if you know what a familiar is a familiar is an animal that becomes very close to a witch or Warlock. But in this case, the quantum entity sort of pops out of the phone in 3d, and bonds with you. And you know, initially they’re very primitive creatures, but they learn about, you know, Irwin, or they learn about Bruce or Mary or Betty or whatever. And they become your familiar, they become like your alter ego, when you go to sleep, they can work on your income tax, right? When they go to sleep, they can be editing one of your videos, their quantum computing. And as soon as this happens, he starts to take them to the next level, they become quantum phones. And the one thing that he’s basing his theory on which is is a valid theory in physics, is that when you create two particles that are related, no matter how far apart, they get, they are still communicating with each other. So you could have quantum phone here and a quantum phone on Mars. And there would be no time delay between the two of them. Right? And unlike some people like Elon Musk, who believes that AI could be the end of humanity, and it might be these quantum entities, the question will become in the first book question is, at what point does an artificially intelligent creature have human rights? Right? And there’s a whole chapter in the book where this question is brought before the Supreme Court of the United States? And have these quantum entities developed intelligence? Are they conscious? And do they should they be protected entities by the US Constitution, or for that matter, the Canadian Constitution? And should they have rights, human rights, and it’s my belief that, that we will see intelligent creatures, that they will be mechanical of sorts, and that they will sleep, they will dream, they will fall in love, because the only way to know you’re conscious or in love is to be conscious or in love, right? That is the only way we have no other definition that makes any sense. You know, I think therefore I am. That is the only definition of consciousness that we makes any sense the Turing test is is Fine, but it doesn’t go far enough. The other way to determine consciousness is early on when you ask yourself a question, just when you’re sitting there and thinking, what am I going to do? What am I going to have to eat tonight? Is there a voice inside your head that says, that answers you? The answer is yes. That’s consciousness. I think we will see a quantum computing at some point. And we will see artificial intelligence agents, basically, that will exhibit all of the symptoms, if you will, of consciousness and may from that dream, and like I said, sleep and fall in love. And these quantum entities that are in your phone, your iPhone 40, there is a lot of affection between you and your QE is crazy. And that’s kind of the beginning of the story.

 

Erwin  

Back Back to back, we’re going back to the Star Trek Next Generation, we know that they’ll legally be people because Lieutenant Commander data was ruled as people are life conscious.

 

Bruce  

I love data. I do. He was my favourite character in that. And I remember fondly him saying, I remember who it was, I think Commander Riker comes in, and he looks at data and data is pouring water, measuring it very carefully into a flask and then boiling it and then doing it again. And commander record says to data, what are you doing? He said, Well, I’m testing this theory that the watch pot never boils. But no matter whether I look at it or not, it is boiling. And exactly the same time my internal chronometer tells me that and command director then says, Turn off your turtle chronometer and try it again. That Riker understood, or the writers understood that that is the beginning of consciousness and, and, and the ability to go beyond pure, you know, binary code.

 

Erwin  

Are you afraid of AI or, or as locus control? I spoke to a gentleman gentleman he said, look, look that’s gonna troll is not within me. So I’m not stressing about it.

 

Bruce  

Speaking personally, anything can be used in a negative manner, right? I mean, you know, fire of humans, mastery of fire was very, very, very important. But fire was also the precursor of all of all of our metallurgy. Metallurgy led to many things, including guns and cannons, many other things implemented jets that bomb people. So, you know, it’s been used in warfare for for a very long time. So, so but I would rather have mastery of fire than be freezing in a cave somewhere in France. So I think AI could be used for very, very nefarious purposes. For example, when this quantum era begins, all passwords are useless. I mean, my QE could read your your bank account while we’re doing this. Now, Kiwis have the you know, one thing that Damien Bill who’s the young physicist I mentioned, one thing that Damien did for him with his Cuvees is he tried to give them a sense of you know, like the Isaac Asimov rules, right, do no harm basically, I

 

Erwin  

like the lawns idea that make the robot weak enough that a human can overpower it. First, thanks so much for doing this.

 

Bruce  

I really enjoyed it. And will you give me a link at some point

 

Erwin  

I when we release? Yes, well, we will send it to us and

 

Bruce  

thank you for everything you’ve done today. I’ll see you soon. Thanks.

 

Erwin  

Before you go if you’re interested in learning more about an alternative means of cash flowing like hundreds of other real estate investors have already then sign up for my newsletter. Find out for yourself but so many real estate investors are doing to diversify and increase our cash flow. And if you can’t tell I love teaching and sharing this stuff.

 

 

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**Transcripts are auto-generated.

Erwin  

Hello, everyone. Welcome to the truth about real estate investing show we have an awesome episode, we’re gonna talk about recreational property investing. And we’re talking about a couple properties, four or five properties that and to give you an idea of the scale, we’re talking about hundreds of acres, hundreds of acres, hundreds of RV sites, even in a hotel and a restaurant in there and a golf course with Darvin Zurfluh, who is the owner and founder of Pinnacle wealth brokers. Before we get to that this is the truth about real estate investing show for Canadians. It is one of the top ranked podcasts on business and investing per iTunes. Since we’ve been around since 2016. Doing an episode a week. My name is Erwin Szeto, I’m a real estate investor since 2005. And we’ve been around for a long time podcasts been around a long time I’ve investing since for nearly two decades, I’ve coached over 250 clients, and among our clients, we have about 45 self made millionaire investor clients, this market is a wild one with interest rates being really high. And looking like we might have another increase, there’s a decent chance maybe one in five chance, it might be higher that we have another rate increase later this fall later this year, while there’s many speculators out there who were honestly feeling a lot of pain. And actually, I find that a lot of people are feeling various levels of pain. But it’s the speculators who are holding multiple negative cash flow properties that are really feeling it. We checked our own numbers. Our clients are taking profit as well. Our clients have been selling some properties over the last six months. And we checked. So just to give you some averages, the properties our clients are selling, they’ve held them for an average of 5.2 years. And among those properties, they receive an appreciation price appreciation alone of $313,000. So that’s how much in minimum profits they’re taking. These are all small multifamily detached homes. Yeah, so they’ve invested smart invest well, and they’re being rewarded with again, on a 5.2 year hold on average, average price appreciation alone is 313,000. Not bad. And we know what they paid for these properties. And because we helped them buy them and they bought and they bought right. The real estate market means many things to many people, folks with houses on land and bigger markets are just fine. For example, detached homes and Treb are actually higher than last this time last year, and the price in July. So Toronto real estate board, Toronto regional Real Estate Board Treb just released our August numbers, sorry, July numbers. And July prices are basically in line with June. So prices are holding, they’re being resilient, versus on the other side. But people who are really feeling it, where we see a buyers market is in the pre construction market and cottages. Those are complete buyers market because who has a lot of money sitting aside for a recreational property, a secondary property. And for folks who are in pre construction, I hear the demands from buyers are very high. You know, it was always dangerous in my opinion to be because the pre construction properties I would see that came through my email, the price per square foot was higher than the resale value on that day. So for example, I was seeing pre construction condos, the price per square foot would be $1,600 a square foot versus resale condos were going for like 1200 square foot. So in my opinion, it didn’t make sense to rift that much. In general, not condo investor in general, I like more control my properties. But again to buy new versus used it didn’t really seem to make sense. Here. It’s all these investment options are likely to be fine in the long term, but the long term but you know, if you’re vacant, it’s gonna be painful, especially when the rate increase and we have a new housing minister, our new federal housing minister was previously responsible for immigration. So I you know, I’m I’m a family I come from immigrants. So I believe in immigration, I believe in control the amount of immigration. I don’t know what the number is. But it seems like you know, the fact that we’ve I remember when Stephen Harper was in government, the number was more like 245,000 immigrants a year. Now we’re over half a million. So something may break along the way when you double your immigration anyways. So my point is that long term likely be fine housing market will likely be fine. But again, it’s all about weathering the storm. I was speaking to one Airbnb property manager in the Niagara region who shared with me that more supply has come on come online in the market. The new construction owners as they can’t cash. They know they can’t cashflow. These are single family homes. They’re buying but they know they can’t cash with long term tenants. So they’re choosing to do run an Airbnb. And they’re hiring these friends of mine to manage for them. So short term rentals. And I’m hearing from many sources that short term rentals for long time. Airbnb investors are not performing as well as they used to a friend of mine who has been operating Airbnb for several years and was able to quit his job from his Airbnb income four or five years ago. I’ll share it with me this his Airbnb ZZ are not performing nearly as well as they did pre pandemic and they are in very ideal vacation areas. That’s for long term rentals. Our clients are doing just fine. I was just talking to one of my coaches, our client that has a try plaques that are now rented for just over $7,000 a month. You know, our clients may be vacant for a month or two, while testing record high rents. That’s the commonality between my clients that are vacant for a month or two, my last vacancy, which was just two months ago, I had zero vacancy. When my tenant gave me notice, we immediately found a tenant to move in the first of the month. So anyways, the long term rent market is doing fantastic and the markets that we operate in like Kingston and Hamilton, speaking to Coach D Phillips on my team earlier this week, and he shared with me that how in Kingston, his client to sign a tenant for $2,600 for a three bedroom main floor apartment in Kingston, Ontario. And we have a client that just rented out, they’re close to signing a lease, and maybe I’ll hold on to that number, but they’re closest signing a lease for their brand new garden suite. This was the first of probably, it’s probably the first garden suite. Well, this is the first time suite to be rented among our clients in Hamilton. So I’ll wait until at least a sign to release that number. On the other hand, small market, novice and landlords appear to be struggling based on the conversations I’m having with investors who have been reaching out they’ve been taking us up on our portfolio review offer. Small towns that are far away from the GTA, which were darlings of real estate in the early pandemic, are not correcting. Is this not new, normal? Long term, everything will hopefully be fine. If they can find tenants. In the short term, we’re we put out that request for folks to send in their what they have for sale, because we do have some clients that are looking and writing offers. Still, of course, our clients are being very picky because they can, as you know, there’s a lot of motivated sellers out there. So if sellers aren’t that motivated, then our clients aren’t interested. But my point is that we are seeing some wonderful turnkey deals in bigger markets. So markets work, you know, over 150,000 population. Why is that important? bigger cities, and turnkey a moving ready small multifamily to me means lower risk. I think that means to everybody that means lower risk. One mistake I find new investors make or maybe two mistakes is that they believe that what they see on HGTV that money in real estate is fast and easy, which it isn’t. It can be further from the truth. The other is that more work and effort means more returns. For example, I mentioned earlier, some of our clients are taking profits and pay no deaths while rates are high. Well, the best performing property among those was a turnkey property we bought from a builder, I sat with that builder to design a house that would be the perfect student rental. And it was the house was built with safety in mind. We had a lot of building code requirements for duplex built into that property even though we had no second kitchen. Each of the basement bedrooms had egress windows, I had the builder do a lot of fire rated drywall and rocks on safe and sound. So there was a lot of fire separation and ceilings and mutual walls. And that house along with other similar houses that our clients owned, they got the highest rents in the market, and there are no renovations required. It was incredibly turnkey, it was just put up the rent for sign and rented out to students. That client after seven year hold, the client walked away with $489,000 in price appreciation alone 489,000 After seven year hold, that’s nearly half a million dollars from just one income stream and then good cash flow and cold good mortgage pay down. My point is that turnkey small multifamily can be a viable option. So don’t just count it. And thinking that you have to buy an ugly property that requires months to renovate plus hundreds of 1000s of dollars and renovation budget. And who knows how many permits or zoning change or use change or variances. Again, from my experience our clients experience you can make a lot of money just buying turnkey as a sophisticated investor. One should always look at all the variety of options available to you and make decisions holistically. I’ve had several calls with novice investors considering investment options as far as like four hours away, or they have to get on a plane. Because the property is out of province versus I tell clients all the time, it’s not that hard to make money closer to home. If you can’t make money in your own backyard, then what makes you think that someone can be successful in a market where they have no contacts and or no relationships. It’s obviously possible past guests of the show have done so. But not everyone is willing to put in that kind of full time effort. Nor do they have a partner or spouse earn six figures to pay the bills and put food on the table. Ember cashflow is important. In my experience, having worked with over 350 successful real estate investors, investing within our drivers is can return world class profits. And it can be done as a side hustle over 9% my clients, they still have their day job. They do real estate investing as a side hustle and they’re doing incredibly well with the real estate portfolios. They didn’t do so investing in pre construction condos, they don’t flip they don’t do any sort of these high high effort high risk strategies a provider that require private borrowing. That’s speaking to another investor recently who has a very successful Airbnb, but they cannot get a mortgage. They’re stuck paying 12% on a private mortgage. So yeah, there’s many options. Again, you should be using a spreadsheet to make your decisions Just to understand all your options 20 Fat investing can work, it just seems to take more savvy, the pockets, risk and effort when keeping it simple, tried and proven works just fine. In my experience, at least, the sad thing was with housing is that with prices so high, it’s only gonna be the rich are gonna afford deals in the current market and going forward. Even more sad as the situation will only get worse when the rate cuts begins sometime next year, based on what the bond market’s doing, because when you see that first rate cut, you’re gonna see all the rest of the buyers get off the fence and push this seller’s market into a further seller’s market. If you don’t believe me, it’s already sold market. The June Toronto real estate board Charl real regional Real Estate Board, their days on market was 24 days. It took an average of three and a half weeks to sell a property that to me screams seller’s market that’s also down from 29 days from a year ago, and not a very good market. You know, check out the stats for yourself, you know what to believe me necessarily. And then price wise in Hamilton were up 5.5% Average Price year over year. I understand that’s a wonderful amount of appreciation. Because if you bought right, and you cash flow at least neutral if you’re at least neutral in cash on cash flow this time last year. And so you put down 25% Right, that works out to a 22% return. That’s an incredible return. And again, what do you think is going to happen when interest rates come down as are expected to mid to late 2024. We should see prices climbing. And we’re gonna continue sharing how our clients continue to earn world class returns via our online monthly meetings and in person mastermind tours. So don’t miss out through mine. Our in person mastermind tours do sell out. We sold out our last one which was in Kitchener, Ontario. We have upcoming ones in Kingston, Ontario. And we’ll have one on the west west of the GTA as well you’ll either be held in Agra. So the best place to stay informed and be aware of when we have when we host these events is to be on our email newsletter, along with the 10,000 other high winning yes investors in Ontario in Canada. Many of my rich friends are taking advantage of the opportunities presented by this market. So find out how you can to sign up for our email newsletter at www dot truth about real estate investing.ca Let me slow down WWW dot truth about real estate investing.ca Enter your name and email address on the right side and you’re set to become a very well informed sophisticated investor. So speaking of simple tried and proven Cherry, the kids and I just returned from a week long vacation in Muskoka. No, we didn’t stay at some luxurious cottage, but rather we stayed at a family camp at the YMCA on this huge property that someone some lovely person donated to them to the YMCA 110 years ago, there was lots of greenery, an incredible amount of lakefront and most importantly, the camp counsellors were wonderful as they entertained our our kids via their programming. So each day, our kids would do all sorts of activities, treetop trekking while climbing, canoeing, kayaking, swimming, sailing, nature, walk hikes, arts and crafts, archery, all sorts of fun things that people do at camp. In the afternoons. We could do the same activities as a family. We pretty much did them all.

Erwin  

Is it arts and crafts, I usually like a little more excitement meals were provided which so we didn’t have to cook and clean our accommodation with a cabin with 10 bunk beds. So very simple accommodation, the same cabin that the overnight that the normal regular overnight campers, kids use. So it’s no frills, no air conditioning, no bathroom. The bed was not built for someone my size. We had a blast. The beds could have been better for my back in my sleep, but the kids had a blast. The camp counsellors were amazing. We enjoyed the meals, the campfires and the sick related singing and performances and just being disconnected from technology in the city. Now, this was our second visit to the YMCA family camp, our first since the pandemic and we plan to be there back there next year. A simple vacation. Camping is tried and proven to be fun for kids and it works. Now on to this week’s show. We have my friend Darvin zoo flew, who has a huge private equity brokerage, it’s actually in terms of the capital raised, they are the largest and they have the largest network of brokers as well as called Pinnacle wealth brokers. If you’ve been around the investor community, you’ve been attending events, you’ve likely seen them around. But today we have the founder of the company joining us from Calgary, Alberta. If you’re not familiar with private equities, all you need to be as a good private equity is part of the reason why you hear me say things like today’s time is the best time to be rich as the options for investing and never been so good and available. I was introduced to Darwin when I asked my own Pinnacle wealth broker representative, Steve Wozniak, I asked Steve for if you knew anyone who did large scale recreational properties to be a guest on my podcast. That’s how we can I got connected with Darwin. We’ve since become friends because we share so many things in common. His recreational properties are much bigger than mine. And also because I know so many of our listeners are interested in Airbnb and recreational cottage investing, he’s been in the investment industry since 1997, when he started up at the bank, and he since progressed to only a couple of 100 acres. Darvin shares how he recently purchased about four or five properties that total several 100 acres, including among those properties, there’s hundreds of recreational vehicle RV sites, dozens and dozens of cabins and campgrounds, and there’s even a hotel and a golf course in the mix. Darvin details the story behind that purchasing like golf course property, the analysis and the value add strategy that goes into it, which I think I find it particularly fascinating. So I hope you do too. In general, this is a fascinating interview into entrepreneurship in the private equity real estate investing space at a large scale. Again, Pinnacle wealth brokers has raised over a billion dollars in capital, Steve tells me it’s closer to like 1.6 or 1.7 website currently says 1.2. It’s one of those numbers they offer passive investments to middle class investors to participate in passively active or passive investors will appreciate this interview. And so if you do enjoy it Darvin is our confirmed desk for the online only November 21 monthly Iowan meeting. At that meeting, Darwin will go into more detail and also have slides and whatnot to show us what private investment equity investments are. He’ll go into the numbers behind the story and the numbers behind these recreational property purchases, hopefully, including the Golf Course. So if you’re on our newsletter that’s already received by over 10,000 of either winning US investors in Canada, then you’re set if you’re not on our email list, newsletter, go to www dot truth about real estate investing.ca and get on our newsletter. As we are discussing securitized investments, please enjoy the show, and the legal disclaimer to follow as required by the island legal department. If you do want to learn more about investing with Darwin’s company Pinnacle wealth brokers, Steve lazy acts, who is my own broker at Pinnacle wealth, his contact information is in the show notes. Please enjoy the show. Hi, Darren, what’s keeping you busy these days?

Darvin  

Quite a lot. Actually. You are busy in the fund investment world focused on real estate. I just got back from a trip to some of our RV resorts. So we had a charity weekend actually this weekend with the Starlight Children’s Foundation. So a really fun weekend hosting a bunch of families at all of our resorts. And yes, I just got back from there back in Calgary now in our home base and just just about to head back into the office for the next couple of weeks before we hit the road again.

Erwin  

So hang on, you hosted families via the starlight charity at your resorts. Yeah, the

Darvin  

Starlight Children’s Foundation, if familiar with them. No, I don’t know if they’re out this way. Yeah, they’re quite a large organisation that work, work with hospitals work with sick children, people from all different backgrounds. And we partnered with them to look for maybe children that don’t have the opportunity to get out into the county and kind of experience. So we hosted them and their families that are different resorts and just you know provided a food and activities and a bunch of laughter and then ultimately all of our staff at our resorts have had a great time as well. So it was a win win for everybody.

Erwin  

Amazing. Yeah. Your kids all this?

Darvin  

Yeah. Well, a couple of my kids were a little older, and they were working but yet my youngest son was there working hard, making the resort look good and hosting people on the boat. So my wife is there helping cook and we had a couple other staff at our resort. And then like I said, we were doing, we were doing six different resorts. So that was a great time.

Erwin  

Philosophers benefits, how you say Darwin is a bit of a big deal. But we’ll get into it, we’ll get into it. So backstory is how you got on the show was I asked my friend Steve, our mutual friend, I said, Hey, recreational properties or has a hot item, you know, like, who’s the best person who’s the best person to speak to recreational properties? You know, a lot of people are talking about short term rentals Airbnb ease, you know, so then he introduced me to you. And yeah, you know, I mentioned before we start recording, you’re the only person I know who’s who owns a golf course. But yeah, let’s let’s start from I don’t know, how did you start your career? Like, let’s start there. What was like your first job out of university?

Darvin  

My first job when he seven years ago working for one of the big banks, and my second job was working for one of the other big banks and then and then my third job going into work for one of the largest insurance companies. So yeah, I started my entire adult life working with investments and ultimately in the financial industry and my early years were kind of a training ground and took all the courses that I could take and tried to move my way up within the ranks and he’ll eventually went more independent and got into the business owner side of things, which was kind of what my aspirations can always worse. Since going to business school, that was my goal. So, yeah, I learned a lot about with banks and how they operate. And you know, how they make money and how they tell their advisors, you know, these are the different investments that make us make us the money. And this is your report card on how well how well you’re doing for making the bank money. Ultimately, I wanted to find other investments and other ways for people to make money than just what what the bank was providing. So I ended up moving more into the independent channel where I had a little more say, a little more choice than just searching for these investments or slogan at Pinnacle wealth has been, you know, continually seeking unique opportunities to find how to create wealth for investors. And by doing it on our own, and having our own team of people that look for these great opportunities, we have the freedom to choose what we believe is best not necessarily what a big corporation feels that we shouldn’t be pushing on investors. You know, that was that was the beginning of my career, though the banking world and looking at all the different products that the bank had. And then, you know, taking courses through the Securities Institute, and, and, you know, the fellow of the Canadian Securities Institute, and more I learned about investing in the public markets. The more I realised, though, this is not something that you can predict. And it doesn’t really matter how good I get, I have no, there’s no ceiling here where I can say, now I’ve know what I’m doing. And I can really make a tonne of money for myself and investors. Because really, the more I knew, the more I realise, I’ll never know, like, right, like Warren Buffett, you know, he’s by a great company that Hold on, don’t try and trade stuff, don’t think that you can beat the market because Because ultimately, you can’t. And so that was less challenging for me than when I realised I can’t become a guru in space. So that’s where I started to lean more towards the real estate side of things. Because I do think you can control you can control your own market a little bit better, you can predict where the markets going without it turning on a dime. Whereas in the public markets, it turns earlier, or an earlier, you know, before we hear about something happening in the public markets, the big money’s already moved out of it. Right. Like it’s it’s happening so fast now. And it’s so sophisticated, that there’s there’s really no no fun in it, right? There’s no because he can’t You can’t beat it. So yeah, coming into the private world and investing in private companies became my focus. The private companies don’t have that turning on a dime, you know, the news comes out and all of a sudden the share price as a as a massive change. Normally, the the valuations are dependent on what, what’s the income being generated for the company? What’s the outlook for growth in the company, and what’s the sector look like? And so, back to more normal investment fundamentals in the private side, and more specifically, in the real estate side, like I said, there’s a little bit more predictability. And I really, like hard assets. And so, you know, going into into the private side, we focused pretty heavily on hard assets. Just, you know, for reasons that you know, and I’m sure most of the listeners really liked about real estate.

Erwin  

So that’s my fault. Darren, thank you. So a good friend of mine was he worked for one of the big banks as a financial advisor. His clientele was like, I think 3 million and up and assets under management. So like he was decent, and one of his including he had a major real estate influencer client as well. Like, I mean, he says it’s private, obviously. And so I go I go, you’re like, Oh, that’s awesome. What kind of cool stuff can you offer? I’m like private stuff like stuff I can’t get. It’s like nothing. No private equity options, everything that you know, like 10 million assets under management guy, I can get all access to the same stuff. And it’s all you know, all stuff people are note were aware of GICs mutual funds ETFs like what do you guys do different than so what what was your experience like? Was there many hard asset options or real estate options for not working for public financial institutions?

Darvin  

Nothing at all back then. Yeah, like bank

Erwin  

offers I can buy gold from my bank but it’s really expensive. The fees they charge are ridiculous.

Darvin  

Yeah, there’s no options it was it was actually quite disappointing in what you can provide to clients so having to look for something something different you know, they’re they’ve missed out I think they missed out in a big way over the last 20 years. I think they realised that and today I think they’re still trying to figure out how do they do it? How do they get into space and so there’s there’s going to be a slow change over the number of years but right now the options are still very limited. That’s how I protect the wealth. Did

Erwin  

you did you buy it? Did you start it? Yeah, I

Darvin  

found it a pinnacle wealth. So like, like you were saying, the way it came to be founded was was Most by by accident, but when you talk about how you ask a broker, like, can you invest in real estate invest in private, there was no option. So I started doing that for my clients when I left the bank and the insurance company was looking for these private options as an independent, you know, and as a business owner didn’t intend to have brokers at the time, I just want to be able to offer Publix and privates to my client base. And what I found was a lot of my new clients were actually financial planners that worked at the banks, or they worked at a large mutual fund broker. And I’m like, why you guys, my guys buying your RSPs for me like it just like it just really clicked when I was driving on the road from a road trip, signing up a bunch of clients on flow through shares, you know, because flow through has a very short window of season when you get in to get your tax deductions. But again, most of these clients, again, were financial planners, they understood these investments, they couldn’t sell them to themselves. And ultimately, some of them were asking, Hey, can I work with you? Can I do what you do. And so ultimately, we had a broker network being formed. And back in 2009, we were raided by fast 50 Girls number one fast 50 growth company in Alberta, and, you know, continued on that path, and did some rebranding and ultimately went national with Pinnacle wealth brokers, in 2010. And it was a unique time in the marketplace, with regulations and a lot a lot of regulation changes kind of came into place. Because our regulators province by province, we’re seeing the demand and the change for for private investments and what they call

Erwin  

Jarvan. You’re having to be regulated under every province are regulated under that sounds like a pain in the butt versus like versus a single regulator. Wait, because I believe in the States is just one regulator. There’s one one national.

Darvin  

That’s right, one, one national regulator. So yeah, it’s something that’s a little disjointed in Canada having our provinces of 10 different provinces that pinnacle wealth brokers is regulated.

Erwin  

Felt like a lot more expensive, unnecessary. I obviously have to do it. They write the rules. So

Darvin  

our compliance department is their biggest department because you go from one insurance regulator, Canada, they do their routine reviews, and then the next province comes they all have the responsibility to oversee the activities happening in their province. And

Erwin  

the clients budget must be millions.

Darvin  

It’s expensive, it is expensive. The cost of doing business for sure.

Erwin  

Right. So not because it’s not a business you start overnight.

Darvin  

No know, it takes time to build for sure. And it’s not it’s not the easiest business to be in for sure.

Erwin  

So how I got introduced to pinnacle, I don’t think Brian Paulus was mine that I share was, this was years ago, so a friend of mine, Brian pulis, of course, investments, he was one that introduced me to pinnacle, because he was telling me how he wanted to be on the on the best, you wanted to work with the best. And that’s how he ended up with you guys. I know and I heard it was long process. You guys are just from what I hear you guys are not you guys are quite picky. The diligence period is long, like a couple of years. But yeah, but that’s that’s how I got it for sure. There’s just the pinnacle. And that was like, a long time ago.

Darvin  

Yeah, Brian and Poulos been one of the the REITs that we’ve been raising money for for for many years now. And, you know, they’ve they’ve done very well and been a successful investment for us as as most of our REITs have been. But we do get approached quite often. And so we do have to have a very detailed selection process that our corporate finance team goes through from, you know, the finance side, the legal side, the client side, and salability what’s unique about them and let them sell in a portfolio. So

Erwin  

because what I’ve heard is, you know, if you want to be bigger, raising capital is either a full time job for yourself, and that’s several others, or you can work with someone like Pinnacle wealth. So can you can you explain to listener what Pinnacle wealth brokers does?

Darvin  

Yeah, we we bring private investment opportunities to market to the retail channel across Canada. And we’d look at, we try to look at a wide variety of investments so that people are properly diversified. We have dealing reps and all the provinces in Canada are the main provinces. And so we’re coast to coast and those DNA reps are financial advisors, really advising on private investments. In Quebec, they’re also able to become mutual fund licence if they wish. And some of them are life insurance licence and so really there and they refer to portfolio managers on the public side, if they if they’re not offering that themselves. And so we’re a portfolio manager as well. So there’s different register duration categories, but we offer public investments. But our niche is really just bringing these private opportunities to market helping get the offering memorandums created, so that we can go raise capital in client manner. And then ultimately we we stay up to date on the investments that we’re raising capital for, and, and work with them if on the financial side and monitor the investments as as they grow. And, and ultimately, we see the benefit of them growing and becoming successful. investments like century and we brought to market through a company that we had acquired when they were new. And they’re they’re one of the largest REITs private REITs in Canada today and 2.6 billion, I think they’re gathered a few different funds. Now it’s adds up to about $6 billion. Right.

Erwin  

So that because the is it, the president or the owner, he has a wonderful newsletter. So for listeners, like if you’re interested in geeking, out on what someone consumes and thinks about real estate, who made that who manages 6 billion? Check it out, check out his newsletter. And so Pentacles quite large. Are you not like your national? I can’t imagine many EMTs or national? Yeah, we

Darvin  

I think we, we have more dealing reps. So more presence than anyone in Canada where we have about 7078 Dealing reps, from coast to coast right now raised about 1.3 billion in retail dollars into the exempt market products that we offer. And like I said, we’re growing growing on that side. And I’m also trying to reach out to the financial advisor network, they said the work in the public companies and then just show them like as part of our goal in the next five years to really show them that they can have access to because they can come and offer what we have to offer and what they can still offer what they have to offer so they can properly diversify their clients. Yes, proper diversification,

Erwin  

I think the key word there. And so for the newer listeners, or the smaller investors, from what I see is when when say like an apartment building investor wants to scale up. Generally, capital is their biggest issue, assuming but most of them are quite talented at finding good deals. But you know, you kind of need to focus on one thing, most of them seem to most will go to someone like you to try to raise the capital for them. So who so I imagine you get a lot of people asking you to do their capital raising for them? What do you think it is, like 10 to one, like asked to actually get on your shelf as an offering hundreds of one?

Darvin  

Yeah, I know, we used to track that a little bit better. It’s about one a day that approaches us. And lots of those don’t even have an offer. Yeah, they just have an idea. Some of them have a full operating memorandum already done. But we want to make changes. But yeah, we only had six to eight new kind of offerings, or maybe less than that maybe less than six offerings a year. Now. The ratio is certainly very, very challenging for an issuer to try and get onto the show got to have a track record, you got to really have a strong team behind you. You got to have really good corporate governance, and you got to be in the right sector, you got to be offering something unique, can’t just be raising capital so that you can buy something to grow for yourself. It has to be like how do you really provide extra opportunity for investors to provide that above average? So we’re looking, you know, and we look at risk adjusted return like So ultimately, that’s what it’s about, like if the risk can be higher return for investors has to be hired to

Erwin  

sadly, I find the understanding of risk adjusted returns is lost on many people. Like for example, I’ve seen like promissory notes for like 17% So unsecured loans for 17%. And then like, you know, the credit your credit card will want like 20 to 30% for that same kind of security risk that you’re taking on? Why would you give it away for 17%? Anyways, moving on. So how many products can you give us like a high level of number, give us listener a high level understanding of like, what kind of products you guys offer opportunity offer? Because I talked to Steve and it’s like it’s currently varied. You’re telling about like you have some like you have some like music one as well.

Darvin  

Yeah, we look for something like unique opportunities to increase wealth, right? That’s our mandate. And so a lot of stuff you’ll see will be a little bit different than what you find. So Steve mentioned music royalty fund. So through ICM, they they have the investment business and they have a REIT but they also accumulate the music royalty for I brought some talented people together to buy, you buy songs that have a long standing track record of being played and you get a royalty. When those songs are played, it goes into back to the owner of the of the song, what we like about it is it’s very diverse, it’s not correlated with your stocks or bonds or your real estate. And so, you know, just a very unique opportunity that provides a consistent return as the song could stop being played. Right? You look at the the friends soundtrack, or whatever that was on the TV show Friends, wherever that one went up for sale. And as long as it keeps getting played the there’s there’s royalties coming back.

Erwin  

And so that’s why you have ownership in the friend zone.

Darvin  

We didn’t know our fund didn’t buy that one. But people have like, they have different kinds of songs that you can buy, I thought that one went for like $300,000. And then you kind of own the royalty. So it’s not not super expensive. The goal for the for this music royalty fund is, is to buy ones that they believe will continue to be played, right or have an increased amount of what they’re being placed. So

Erwin  

I’m trying to time it, I would sell it for the seasons, the series is over.

Darvin  

Yeah, there’s a lot that goes into into their business, for sure. And the key again, good, great management team with that, understand what they’re doing and understand the business and very prudent on the financial side. It’s easy to get excited about something but you got to make sure it makes long term financial success.

Erwin  

And you mentioned you have Centurion which is incredibly boring apartment buildings. 6 billion, just apartment buildings.

Darvin  

Yeah, but some of the very best managers in the space. Right? So they’ve provided us double digit returns, you know, for a long time now. So last years,

Erwin  

we my mom’s invested in the the carwash fund.

Darvin  

Yeah. We thought, well, what’s the unique aspect where you can get into real estate, but maybe they can generate a little bit better return than than typical real estate? And so carwash, you have the business side, you got the real estate side. So we liked that asset class, and that was probably closer 2015. When we got into that, then after that it was storage facilities like can you consolidate or build storage facilities where there’s high demand, so that was nationwide that started doing it. And closer to that in Vancouver, you know, instead of going by cheap land where the storage is spread out, they thought, let’s go more vertical, and be more walkable and closer in proximity because there was high demand for that. So that’s just one other real estate kind of asset class. We have stuff. It’s not real estate at all. We built a fund we called Pinnacle institutional access fund, and it’s access to Blackrock as a money manager. And so they they invest into private companies that are much larger scale than other companies, you would see on the pinnacle wealth brokers shelf. So they’re investing in the United States and Europe and Asia. And so the only way that is one of the funds that is very unique to us, we chose not to use their real estate funds do we have lots of real estate, but they’re, they’re buying secondaries funds, funds in private companies that may be large investors need liquidity, so they might need to sell the private fund that they got into your five years ago. And so now they sell a pool of private investments and our institutional blackbrook fund those managers of Blackrock to money, largest money managers in the world, decide which ones they want to get into it and get out. So that performs very well. It makes up a good chunk of my registered plan portfolio than then. Yeah, we have lots of different kinds of unique opportunities that don’t without being out, but it gives you kind of a general scope of like, what we do a pinnacle wealth brokers.

Erwin  

That’s why when I explained to someone new to the space, I say, you know, this is the way I explain it, is the analogy I use is it’s like a mortgage broker who has access to many different types of mortgages and lending products. You guys are a broker of different investment opportunities in the private equity space.

Darvin  

As writer. Yeah, we exactly. That’s a really good way to explain what we do. Your job is to quarterback which we think is best for the client. And including diversify you can one can diversify across many funds. You don’t put all your eggs in one basket, that that’s key. Choose whatever, right? Yeah, you said it before, right? Diversification is key and it’s easy for anybody else. losses, investors might favour a sector, right? We might favour apartment buildings. And maybe you win on apartment buildings, or you have one on them, but you don’t know what the future holds. And that’s why financial planners always tell you to diversify. And that’s the job of our brokers is to make sure what’s an investment, what’s in your investment portfolio is suitable for you. Your timeframe matches your risk tolerance, and the diversified, you know, over concentrated just into one sector.

Erwin  

And I believe my mom’s returns on Polish was 14%. Last year, so she’s quite happy with that. Predict the future. This is not financial advice. Don’t sue anyone. Now, I want to ask about your own personal investing. Because if we started off the show, we’re talking about like recreational property. Yeah, please like, like you were talking about Warren Buffett, for example, like Warren Buffett, of course, correct. So along the way, like 10 years ago, did you ever think of you buying recreational property?

Darvin  

For me, like I have been in like, I’ve always had a bought a cottage at a young age, I grew up what are the competition water skier, and so our family was always on the lake. And so I like that space, we have a recreational property for 15 years in Honduras. And, and so I think a lot about it, I think both the pros and the cons. And ultimately, when I had some money coming back from some of our exit market products, I needed to deploy, redeploy. And I wanted to think of something that I can hold for the long term, like, what do I really believe in? What sector can I just, you know, have a 10 plus year time horizon that I can invest in. And ultimately, we thought the campground space hasn’t really been touched by big investors. So what you’ve seen happen with apartment buildings, or even office space has already happened in this space yet. And we happen to be living in Alberta, and we spend our time in British Columbia, those are the two best places in North America to invest in this space. So I made an investment with my own money to try it on the first fund, I call it and it worked out really well. And so we thought, well, let’s see if we can replicate this and do some other properties and start inviting investors in. So I although invested in all the properties that we have. There’s only two that was kind of myself and my business partner. That is just us. And now we’re doing a fund that is for everybody.

Erwin  

So before we’re recording, I mentioned that I think it’s I think it’s the right thing to do is to cut your teeth, your own money, if we will you and your business partner. But yeah, he was he was active on this, too. He has needed each other. I think it’s I think it’s the appropriate thing to do your own teeth with your own with your own money before going to use other people’s money to invest, especially especially when it’s something that hasn’t been done before. That’s how I was going with my next question. My next question is actually can you speak from your own experience the importance of using recreational property? Because like, you know, you went from, you know, university to owning a national nationwide poker network. I’m sure it wasn’t easy. didn’t happen overnight. Wasn’t a four hour workweek wasn’t

Darvin  

read the book, loved it. Great concept. But yeah, getting down to 40 Hour Workweek still still a goal. So yeah, how did they get to recreational space is your question.

Erwin  

Like, what’s your experience? Like? How important is recreational space to your to yourself? Because again, like your journey has not been easy. I’m sure there was your business building. You know, you had a startup. All right. I’m sure that’s stressful. If you have four kids, or kids, or kids yeah. Busy, busy.

Darvin  

Yeah, so I guess you know, from my family aspect, getting into the recreational space seemed like a good way to start finding balance. You know, it’s one of the slogans we use the pinnacle lifestyle, it’s, you know, finding balance. Getting out of the desk, for me was a big thing, spent a long days in front of a computer and eventually that catches up with your knees, your back your neck, you know, either your forearms, your typing. And so, health and fitness. I grew up being more athletic than I found myself as an adult because it wasn’t getting out enough. Playing enough sports. And so yeah, but this I realised that’s when you’re happy too is like after a workout usually feel better, right? After going to play hockey with your friends or going to do any kind of sport. You feel good getting out in nature. One of the things that really astounded me was an article that came out when we’re starting the pinnacle lifestyles as doctors now prescribing prescriptions to go for a walk in the park and it’s like, wow, that sounds so crazy. And the more you read into into nature, the more healing you realise that it does for you, and so in some cases, it can replace entities depressants, but ultimately it does. It does make you feel good releases endorphins to be out in nature and just hear the creek, the water running through the creek and the birds chirping. And just to get outside hiking and walking in the park is really good. So for me, it was a feel good thing. It was healthy for me looking for what’s healthier for me in the future. And, and how do you help others, we know that there’s a big problem with technology really consuming our time and our minds, especially kids. And that was a concern for me and my kids was, was seeing how these, you know, these all these new apps really have their attention and, and their mood, right their mood after spending time not to pick on anyone but Tiktok or Instagram or something for a couple hours, their moods not the same. Right? As you go you play baseball with your kids, and they see what their mood is after it’s just a night and day difference. And so I have a pretty big passion now of trying to encourage people just to get out and and to be more active and live that lifestyle. So yeah, it’s a bit of a feel good investment for sure.

Erwin  

This is I love where this conversation is going. Because I find many real estate investors. Like, you know, I never grew up thinking I wanted to be a landlord. And so what I find a lot investors are new and veteran, as they’re always trying to figure they’re trying to figure out where can they find their passion within real estate. And then you’re a living example that you’re doing exactly that. Right, you find your passion. So tell us more about about I don’t know, maybe the first two projects you got you started doing with recreational wise. Yeah,

Darvin  

well, we always look at investment fundamentals. I mean, we’re an investment brokerage, we looked at 1000s of opportunities. And so the one stat that came out that really, that Tom brought, to me who’s my business partner, was there’s 20, recreational vehicles or RVs, for every place to plug an RV into in British Columbia, and an 18 RVs for every place to plug an RV into in Alberta, then you go into Ontario, and it’s more like six to one, you know, and a lot of United States a lot lower. So it’s just a it’s out of balance. There’s not enough RVs especially service derbies, there’s some dry land count more dryland counting, probably than a lot of places where people can go that they don’t need any services. And so there is counting opportunities, but we know where the trends going. People want electricity, right? People want running water and services. So we look at that as a very solid investment fundamental to base our location of business on right because with real estate, its location, location, location. So when we get asked why we’re not in all these other places, I just go back to the number one fundamental that made me want to start this business and then we looked at it from from different angles, like how do we do better than what an average campground owner gets? Are they getting a cap or a 10 cap on their investment where you know, apartments or maybe going down and cap rates so you know, there is there is opportunity to take a campground and increase the revenues, I think we’re well over 40% in the first year of of our operational campgrounds that already have to service RV sites in there, and being able to increase the revenues from it. So there’s there’s lots of little things you can do as a company to be strategic to get more customers coming and take advantage of off season. Take a business it’s actually profitable in two months of the year because we’re in Canada, right like they these campgrounds make their money in July and August. You might have a long weekend or September long weekend, but you don’t make money typically in those months. And so from an investment side we go in and say is this something we can make money in and more than two months going forward. And so we’re looking for those ones like fishing resorts, while April May are really good fishing months in September and October really good fishing months, but they’re also on beautiful lakes. So you know, white lake fishing, we have a fishing Resort at White Lake and the shoe shops in British Columbia where it’s top 10 Rainbow Trout fishing lake and so it gets a much longer season and it’s just a great investment with consistent cash flow and people are spending more on fishing so we upgraded our old owners residents and making a fishing lodge and we’d like to keep evolving that into into providing more services to people that maybe want to have fishing guides the future so we’re not there yet, but we are seeing boats

Erwin  

I mean Oh that sounds awesome. I need a fishing guide. I don’t know anything. Yeah. I don’t like putting a worm on my hook. Hook beaver

Darvin  

fishing is a really cool thing. Again, it’s not a sport that’s getting your your your endorphins out as much as as most sport but when someone gets a like this weekend with the Starlight Children’s foundation we had a few kids to catch a fish for the first time in their life. You know, some of these kids are 1617 years old, you know a smile on their face is just priceless is a fun sport for people of all ages. And you know, something that I’ve grown to like more and more I did a lot when I was young and I hadn’t done it much less

Erwin  

you know, I can recall every memory of fishing with my kids. I’m sure you created some amazing memories with across your six resorts for those poor children.

Darvin  

Yeah, yeah, I mean they did they all had a good time. We got some positive reviews from I think all families, but even just our regular campers right like just it’s just one smile at a time right? That’s our goal for our staff and all the different resorts help great smiles.

Erwin  

So for the listeners benefit like me my benefit to how do you describe like six out of six resorts? Like how many campgrounds is that? How many RV? Do you can you host like how do you quantify that for somebody just so they can understand the scale?

Darvin  

Yeah, well, they’re all vary greatly in size. And so we have where I have my cabin and I bought it more just because it’s where I want it to be. It’s very small 1.4 acre campground 20 RV sites, five other cabins to rent out. And

Erwin  

that alone is pretty big for somebody. Five cabins 1.4 acre 20 RV sites. Okay, that’s that’s, that’s more than the mouthful. Okay, so that’s one.

Darvin  

We have one in Edson which is the first one that I bought with Tom and it was 143 fully serviced RV sites. We got a privately we got a couple suites like condo style suites and and a cabin on that one. And we have like 100 acres of expansion room. So we’ll keep building RV sites on properties like that. We have the Golf Resort Kokanee springs and coot nice, and that one is 432 acres. So it didn’t have any RV sites. We bought it and then we put on RV sites. So we just were just launching like I said beginning of June like 36 RV sites for for rent and then 26 RV sites for sale and we have nine new cabin lots that we’ve constructed on that property.

Erwin  

I’m sorry other cabins for gonna be for like Airbnb or your hotel or

Darvin  

it’ll be the it’ll be ownership. So if somebody wants to have their own cabin for ownership, and then Pinnacle lifestyles actually has a management company and it’s through our same investment fund that we manage will rent those out. So if you want to rent yours out, we’ll do all that work for them. We’ll advertise that we provide the cleaning and come in and get them rent ready for everybody in between customers. Amazing. And then going on to other resources may have Revelstoke and Sitka moose. Guests we have about 180 sites and our Revelstoke campground and I think it’s 86 sites and the second most campground we have gold that I did, that’s not one of our six campgrounds because it’s just it’s 200 acres of riverfront property that’s not developed yet. So it’s nice beautiful treed property actually on the Columbia River on both sides of the Columbia River and it actually owns on both sides of the way a bit Creek so there’s kind of a where two rivers can join we own all around this, this beautiful junction of of two gorgeous rivers. So again, fly fishing and, and the trails ATV trails and stuff from there are quite wonderful. One of the tights it’s right across the road from the staging area for sweaters and snowmobilers. So again, it’s one of those places that we can make a 12 month of the year season, close to the ski hill and golden and but beautiful summer and winter and fall and spring destination release. So that one we’ll put on a few 100 RV sites like we will with the coconut springs golfers or we’ll put a few on like three or 400 on each of those properties. So yeah, that kind of gives you an idea of the size of the properties but the investment horizon continually being able to develop more lots in a resort that is already popular and attractive, and then allowing people to either rent or allowing them to buy. We have both options. And I think we’re the probably the only unique company that does this in North America where you can come in and you can kind of do both can have multiple properties. So you can move around from from different locations if you wish. We were allowing people to invest, invest in a fund that owns all of these different resorts and we do have three different funds that own those ones that I mentioned. Fund three is the one we’re on now and everything going forward will be in this political lifestyle. It’s been three, but they own the management company so they own the rental revenues. They only golf course they’ll note we have a 62 room hotel that’s at that golf resort so they would own that And then so they get the they get the fees from the restaurant revenues, we have a marina at the White Lake fishing resort. So they would own part of the marina and the boat rentals and the gas, the only it’s only gas station on the lake. And so there’s multiple streams of income and what we have as one different investment, one investment, very unique Pinnacle wealth brokers to invest into the sector. And it’s a sector that I don’t think many people have in their in their investment portfolio, and it happens to be RRSP eligible. So, you know, if you want to buy with a TFSA, these are your registered plans, you can do that as well.

Erwin  

I mean, that was a mouthful. How much? How much did it cost to acquire all these properties? And over what period of time? Like, you know, one of them is one of those a personal property or cabin, unlike all the other ones that were bought strictly investment purposes?

Darvin  

Yeah, cool me the exact numbers, but we’re in for about 17 million on on the equity on these properties. Yeah,

Erwin  

over what period of time over the last three years. Okay, so on average of 6 million to deploying in every every year.

Darvin  

And that’s the reason we went to full investment offering for accredited investors to allow accredited investors to get in. But in order to, to get the velocity of building all the amenities and campsites and the cabin sites that we want, does require for a fairly high amount of equity. And then so we also use some debt, but we’re very low leverage and this time of higher interest rates. So we prefer equity for sure in this space.

Erwin  

So I can speak to the listener, like you’ve said, You’ve dropped many golden nuggets. Like for example, you mentioned you’re trying to extend beyond just the summer season because like, generally for Airbnb, this candidate generally Airbnb, for example. Most all our friends, even my own experience was the summer killed, Christmas killed, but then maybe Thanksgiving. But you know that there’s a lot more to the year than that. So you mentioned snowmobiles, if that’s the property snowmobile near SamMobile trails that will be popular emission fish, and that’s a new one for me is is hearing about like the fishing opportunities within for that property, make it more marketable as well it gets more rentals because I literally have friends who rent the entire winters. And like Muskoka, for example, to some old dealers, when normally you get nothing else like if you’re not if you’re a three season cottage, then you don’t get that business. But if you do, then if that’s available, right, every

Darvin  

property we have actually is close to fishing and every property has close to snowmobiling. And and I think all of them are not that far. It’s it would be the farthest from a ski hill right from a world class like ski destination in Revelstoke. We’re in the city of Revelstoke. And it’s the tallest vertical of any mountain in North America, right golden has one of the most popular ski hills and we got three that are about an hour drive from the Kokanee springs destinations, they’re all

Erwin  

ski so now, if you’re unsure, you’re in Blue Mountain, you’re telling

Darvin  

ya know, four of our properties are kind of in the Rocky Mountain area. So we’re, you know, golden being the heart of the national parks, you can go in all directions and find a national park within the Rocky Mountains and golden. And so from that standpoint, you see people coming from eastern Canada, you see people coming from Asia, you see people coming from Europe, because they want to go to the Rocky Mountains and they want to want to own a piece of that right. And so I think in the future, we’re gonna see a lot more people wanting to own, you know, in the national park close to the National Parks you can’t own in a national park like bath is the closest beautiful mountain destination for us in Calgary but you got to drive paths down and then you can go to Lake Louise and then Golden’s next so it’s one of the closer destinations we can actually have ownership to these

Erwin  

kinds of properties. Are you seeing much action from Americans in Kokanee we’re

Darvin  

starting to see them come back again for the Golf Resort. They through COVID that had slowed down a little bit but also increased in people that were more local. That didn’t have to travel as far so we’re seeing that we’re seeing and Revelstoke for sure we just have tourists because a lot of our properties around there and Highway One, you know Revelstoke and sick of moose and, and white lakes off highway one so you get a lot of people coming from the United States and also from Europe. A lot of people come from Europe and rent your campervan and they’ll stop it all these properties along the way between Vancouver and Calgary it’s a very public route if I don’t have a snowmobile can I rent one from you? Yeah, we don’t rent them but with knowing soon we work close with a company called stomping ground and so they do they do a TV show actually and they’ve done that filmed the TV show at all of our different resorts. And they’re big snowmobilers in ATV years and so they have all the fun toys and equipment and so I think it’s As part of their future will be opportunities to to get into solo deals and they do so. Yeah, that’s awesome. Pancho Yeah? Oh,

Erwin  

can you share the story of the how? Just for someone cuz I’m sure for the listener this sounds all massive it is because of this big. Can you share the story of how you bought the the golf course in Kokanee? Like what was the story behind that? How much can you share?

Darvin  

Yeah, that’s that’s good question that’s unique. It’s a Golf Resort, it’s been there for well over 50 years very mature trees in just a gorgeous property. It had different owners over the past and like most golf courses, would you build a golf course very expensive. And then you got to build a customer base, that’s hard. All the golf courses that we’ve really looked at, they’ve had a history of running out of money, because they spend so much money on building it developing it, and then they bring in new investors or a new group buys it. And then you know, that usually happens two or three times when a developer is being established. So I, I’ve always wanted to stay away from golf courses. But this one was quite special and unique. The last owner group, and this was nine different investors. And they’d been in it for about 30 years, and Done, done a great job with the resort itself. Like it’s nice as golf course that I’ve golf that like it’s just absolutely beautiful. They were all successful business owners in different regards. So you know, some real estate, some not real estate, some oil and gas, and they put a lot of money into this Golf Resort. And they’re all retired and that in that age, I think the youngest was 72 or 73. And, you know, the oldest was was well into their 80s. So it was just time for them to move on. They actually approached us because they said you know what this resort needs, it needs Pinnacle lifestyles, and it needs our unique 30s It needs cabin they wanted to create, it actually had the vision that we’re rolling out for Kokanee springs. And so you can see some beautiful pictures. Kochi springs.com, or Pinnacle lifestyles.ca. But it’s, it’s a gorgeous resort that just needed more people. It’s in the Kootenays, which is crossed from Nelson on that lake, the Kootenay Lake, beautiful lake again for fishing and boating, but six hour drive from Calgary a little bit more than that from Vancouver. And so in order to make the golf course really successful, we need people to come and stay longer. And to make the resorts successful, we need to be more than a golf resort. So we are building a small private lake on the Golf Resort. So people could swim and paddleboard and it’d be right in front of our restaurant and bar where we can play music. And, you know, Pinnacle lifestyle is all about creating community. So we want to bring the people in from their cabins and their v’s and get them out and then do fun activities. And we already have a beach just like that with the privately gather Edson property and get weekends going in our hot summer days. And it’s just it creates that community where they’re making new best friends and adults are doing the same thing. And being kids again. So they ultimately their vision sold us on like you right, this is this is a golf course I would consider it takes time to build that community. They have a long standing customer base, we come golf one or two or three times a year. But we want to figure out how to get them to stay there longer and how to increase the population in the area with 400 acres. We’ve got lots of room to develop on. So that’s a bit of the backstory to like, how we came about that that one resort.

Erwin  

I was talking to a friend of mine this morning about she she’s considering selling her house in Muskoka. And I was saying, you know, with climate change the way it’s not the direction it’s going is, you know, for example, I just saw a bunch of my friends just get back from Florida, because they do not want to be in Florida for the summer. Because it’s it’s already uncomfortably hot there. Right? And with climate change, they imagined swing and keep getting warmer southern states, even northern US states and I imagine more and more than will come to Canada, especially with the strength of the dollar, just to avoid the heat.

Darvin  

Yeah. I agree. And that’s another aspect of this space, right is that it gets people out into nature where they if you’re conscious about the environment, we’re super conscious about the environment and our resorts and use top tier septic systems because we’re not usually connected to city sewer conscious about the amount of water we use, but Cocconi springs itself is an inland rainforest, kind of only one of its kind in North America, is that that area around Kokanee and it’s people are attracted to that because they realise the amount of nature in there is increased like it’s a crazy amount of wildlife that you see, but it also just feels good to be in that slash rainforest type of a zone. So yeah, but I totally agree with that. lot of people will be coming, coming north and coming to beautiful nature properties right in the Rocky Mountains being one of them or like Muskoka. Those are popular places. And I think in the long term, those are going to climb up in value more than your typical city destination.

Erwin  

Hopefully, you guys have a whole host of investor events or something that discounted rates for investors.

Darvin  

We knew Yeah, investors get discounts so we have a concierge service, we’ll help them provide their tours to our different destinations. So yeah, and our big investors kind of get a golf for life that cocaine springs and but we do we do various investments online for people to see what’s provided in the lifestyle has been

Erwin  

amazing. Yeah, so that’s how you buy golf. I met need to share how much you paid for the golf

Darvin  

course. Yeah, you bet. It’s in our offering documents. So we we actually had I think was 11 point 4 million somewhere around there was the the actual tax assessment on it, but we only paid 5.4 million for the property. And the old owners did roll in 1.4 million. So we had to write a check for $4 million for for this property. And like I said, we got 62 room hotel, as well as the golf course and, and some other sweets and lots of equipment and golf carts and stuff that we’re seeing in the restaurant. Lots of extra acres to develop on. So fantastic buy. When you look at value investment there.

Erwin  

My timing might be off, but like golf course you bought it late pandemic, am I right?

Darvin  

Yeah, we bought it. Our possession date, I think was October, coming up on two years. Now, this year will be two years. So yeah, that would be the later middle pandemic.

Erwin  

Alright, so but at that point, like golf was on fire. Was there multiple offers, like was it a competition? Well, there was

Darvin  

there was lots of other people looking at it. And with different views of what they wanted to do with it, there would have been probably higher bidding on it if it had been like six closer to a mean centre. And that’s part of the reason why the price was was more favourable, but the owners also wanted to deal with us because they like the vision of where we were going to take it, they really care about this property and the whole neighbourhood around there because like I said, they spent last three years there, their friends are there. And they’ve been there, the biggest employer now were the biggest employer kind of that area. So it was important for them to see that area thrive and create more employment and so I believe they could have gone a little more selling it to somebody else, but I think they you know, they made a good decision and in partnering with

Erwin  

which is your favourite property?

Darvin  

Yeah, that’s a that’s a tough one. Like I said, coconut has been the place that the nicest golfers that have ever golf that they feel like you’re in a different world when you’re there, you’re it’s a total slow down laid back kind of community and rain forest that, you know, so it’s I think that is my favourite place just to be where my cabin is. And the second moose area, it’s houseboat capital, Canada, I grew up is like waterskiing. And so that’s my favourite Lake is where I’m Mara Lake, which is similar to White Lake, they’re close to each other. So those are my favourite lakes for sure. So I’m torn between the two. Like a good question. I like to spend time at both those destinations.

Erwin  

How does someone get to the golf course you mentioned, it’s far from our major centre.

Darvin  

You can fly into Creston. And it’s an hour drive from from Creston, British Columbia. So questions fairly close to the US border. So it is fairly so. And so that would be your nearest airport that you can fly into? Well, what else do you look for

Erwin  

when you got into this? This sector real estate, you mentioned that the complete imbalance in the demand, the number of RVs out there in places they can plug in one of the one of the things were you looking for, in terms of how to make money in the sector,

Darvin  

real estate in general location, right was big. So one of our other themes is just buying in World Class destinations. So there’s a lot of campgrounds out there, which campgrounds are going to do better if campgrounds aren’t doing well, you know, I think you got to be one of the nicer campgrounds, it’s got to be very beautiful. And it’s got to be accessible. And so like I said, Highway One is where a lot of our properties are, because it’s super accessible. But we look into like in the future where do people want to be and where will value go up and we think boating as well Harvey’s, the amount of sales from our V’s the amount of sales for boats have been on a pretty steady incline. And and so having lakefront access was another big thing that we looked for, and also having marinas because you can imagine the in today’s day and age how hard it is to go get a marina approved or how to get harder just to get any development approved on the Lake Park gas station. They find a way So we’re not, we’re not looking to buy stuff like that, where we have to go get approvals. We avoid that, right? That’s one of the things just stay away from because it’s pretty bureaucratic world out there when it comes to getting those kinds of approvals. And it could take years, you could spend millions of dollars, and you could never get there. And so we want stuff that has approvals or in like the golden situation where we’re golden property is, there is no zoning on there yet. And there’s so there’s no, there’s no body overseeing or restricting what we can do. And so we have the ability to develop a new campground just the way we want it. Based on today’s market demand, we’re looking at doing geodesic domes, just to create the buzz and getting people out there, right above the river and then continuing with the fly fishing that they do off in the river. But we can do that because there’s no restrictions. So we would avoid it if there was a need to get get a rezone on a property because that can be difficult to do.

Erwin  

I want to ask as a lot of beginners and like even veterans, they’re always looking for partnerships. Now I can tell you how to build their teams. So you came from a finance background, your company raises money for living. Who else did you need on your team to make this happen?

Darvin  

On the wealth broker side, like to raise

Erwin  

no on this record on this portfolio of six vacation recreational properties, you’re not doing this on your own?

Darvin  

Yeah, well, we have 25 full time staff that run like the headquarters and oversee everything from we need people in charge of marketing, we need people in charge of sales, we have a planning officer, we have a development officer. So you know, we have obviously a fairly large accounting team because we’re reading books for lots of different companies and destinations. So you know, there’s there’s human resource manager. So there’s quite a quite a large team that oversees all you can imagine we have a lot more staff in the summertime, we get busy, so you’re well over 100 100 people kind of running the resorts. So we started with the top, you know, getting a board of directors together that had experience in these areas, especially in development in real estate. And and that had capital and ran different businesses. So that’s the kind of the mature group has been through multiple recessions. And they know like how to plant and how to get through all different kinds of market environments. And then from the board level, we looked at the executive level. And again, people that can operate people that have the pisser vinegar to go out and actually the passion to work that the hours that it takes to work because it’s not, it’s not a business that runs itself, I haven’t found that yet, in any of the businesses that we’ve looked at, and it’s something that we’re building, we’re not buying to operate what was there, we’re buying to take it to a totally new level. So every property we buy, it’s got development on it, and it’s got more marketing, we’re bringing in more customers. And so buying or building the team is critical. And Pete finding the people with the passion to to run and operate, lots of times we get lucky because we buy a resort that has people that just love it and they don’t ever want to do anything else. And so we get to keep that the on site staff that are there and we’ve gotten really lucky with that and a couple of our resorts we have human resources to go out there and find people that are passionate about that to bring in all the different roles we need for seasonal stuff.

Erwin  

Now what about your business partner Tom? What What What’s his job in this and what is his experience or background?

Darvin  

All right, he’s good he’s a very talented young man that does Master’s in real estate so he his background, I would say is a combination of of real estate and investment banker so he’s worked for big investment banking shops, small investment banking shops, when you’re doing the different kinds of investment that we’re doing, you need that talent of somebody he was my head of corporate finance at Pinnacle wealth brokers. So he spent a couple years looking at all these different private investments and learning what makes them successful where are the risks and and what to avoid and so very talented man with a with a really bright mind and and understands that the numbers sides so he’s really trying to make this work as an investment and he does oversee the development and the operational team and he’s always making sure that the numbers make sense for everybody from an investment standpoint.

Erwin  

You mentioned numbers and where risk where the risk is like before recording I mentioned like there’s there’s investors going belly up over leveraged likely variable mortgages and rates have gone against them. I think guys mediate know how do you manage your risk?

Darvin  

Yeah, we mitigate risk. With a debt level. That’s that’s our biggest thing like we we will never go over 60% loan to value but in general, we’re we’re under like around a 40% loan to value and we want to keep that lower during times of uncertainty. And so we can because we have an investment dealer, like one of the biggest risks is like we start spending money on development. And if you don’t finish the development, you don’t have renter’s, you don’t have your customers coming in yet. And so we see that as a big risk in real estate. And we avoid that by being able to raise money, because we’re an investment dealer. So if we need more capital, we can raise more equity, we don’t believe we’re going to run out of the equity needed, but we also are avoiding too much leverage, especially because interest rates are higher. So the lower the interest rate, the more we’d be willing to do and will slide up the mountain leverage, as we’re putting in a whole bunch of new RV sites with intention that we’re only gonna put in what we think we can sell over the next 12 months. So that means that leverage is going to drop back down again, in the short term, we’re not leveraged over the long term, and our model has under 40%. Leverage.

Erwin  

And correct me if I’m wrong, when you’re raising capital, you’re raising equity. It’s not debt that you’re paying interest on.

Darvin  

That’s right. We’re raising equity only. Yeah, yeah, we do have we do have some financing and BDC finance, but two, we have a private lenders, finance been three that we hope to move over to some some, like bank financing next year. And so there’s debt that way, but we’re not raising capital for the debt side.

Erwin  

You mentioned that you’re you mentioned that everything that you touch has approvals, for example, already. So that’s a that’s a risk that novice investors miss out on is that its path of least resistance would be the beyond side with whatever government wants all levels. How is government for you that like fed municipal, provincial? Are they on board with what you’re doing?

Darvin  

I think they, they want it right. They want what we want as far as like getting people outdoors and when you’re creating jobs. You’re definitely creating jobs, a lot of jobs, and a lot of environmentally friendly development. But I can’t say I mean, they have a process to follow. So when you’re dealing at a municipal level, they have to they have to check all the boxes like they do for anybody, whether they like them or they don’t like them, it’s the same process. And, you know, we found with our Revelstoke project to be really slow in getting the ability to build a cellar are a lot and we get it, it’s just we waited a year and a half to kind of get the answer that we wanted and that was just just their process that they go through and they get opinions from everybody and and ultimately we got full support. So yeah, we were not stuck on anything on that level. Like I said, we were not asking for a lot we’re not asking for rezoning or we don’t need rezoning and second was we are asking for it. We don’t need it. We get it it’s even better for the project. But we don’t buy somewhere where we we need it because that would be that would be too risky for our investment mandate.

Erwin  

Firemen this has been a blast. I learned a lot. Oh, my lesson learned a lot. For anyone interested in following along or learning more about Pinnacle wealth, or these recreational funds, where can I get more information,

Darvin  

you can go to Pinnacle lifestyles.ca Pinnacle wealth.ca for other options that we have at Pinnacle wealth brokers, my emails, Durban at Pinnacle wealth.ca var vi n at Pinnacle wealth.ca

Erwin  

The internet is forever.

Darvin  

Give out a cell phone number of my my branch managers, your friend who introduced me to use Glazier. He’s one of our dealing representatives that if you’re looking at investing into a fund, he’d be happy to talk to you direct and I think he gave permission that hey, if you’re interested in the call so Steve, please Yaxha 416-464-3085 It is email Steve lazier get Pinnacle wealth.ca.

Erwin  

And for listening, I’ll have this on the show notes. So don’t worry if you’re driving or cooking or I don’t know what else people deal with and listen to podcasts sleeping already and thanks so much for doing this. I understand. I know you’re really busy got like $1.3 billion to manage and six properties of hundreds of acres to develop.

Darvin  

there and I appreciate the opportunity to be on your show and get in front of all your listeners. So yeah, appreciate it. And hope everyone has a great day.

Erwin  

And ah, sorry, I’ve had to always ask my guests like any final thoughts you want to share?

Darvin  

I just I thought it was super, super interesting. I love your podcast and I am starting to listen to it now. Especially your your Mexican fishermen one that you had sent me. I’ll be thinking because yeah, that’s That’s again like you knew that that was a connection that I’d have. It’s like a think about how to get to what you want in your life and be able to do what you want to do and it’s not always about money. It’s about being able to do what you want to do. So Chase the dollar raise a dime. The cool thing about like folks our age, just because we’re not at your level, but many of us who have been around for like 10 years like they’re all now having the Mexican fishermen conversation because they have enough now to for for now super retirement but a pretty good retirement. Yeah, yeah, exactly. Thanks, Sundar for doing this and I gotta run. Okay, thanks everyone have a great day

Erwin  

before you go if you’re interested in learning more about an alternative means of cash flowing like hundreds of other real estate investors have already, then sign up for my newsletter. Find out for yourself what so many real estate investors are doing to diversify and increase our cash flow. And if you can’t tell me I love teaching and sharing this stuff.

 

 

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**Transcripts are auto-generated.

 

Erwin  

Hello and welcome to the truth about real estate investing show. For those watching on YouTube. No reason to adjust your camera screen colour. I actually see myself and I’m pretty tan for just came back from the cottage been off for a week. And would you like to know what what it takes to be a guest on the truth about real estate investing show one criteria is that one has to share both a repeatable systematic strategy to investing and sharing what did not work, including the lessons. Our last episode was great one with Austin yay. And we’ve got some great feedback coming in already about what a great episode that was. Again, Austin is very successful right now. But he’s he’s quite frank about sharing the very rocky journey to get there a lot of things that has changed in his investment strategy. So have a listen to that episode. If you missed it. There are some influencers out there who are not completely transparent and do not share but they’re losing deals, or their breakdowns and business partnerships or personal relationships. There’s nothing wrong with that to his throne. But a mentor of mine shared with me how he does not trust anyone who’s never lost in investing, gambling or whatever. If someone’s willing to withhold information on losses, what other information are they willing to withhold, there’s the famous quote by T Harv. Eker. How you do anything is how you do everything. So to me how it applies to real estate investing is if someone’s willing to lie, cheat or steal in any area of life or business, they may be willing to lie, cheat or steal from you. Well As for me, hence my business. One red flag is usually enough for me to stay away from someone or in their business associations and Associates. Take for example, this one Real Estate Investing Club that just recently imploded, they were being accused of one of the founders, has been accused of many things and have been for many years. Hence, I’ve stayed away from members of that club, the owners of the club, as they’ve never guessed it on my show, while they were out there operating that club. There’s so many good people in the real estate investing world, that’s actually hard to keep up with all of them. Many friends who are better are excellent, excellent investors. But again, it’s hard to keep up with them to spend more time with them network mastermind, whatnot. So why spend time with folks with red flags, life is short and never losing money or guidelines that I try to live by. I’ve lost plenty of money in my career. Thankfully, I’ve made more. And I’ve been terrible at times with my work life balance, but the long term trajectory looks pretty good. Speaking of long term from all the news and information I continue to consume, but economics, artificial intelligence, networking with the real estate investors, you know, folks who own stuff on the ground, long term view is interesting. It’s always been interesting. I think now, as I’ve been saying this for for a very long time is an interesting times we live in, and we’re living through history right now. So to me, at least as I continue to geek out on more and more information, my conclusions are still the same. Owning quality income properties is still the path to building one’s wealth. That’s an incredibly efficient and time saving AI won’t stop that. But AI is already disrupting a lot of jobs and industries. I’ll be sharing about that in my presentation. One’s ideal window to buy investment properties. It’s about 12 months roughly till we see another interest rate cut. And that’s just a guess, no one knows for sure. So again, I’ll be sharing my research on Tuesday. So probably the day you’re listening to this, hopefully you listen to these Redway Tuesday, July 25 7:30pm. eastern standard time I’ll be sharing an economic update at this month’s I’m meeting via zoom webinar. So it’s all online. I’ll be at home. Hopefully you’re all at home enjoying yourselves and your families. My research and AI will hopefully take the fear out of AI away from most of more people understand Yeah, there are some fears that bit to have around it a more importantly the opportunities. And also coach Tim Hahn from my team will be sharing how he himself and other our restaurant clients with who own condos and single family homes, how they’re navigating negative cash flow in this high interest rate environment. It’s not something you want to miss the link to register is in the show notes, which may mean it’s in your email already. If you’re on our email newsletter, and if not, you can find it on our website at WWW dot truth about real estate investing.ca on the show episodes, in the show notes, you’ll see this link and yeah, you can find it at www dot truth about real estate investing that’s it, the meetings all virtual no charge and but if you do prefer personal and more personal, small or technical hands on experience in person, then you do not want to miss our island mastermind tour in Kitchener, Ontario on Saturday, July 30 10am, where we tour inside a note to income properties. Real estate investing is about owning physical assets. So this is an opportunity where the rubber meets the road. And when yourself can do hands on learning about how our clients earn world class returns, investing in income properties, quality income properties, so don’t forget that quality part time of writing we only have four spots left these tours they’ve always sold out. So again, the link to purchase tickets are in your email or you can find it on the web on our website in the show notes. The cost is nominal and All proceeds go to charity. onto this week’s show. Today we have a full time real estate investor who’s really really smart. I’ve known Christian Spil. Fogle. Yes, I can say his last name. It’s not the easiest to see or smell, and still phone call. I’ve known him for a couple of years, but only in this interview to actually get a better understanding of where he’s coming from, and how he actually transitioned out of his executive position in in big tech and how he became a full time real estate investor. What’s especially interesting so Christian originally, in metabolise investing, it’s not what I expected, and how he found a bunch of cash flow, enough to replace his job income in mixed commercial residential real estate. If you’re a geek like me, that might catch your attention. And you may enjoy this episode as I cannot think of anyone off the top of my head who is as successful in mixed use commercial residential, he’s got the worst kind of commercial to retail. Yak am I experiencing financing is expensive when investing in mixed use by Christian has cracked that nut. So if you want to learn the truth about how one can replace how he replaced his income, his job income and you make good income, you make really good income. He’s a tech executive for a big company. And he replaced it with real estate cash flow from operations. So you want to take notes, if you’re interested. Listen to this episode more than once. You can find Christian on the web at WWW dot att liveris.ca. Eliphaz means to have wings, Alec Christian explained that in part two of this interview, but I’m guessing if you want your retirement planning to have wings that invest in real estate, so again, a Lefort liveris.ca. And he can find them on Instagram, on Facebook, LinkedIn, all at Elif rehearse properties, please. And during the show. Hi, Christian, what’s keeping you busy these days? Oh, boy,

 

Christian  

lots and lots. A lot of what I’ve been doing over the last six months is refinancing the

 

Erwin  

portfolio at historically high rates. What do you think about? Well,

 

Christian  

if you think 3.85% is historically high rates than I guess they’re high,

 

Erwin  

it’s all a crying and screaming IECA out there. You think the world’s ending with the rates of the way they are?

 

Christian  

I think there’s a big difference. Because one of the things is, you know, I invest primarily in commercial type assets. So I’m not doing much if anything in the in the smaller

 

Erwin  

retail assets. Elaborate on commercial, what kind of commercial? Yeah, sure. So we cover

 

Christian  

about 60 70% of our holdings are in mid size multifamily buildings. So that’s basically anything five plus, most of our buildings these days are in the order of 10 to 20 units, we have some light industrial property, we have some mixed use buildings, we have a little bit of office and a little bit of retail. So it’s it’s a wide variety of things. And we got into those asset classes for completely different reasons. So you know, at one point, you know, when I quit my job, right, you know, that’s a whole other story we might want to talk about. But when I quit my job, the first thing I had to do was replace cash flow. So at the time light industrial, you could basically pick them up for in the order of 910, sometimes 11 caps, which meant that they were highly creative, as long as you keep them full. So lots of cash flow coming in. So that was a priority for me and why I focused on that particular asset class at the time. And so over time, asset classes become more or less popular, or they meet your specific needs or objectives at a particular time. And so I shift. So light industrial five, six years ago, was a cash flow machine. But through the pandemic, the cap rates came right down on those, the value of those buildings I hold, obviously, you know, really, yeah, they exploded, they did really well. I never planned for it. It’s just a great upside in that, but they generate great cash flow through the process, right, because you got them at a better price. Yeah, I got them now relative to now they looked like great prices at the time it met an objective which is cashflow. So you know, I had to replace income at the time. And then we’ve done lots of multifamily.

 

Erwin  

Sorry, before we move on to light industrial, like what are housing? Yeah, so let industry have a picture of what like what light industrial looks like? Yeah, it’s

 

Christian  

a good question, because I get asked this all the time. So our light industrial buildings typically look like big buildings with big garage bay doors on it. So it’s where the trades will typically set up their business, the electricians the fire, guys, like we have Winmar in there we have oh, in large disaster

 

Erwin  

renovation. Yeah,

 

Christian  

so the exact place so floods, fires, that kind of thing. So there were I think I want to say buildings we’ve got

 

Erwin  

they made lots of money. It must be a great tennis.

 

Christian  

Yeah, they’re they’re actually very professional, which is nice. So because they’re a larger operation, they’re very professional to deal with. We have capital appliance and repair in there as well, which is a firm that’s pretty much going national so they were Ottawa based. They started leasing some of our space and then more space and then more space, fantastic tenants and strong business. That’s their opening locations all across Canada. No, but yeah, it’s basically business. You know, businesses like that are the two Typical tenants,

 

Erwin  

they mainly just need to space, industrial zoning, current manufacturing anything. They’ve machinery robots. And I

 

Christian  

know that probably be what I’d call a heavier industrial. But it’s, we don’t do manufacturing facilities, this is for the trades. So they typically have their offices in there they have, you know, for example, their accounting staff, administrative staff, but they also store their materials, they might park their trucks in there, that’s why they have the big bay doors, so they can unload things, and put stuff in there, you know, and then we’ve got a bit of office space as well. So we’ve got, like the Alzheimer society is one of our tenants in there were a bunch of smaller telecommunication providers that are in those offices, and we’ve had some nonprofit government organisations in there, they’re actually really good tenants all the time, because they tend to be very well organised and professional. And they tend not to be highly demanding, either. So I find a lot of the tenants in the pure commercial space like that, once they’ve got their space, it’s their space to do with as they wish they’re managing their own fit UPS inside. So they tend to be very responsible about what’s going on. So the only time we hear from them is when there’s something significant happening, right, like a giant power outage in the area, or there’s a leak in the roof or something, something to do with the shell,

 

Erwin  

just the commercial act is way easier. And just the, I don’t know the culture of commercial, you know, it’s in your unit, you’re responsible for it, versus I hear residential,

 

Christian  

I hear that. And based on everything I just said, it sounds like that would be a true statement. But I find that it has a lot to do with tenant class as well. All right. And by that I, you know, just the quality of the of the place that’s being rented as well as the quality of the tenant. So Class A tenants tend to be relatively not too heavy maintenance, be them commercial, more residential. And you’ve seen some of our property. So we have a lot of what I would call a Class A or B plus tenants. And they tend to be relatively low maintenance as well, some you just never hear from at all. So when they, they keep the properties in good shape, and, and so on. So we like to focus on good quality tenants, good quality accommodations, because it actually reduces our operating costs and the distractions.

 

Erwin  

In my experience with our doctor tenants, they’re generally great. But they know their strength in the negotiation, and office space, if there’s massive vacancy. So they know where they’re that they have a lot of strength in negotiations. So they’re asking for a little bit more than you’d typically expect from a commercial tenant.

 

Christian  

Yeah, and that’s absolutely right. There are times when certain asset classes have higher vacancy rates. And so it’s a little harder to manage. Sometimes you can mitigate that if you have space that you can easily convert to other

 

Erwin  

purposes. Yeah, like light industrial and be nice.

 

Christian  

industrials, exactly right. You know, so, for example, some of the space was more lucrative for a while to do office space in it. So we just took some of the bays and just made office. In other cases we had, and I think I’ve mentioned this to you before, but we had, you know, a larger 2000 3000 square foot office space, that was impossible ease through the pandemic, but we had them already, in some cases converted to individual cubicles, or you know, but in closed offices. So we started renting the individual offices during the pandemic, when people were trying to get away from the spouse, the dog, the kids, you know, all the background noise, but they couldn’t go to the office. So we did really well, when we pivoted that way, in the pandemic, now, things are starting to shift back, right. So those are a little harder to fill again, as people are really kind of, even though everybody’s saying they’re not going back to the office, people appear to be going back to the office,

 

Erwin  

three days a week. Yeah, it’s much better than than what it used to be.

 

Christian  

So having flex space like that, so space that you can easily just pivot and change the tenant category that you have, gives you a bit more power to negotiate as well. That’s just sometimes luck in what you bought. Or sometimes it’s strategic and what you bought,

 

Erwin  

how is light industrial demand, and we’re just gonna spend some time on this topic because we don’t get many guests that can speak to this subject. Sure. How is the demand for light industrial,

 

Christian  

there’s a good reason why the cap rates are down.

 

Erwin  

They’re making so much money. Well, the cap rates are down,

 

Christian  

right? Because there’s a lot of demand. There’s just huge demand. And the pandemic kind of forced a bunch of things to happen. You know, it wasn’t just that the trades needed space. There was clearly a lot of demand for the trades through the pandemic, as we saw as we were trying to build stuff. But then also warehousing started to happen. So with everybody ordering at line, there was a whole video of storage, right? Yeah, and often light industrial and warehousing tend to be build on spec. So if Amazon comes into town, they’re not looking for space they’re building and a lot of time light industrial spaces relatively easy to build, right? Because you’re just putting a concrete pad down, you’re putting a shell around it, etc. So and by the land,

 

Erwin  

or did you see more businesses doing more eco commerce business. So the right term e business just like just like packing, delivering shipping. I know that was a big story in the GTA for industrial

 

Christian  

Well, yes is the simple answer, right, I was just taking a pause to think about it because every business was a little bit different. I saw all the retailers that we have, and some of them are in our enlightened industrial buildings, but they they definitely pivoted online. So for example, one of our tenants is kaboom comics. And these guys have some of the most amazing product that you’ll ever see, the guy’s a passionate collector, and I helped him consulted with him, during the pandemic, to help him save his business. He was almost ready to pack it in. And as I look at his business, right, and we’ll get back to it in a second, but it was it’s an interesting segue, because when I looked at his business, I realised his business was very similar to real estate. Right, what he had was his assets were books, instead of, you know, real estate itself. But the notion is the same. So he’s building equity. So every time he sold something, he made profit, he took a portion of that profit and reinvested it in building the collection and the asset base that he had. And we went through it and did an inventory. I said, Dave, do you realise how much what you’ve got here. And once I explained it to him, the light bulb went off for him, and he doubled down on his business. So instead of packing in, he grew it and continued to grow it. And then it was more a question of operational discipline in order to make sure that he had a good solid, cash flowing business he was going through. So Dave’s business has grown very well. And the reason I bring up that is because obviously, the comic book trade is largely their revenue comes from the event market. So they go to things like comic cons, and other forms of, you know, comic book events, etc. And during the pandemic, all of that gets shut down. That’s why he thought he was done. And he did pivot to online sales. So he found through recommendation as somebody else of doing these sorts of sales parties, if you will, or live party, so he would talk about comic books and so on, that were really very interesting that he had, and that would attract people to live views of this stuff, and people would buy during that session. And his profitability on those was higher than when he was actually at the event space. Yeah, he had virtually no overhead and the price per book was actually a lot higher than when he was at the event space. At the event space, all your competitors are there.

 

Erwin  

You’re competing with everybody. Yeah, all your competitors are there versus he’s the sole voice. That’s

 

Christian  

right. And not only that, but people are buying in the moment. And everybody loves a good story. Right. And so he’s a very good storyteller, and he would talk about the books. And because he’s an avid and passionate collector, he knows everything about it.

 

Erwin  

So he would, you know, guess the audience would would jive with him.

 

Christian  

Absolutely. And they’d be all in. And so yeah, like, and then you have a bunch of people now are interested in the book. Right? And he’s got one book to

 

Erwin  

sell, and then you raise the rents, right.

 

Christian  

Dave is on a good lease. He was. He was one of our early tenants. I brought him in probably in the very first year of that particular building. So he’s got a very, very good, right very,

 

Erwin  

for listeners benefit, who are who are newer to commercial leasing. What happens when the lease is up? Does it go month to month you write a new lease? Like what?

 

Christian  

So commercial leases are negotiated with the concept that the people involved are responsible adults that know what they’re doing?

 

Erwin  

That should be all contracts? Residential tenant leases, and yeah,

 

Christian  

you mean like residential leases? Yeah. Residential leases are a whole other ball of wax, but with commercial lease,

 

Erwin  

do freedom to you, I saw some posted somewhere like Twitter or something that all landlords had to take a course before becoming a landlord. I couldn’t agree more. And in turn, I think I think all tenants should also take a course on how to be a tenant as well. Like,

 

Christian  

I think there’s pros and cons to all that stuff, for sure. Potentially. Yeah. But yeah, at the end of the day, you know, being a landlord is a business in every way, shape, and form financially as well as customer relations and how you manage things. So that’s a whole other thing.

 

Erwin  

But a bigger topic. Let’s

 

Christian  

let’s get back to your question specifically and answer that. So commercial leases are relatively simple. In Ontario. They’re governed by the commercial Tenancies Act, which is separate from the Residential Tenancies Act. Whereas the Residential Tenancies Act, I forget exactly how many pages it is now it’s but it’s quite quite large if you were ever to print it out. The commercial Tenancies Act is quite short in comparison, and it’s just basic ground rules. So when it comes to law and covers

 

Erwin  

so much, you can’t be too specific. We’re talking about Office light industrial heavy industrial.

 

Christian  

Yeah, but it governs the You know, fair practices in business is really what it does. So it’s just making sure that people, you know, there’s a level of anti predatory behaviour, aspects that are in there that are just good practices that developed over hundreds of years. But it’s relatively lightweight and common sense. So when a lease ends, and it depends very much what’s written in the current lease. So some leases, for example, and we’ll use a typical framework, a lot of leases have milestones at the five year mark, they may be a renewal, they may be a continuation, they may be an interim point of changing certain terms, like the rent price, etc. But often the lease and the leases can be very flexible. So there’s no rent control, right? It’s what you contracted in the lease. So you might say it’s a fixed base price for your rent from now for the next five years. Or you might say that there are escalators, so that every year you might have a rent increase of a certain percentage or a table of some form. Because often what we do for the first year of operation is we’ll give it you know, brand new commercial operation, a bit of a discount, right to help them survive the first year. But then they go back to the regular rate. And other things we might do is if they’re doing fit ups, right, that’s typically at the end, fedup means that they’re doing all their internal renovations in their unit, it’s typically at their cost. But some tenants don’t have the capital to do it, but you know that they have long term viability. So what we’ll do is we’ll finance their capital work, so they might do their fit ups. And we might go on and say, a 5050. And we will take part of it, and we’ll finance it at a prescribed interest rate. And then we’ll just add it on top of the rent that they pay over the, say, the five year period.

 

Erwin  

So some big Phillips during the pandemic for Office.

 

Christian  

Yeah, we didn’t end up with a lot in that.

 

Erwin  

My point is, is what to negotiate and what the what the markets like a good friend that did very well. Office space, it was a really painful part of the pandemic. No, yeah. And so the landlord is very motivated,

 

Christian  

we were lucky that a lot of the office leases that we had were relatively fresh just before the pandemic. So we only had I think, maybe 3000 square feet come up for renewal during the pandemic, and it was early on. And those are the ones that we pivoted to the micro offices, but everybody else had commitments on the longer term and the because there were good quality tenants, right? It’s not like they were just gonna file for bankruptcy or disappear. So to close off in your question, when you get to the end of that lease, there’s a bunch of different options. It depends what’s written in the contract. So sometimes a lease is just the end of the lease. And if it’s the end of the lease, the next lease is that a brand new contract new terms, rent everything.

 

Erwin  

It’s, you’re discussing this in advance, usually a few months in advance of discussing what’s coming. Yeah, it’s

 

Christian  

three to six months, depending on what you write in the lease. But the other thing that can happen is you might give certain number of renewals on similar terms, or uncertain terms that are to be renegotiated on the renewal mark it because

 

Erwin  

the tenant will often want the right to reopen or re rent. Oh, no, I’ll be in the contract.

 

Christian  

Yeah. And they’ve rent, they’re running a business there. And it becomes part of their goodwill, if you will, because we’ve already renovated this space, not just a capital investment, but people know where to find them. Yeah, they’ve been going there for five years. So if you suddenly up sticks and move, now you risk losing some of your clients.

 

Erwin  

So I’ll just see if they like your car restaurant. Rental, your menus, for example, because you’re the address changes. Yep. And the like you mentioned goodwill, people will keep going to the location expecting you to be there. That’s right.

 

Christian  

And if you move to a different place in a different restaurant shows up their portion of your customers are going to this new restaurant. So the the location itself has some goodwill. So that’s why tenants that are a bit savvy commercial tenants will negotiate rights associated with their renewals, and

 

Erwin  

like my tenant do.

 

Christian  

Yeah, well, they’re smart, and they’re savvy, they’ve obviously not their first rental. So but they would do something like, you know, what’s very common is they will say, or want things like I want the right to renew either on similar terms, and the landlord is saying, Well, look, it’s five years, a lot can happen in five years. So we need to renegotiate what the rent is going to be because we don’t know what the market is going to look like,

 

Erwin  

especially today with inflation being so I see I have lots of the entrepreneur, business owner friends who are trying to negotiate maximum increases to rent like tap tap increases your rent, but a

 

Christian  

savvy tenant will then make sure right, and often we write this, probably about 30% of our leases have something like this is where the landlord and the tenant can’t agree on the new rent, you’d bring an arbitrator right and arbitrators so that, you know a fair third party person would come in and and help decide what that new rent is actually going to look like.

 

Erwin  

Interesting. That’s fine. comstice anything else? Yeah, yeah. See what the recent listings rented for. Yep, I even visited some of them ourselves.

 

Christian  

Yeah. Well, typically when I’m doing something I don’t, I don’t push people over the edge, right? So do is I’m gonna raise it to what I believe is fair market price that you really gotta raise. You know, I mean, you want goodwill with the, with the people that the tenant, so I’ve got a lot of Main Street retailers. And I always want to make sure one that they can run their business. So if they’re highly profitable, right, that’s one thing. But a lot of retailers are doing, okay, they’re doing all right. So but they’ve got a lot of operational expense. But I take a look to see what the current rents are on that street, right. And I go for what the current rents are there. And typically, what I’ll do is I’ll anticipate some inflation. So we’ll typically put a percentage increase every year to account for a level inflation, and then five years, we’ll do a reset again, based on what the real market is. So that’s the way we tend to manage it.

 

Erwin  

So before we were recording, we were talking about this interesting conversation because your investment journey has changed along the way. Yep. So actually, before we move on, like, are you not looking for light industrials things that you made a lot of money there?

 

Christian  

No, if we’re, we’re actually thinking of building so. So when the cap rates are low, like this, it becomes expensive to buy relative to the cash flow, you’re gonna get out of it. But light industrial is relatively inexpensive to build. Because you’re basically putting concrete pad you’re doing all the service things like water, power, etc, you’re doing the shell, and you’re doing a modest amount of fit ups on the inside of the building. But it’s in the land, it’s still expensive. Depends on where you are, if you’re in an industrial park, we’ve got some opportunities right next to one of our buildings where I could buy probably about four or five acres and build something reasonable. And it’s really funny, because, you know, my business partners is my wife, townie. So she’s when I first bought the light industrial, she she much prefer the residential side of things. And she looked at it and she said, I don’t really want to do this, right. And now she’s all in. And she said, When are we going to build some more of these things. But right now it makes sense to build them rather than to buy them. And that’s often a discussion in any asset classes. Sometimes you can’t buy it cheap enough to make any sense. But you could build it for maybe the same or less, and you get a new product, in that case, so. So that’s the way I look at it. And to be honest, building is probably one of the riskier things to do in in real estate. But sometimes it still makes more sense than buying, though, because buying something that’s I wouldn’t say overpriced. I think overpriced is the wrong word. But something where the business case just doesn’t hold very well, or there’s a lot of risk associated with the business case, is sometimes riskier than the other options such as building.

 

Erwin  

It’s a question it doesn’t sound like you make these business decisions based on your gut feeling.

 

Christian  

Yeah, you know me well now. So it’s

 

Erwin  

a you’re not buying based on a television personality telling you if something’s good, and you know, though, seems like you’re actually researching stuff.

 

Christian  

It’s so easy to get caught in that emotional hype isn’t as I’ll admit, I can get caught up in the hype, I can. And, you know, I, I look at it, and I get excited, emotionally excited about it. But I’ve got a discipline that I’ve developed over the years, when I’m putting money into something, I need to know how I’m getting money back out at I just prefer deterministic things. When I was younger, I used to do more stuff that people said, oh, you should do this, you should invest in that you should invest in this other thing. And in hindsight, I realised that a lot of what I was investing in was speculative. Right? So you’d invest in this because you expected it to go up in value. Well, why? Why would you?

 

Erwin  

Yeah, why invest in? Also, how does it go up here.

 

Christian  

And the one thing that I’ve learned over time is that there’s easier ways to make money. So if you take if you buy soybeans, the

 

Erwin  

magic words, easy money, I’m excited. I’m turning sound clip does that on their show? Easy. Money isn’t easy, but

 

Christian  

it’s easier money. Relative? So the thing that I’m looking for these days, okay. So, you know, I kind of recall a discussion I had with my father. Okay. And my father, you know, he was trying to top up his pension. And if you take a look what he invests in, now he invests in good dividend producing assets. Right? So Trans Canada pipeline is one of the things that he holds. That’s a

 

Erwin  

good one. Yeah, it’s so easy to make more pipelines in Canada,

 

Christian  

and the dividends so he focuses on the dividends because he’s retired and as long since retired, and he’s looking for cash flow out of those operations. And then when you really think about I didn’t think about it at the time when when dad was doing this, but I realised it later and now I can backcast and think about, you know, how clever My father actually was around these types of investments is if you can find an investment that has a good rate of return, you know, one that’s determined relatively deterministic. So whether it’s a dividend producing, you know, A stock, you know, with a high yield on it or whether it is real estate that generates a level of cash flow, those are good returns at the end of the day. And so you can have that as your base. And if you go back to why did I buy light industrial, for personal reasons I left my job at the time was by my older daughter had some mental health issues, right, which we talk commonly about. And you know, I had to make a decision at the time, so I had to focus on her. And so we had to pivot and restructure our portfolio and drive cash flow, and we looked for assets for cash flow, and that’s at the base of our operations. But if you really think about it from a business perspective, any successful business has to have effective cash flow management, you have to pay yourself, you have to pay your staff, you have to pay your operations, and then everything else is like that’s your foundation. That’s where you start. And then from there, you grow your business. And so the other thing you’ve pointed out is I’m doing mostly stuff in the commercial lending space, right, or the commercial, you know, we talk at commercial assets, right. But it really relates back to what the lenders look at in terms of the way that they’re loaning you products. So five plus multifamily residential, typically, it’s commercial loans. That’s why they’re called commercial

 

Erwin  

and can be very attractive lending to as well.

 

Christian  

Yeah, for sure. Right. But what’s nice about those is okay, now I’ve got my cash flow plan. So that’s my business and my foundation, now we can take a look at an asset purchase, and think about what am I going to do with this? So how am I going to improve it? So I could just buy the hold? And if it’s a creative, meaning that it adds cash flow to the business, then that can be fine, right? But we’re a bit more aggressive than that. So we’ll typically buy an asset and figure out how can we take its current value and increase its value. And the cool thing about commercial assets is it is primarily driven by the net operating income of that particular asset, revenue minus expenses, net operating income, if I can increase the net operating income, there’s a direct portion will increase in the value of the property with some puts and tastes. But generally, that’s the case. So if I can double the noi, I’ve generally doubled the value of the asset that I have. So to me, that’s a very deterministic thing. So if I improve

 

Erwin  

something, you can really control what’s on something you’ve lost control over? Yeah, it’s

 

Christian  

much more control. It’s much more deterministic. I can go from point A to point B control something that’s pretty quite predictable. Yeah. And if I can figure out how to do it, and usually that’s affecting the revenue line. So if I can do something to change the revenue, and I can maybe do a bit to improve the expenses. I’ve increased the value of the building.

 

Erwin  

But I do have to say, it took some hard work and talent to do this.

 

Christian  

I don’t know about that. To me, it’s relatively straightforward math. Alright.

 

Erwin  

So not everyone can do math. I mean, we know that.

 

Christian  

I believe we’ve seen evidence, so I didn’t balance

 

Erwin  

themselves. You know, that’s a that’s a very excellent lesson in math. The budget will balance itself. Budgets, budgets balance themselves. Yes. So if you apply that to all areas, fiscal policy, monetary policy, they balance themselves. So who needs math?

 

Christian  

Yeah, that’s great. Until you have to rely on it personally, right. And you don’t want to a financial crater where your life used to be. So

 

Erwin  

sadly, we know people that have that, but yeah, but my point is, is that you you can’t just walk into this, and it’s not quick and easy.

 

Christian  

No, no. And that’s the thing, I think. And also,

 

Erwin  

I think, for folks who don’t know, like you were very successful tech executive.

 

Christian  

Yeah, I was, but I didn’t make my money there. I’ll tell you that.

 

Erwin  

I’m gonna guess that you were before you quit your job. You probably had higher net worth and most people who are listening to the show,

 

Christian  

not to the extent that you think really, you know, who are poor, rich tech executives, something like that. Yeah, we’re single income family or expenditures were very high. You know, I’m not gonna lie about that. My daughters were in private school. They were in debt, you know, competitive dance. And any, any, any parent here who has daughters or sons that are in competitive dance, know how outrageously expensive that is. It makes private school look cheap.

 

Erwin  

You’re getting close to what is 8070 80,000 a year between private school and dance?

 

Christian  

Yeah, I would probably be getting up there. So we burned all the cash that I earned. I wasn’t really saving. And there was a period of time there where our home finances were cashflow negative. All right. I’ll be perfectly honest about that. So no wonder you have to quit. Yeah, I’ve made more in real estate than it ever did in tech. Dami.

 

Erwin  

That’s absolutely the case. In some projects bluff because you’ve worked for a lot of startups as well, like,

 

Christian  

No, I’ve never worked for startups. I’ve worked on larger firms where we did do IPOs and public offerings. And I’m on the board of a lot of tech startups to help from a tech perspective, because I love technology, right? I just you can’t get this done. So one of my mentors said, as a Christian, you said, you might be in real estate now. So but you’ll never get tech out of your blood. So you need to come and help me with some of these companies. I think it was a part of a sales pitch, but he’s not wrong. So, in fact that that gentleman, he said to me, because he’s a big tech entrepreneur,

 

Erwin  

we’re not naming names.

 

Christian  

I don’t think that’s fair to him. So, but he’s a big tech entrepreneur, you know who I’m talking? Yeah. So

 

Erwin  

and it’s a household name. Anyone falls on Canadian business?

 

Christian  

Yes, that’s right. So he said to me one time, because he was still trying to convince me to make sure that I stayed within the tech world. He said, he said, Where do you think, can I actually make my money? Right? And, and I know, he has a lot of hand off our land holdings. And I said, I’m guessing the real estate, so absolutely. So but I love technology. That’s where my passion is. And that’s why he stays in there.

 

Erwin  

That’s crazy, because he has like two or three tech companies that anyone who follows Canadian Tech was the name of That’s right.

 

Christian  

That’s where he made his money originally, but then he put it in the lamp. Okay, so he owns a tech Park. Right. So that’s

 

Erwin  

what started to do. So he owns the property that his businesses are in, I mean, the tech, just

 

Christian  

his but all the spin off businesses that came off him all the other companies that came in because he became sort of a centre of gravity for that particular area. And so a lot of tech companies that are unrelated to him would also leased property in that area. So he has, probably, if I was to guess, maybe 60 70%, of the largest tech Park in Canada. Yeah. And what’s kind of funny is that there’s a few competitors that were always a thorn in his side, you know, through his history, and they leased property that’s across the road. It’s just, it’s an amusing piece of it. But no, on the tech side, I mean, we were burning cash as fast as I was earning it, and for a few years burning cash faster than I was earning it. And that was at a point where I actually thought about how he’s gonna restructure the finances in our in our household is neither my wife or I had a pension plan at the time. And, and I really, I got very nervous about the whole situation, understandably. And I had to think about how we were going to fix this. So

 

Erwin  

it started what what year, did

 

Christian  

you quit your job? 2017.

 

Erwin  

So you’re 20 years old?

 

Christian  

No, I wish so I don’t know how to be probably 52. I

 

Erwin  

guess. So you didn’t you got started pretty late in the game? Well, no,

 

Christian  

sort of. So we had built some assets. We had the equity in our principal residence. Gorgeous home, by the way, thank you. But we trade it up, right. So my wife and I started with nothing, right. And I had no money to my name when I finished university, right? Like a lot of university grads start off cash negative, right, your net worth has a minus sign in it. My wife came from Hong Kong, she’s, and she came from very modest beans. So you know, when she came here, she didn’t bring any money either. So we built everything from scratch. But we made some smart decisions early on, we bought, remember, the very first real estate we bought was probably about 1989 or 1990. And we bought two and a half acres, it was a country estate lot. And we bought it off of a friend who had just done a subdivision. And we thought, okay, this is where we wanted to build our own home. And at the time, so the first thing so after we bought this, our friends were how much was that? Oh, yeah, it was. I think I paid 50,000 or 50. So

 

Erwin  

you tell someone today, the lots were 50,000 they got arriving because I think there’s something wrong with it.

 

Christian  

And it was just outside of Ottawa. So it’s technically still in Ottawa. Now. It’s fairly close to the city.

 

Erwin  

That’s your fun when even that loss worth now, just a lot, same lot that you bought,

 

Christian  

maybe just shy 200 For that lot. Might be more than that. I sold it four times for time. Well, I so I bought it. And so there’s a lot to the story alone, but so I bought this thing 55,000 Let’s say it’s 1990. And the first thing my friends said are actually it was my wife’s friend. She said, Because Chinese so okay, we will build a house there. And she said, Well, do you know what you want to house? The Chinese had always lived in a you know, a small apartment in Hong Kong. So she’s, well I I’m not sure it’s just Well, maybe you want to buy a house. Right? Figure out what you like and as and then build it on this lot. So what we did was we bought a house in a little community called Constance Bay just outside of Ottawa. But it was we bought, we didn’t over leverage ourselves at all. We bought Well, what we could afford at the time the house was we bought it for I think $120,000 And that house is probably worth 300 Now, I think no actually that’s it’s got to be more than that house probably 450 or 500. It’s actually reasonably well situated. That’s a good word. Turn. But yeah, but that’s a retail market part of that’s inflation part that’s housing supply. But we bought it. And it was far from town. We thought it was near the beach right now, I grew up near the beach in Nova Scotia. So I thought, okay, that’s where we want to live. And we found ourselves commuting five days a week, all the way to downtown Ottawa, and then maybe going to the beach on on a Saturday, maybe, right, but definitely not every weekend. And then it became clear that we had this wrong, and everybody who was living in Ottawa and coming out to to Constance Bay probably had the right idea. So at that point was okay, well, we gotta move closer into the city, we paid off because the mortgage was so small, and the value of the house was relatively small. We what we did was we lived on my salary, and anything Chowning made went into paying off the mortgage. So we slowly built up equity that way. And then we sold that house, we bought a house in a pn, which is a suburb of Ottawa, so you know, halfway to downtown from where we were, and then we, same strategy, we lived off my salary, and then my wife salary went to paying down the mortgage. And it was a very conscious decision, right? It was, we were not going to live the lifestyle of a two income family, we decided we were going to live in one one income style family, and just bank the cash effectively. And then the after the second home, I was out of town on a business trip in Washington, DC and I got a call Wednesday. It was really funny because a colleague of mine at the time was he was playing move, his wife was looking for a house and we were joking was going to come home and find a post it note on his door. Well, while we’re talking about this, I got a call from Chinese. She says, I bought a house. And I didn’t know what to say. So I just had said a nice house.

 

Erwin  

A nice house that she bought a shithole.

 

Christian  

Yeah. And that’s the house that you know where I live now. Yeah. So it was a bit of a fixer upper, we had a lot of work to do on it. Great views. Great. The view is we’re right on the canal. It’s a great location, and like house, but it was all part of our equity development. So there’s all kinds of I learned a lot about financing on that one, too, because there was no condition of selling our old house. Right. So I had to finance that entire thing. And we didn’t have enough. And the bank gave us a demand loan. They said, Look, I know you’re good for it. They gave us an extra 50 grand or something like that, to just make sure we could close it.

 

Erwin  

That’s sure how much what year and how much it costs that

 

Christian  

we bought that one for 430,000. I think in that insane? Yeah, the you. It felt like a stretch at the time. I’ll tell you, like the

 

Erwin  

poor kids today, for 30 felt like a bigger stretch. And you’re here you are a very successful tech executive. Yeah. Oh, yeah.

 

Christian  

It was a stretch. It was a stretch. There were some nicer houses in the area that I really wanted to buy, but it just looked like it was too much. And we always lived on the principle, like the mortgage we had on that house was no bigger than the mortgage we had on our first house. Right. So I think that’s worth emphasising right, we did not carry more and more debt. As we went through this process, we carry the same amount of debt on each step. And that enabled us to have a reasonable lifestyle on a single income family. Now we had children by that point. And at that point, the animal the kids were getting into all kinds of stuff. Chobani decided she was going to stay home and focus on the children and the children, which was great. It was mutual discussion. And we had that flexibility because we learn to live on one salary. So it wasn’t easy, but that’s why we get into that negative cash flow situation within our family. Now, even with all that going on, I took the equity that my house and I bought my first four Plex. And I think I’ve told you

 

Erwin  

this story before Home Equity Line use a home equity line or Yep, yeah, yeah,

 

Christian  

I just I put the HELOC together. And this was with TD Bank. They were really super helpful on this. But it was a purpose built four Plex right next to her house that came up for sale. And Tony and I had always thought about about buying rental property. And so it just felt like it was being handed to us. And we knew the owners well because they were just next door. And that was my first private deal that I’ve negotiated. So that was a first purchase but I that one because it was the first one. I spent a week doing financial risk management. I went through full analysis on this property figuring out what did I think it was worth knowing not what I know today. Okay, so I was I was an absolute amateur at this stuff, but I just used a lot of common sense to figure out well, how much could I afford to pay with carrying costs with the operating expenses, etc. Because I could not afford to have that being cashflow negative, I was already cashflow negative, but if I figured if I could find a way to make it cashflow positive and it would add to our family position So I modelled everything I modelled what happens if I have a vacancy for a period of time? What happens if I have two vacancies? What happens if interest rates go up and at the time interest rates were about five and a half percent. So I modelled at 7% and 10%. So, okay if that were to happen, how long could I sustain this before it became a serious problem. So, after a week of that analysis, I knew precisely what I could afford to pay. And I wasn’t going to pay more than that. It turned out that became a great position when I was negotiating with the seller, because I knew what my bound was. And I was simply wasn’t going to pay more than that. And in the end, we ended up at a price that was actually a little bit lower than what my upper bound was. And the seller guaranteed the rents for six months, as well, in order to make sure you call entities and so Oh, they have ever seen that before. Yeah, he was facilitating the sale. And he was very confident in the asset and his his abilities. And he was trying to make it easy for us. And I think he liked us. And I know his his wife was looking at us. And I think she wanted to they’re very good people, to be fair. So they’re they looked at us and saw us as a young couple, and we’re trying to help us get on the right path. So they kind of made it easy for us. Right. And that was great. So that set the base. So once I have that property, Keaton road paid for. Yeah, it was about 850, I believe,

 

Erwin  

Oh, and year 2005. And then when you think the rents were back then they were

 

Christian  

I know this because it’s one of my rules of thumb. So the rents were about $1,500 a month, spacious two bedroom apartments overlooking the canal. Oh, Luxury. Yeah, yeah. And so my rule of thumb at the time became for that $1,500 of rent, the value of per unit cost needed to be around $250,000. That’s what I needed at the time, right for to in order to make sure that there was at least cash flow neutral.

 

Erwin  

So what do you think it’s worth today, though? It’s

 

Christian  

probably worth, I know this, because we value our properties on a regular basis. So it’s just under 2 million. I think I have it valued at 1.9. or somewhere around there. Seems like a decent return. Well, we’ve only had two tenant turnovers. So I have a tenant in there that’s been there since 1993. And she’s paying. She’s paying, she just went over the $2,000 mark, but the value of those units now on the open market is probably about just shy of $3,000.

 

Erwin  

That much nado

 

Christian  

on the canal. Yeah, yeah. When there’s never a vacancy in that building, when we have had turnover. So it’s, we always have people interested in moving into that building. And the people that are there. I mean, there’s a psychiatrist, there’s a lady that used to work for the WHO there’s a lady that used to be the chief protocol officer of Ottawa, right, who is in there. So they’re very good quality tenants, and the units are tacular absolutely spectacular. The quality of the work that we do in the units is always high end. Right? So makes it easier to rent, get better quality tenants, you get a better value and better price for the for the product, would you call self manage? Yeah, we do. So we, we started self managing, but then by virtue of the kinds of things that we invest in, because we’re always trying to figure higher and better use, we’re trying to figure out how to increase the value of property. Remember that what I was saying about determinism. So cash flow is the operational base. And then we as we take an asset, and we improve it over a specific period of time, we’re fundamentally increasing the value of it, but we know precisely what’s coming out on the other side. So so that’s the deterministic piece of it. So the other lesson that came out of that, when we bought that asset is I now had an asset to be able to do some financial restructuring. So that’s when I started to figure out how to do a lot of managing the debt structures associated with this. You know, I applied at the time, a concept that’s now known as the Smith manoeuvre at the time. It wasn’t called Smith manoeuvre, it was just a practice that was accepted by accountants based on recent CRA rulings. And so I started to apply that principle and

 

Erwin  

can you explain it for the listeners benefit? In

 

Christian  

case they’re not familiar? Oh, yeah, sure. So debt that you have in your personal name, you cannot deduct the interest from as an expense against your income interest that you’re charged on. Things that are to derive an income later on. So an investment if you will, so carrying charges for investment purposes are tax deductible as an expense. So what is now called the Smith manoeuvre is effectively a process that allows you to transition, you know, personal debt to tax deductible debt. And usually what you do is you set up a HELOC to do that, where or you use the revenue associated with the rental property in order to pay down the personal debt, right the stuff that’s on the personal debt. And then you can re advance money on off of the HELOC in order to be used as an expense, or sorry to pay for the expenses associated with the rental property. So it’s a very fast way of getting that converted. There’s another concept called, I believe it’s called these days velocity banking, which has a similar type of concept. What it does is it says it’s similar to Smith manoeuvre in the sense that it takes advantage of the fact that interest is tax deductible when use for investment purposes. But what most people do, and the easiest way to explain velocity banking, because it can sound complicated, is that people typically take their paycheck, then they save it in a very low interest savings account. And then they pay their expenses through the month, and then they get a new paycheck, you know, two weeks later, or a month later. And then they repeat the process. Now that money is just sitting there earning nothing the other way, because a lot of people have personal debt that’s non tax deductible, what you can do in that scenario, is you start with a line of credit instead. So you get your paycheck, and you pay down your line of credit, and then you pay your expenses out of your line of credit. And since that interest is non personal tax deductible, you’re you’re basically saving the equivalent instead of earning, say, 6% on your savings, which you weren’t doing before, you’re now saving 6% on the money associated with your line of credit. And the compounding effect is is significant. So it’s just another approach to you know, a money hack, if you will, that a lot of people aren’t aware of, but things like that, or, or the Smith manoeuvre are very useful. By doing that I was able to convert by personal debt to tax deductible interest over the period of I can’t remember exactly maybe five years, and my personal cash flow situation completely changed, we finally got back into positive cash flow, the equity within my house and the four Plex that we bought, then was large enough that we bought our first six Plex. And that was my first commercial asset in 2010. And at that time, and it was it was funny, because I knew nothing about investing in commercial assets at the time. It’s I, I sound like I know what I’m doing now. And I do know what I’m doing now. But it was through the school of hard knocks. I figured out commercial and at the time, trying to figure out how to finance that. And I was dealing with TDs commercial thing, they were so patient with me, I have to say they were really very good about it. That was the first time I’ve ever heard of CMHC based financing at the time. And it was it was hilarious, because the guy that was doing the underwriting for TD, he was based in Toronto on Wellington Street guy Armstrong. So I’ll just name him up because he deserves a lot of credit. And guy was really patient with me. And he said, you might want to consider CMHC financing for this. And I said CMHC financing as well, my friend, he said, Well, you know, there’s certain events, so what does it cost? And he said, Oh, it’s probably about 4%. And my thought was because I was so naive, I thought an extra 4% on my interest cost, right and not realising this 4% premium on the actual loan amount. So I was like, Oh, God, that sounds terrible. I’m not interested in that. Then I thought about it later on or read up more about this guy. Maybe I will want to do that. So that was my first CMHC based financing that.

 

Erwin  

So in this, you know for listeners benefit. Nobody knows what they’re doing the first time. Yeah, yeah. The best learning is the first time. Oh, yeah. The analogy I always say is like just like the first kid. You know, nothing the first kid. No. Yeah, by the second one. It gets way easier.

 

Christian  

Yeah. The first kids bubble wrapped. The second kid is fend for yourself. Yeah.

 

Erwin  

The classic is so true. Like, I have a bajillion pictures of my daughter and my firstborn. Way less pictures of myself I signed. And then if there was a third Yeah. Just Yes. This declining? Yeah. So we’ve talked about a lot about some past real estate. What do you focus on today? Because I want the listener to understand where they should focus today isn’t because again, you know, I speak to novice investors all the time. What’s better? Industrial or vacant land? Yeah. And like, Okay, how much money do you have?

 

Christian  

Yeah, well, that’s right. Some of those asset classes are capital intensive, for sure.

 

Erwin  

And because I can say like she was Chinese or like, are you crazy rich Asian, because then you could afford these things. Yeah. You’re not these might be tough to get into yourself.

 

Christian  

It’s funny because a lot of the properties I bought I did not put a lot of money on them. I just figured out leverage really quickly. And to be fair, and I want to make sure that people understand we are not a high leverage portfolio. So My debt to asset ratio within the portfolio, I don’t allow it to go above 65%. Right. And it’s typically lower than that. So some people say, well, that’s highly inefficient. But for me, it’s part of my risk management strategy. But on an individual deal, I might put something in. Alright, so one deal that I’ve talked publicly about, I’ve done a session with Elizabeth Kelly, I’ve done another one with Delia Barsoom, where I talked about very specific examples of of transactions that have done and how I made the money on it, what the business case look like, etc, etc. So it goes through all the math. So one that I did, I ended up buying a building that had six residential units, a commercial unit, it was on a town’s main street. And I got a house thrown in like a piece of land and sort of a rundown house, its end of life. But I got thrown in to the deal, because it’s right adjacent to the property it was actually buying and the owner on that as well. And he wanted, he was trying to consolidate his portfolio. So I got that thrown in. I bought the whole thing for $850,000. But I had a 90% VTB, with a four and a half percent interest only loan on it. And so the cash that I had to put into it was about 85k. Right? So with legal fees, and everything is probably just under 100k. Because there were some puts and takes on the 85 based on closing dates. But at the end of the day, I put in less than $100,000. On that I turned that around, not even Well, yeah, just about a year later, I guess with a valuation just on that mixed use commercial portion of about 1.4 million. So I drew out a lot of extra equity out of that particular property. And that’s a process that I repeat quite frequently, so I might buy it high leverage, but I have a principal is like the building either has to cashflow, an acquisition or a line of sight to cashflow. And I knew when I bought it that there were some quick and easy things that I could do to make it more valuable. Again, going back to the commercial side of things, just figure out the NOI exercise. And so that’s how I make money on this stuff is they all end up cash flowing when I’m done, they add to our cash flow base. And then we increase the net worth of the value of the building in order to extract more working capital to do more projects. So it’s like a big flywheel

 

Erwin  

just goes fast. So what do you do this property to increase noi you’re now when I was a piece of cake

 

Christian  

is probably one of the easiest ones I’ve ever done, that generate a lot of cash fast, the fundamental promise that the seller had, although he was a sophisticated real estate investor, he had taken his eye off the market and the market had moved very quickly. So everything was under rent. He had, it was a complete renovation in 2015. So it was Paul brand new in there. And as of 2015, so I had no renovation work to do. The issue was that his rents were about half of the current market. Well, at the time, it was probably about 50 or 60%. Let me put this in the right context, say $900 a month in rent where the market was probably at the time about $1,400 in rent. By the time I finished my business case, the market had changed again to about $1,800 a month in rent. But my initial business case was on the 13 $1,400.

 

Erwin  

So as the sole losing money was always so motivated to let it go.

 

Christian  

No, it took nine months to negotiate

 

Erwin  

that deal. Not very motivated, then

 

Christian  

he was not motivated. And he asked originally for 1.2 million just for the mixed use building. But when it came down to it, so he and I negotiated over and over again. I’d met with him monthly until we finally hammered out a deal. And I had him help me with a valuation exercise. And he said, I understand why you believe it’s worth that. You said but I’ve got over a million dollars in these renovations, so I can’t afford to sell it for less than that. But eventually he sent me an unsolicited offer to sell. You know why? I think because he had just gotten tired of holding it had been on the market for over a year at that point and he was trying to consolidate why no one else wanted it. The reason it didn’t sell was that he did overpriced it so he had priced it right if the rents were at market value right. And I think he was thinking about that in his mind he said okay, well I’m seeing units go and selling for you know certain price and great but as rents roll and yeah his rent evaluations and makes sense based on current rent. It didn’t make sense. And at the time this was in a town called Carlton place. Carlton place at the time. I saw the potential that’s why I started buying in Carleton Place I go like I don’t understand why this town’s not on fire right now. Like honestly, it’s right at the end of the divided portion of highway seven on the Ottawa side. Alright, so just like you have the 407 here on in Ottawa highway seven is divided right up to Carleton Place. And you go there and you see Walmart Home Depot Canadian Tire. Rona Plaza has lots of new subdivision development going on. I want to go like, why isn’t this place going crazy in terms of real estate? So we got in there we bought tonnes of stuff. And just to understand and we’ll get back to this right but this was just at the period where I had left my job so before I left my job, I basically expanded my he locks to maximum extent I did refinances on the other buildings that we had while I still had a T for job. And then I made my transition that point because so it was all very planned, if you will. And then we started using that money to buy primarily cash flowing assets. That’s how I ended up in the light industrial, right. So we talked about that earlier. But when I looked at Carlin plays and go, Okay, well, this plays really should be doing well. And right now I can buy cash flowing assets like residential stuff on the main street I could buy so so you

 

Erwin  

had all these big box stores there Yeah. What was driving all that though?

 

Christian  

Because it’s so close to the city of Ottawa and divided highway right there so transportation was a piece of cake, how far then town as well. Like you have to go through Carleton Place if you want to go to Elmont or Perth or Smiths falls, etc. And from downtown. Okay, so I live downtown Ottawa, I can get to Carleton Place in about 35 minutes.

 

Erwin  

Oh, okay. Yeah. So very reasonable, right bedroom community. Absolutely. And then you

 

Christian  

see the City of Ottawa growing. And, you know, you and I talked about Canada and Stittsville before Stittsville having the highest per household income in in the country. And Stittsville is maybe, you know, Stittsville to Carleton places, maybe 1012 minutes. So the boundary between from Ottawa to Crowne Plaza. In fact, the physical boundary of the City of Ottawa is about two kilometres short of Carlton place. So, which also gave it an advantage because of, you know, the municipality, putting so many restrictions in development, all the developers were literally just going to the townships that are literally just outside the city boundary here. So we bought a bunch of stuff in Carlton place through 2017. And then probably by about 2019. Like, yeah, somewhere late 2019, everybody discovered Carlton place, and everything went up in value there, and the cap rates came right down in that town. And they’ve stayed there. So now it’s a popular, it’s basically become a new bedroom community. So that was that. So now let’s go back to that particular transaction. This was a just before all that stuff was really starting to take off, and he had put quite a bit in renovations. That’s why he didn’t want to sell it, it sat on the market for a long time, he had valued put it at 1.2 million. And, you know, I said, Well, it’s not worth anywhere close to 1.2. From my perspective, it’s worth maybe half that is the value at ascribed to it. And, but he was emotionally tied to getting that particular money out. And because it was priced too high to market, especially at the time, you know, if he’d waited another year, he probably would have gotten this price. Okay. But at the time that he was selling it, he couldn’t. And because it was overpriced relative to the market, nobody was putting an offer in, it was just there maybe putting other ridiculous offers, but he just wasn’t accepting it. But I kept that conversation going with him all the time. So every month, we would meet up and see if there was another way to structure this deal. And the I think the part that really got him over the hump was when I literally sat down, he and his wife is doing the bookkeeping. So we sat at his kitchen table, and we went through all the revenue, all the expenses. And then I asked us what what do you think the cap rate is in this particular area? I saw? I don’t know. I think it’s like maybe six or seven cap? And he said, so yeah, that sounds about right. So will they choose the lower that the sixth cabin, and as you know, based on the noi, this is what the value is? And he says, I understand and I know that but I’ve put a million dollars into this property already. So I just want to I need to be able to get that back out. So So I left it alone. And it was maybe three weeks later that he he sent me an unsolicited offer right to sell at 850 at the time, or sorry, 825 is what he offered which and I’d offered him 790 or 795. So we were close, right and we were figuring it out. And then so I called up the realtor that had originally been involved because his contract was up both the seller and I didn’t want to cut them out of the deal. So we brought the realtor back in. And the realtors name is Rob. So as Donna Rob, and he said, Well, he said now he wants to sell it at 850 As always, well somebody asked him a question about the property. So now he thinks there’s two of you, right potentially buy. I said, did the guy put in an offer? He said no, no, it’s just an inquiry. Actually Okay, so Okay, Rob, this is

 

Erwin  

the joys of working with sellers. Yes, yes.

 

Christian  

Well, yeah, you appreciate it far more than I do. But you know, here we’re at 50. And so I said, can you get them off the 50? Mark, and at least back to the 25. And it drops it? No, he’s absolutely fixated on 850. Now because he thinks he can sell it for at least 850. And I said, Okay, totally Well, at the time we had a 6%. Interest, p&i. So I said, Can we take that 6% VTB interest and convert it to four and a half percent interest? Only? I said, No. And then I’ll give him his 850. Rob said, he does private lending all day long at 12%. Why is he going to do it at four and a half? I said, is he fixated on the price, or is he fixated on the other terms, or he’s totally fixated on the price. So just ask him that. I’ll give him his 850. But this is what I want in return. And Rob called me back 10 minutes later, he says he’ll do it. He said, he said, I’ve already filled out the paperwork. I’m in the car driving to his house right now to get his signature. So he doesn’t change his mind again, that for Docusign. Yes. And then later on, Rob, and I had a coffee, right. And Rob said, Why did you agreed 850. I thought you weren’t gonna go above 800. And I said, Rob, what’s the difference between 6% and four and a half percent over five years? He did the math. He just he looked at me. He goes, Oh, right. Because it was about a $60,000 difference. And the way I like to explain it is, is that the seller got his price. And I got my price, which was a psychological number for him. Yeah. Yeah. And I get thrown in. It was a psychological barrier. That’s that’s actually really important.

 

Erwin  

Yeah. Yeah. Because those are real things.

 

Christian  

Yeah, right. Yeah. But it’s not always the price is the thing, right? Like you just find other terms. Well, okay, I’m gonna give up on this. Can I find another term that he doesn’t care about? That matters to me?

 

Erwin  

Well, my favourite stories was stuck in a number of selling my country property to city folk, as we call them, is a three acres of three acres and in a rural area, we were 10 for 10 grand apart. So you know, classic negotiation, make it about something else. I had a tractor of a 23 horsepower Kubota Tractor, okay, with a five foot five or six foot bed on it if mowing bed in a in a snow thrower, a five foot wide snow thrower, so I said, we’re going to take the tractor trackers working with Larry $5,000. He says I do it. I say 25,000. Yeah, he gets his 10 grand off.

 

Christian  

Yeah, the solar probably didn’t have a need for the tractor anyway. Oh, no,

 

Erwin  

he’s didn’t know his country by using a city folk. Didn’t you have an acre of grass? Yeah, yeah. You need a serious mower? Yeah, that’s roughly didn’t know. Yeah, yeah. Engineer budgets.

 

Christian  

Oh, there we go. fatal flaw, right. I

 

Erwin  

didn’t understand mindset.

 

Christian  

But you were talking about asset class. Right. So I thought it might be good to wrap that one up. Right. So what am I looking at right now?

 

Erwin  

Yes. Because I guess, you know, get some current times, especially people aren’t no new to the show new investing. Yeah. Like, what should they be looking at today? Like, what are you looking at today?

 

Christian  

So I’m looking at mixed use buildings today. And

 

Erwin  

interesting, typically tough to finance. No, they’re not,

 

Christian  

not if you do it, right. So it’ll give you the parameters so that it’s easy, but what I’m always looking for as I don’t follow the herd, okay, I look for what I can get under the parameters I’m looking for. And I’m not religious about an asset class. So I didn’t get into light industrial, because I knew anything about it. I just knew that it meant my parameters of what I needed as output. And then I was going to figure out how to make it work. So So I’ve do a lot on the residential side, as you know, in terms of the multifamily, and we’ve had a pattern, it’s really easy and so on, but if you’re, well, it’s practice. Alright, so but on the multifamily side of it, everybody seems to be teaching people to go after multifamily buildings that it’s, you know, generational wealth and all this kind of stuff. And, and so

 

Erwin  

you can, it’s good for a lot of reasons, but they have the caps are pretty low these days. Yeah, the caps are

 

Christian  

very low, especially relative to the interest rates. And if you really, truly believe that interest rates are going to come down, then you’re kind of hoping that that’s the case when you’re buying them at the cap rates today. I never count on that stuff ever. So do I still buy multifamily? Yeah, sure. But it has to be a screaming deal. And, interestingly enough, it’s the new developments where the screaming deals are coming in, right? Because the construction lenders are trying to get out of those deals right now and people can’t do the refinances to pay other construction loans. So that’s a whole other topic, but I’ve been looking at mixed use assets over the last couple of years because the multifamily chasers if you will, so yeah, there’s a lot of them and they’re not looking at mixed use for one they don’t know it’s one of these scary things. It’s got a commercial piece on it, right. They don’t think they know how to deal commercial leases and all and how to manage commercial She’ll tenants, they think vacancy rates are going to be super high relative to Residential Tenancies. If you buy wrong, that’s true. But I purposely

 

Erwin  

overpay, but yeah, I think everything will go wrong. Yeah, yeah, that’s right.

 

Christian  

There’s a lot of parameters, you can make mistakes on in anything. But the reason I like makes us one is I’m very familiar with commercial tenancies, right through my experience in the Residential Tenancies, and you’re saying, Okay, well, it’s difficult to finance. Well, at the very basic level, you can do conventional financing on it, and lots of lenders will do it, it’s not that big a deal. But if you buy strategically, you can get CMHC financing on it. So the parameter for CMHC is that the commercial component has to be 30% or less of the gross leasable area. And if that’s the case, then they will do CMHC. The underwriting is a little bit different, right? So you have to underwrite the commercial piece and the residential pieces to distinct entities. And you need to do that anyways, from a valuation perspective. So a lot of people say, well, what’s the cap rate on a mixed use? And I said, What’s the percentage gross leasable area that’s commercial. And really, what we do is we write, we underwrite the commercial portion, we underwrite the residential portion, and then you add the two valuations together. And that’s the value of the property, but they’re often overlooked. And what I do is I buy mixed use buildings on Main Streets, on towns that I believe have strong economic fundamentals. I don’t invest in towns that I can’t understand their economy. So if I understand it as solid economic fundamentals, then if I invest on streets that I know are going to be popular or nearly popular, that’s where I buy them. So that first mixed use building was on the main street in Carlton place, right? We have a great tenant, we have great commercial tenant in there. So that’s what I’ve been buying these days. And as it turns out, on a blended cap rate basis, you can get them to cashflow and acquisition if you do it right. And not only that, but just to accent the point a bit, is remember the whole feeding frenzy that was going on in the back end of 2021, early 2022, I bought a portfolio of these buildings in Elmont, just outside of Ottawa. And people know Elmont because it’s often featured in Hallmark movies, it’s really cute, pretty little town and my buildings are often in those Hallmark movies. So I bought those in the height of all that, you know, craziness that was going on. And it was cashflow on acquisition with tonnes of upside in the buildings. So I have a five year plan around that those properties. And they the business case, the internal rate of return is going to be I think a calculated out to be about 45% IRR right over a five year period. So which is outstanding, right by any measure. And it’s relatively straightforward, right? Some of the units are freshly renovated. Some are a little bit dated, so easy to update and there’s probably out of the whole portfolio, maybe four units that need like a complete gut.

 

Erwin  

Tell me about the tenant profile who are your commercial tenants and

 

Christian  

so on Main Streets, their retail. So for example, in Elmont, I’ll give you some example of the retailers in Alma, we have Ottawa Valley Coffee Company. It’s they’re a great little boutique coffee shop there. They’re always full, fantastic coffees, fantastic teas. And the place is always full.

 

Erwin  

Sorry, just to take a step back and you’re gonna do diligence period, you’re checking out all the retailers.

 

Christian  

Oh, yeah. Yeah, check everything out. Yeah. Like,

 

Erwin  

you went as a customer type thing or? Yeah,

 

Christian  

I went in, you know, like, get to understand what their clients look like, I want to understand their longevity. I want to know who’s backing after etcetera.

 

Erwin  

Right. So you didn’t just like, do this virtually or? No, no, I

 

Christian  

was on site. Okay. Yeah.

 

Erwin  

So yeah, you know, by like, in Saskatoon without ever seeing it. I’m sorry.

 

Christian  

What could you be alluding to? Or what? What could you be alluding to?

 

Erwin  

Point is that you’re active,

 

Christian  

very active, and there’s Intel oriented

 

Erwin  

boots on ground boots inside the property. You’re talking to influence seller?

 

Christian  

I’ve met every seller have bought a property from without exception. There’s I’ve never bought a property blind. I’ve always met the seller, even if a realtor was involved. Yeah, always, always always. It builds a connection when we’re doing the due diligence. I mean, clearly there’s inspection involved in my inspectors a pH, okay, so we’re looking at everything structural to the point where the seller was like, said, Holy cow, this guy’s good. And it enabled me to negotiate a 400 grand off of that deal. And the guy the seller was convinced that I was right in terms of negotiating that it was just was an arbitrary because the engineer was very thorough, and I told them exactly what their concerns were One of which manifested before close. So it’s another story. Right? So as real concerns, they were real concerns. Yeah. So I just thought, okay, that’s fine. I’m just going to some of it will absorb because the business case was solid and I could, but heck, I’m gonna negotiate that price down. Right. So and because I have a duty to do so. But yeah, then we go not just past the paperwork, diligence, but we take a look, we’re looking at the tenant profiles as well. So in Ontario, because of the Residential Tenancies Act, there’s one key thing that I don’t think a lot of politicians understand how negative and impact it is. rent control is one thing, but that two and a half percent rent cap that regardless of what inflation and CPI is, is really detrimental to long term tenants. And so when I’m going to buy a property, and I take a look at the demographics, if I see that the tenants have a profile that will typically be long term, I don’t buy the property. Because I know my rate of return is going to be too far. So we do have tenants, you know, so we’re looking at a percentage. So if there’s some people that are fit that profile, I don’t have a problem with that, necessarily, as long as the overall business case is gonna make sense. And I want to be clear, we never push tenants out. Okay, the only, I shouldn’t say never the only time we ever pushed in and out is where the building cannot be renovated or redone. With them in place. Okay. But if I’ve

 

Erwin  

been in the property it was because I don’t think the previous owner did everything with permits. Is that fair to say?

 

Christian  

I’m talking about the James Street project. Yeah, no, that building was just a disaster, right? We it was chopped up, it was structurally unsound. And we had structural engineers in there to double check everything. And it was very clear that there was just no way like, often what we’ll do is unit turns, right? We might can reconfigure units. So if a three bedroom comes available, we can make them to one bedrooms. That’s easy. We’ll just wait for that tenant to move. But, you know, if tenants are good tenants, and they’re just trying to lead a comfortable life, we won’t push them out? I’m sorry, I just I can’t, you know, I kind of look at it as like, what if I was living there? How would I want to be treated? So we don’t do that. Now, if a tenant has a real problem in their interface, that’s a whole different situation.

 

Erwin  

Oh, the tenant board does not like anyone infringing on tenants, including other tenants.

 

Christian  

They, they don’t, but I’ll be honest, it’s very much a process of retaining housing. So even if they’re interfering with other tenants. So we have a number of cases where we’ve dealt with this, we’ve always been able to negotiate it out before getting the LTV, but the reality is that it has to be egregious before the LSB would do it to the point where like, I’m sorry, but the way it’s set up is good tenants suffer at well, the bad tenants benefit.

 

Erwin  

Yeah, all right, is 20. Probably even smaller, but like 4% 96%,

 

Christian  

good tenants far far outnumber bad, you know, I put the ratio of 95% Good, right. 5% of problematic 2% in that 5% are truly problematic. So going back to where I was saying that is I’m looking at a demographic profile. So if I see that the tenants are typically let’s say, in their 20s and 30s, okay, then, that I know they have life events, I don’t need to do anything, I just wait for them. They’re getting together, right? Like boyfriend girlfriend, or they’re getting separated, or they’re getting married, or they’re having children, or they’re getting a divorce or the there’s just lots happened that get changes in jobs, life when you’re in your 20s and 30s. It’s highly dynamic. And so life events just naturally have them do turnover. So I can take a look at in that portfolio purchase. It was 80% of the people were in their 20s and 30s. So I know over a five year period of

 

Erwin  

community generally be the younger people, your families. Yeah, yeah.

 

Christian  

So when I was talking about unintended consequences on that two and a half percent cap, so you know, while I don’t ascribe this of the policy that we do, because we look at tenants on merit, I can absolutely see that there are some landlords that say, Do I want to take on a long term tenant? Because my expenses are absolutely going up faster than two and a half percent, which means that 510 years from now, I’m going to be underwater from a cash flow perspective. So I could see that there would be a bias. Oh, it’s an unfortunate thing. And that’s why, you know, things like that, while they sound good on the surface, I really would love to see them change, not for the benefit of the landlord. Right, but for the benefit of the tenants. Right? If the landlord’s benefit out of that as a you know, as a side effect, that’s great, but there are unintended consequences to a lot of these policies.

 

Erwin  

That’s what pushes people to Cash for Keys. As part of it. Yeah, for sure. Sorry, back to the parameters of what you’re looking for a mixed use. Yep. So you’re looking for a term profile. Sorry, you’re in an area that has The tenant profile of 2030 Somethings that will likely turn over.

 

Christian  

So let’s be crisp about it. Okay, so what I’m looking for is highly sought after area. So Main Street properties are almost always sought after from a retail and commercial perspective because everybody wants to get their sign on the main street. And so even with those ones in Elmont, we just had a unit turn. Like literally right now, I think we wrote up the lease last weekend. And we didn’t have to advertise. We already had like four tenants had already put in requests over the last nine months saying, if a unit comes free, can we have one?

 

Erwin  

No kidding. And this is retail. Yep. Because Because retails capturing headlines as a in general like, well, for example, when I go to the mall, I’m sure everyone’s seen it. There’s lots of vacancies and malls these days there is

 

Christian  

but main streets are different. Right? So people like to go to main streets because it’s a social thing as well. Right? It’s walkable, I go to a mall because I need to buy something I don’t wander around all but I’ll wander around a Main Street and Main Street like Elmont is, is really interesting because it’s highly picturesque. So James Naismith, founder of basketball, that’s his hometown, and there’s a statue of him there as well. And then the buildings all on Mill Street, which is the main street there are gorgeous, right, like the building that the post Dino’s restaurant is just a beautiful, it used to be the postal post office building and customs and revenue. And there’s lots of stone buildings right on the Mississippi River there, the waterfalls there, there’s a little power generating station, you know, I’ll show you some videos later. It’s just, it’s just gorgeous.

 

Erwin  

So it’s kinda like Niagara on the Lake.

 

Christian  

Yeah, it’s a little bit like that, but more condensed. So you don’t have to go far right? Like the the main streets, maybe three blocks long, maybe a little bit longer. But it’s all there. And there’s lots and lots of people there all the time, because it’s very photogenic. You can do you know, all your social media pictures to be seen there. And it’s one of the reasons it’s been featured in Hallmark movies so much is that it is so picturesque of Old Town in our living, Small Town Living and because it’s Hallmark features that also draws people in, but Alamanda is one of the most popular towns in Ontario to go from a visiting perspective. So it’s absolutely lovely.

 

Erwin  

Right? So heavy tourism. Yep. Just switches just for the local economy. Yeah, yeah. And get for Main Street. Yep. Fascinating.

 

Christian  

So I’m looking for Main Street, like where there’s lots of demand. So you could go off Main Street, but you have to be pretty convinced that there’s enough foot traffic to make sure that the retailers are going to get trade. But Main Street, I’m looking for commercial where the gross leasable area is 30% or less of the overall space so that way, I can get CMHC, you know, beneficial financing associated with it. I’m looking for good quality structured buildings there. I don’t mind if they need renovating, because that’s a specialisation that we have. So we’ll just do that. But by looking at that specific asset class it because no one is really chasing it. Like I said, that portfolio I bought, and it was a creative and purchase the clothes was a nightmare, but completely unrelated to the well, not because of the asset class. It was a couple of things. But that’s a whole other whole other story. Unless you want to dig into that.

 

Erwin  

I said that I think this whole thing leads into a joke is that maybe they’re not allowed people to look at from excuses. No one’s has a course teaching you yet. You’re looking for a business idea interest, if you want to be a core seller. Get rich quick, I’ve mixed use for real estate.

 

Christian  

There’s a lot of that stuff going on out there. Right. So I you and I talk about this at length, it’s it’s a bit of a scourge in the industry. I never understood this because I was doing all this investing relatively privately. And then at one point when I decided to go really kind of full time in 2017. So I should get to know this community, you know, other fellow investors network with others. For real, real estate investors organised. It’s where I started with and you know, I paid my $127 A year before nothing. Yeah, it’s a not for profit club, you know, just investors, helping investors. So I started there. And then I, I began to understand the network of everybody else that was involved in the industry. And then I began to understand the fact that people were coaching and teaching and stuff like that. And then I started really looking at their qualifications. And I was I was shocked. I was absolutely shocked by it. The industry is just, you say this all the time. And you’re absolutely right. You got to do your due diligence, not just on the properties, but on the people that are helping you with it. Right and the so called coaches and education programmes that are going on it’s it’s really quite troublesome, such as capitalism. It’s always been this way too. I came from a poor Rational Environment, right? So, you know, as we talked about, I came from the tech side of it. Most of the people there were, you know, engineers who have a ethical code of practice. I’m not an engineer, right? Not, I don’t have a ring, you know, so I’m not a piano or anything like that. So, but I was in that environment where it’s mostly engineering staff, it was, you know, corporate business professionals with certain ethical standards and so on. And I lived in what I now realised was a sheltered life. You know, I thought that’s the way everybody was, and that’s the world and when I came out of that world and started getting involved much more on the real estate side, I was a bit disappointed to see how many people are trying it, trying to take advantage of other people in capitalising on their hopes and dreams. And I just find that terrible.

 

Erwin  

There’s there’s all these courses on trying to raise money. And usually people trying to raise money have no money. Yeah. And so, you know, fake it till you make it. Yes, that means you lose other people’s money.

 

Christian  

Yeah, there’s a lot of that going on. You know, one of the things that we’ve seen you and I have recently over the last few years is just prom notes going bad. Oh, yeah.

 

Erwin  

The gentleman on the show that will never air 2.8 million prom notes, they’ll never get paid back. With due diligence, like, we should fully when it prominent means and understand that you may never see that money again. Yeah,

 

Christian  

a prom note virtually has no security. Right? And I listen to your show regularly. Actually, I do. I’m one of your 14 listeners. So a regular one. And you had a one with Elizabeth Kelly back a little while ago. And she mentioned me in terms of my underwriting practice, Elizabeth and I talk very regularly. And when I do write prom notes, okay, so I do them. But my criteria, like I understand the risk and underwrite them based on what’s the likelihood of getting back. Okay, so I’m not focused on the interest rate, right, I’m interested in getting my money back. So if it’s a very low risk, and I know that the money is going to come back, and I have almost absolute certainty, I’m going to be lenient on the interest rate, you know, within certain parameters, because you have to make a certain return. And of course, I’m covering myself, right. So it’s not a simple one page prom note. So if I do a promissory note to somebody, there’s probably about five or six documents involved that you got to sign off on including PPSA. Sorry, BSA is PPSA. What was it? What does it stand for? Personal property? I don’t remember. But what it is, is basically, it’s a note against your name. Okay. So if you then go on to your personal securing it, yes. personal security. That’s right. So it’s, yeah, private, personal property securities agreement, I think is what our PSA stands for. But basically, if you’re personally liable for Yeah, yeah. So if you go to try and get a car loan, for example, and you’ve got a big lien on a PPSA perspective, you probably won’t get your car loan.

 

Erwin  

Well, sorry. You can register this on their on their credit on their Equifax. Yeah,

 

Christian  

yeah. Yeah, I don’t know. It’s registered as a PPSA. Right. So there’s a separate registry. So I don’t think it sits on Equifax and TransUnion, that they had sets on another registry. So I just let my lawyer do that, right. But it’s something that we do. So we’ll take the entire amount, and we’ll just register it as a PPSA for a certain amount. But that’s just one of the documents that we do. So I’m interested in getting my money back. So if I’m lending to somebody who’s relatively high risk, and I will do some high risk loans, but then I’ll look at it like I have one guy who I know is risky, and that I loan money out to and I look at I’m gonna go okay. I think that if I were to write four loans, that type, I would only get three back. Okay, so are this okay, well, what interest rate do I need to earn on that in order to still make that a business case? So if I keep writing these and I know that one and four is gonna go bad, I still need to make a certain minimum return and so that’s just the cost of doing business so don’t get wound up. Remember what the return was the only charged on that one? It was 30% interest compounded daily.

 

Erwin  

All right, with a credit card return credit card rates. Yeah,

 

Christian  

I mean, I could go higher, right. But on that one, it was 30% and like loan sharking is 60% Okay, so just to put it plus whatever else yeah as the you know, some people don’t know what the loan sharking limits are. And they’re 30% Christian, you’re just another word no, no. 60% is actually the limit but 30%

 

Erwin  

like credit cards, do it all the time. All the time. And we’re not talking payday loans, no.

 

Christian  

Payday loans do that kind of stuff all the time to the difference is that the guy was boring as a sophisticated borrower. And I know he, he knows what to do. The thing that made him risky was he had a bankruptcy about five years earlier. And he has this tendency to take on too many projects. So there was always that risk. But at the same time, he is a finisher, like he’s determined he’s not a lazy investor by any stretch. He’s very active in what he does. So so, you know, there’s probably still a decent chance that I’ll get the money back. But I that’s the way I underwrite it. So if I lose the money, okay, I lost the money. But your return of risk adjusted its risk. That’s exactly right. Yeah. Which I find most retail lenders are do not know how to risk adjusted or whatever they’re doing. I’ve seen some of my clients, and I help people from time to time, take on a handful of people to kind of help guide them through some troubling situations. And I’ve had some clients come with me like, I’ve got this problem note, right. And they wrote it like 12% 12%, no security simple one page problem.

 

Erwin  

If the credit card company won’t give them money, then why should I? Yeah. Because they can no use their credit card 20 30% interest they could, right? So I want something similar?

 

Christian  

Yep. Yeah, well, it is. But again, like there’s other scenarios where, you know, I might lend money to somebody, and I know that they have the ability to pay back. I know that in some cases, there’s some people I’ve been loaned money to that have a reputation they have to maintain, like they would be devastated reputational, if, if they didn’t pay back, so you know, what? I know the risk was a lot lower in that scenario. So it’s not zero.

 

Erwin  

It’s actually funny that you mentioned that because there’s like, there’s actually some well known borrowers out there. If I know that they’re bad at paying back, I imagine other people know, but people still give the money they do, because they’re good marketers, good marketers. And also, I just find in general, not enough people are suing.

 

Christian  

Yeah. And I don’t know why that’s that’s the case. I mean, one is you might just say, well, it’s we can’t get blood from a stone and off. Oh,

 

Erwin  

the other thing is that they want to be the pawns that they keep going for in order to get for them to get paid out.

 

Christian  

Maybe it wouldn’t stop me I’ve sued people before. Right. And,

 

Erwin  

and we’ll name names right now.

 

Christian  

As it turns out, whenever you settle something, you’re often putting a nondisclosure, right. So, but I’ve sued people before, right? And because I’m no nonsense with this kind of stuff, so sometimes, it’ll mess up people’s money. Well, yeah, I can be very lenient with people who are very reasonable. Okay. But when people become jerks, right, I can be far I can be really tenacious about that. So if

 

Erwin  

I tell you, I’m not paying you. You’re not our sponsors are suing you. It’s not my

 

Christian  

natural response. My natural response is, okay, well, let’s figure out how we can work this arrow. Oh, no, I’ve

 

Erwin  

already told him that. Hey, you. Yeah. Well,

 

Christian  

if you’re coming back is, you know, the worst, I think, was one who said kept saying that they were gonna pay me back. And then every time we set a milestone, right, they didn’t pay? Yeah. I kept trying to drag it out. So look, at this stage, again, I’ve tried everything to work with you, and you are not helping your cause at all. So in which case, you know, the next step is, is we’re going to go to a suit, right? In which case, it was a she at the time, she said, Yeah, whatever. Alright, she was surprised when I actually sued her. And she ended up I got, my lawyers got most of the money to be fair, because it was a relatively small amount, but it was the principal of the situation. And I got as much as I would have gotten in, you know, if she had just settled with me, my lawyers basically made a lot of money on that at her expense. And she had to pay for her legal fees. So in the end, it costs her far more to defend this than to just work something out with me. She took

 

Erwin  

a bet, stick a tuck in it a bit. But she had

 

Christian  

an even when you’re in a lawsuit, there’s times you can negotiate out, but she was too stubborn

 

Erwin  

it but like I said, though, there’s always people who aren’t suing people who deserve to be sued. Oh, yeah. Yeah. Christian, we’re

 

Christian  

way overdue. As typical of us as typical, we didn’t even get into the macro. Early, we could have talked about the refi that we did, as well. But you know, obviously, maybe we’ll save that for another show. Yeah. It’s a really interesting set of lessons in that.

 

Erwin  

Because I think it’s important because I find a lot of beginner investors, they don’t really see the larger picture. Yeah. Canadians in general, because I believe the Canadians General saw the larger picture. They understand we’ve been problem. Yeah, sorry. No, I think every global citizen is interested in the world problems that we have, then naturally, you go towards trying to fix the problem. Yeah. And that’s why we both ended up and holding hard assets and real estate, right, we’re solving a problem.

 

Christian  

So right now, if the if you know, and we can discuss at length in a future so this will be the teaser right but right Right now, people should be holding hard assets. And I don’t care if it’s real estate or gold have a preference to real estate, but you gotta hold a hard asset and have liquidity have cash on hand. Okay, it’s lots can go wrong for the next few years. And you don’t want to be in a situation where you’re in a cash call situation, no matter what’s going on in your life. So have cash on hand, just in case. Maybe it’s a 20% issue or 15 percentage, but have cash on hand.

 

Erwin  

Don’t Don’t quit your day job. Just yet. have cash on hand till you’re Christian rich. Country, where can people follow? Follow you?

 

Christian  

I’m all over social media. You know, me I like to give back. You know, I do lots of give lots of resources to help educate people and stuff. So my website is a liveris.ca a l i f e r o u s.ca. I’m sure it’ll be in the show notes. I’m on social media under my name, as well as my company which is a live harus live press group. It’s registered. So it’s a very unique name. And I also encourage people to become members of the Ottawa real estate investors organisation that’s o r e i o.org. I’m a member to Yes, or wins or wins a member,

 

Erwin  

I hope to hope to make it to the June meeting. Yeah,

 

Christian  

I won’t be there for June. I’m at CFA, I’m presenting at CFA in Halifax

 

Erwin  

is that you’re a pilot what is the

 

Christian  

Canadian Federation of apartment associations? Because I’m on the board of the Eastern Ontario landlord organising which is a member of CFA and it’s the same chairman of both boards. So CFA is a an advocacy group for landlords at the federal level like Firpo is for the provincial level and yellow is for Eastern Ontario. And in Toronto, it is the GTA Greater Toronto Area apartments or association Apartment Association. Do not Airport Authority. Okay, good. No, no, no, no, there’s an extra a.

 

Erwin  

A Yeah. Okay. It’s great. Yeah, it’s

 

Christian  

the Greater Toronto Apartment Association GTA.

 

Erwin  

Yep. Let XJ Trishna. Thanks so much for doing this. All the way to audit from Ottawa just to do this show.

 

Christian  

Yeah, it’s actually I’m glad to finally do this in person. You and I always do this over zoom. So this is awesome.

 

Erwin  

We talk mostly during the pandemic, so yeah. All right. Thanks so much for doing this My pleasure.

 

Erwin  

Before you go if you’re interested in learning more about an alternative means of cash flowing by hundreds of other real estate investors have already then sign up for my newsletter. I know for yourself what so many real estate investors are doing to diversify and increase our cash flow. And if you can’t tell I love teaching and sharing this stuff.

 

 

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**Transcripts are auto-generated.

 

Erwin  

Hello, everyone, and have you stepped out of your comfort zone lately? I find that those who are willing to challenge the status quo often, that often that’s what I see as successful real estate investors. I see it my clients, I see that’s what sets them apart from that assets. Real estate investors from my experience are often from the middle class. They’re homeowners, kids, are the children of homeowners. They have great paying jobs that businesses and they want more. And oftentimes, their parents wanted more adults as well. So that’s pretty much the investing is that many investors receive help from their parents, especially young ones. And when I mean help, I mean like significant financial gifts range of hundreds of 1000s of dollars, which can also include guaranteeing or cosigner mortgages. And you please read stories of folks who have received inheritances. One of our staff received a very sizable inheritance from their grandparents, grandfather’s passing away, leaving behind I think about like a $1.6 million free their house. So is left behind to two grandchildren. So yeah, massive transfer of intergenerational wealth, and the cause of it was real estate. Will that change anytime soon in Canada, as soon as immigration changes, we see immigration current numbers come down. Don’t forget when Harper was in office, and this isn’t a political thing, it’s more of like a dating. Well, over 10 years ago, when Harper was in government, he set a record of immigration that with 245,200 45,000 new immigrant Canadians during his office, and we’re now in 500,000. Immigrant rage now, at the same time, there’s articles this week that just came out about how massive labour labour shortages in construction and renovation. So add on that to the difficulty already building housing. Oh, it still seems like owning quality, small multifamily properties. Makes sense. And that’s the advice we’re giving to our clients. Now, we’ve spoken to some, we have some new audience members who are new to the value investing world, we have a lot of folks who were buying construction now listening, at least they’re not they’re now tuning into this show. And unfortunately, a lot of negative cash flow properties. Thankfully, some of them do have equity in their properties they’ve held they’ve had them long enough that they’re leasing equity, they are positive. And we have many clients in similar situation. They bought single family homes for value, like five 810 years ago with refinances. Now for anyone who’s done the burr method, you know, one of those R stands for refinance. So that means that someone took a new mortgage, to borrow more money on the existing property, making the mortgage payments bigger. Now, if interest rates, pretty uncomfortable rates pretty high. Even people who’ve owned property for a long time are negative cash flowing. We’ve had clients choose to divest them in order to pay down debts, or even turn that money over into properties that can potentially cash flow, like a duplex or a triplex. So this is getting people out of the comfort zone. Many of us got into real estate investing thinking that we would buy a property held like 510 15 years, pass it on down to family at times change. So we’re always happy to do a portfolio review and that can be checked with our listeners. And if that’s something that interests you, feel free to email us at Iwan real estate. Sorry, that’s Iwan wi n at infinity. Well, that’s, that’s iWin community wealth.ca. Again, we’re happy to do portfolio reviews to do an equity check how you’re doing, because again, many of our clients who are negative test positions that are positive on their equity returns are choosing to divest. If you want to have a conversation around that, we’re happy to help. Because, to me, I’ve spoken to some people, people who aren’t our clients, they tell me that they have negative cashflow. 1000 or more on generally the condos and I have better things to do with my money than to subsidise my tenants rent. That’s just me. So hopefully everyone out there is okay. Hopefully your equity positive. Again, we’re happy to have the conversation if you’re interested. Yeah, again, I’ve never been a fan of condos. I think I’ve been pretty obvious in the show. I’m happy to invest in the development of condos. I never want to be a holder of a condo because again, condo fees rise, typically faster than inflation. counterbores limit once control the property doing what you can do with the property. For example, if you wanted to run into short term rental, on the other hand, real estate our clients generally own freehold houses on land, and those with a big lot and add a garden suites and a better name. So just some loose rocks, not the numbers. You can build a garden suite for around $300,000 from from scratch some young land already. And then our client is renting out her property right now for $2,500 a month. So if she gets that, bless the management costs, maintenance costs, they can see costs, a cap rate works out 9.1% 10.1% Tap on the garden suite. So that pretty much beats almost any investment out there. Real Estate. Again, assuming that you already own plant, that’s the point, you need to own a property, not a condo in the sky. So if you would like to invest like one of our 45, plus Income Property millionaires or multi millionaire real estate investors, and you need a portfolio review, I highly recommend it. Especially if your cash flow negative. If you’re not ready for action, and you’re just ready to you’re interested in learning more, we do have an upcoming Iowan meeting online on Zoom, where I’ll be sharing the Live Smart market update. And I’ve been digging to artificial intelligence quite a bit in terms of the tools that are available for for my business, including being a landlord. So I’ll be sharing about the tools that we’re using today in our business, AI is going to be a massive disruption for the good for those who know how to use it. And the tools is getting better and better. I’m not easily impressed with what you can do already with these tools. As always audition for truth, seeking to find out what works and what doesn’t work. In my own business, my own portfolio. That island meeting is Tuesday, July 25, at 7:30pm. Eastern Standard Time, my team and I will be breaking down, my team will be joining us as well, Coach Chris and Steve will be showing you what the highest and best use shows the investments our clients are executing on right now. Properties that do actually cash flow, and they even work in this elevated interest rate environment. And the timing device actually is pretty strong. Because if assuming you’re one of those who saved and worked hard, save a much premium with their money, then there’s not a lot of buyers out there, all interest rates are high. And we’ll see more and more business owners come online as the interest rates the high for probably at least a year. For those who enjoy an in person experience. We do host I would mastermind tours in person. And our next one is Sunday, July 30. in Kitchener Waterloo, for me for coffee tour to income properties. So we go inside them. We have hand notes that the numbers potential numbers on their properties, and then we mastermind over lunch. To me there’s nothing better than learning hands on in person and hanging out with like minded people in my experience. Make sure you’re on my email newsletters stay connected to all these best in class educational events. I can register on my website at WWW dot truth about real estate investing.ca. Again, that’s www dot truth about real estate investing.ca. On the right side, enter your name and email. And you know that all of our latest events, if you have a friend or family member who cares about improving their financial future, feel free to come along. Now speaking of being in a display, business play my terrible golf game, for which I am self conscious to others. While I do love the game, and especially the networking, it’s painful for me to be consistently slicing my ball into the woods, and regular three, or sometimes four. If you’re new to golf for unaware this is these are. The positive, the people I’m meeting and getting to know has been awesome. My new friend Susan, for example, has been in the business for a very long time of helping immigrants come to Canada. I asked her How’s business? For answer? It’s been busy. And you know me, I always follow on questions busier than pre pandemic answers. Yes. To my surprise, I have more questions. Don’t they know how expensive it is to live here? She responds with a smile. Yes, that’s why they’re moving to Hamilton. This type of backroom of micro economic information to me is gold. Because it’s information that my clients that I need to know, we as real estate investors have two businesses. So therefore, as a real estate investor to business, you have one, you’re in the business of renting to tenants. And two, sometimes we do sell these businesses. Hence I want to own what’s in high demand for both tenants and buyers. And the way it’s going to do just look like we’re gonna have clients for both tenants and for resale. And as long as you’re messaging right asset class, in the right area, and as long as the immigrants keep coming, surely, that’s happening onto this week’s show. We have our friends returning from covered home mortgage investment corporation back to give an update on the private lending market, mortgage market dates, including lessons from the downturn. For example, what did in default real estate investors do wrong? What do they have in common? So that you the listener, this is leverage, right? So that the listener myself my clients can learn to avoid the same mistakes. So please keep in mind, the same essence can be easily done wrong. And there’s obviously less right ways to do it. Ask anyone who speculated on construction and its negative cash flow like a lot, and especially those who are close almost pre construction contracts. Long term, that can be a fine investment, but most can’t handle today’s interest rates in the work difficult lending guidelines. Anyways, on today’s show, we have Derek Lebar was an underwriter at Calvert. He’s the guy so an underwriter what they actually do is there’s one who reviews more mortgage applications from a risk perspective, both the applicant and the property and determine whether or not to let awesome we have to So I’m guessing Justin’s his boss. He’s the vice president.

 

Erwin  

He’s been on the show before. One of the things about real estate investing is that the asset is so good, the banks will lend me a lot of money versus my objective of keeping the deal and the equity to myself, I maintain full control of the asset. And all the upside and profits are mine. On flip side all the last week, as well. This is why learning financing options is absolutely key to becoming a successful investor. But debt is a double edged sword. As your risk is greater, as you’re, as you’re about to hear. In this interview, such as the truth about real estate investing. Some people got the wrong sort, since Garrettt, Jesse living invest in Calgary, the share market and economic update on Alberta, which I know is a hot topic for investors. As we do discuss securities investments, the disclaimer is coming. And you can check our Calvert at Ch hmic.ca Ch M ic.ca. Please enjoy the show.

 

AI  

Disclaimer. The Information and opinions expressed in this podcast are solely for educational and informational purposes, and should not be considered as investment advice. The hosts and guests of this podcast are not licenced financial advisors, brokers or registered investment advisors. And their comments should not be construed as recommendations or endorsements of any specific investment, security or strategy. investing involves risks, including the possible loss of principal. Before making any investment decision. You should conduct your own research and consult with a licenced financial advisor to determine the suitability of any investment for your specific financial situation and investment goals. The hosts and guests of this podcast make no representations or warranties as to the accuracy, completeness or timeliness of any information discussed in this podcast. The podcast is not responsible for any errors or omissions, or for the results obtained from the use of this information. listeners are advised to use their own judgement and seek the advice of professionals before acting on any information provided in this podcast. The podcast shall not be liable for any damages, including but not limited to direct, indirect, special or consequential damages arising out of or related to the use, inability to use or reliance on any information provided in this podcast.

 

Erwin  

Jesse, Garrett, what’s up guys busy these days?

 

Jesse  

Oh, fortunately getting to hang out with you.

 

Erwin  

But last time was over zoom. You guys are from Calgary. We’re here in the GTA today.

 

Jesse  

So yeah, we get to visit with yourself, we get to visit with some of our borrowers. While we’re here on this trip, we get to visit with some mortgage brokers that we get to do work with and then also some of our capital sources, bankers and shareholders.

 

Erwin  

Fantastic. So let’s jump right into it. Are your borrowers happy to see you hear from you?

 

Garrett  

Yeah, I think so. I mean, they’re always happy to hear from us. Like we were talking about earlier, we’re calling all our old clients who bought in that tough time between January and April. And just checking in to see how they’re doing making sure projects are coming along and seeing how we can help. We’re always solution based lender, so we want to do what’s best for our clients.

 

Erwin  

Fabulous. Sounds like you’re experienced better than mine. Because I’m chasing my property manager for my last month’s rent right now. No, no, it’s like it’s May 11. So it’s a little bit late.

 

Jesse  

Well, well, don’t get us wrong during our check in calls that we did to those borrowers who we lent to during peak times, there are some some issues, there are some people who are not going to make as much money as they thought or worse, lose money. But based on the fact that we saw property values dropped essentially 20% In six months, we as a fund are very happy with the results very happy with the performance of our borrowers, and their ability to be resilient through this time. So so it was it was a good exercise exercise. We’re really glad we did. And I think if you were to pull our borrowers in and exercise, they’re glad we did how many? How many banks reach out and say, Hey, or when everything okay, anything, anything we could do to to work with you on? Like, like, we literally took that approach and called hundreds of borrowers to see how they were doing.

 

Erwin  

How many did help, how many needed help? Well,

 

Garrett  

I mean, cost them needed help in the sense that the properties went down in value so

 

Erwin  

much, because I know lots of flippers are losing money. My friends aren’t losing that badly, because they were pretty smart. Yeah, no, I’m talking like 515 K on a property. Right? Not bad. Considering

 

Garrett  

Right, exactly. And I’d say that’s where the majority of our clients would stand if they lost money would be around that 1015 grand type of things in the world. Yeah. And then it’s just talking to them about like their future plans. Right. Let’s see. Let’s see if you want to continue this. Let’s you could take this as a learning experience. Or you could say it’s This isn’t for me because I lost on this one. So people have different mindsets. And it depends how long you’ve been in the real estate investor business to right if it’s your first flip and you lost be tough to come back from that.

 

Jesse  

Yeah. And even when you say, how many people did we help? Like? I’d say all of them, because in some instances, help was just somebody to talk to, like, you know, your plans got flipped up on their head? Is it to sell is it to refinance? What should I do? And, you know, we’re fortunate as a company in that we’ve been through multiple cycles. And we’ve seen what works and what doesn’t, and what doesn’t work is inaction. That’s where

 

Erwin  

things compound sit in your head, and

 

Jesse  

you’re paying our fund, high interest rate, things are getting worse. So something was just talking about action, what are the next steps and pointing them in directions and giving them options? So I’d say we helped everybody but some needed different types of health and others.

 

Garrett  

Clients always want to, I shouldn’t say always want it. But clients are sometimes nervous to call their lender and tell them hey, I’m having troubles. Like, that’s a tough conversation to have. But we welcome those. Yeah, yeah. We welcome those. And we were good with those conversations. So we’d like to talk about it, see what we can do to help. And, yeah, people just need to know like, it’s a good thing to call your lender and be in contact with them will work with you more,

 

Jesse  

at the end of the day, their success is our success. So to sit there in fear, and worry about that stuff. That’s that’s not going to be successful. So

 

Erwin  

there’s just a, you know, I’ll pause. So listener, because you and I already caught up last week, so I’ll tend them, I’ll likely miss some things. But one thing we discussed was, I actually found the shewbread. Within the last week, the national average for default, is something like point one, six, or point one, nine, so it’s crept up, but historically, it’s still extremely low. Right? What are you seeing in terms of your own portfolio?

 

Jesse  

So from a high level perspective, what we’ve seen and keep in mind that typically we’ll see defaults quicker than a traditional bank lender. And that’s because the bulk of our borrowers are typically in and out in a very short period of time. So it gives us

 

Erwin  

sorry, you can’t quantify that like six months, 18 months?

 

Jesse  

Well, in normal market conditions, our borrowers are exiting around every six and a half months. Yep. And these, again, are flippin bird clients. Today in on cheerio, she’s not has been, let’s say four months ago, in Ontario, we were seeing that push up to 910 months. But in Alberta, they’ve stayed around six months for us. But going back to defaults, we had seen an unprecedented time of low default, through to basically, let’s call it May of 22. And then from May of 22, to October of 22, we saw that really ramp up, but still well within historical averages. So our historical, we use a word of enforcement rate. So that would be people where we’re having to take legal steps on would be, I think it’s then and I might not get this number perfect. But I think we’re at like two and a half percent of our fund. So we use the bank’s Term versus our term are a bit different, we’re more liberal with with what we consider default. So we saw that increased significantly. And then over the last six months, we’ve saw that level off. And today, we’re on a downward trend with defaults. Again, keep in mind, most of the stuff that we lent on during peak is off of our books. So we’re lending on today’s values in today’s market. Yeah, we

 

Garrett  

think that a big part of that decline now. And that historical loss rate is based on those phone calls that we had with our clients. That was super proactive and beneficial for us to understand our book and see where we stand. Yeah, so now we’re seeing this decline. And now we’re, we’re doing deals now in a market that isn’t seeing the massive decrease in values.

 

Jesse  

And really, we you know, when we look at Ontario stats, things have levelled off for three months now in a row, which has us comfortable of deploying capital back into Ontario,

 

Erwin  

right. So you’re bullish again,

 

Jesse  

we’re happy with the stable statistics. We’re also happy with where inventory levels are. So even if there is further pain, we believe it’ll be muted because of the low inventory. There’s a lot of buyers that are out there. And I’m sure from the realtor point of view, you have people ready to buy, there’s just not much product.

 

Erwin  

Yeah, there’s way more buyers out there. When people need to understand is there’s a lot of smart money out there. So people that did not over leverage, and there were no pouncing right now. Yeah. And

 

Jesse  

that’s that’s who were like the clients that we’re lending to today in Ontario are that smart money?

 

Erwin  

Very good. I’m sorry. So you mentioned enforcement rate to 9% How many properties is that how many files is that like 1020?

 

Jesse  

Well, we have 800 mortgages. So what would that be? 1620 20 properties.

 

Erwin  

So for listeners benefit for context, I had my friend in here, saw Rob, who’s a Mississauga lawyer, one lawyer office. I don’t remember. I think I’ve 32 Power Cell fallacies working on. Well, so I’ve been concerned enforcement.

Yeah, yeah. Yeah, that would be so one lawyer

 

Erwin  

one office 30 Something files, and your your guys are under that?

 

Jesse  

Well, under that, like in Ontario during this period to date, I think we’ve had, because we have to keep in mind we have a few active, I think the number has been eight total power of sales, five of which we’ve sold. And it’s through that sale process, what we’ve seen it to Garrett’s point is, for the most part, our borrowers have lost very little, some have lost, the ones that have lost the most significant amount are the ones that were over leveraged, the ones that weren’t taking action. So we had to take properties over, or we had to force the sale of properties that were not finished. And that guys didn’t take action. And those are the ones where we saw losses,

 

Garrett  

it was typically clients with multiple projects on the go at once, and just being way too tight on their cash reserves or line of credit and stuff like that, and running those up. So over leverage, and then just really bad timing on that purchase.

 

Jesse  

Yeah, and which is, it’s tough to see those things happen. It’s something that we as a company now paid more attention to for like, like from the risk side we look at okay, what are the real contingencies this client has? What is their ability to project manage, we always ask ourselves that but even more acutely today than ever,

 

Erwin  

right? See, for myself, I’ve only ever bought one property at a time. I will not buy the next property until my vacancy until my property is full rents coming in stabilised everyone’s definition of stabilised, but by tenants in and getting rent. Now I will look for that next property, I only want to have one vacancy in my portfolio at a time. I can imagine people doing two three properties at a time.

 

Jesse  

And now keep in mind their model was flipping not boring. But yeah, you definitely have to have project management acumen and the ability to source trades, like the trouble you get in his young guy who knows what he’s doing. Doesn’t Well, let’s say he atletic see as a trade and he has a good team. But then when you stretch that team, yeah, cracks you up,

 

Garrett 

you got to make sure that cash reserves are there and the experience is there. But one of the big benefits about Calvert is the fact that we will lend almost all the purchase price, right? Like we do $20,000 down in Ontario, minimum. And then in Alberta, it’s 10,000. And our biggest client in Alberta, he’s got about 20 on the go right now. So yeah, so that’s a lot to manage. But you if you have the teams in place, it’s doable. And he’s been doing this. He’s been scaling with us for the last four years. I think so. And

 

Jesse  

he’s an interesting case, because he’s very, he’s much more cash rich than a lot of our borrowers, like a lot of our borrowers that use the 20 Grand down product. They’re just starting out, right. So so so their barrier to well, just starting out in that they’re doing what the barrier to entry, we’re reducing on the capital inside, but they have the experience. They have the acumen. So we support them. This gentleman with the 20 on the go. He’s built this over decades, and he’s putting 25 30% down per property really de risking us on that end.

 

Garrett 

Yeah, he’s started in the 90s. So like he probably would have started where all these others would have started at that $10,000 down or doing some sort of loan like that, and scaling to the point where we can do all these at a time. Yeah.

 

Erwin  

That’s investor and guess if we have 20 deals on the go, I’m guessing they have lots of staff.

 

Garrett 

Yeah, for contract teams that 14 for teams on payroll. I don’t know that I don’t get into that too much. And that’s not something he always wants to share. So it’s a bit

of a secret sauce.

 

Erwin  

Yeah, but I’m guessing he’s our biggest customer. So there’s a lot on payroll, or he’s probably like, over 80% of our business.

 

Jesse  

Yeah, I would be like, it would be like the contractors for builders, where, while they’re not on payroll, all their business is coming from the builder

 

Garrett 

or Yeah, so if he doesn’t have a property on the go, then they’re gonna go elsewhere. I think that’s the case. So he’s always got to keep moving and buy the next property to do so.

 

Erwin  

So sorry, you said when you said 90s, you said you’ve been doing this since the 90s. Yeah,

 

Garrett 

okay. He’s a real estate, investor business,

 

Jesse  

and all Calgary. So he’s seen what what we love about our Alberta clients is they really understand risk. Because in Alberta, yeah, they’ve seen it, we get slapped around every eight years typically, you know, market drops 1020 30%. So they understand how to manage their downside. Whereas here in Ontario, we have a generation of investors who haven’t seen that the although we just did witness it over the last year. Although I think like we’ve talked about it, it’s impressive how quickly it has bottomed and stabilised

 

Erwin  

which is really fast. Yeah, yeah. And I thought

 

Jesse  

Yeah, faster than we thought to we were really concerned that it would compound itself with with inventory issues and continue that slide down. But it all data indicates that we’ve found bottom, although data can be wrong.

 

Erwin  

It’s kind of the silver lining of rates going up so quickly. They went up quickly, so they stopped pretty quickly.

 

Jesse  

Yeah, we felt the pain quick. We rip the band aid off.

 

Erwin  

Yeah. Can’t wait for that stop. For example, I’ve shown the show like we Terry and I bought two duplexes in August 2021. And so we paid like low eight hundreds for them. And then with the downturn, we were under, like prices, a farm boy paid like, dammit, we screwed up shouldn’t have bought those. Yeah, I knew I didn’t have a good feeling about it. And now like, you know, our backup in our back in the black like, yeah, I didn’t sell those. Yeah,

 

Jesse  

like, like all the investors who say it’s ermine, it’s not timing the market. It’s time in the market.

 

Erwin  

I’m in the market. Timing is pretty nice right now.

 

Jesse  

It’s great to have timing, but you can’t rely on

 

Erwin  

Oh, no, no, my point is like, from what I’m seeing, we’re past the bottom. I’ve been saying on the show and into our clients for the properties that we transact on the bottom was August 2022. Yeah. And then since then, it’s just been price has been steadily creeping up. And then it just make just keep creeping up until I don’t know what well like,

 

Jesse  

until there’s inventory or less demand, which are we seeing neither of those happen. Look at the immigration numbers. Look at the employment numbers, like

 

Erwin  

in the I don’t know if you guys caught it a Toronto last night just passed. We got rid of single family zoning.

 

Jesse  

Yeah, we were. I read about it on the news this morning. But we were also talking with Rockstar real estate earlier about that. And it’ll be a really interesting trend to follow. Hopefully, we see a lot of opportunity for more density in the single family space in Toronto. And that’s the business we want to support. So hopefully, we see a good trend with that. Let’s get

 

Erwin  

into it. Because for example, I think it’ll turn we’ll set the trend. So for example, I invest a lot in Hamilton, we’re probably I’m gonna guess about two years behind. We have an NDP mayor. So I think she’s at this she’s probably like the on board with something similar as well. So I guess probably within two years, we might have something similar in Hamilton. But let’s get into it, for example, because I was talking with my investor friends, and we’re talking about what happened about the getting rid of single family zoning. So how do you actually invest? So specifically Toronto, you know, you might have to pay like 1.3 for disaster property, right, that you can convert into a four Plex? Yes. Right. So say I want to invest in me say I want to buy that. How can you help me? So

 

Jesse  

we want to focus on the renovation side. So if you’re truly tearing it down and constructing, we’re not the right lender?

 

Erwin  

No, my plan would be convert, because I want to do within the ability to love your plan. Right. So I want like, my perfect role would be two and a half storey. I need at least 3000 square feet. Ideally, a detached garage. Alright, go. I want a four Plex in the house. Let’s do

 

Jesse  

a tonne of those. Yeah, so we’ll support on the purchase. Because that’s a lot of money. Yeah. 1,000,003 We definitely aren’t going to do it at 20,000 down. Come on. I know I’m sorry.

 

Garrett 

Yeah. Anything over 800,000 We’re typically gonna want at least 10% down. Okay.

 

Erwin  

All right. 10%. Down, okay. 10% down,

 

Jesse  

show us that you have the capital to renovate, and the ability to renovate like,

 

Erwin  

because I’m probably gonna be like, five 600,000

 

Jesse  

Yeah, so that’s gonna be a trickier one. And we may have to take a good look at our product to try to support the construction side. Because the barrier to entry is huge on

 

Garrett 

that. What I’ve found, too, when people want to get into these bigger projects, or multifamily is they do have typically a portfolio of real estate too, that we can possibly tap into, as well. So we can blank in another property up to 70% 75% loan to value and use some of that equity to help with those renovations.

 

Jesse  

Yeah, very solutions focus. So you know, guy like, yourself might have a portfolio properties, let’s say on average, they’re leveraged with the bank at 60% will take them up to 75. to inject the cash into that property. We’re always looking for ways to get it done for

 

Garrett 

you exactly. We’ll look at your whole portfolio and see what’s the best solution for you give you options too, because some people will want to, they will want to tie in other properties. Let’s say I can bring on a partner or something and I’ve got this other cash so they want to do that way. But a lot of people will say hey, I’ve got this equity here doing nothing for me, so might as well tie that in.

 

Jesse  

Yeah, but today if you’re without that property, and you want to buy for one, three, and your cost is 500. It’s gonna be tough for us to get that deal done, unless you have the money. So like 10% Down 130 grand and then you have to have the four or 500 grand, so the cash preferably in cash Credit. We’ve seen good joint ventures happen, like, you know, or when’s uncle might be looking for yield, everybody’s looking for yield in this environment. Everyone’s got a great plan and he’s gonna back it. So we’ll allow that money to come in Absolutely. As long as we see the money’s actually there. You can’t just show us Hey, Uncle Joe’s lending me 500 grants, we’d say great, show us the bank statement, show us the agreement. Ideally, Uncle Joe flows the money into your account. Because what we’d hate to see happen is life event happens Uncle Joe and now the money’s not available. Now we’re in trouble on the project.

 

Erwin  

And just a reminder to the listener, like I’m talking about disaster property. So pretty much no one else is gonna touch or be like, like,

 

Garrett 

even I remember, my was probably my most recent multifamily, but it was an IT WAS AN Edmonton, and it had cockroach infestation. And and that’s my like, Well, no, it had like a bunch had health orders on title and stuff and boarded up and all this. So like, there’s certain ones like if

 

Jesse  

we see all the orders on title, you see opportunity. Yeah, in Alberta, we register our health orders on title. So we see opportunities with those get pretty

 

Erwin  

bad to get to that point. Yes, certainly, visibility government didn’t want to like register on title and belly of legal fees to Yeah, they gotta

 

Garrett 

provide a specific plan for us to be able to consider that like that’s an extreme case, this is not going to be most cases. But a lot of times it’s hoarders or just a property that just looks off on the inside that for a lot of people, a lot of people just shy away from just for the look. But there are opportunities there.

 

Erwin  

Right. But you guys love it.

 

Jesse  

We love it. That’s where we see opportunity. You don’t go on site. Yeah, we do. So we always send and we always do a site inspection, that will sometimes be our staff that hazmat suit that will sometimes be a third party. So we’re always walking the property and understanding not only the property, but its surroundings, because maybe the hazmat suit is the next door and they’re always looking to buy and where they grew. And it’s gonna be hard to rent this out for the market rents you think you’re gonna get when you have a crack house next. So we always we spend a lot of time understanding the property and its location, because that’s really how we manage risk is by doing good loans on marketable properties or soon to be marketable

 

Garrett 

properties.

 

Erwin  

Because this downturn like my friends and I we say like this downturn is the ultimate stress test for anyone’s business portfolio. Sounds like you did all right.

Oh, we’re really happy with what we do.

 

Garrett 

We feel very comfortable with how we did like I said, the big problems that we had, were those people that bought January, April. Other than that, we’ve been super comfortable with our book and and what we’ve done

 

Jesse  

so yeah, like we talked about the exercise that we did, where we literally went looking for problem files, which not a lot of banks do not a lot of mortgage lenders to. And we when we find a problem, we mark to market that problem. So it lives in our financials as here is the problem. And we our year end is February 28. So we just published our urine statements to our shareholders. And with all of that, in this terrible year, we were able to produce a plus 10% return to our shareholders. So yeah, we’re, we’re happy with how we manage the risk.

 

Erwin  

All right, many directions are gonna go. Let’s first talk about your outlook for Alberta. And a lot of people interests on Berta, whichever look for Alberta. Yes, the lending thing gonna fall apart. Do you care about oil prices?

 

Garrett 

We’re still excited about Alberta Oil. Yeah, there’s a lot of don’t go that far. But there’s tonnes of opportunity in Alberta, like oil is still here. We’re like, there’s still opportunities there. We’re building in the tech centre as well, like tech is becoming a big thing in Calgary as well. But just cost of living to like our properties are valued, on average, or benchmark prices in the 500,000 range, right? Whereas here, it’s a little more expensive. So but like we haven’t seen it, we didn’t see a big Yeah, just a little more. But we didn’t see the big drop off that that Ontario did, right. Like we stayed flat all the way through, we’ve been a steady market. So we’re really comfortable with Alberta. Oh, yeah.

 

Erwin  

Like Jesse said, what? 20%? Over 17 years.

 

Jesse  

Yeah, if you look at we had a peak in residential real estate in 2007, followed by the financial crisis, followed by a couple ups and downs. And then most recently, an upward trend and values are 20% higher than they were in 2007. And to Garrett’s point, all these great things you mentioned, because of that, we’re seeing unprecedented migration to our province,

 

Erwin  

your federal community for BC and Ontario. Yeah, and even

 

Jesse  

on the income side, like on an average basis Calgarians on earn more than Torontonians and real estate is half the cost. We have less income tax. We don’t have HST it’s just GST so fibre sent and the quality of life like you and I were talking or when earlier tomorrow morning, we have to go. We’re gonna stay in Hamilton tonight and we have to go downtown Toronto for breakfast at 10. And we’re worried about it’s probably going to take us two hours and probably be off for two for two hours and be a bit of a hassle. Whereas in Calgary, you can live 20k outside of Calgary, in let’s say Cochrane would be a good example. Cochrane is a town of I think Cochrane is 40 50,000 people. No, yeah, but that’s what we were, you know, we’re only $1.4 million dollar population base in Calgary. So 20k outside, you could be downtown Calgary in under 40 minutes during rush hour. So it’s very easy to live in Alberta. You get the mountains nearby. And you can see them

from everywhere. From everywhere. So anyhow, that’s the

 

Garrett 

other thing is we when we drove into vond, because that’s where we’re staying last night. Like what is around here? Like we didn’t see anything. But we’re close to Toronto. Like that’s the crazy part is there’s no interest like there’s there’s a couple couple of condo buildings as well of it

 

Jesse  

in saying all this we love on Yes, we do love to and we think Ontario has a bright future. But going back to Alberta, we’re very comfortable. With lending in Alberta. We’re very comfortable where our economy is. One thing we have to be wary of is that our economy does move with oil with energy prices. But the outlook on energy is is isn’t going to drop below $60 A barrel in the near future. The smartest people who say not likely so but also like Garrett said we’re we are finally diversifying our industries. There’s a lot of tech happening. There’s a lot of clean energy solutions.

 

Erwin  

There’s a lot of both Edmonton and Calgary diversification or mostly Calgary, Edmonton has

 

Jesse  

always been diversified more on the public sector. So that’s where our capital is. That’s where a lot of public sector activities are. But both cities also have a big education of a few universities, well regarded worldwide. So yeah, we’re both Edmonton and Calgary. We’re really confident and that’s where 90% of all our Alberta money is.

 

Erwin  

Do you notice your split between the cities? Yeah,

 

Jesse  

I might not get it perfect. I think it’s 7030 70% in Calgary, and now that’s because of Calgary is our backyard. So we understand a lot better. It’s a lot easier for us to deploy money.

 

Garrett 

Yeah. Also, I think the biggest brokerages mortgage brokerages are in Calgary as well.

 

Erwin  

Yeah, it matters. It really depends on where the opportunity is.

 

Garrett 

Sure. It’s just what they know. Like and it’s what we know. We know Calgary,

 

Erwin  

intimacy. Yeah. Yeah. So you’re still Calgary game like it’d be like 50 or 80,000 people just from Ontario last year.

 

Jesse  

It was a big number. Yeah, unprecedented migration.

 

Erwin  

Oh, yeah. You guys must think the prices here are nuts. Do you got we do early. Okay, so I live in Oakville, I think people know it’s not the cheapest. And a friend of mine had put it off our house in Canmore. Okay. She’s got a beautiful view. It’s like 3000 square foot four bedroom. And he’s told me it’s like 1.5.

 

Jesse  

And we think that’s wildly expensive, by the way, but like cameras and camera are expensive and more. Kenmore is the most expensive area within

 

Erwin  

GAVI. Right. Yeah. And it’s only that you want to be close to Banff. Isn’t that why you live in Canada?

You’re literally smack dab in the mountains are 10 Wars just

 

Garrett 

nights too, but I mean, it’s only 10,000 people. It was like 10,000 people and that price so

so so are you is your friend thinking that Canada is a good deal or an expensive deal? Oh, it

 

Erwin  

is expensive? I’m like I’m laugh. Because 1.5 Don’t get you much.

You don’t think that that’s that expensive? No, because of Euro

 

Erwin  

do not get a view at 1.5 and 10 in Ontario. Right?

 

Jesse  

Where is that? 1.5 You’re waking up smack dab in the mountains. In this world class city. We’re close to class. Yeah, yeah, yeah. But yeah, can more we’ve seen big growth like Mr. You drive around. And because it’s you’re an hour away from the Calgary International Airport. You have Europeans buying in Canada quite a bit, because it’s cheaper than buying in Zermatt and Switzerland and all that kind of stuff. And you can’t

 

Erwin  

find their freight. No. So it’s the next closest thing

 

Jesse  

you can if you live and work in Bath pricey if you don’t live in work in bath you cannot buy in Bath.

 

Erwin  

I’m guessing it’s pricey.

Yeah, similar we can Yeah.

 

Garrett 

But it’s mostly businesses. I feel like people who are buying in Bamford getting like Bed and Breakfast, that type of stuff. Airbnb, there’s a couple I don’t know. There’s not many. So

 

Jesse  

yeah, you’ll have like these millionaires that want to live in bamps a little by convenience store. Yeah, most.

 

Erwin  

Most will buy in. The bad part about living in tourist town is the tourists Yeah, festivals and weekends is nuts. To change it. You can’t get a table at your favourite restaurant,

not on weekend. It’s not in the summer.

 

Erwin  

Okay, so look for Ontario prices are nuts here. No one can afford anything. Yet they’re

 

Jesse  

somehow affording it. Yeah. Okay. But it is it is one of the things that we worry about is how stretched Canadians are, you know, we’re not seeing it as as bad in Alberta, because what we just talked about, but the debt burden is worrisome. Like, it’s tough to do the math on how people are surviving the average person with how much housing costs. So, but what we’re seeing again, as it relates to the micro economic data, is you got hardly only supply. You got a tonne of demand. And families and individuals are figuring out ways to make it work. They’re living multi generation, they’re staying with their parents longer. Parents are passing down wealth to children in order to buy housing. So we’re comfortable with the values, believe it or not, it’s just from a Calgarians perspective is like, how do you make it work? But they’re making it work? Yeah,

 

Garrett 

but we don’t do a lot of lending right in the GTA area. Like that’s not our main focus, some, but our main focus is those London, Hamilton, K, WC Euro, like all all these different places where the the average price point is not over that million dollar point,

 

Erwin  

but we’re still well above a Calgary price point. Yeah,

 

Jesse  

well, even those centres that we mentioned well above Calgary price point, when you’re

 

Erwin  

so you had yourself feeling comfortable. Yep.

 

Jesse  

Yeah. And again, we’re, we’re shorter term, right, like we can flow through our portfolio in a year. So we’re not saying, you know, bullish 10 years, 20 years out, but we’re very comfortable letting today’s Yeah.

 

Garrett 

And we pay close attention to the markets, though, like we do if you’re probably on our monthly economic reports, right. And so we send those out, and we analyse them internally as well. And we keep a close eye on what the markets doing. But since like you said, since that drop off, we’ve seen it really steady for the last few months. So we’re comfortable with Ontario. Yeah, it’s

 

Jesse  

a good point. And we stay really fluid with how we lend, like our chief risk, Officer Dale, is paying a lot of attention to the leading indicators. And if we’re seeing issues with supply, if we’re seeing values drop, if we’re seeing demand drop, we can lower our loan to value, that’s the easiest way we do it. So during this downturn, when we were comfortable with the market, we were letting up to 80% of the after repaired value. We brought that all the way down to 70. We’ve since brought it back up to 75. So we’re not as comfortable as two years ago, but we’re comfortable. So we have we have really good levers to look at the data and move our lending decisions around based off of that.

 

Erwin  

Now I want to talk about lending because it’s, it’s funny, as I’ve been saying to friends lately, it’s never been a better time never been a better time to be rich. Because the quality opportunities I’ve never seen so many last time I call it off opportunities. I’ve said on the show many times that I personally don’t private lend, right to me, it’s too much work. Too much risk. The worst case it does too much for me, as for example, worst case is I’ve had to take back the property. So this is so for the benefit of the listeners benefit, if worse comes to worse, if I need to take control the property, and I need to start making mortgage payments for the first mortgage, I’m generally not happy at all, like the intention of private lenders is for something passive. Now you went from extreme passive and to earn some positive cash flow. Now you’re nowhere near that once you’ve taken control of the property, a lot of work a lot of work, legal fees, I have to pay someone else’s mortgage. Right?

 

Garrett 

Yeah, like Jesse and I came from the same background, we both were at a syndicated mortgage lender to start, which is one off mortgages that you’re selling. So you get a mortgage and you have a bunch of different individual investors and you send out a whole summary of this mortgage to sell them and say, Hey, this is what we got. Are you interested in participating? So we’ve been on that side, but now being on the mix side.

 

Erwin  

Just want to elaborate on the syndicated deals you were doing. What kind of deal with is this a single family home was a retail,

 

Garrett 

it was all types of deals. Like we’d do just all typical stuff that a private would at that COVID is purchases debt consolidation, equity, takeout some construction to and we just sell those to individual investors.

 

Jesse  

But where you’re talking is it would be so for some context, that would be a form of private lending where you Erwin are going on title. But there’s a professional manager in between doing the due diligence, having disclosure and your best interests in mind where what I believe you’re talking about is you doing your own due diligence sourcing your own deal and going on title.

 

Erwin  

Yep. Or even just

 

Garrett 

working with a broker. But yeah, well, the Sure yeah. And that’s even more challenging because you have to do all your own administrative where call you or, like you said, so

 

Erwin  

your own collections? Yeah,

 

Garrett 

it’s a very tedious and it’s hard work

 

Jesse  

takes a lot of expertise to manage that risk. Like what I would consider if I was considering that is what is your expertise? How do you know how to underwrite risk? What does loan to value mean to you? What type of property Do you want to focus on? What type of market do you want to focus on? Ask yourself those questions. Also?

 

Erwin  

Well, the words are to diligence, due diligence. But with all these failures, we’re seeing, like we’re talking about, like Greg Martell, and MMAC, whatever it name is, MC is, we have a developer of 1000 houses that won’t get built, all the deposit money’s gone and cost a few in Ontario. My point is that everyone says due diligence. And then I generally think a lot of people are a little bit overconfident themselves in their ability to do due diligence. Yep. But we’ve there’s a lot of history out there that people cares.

 

Jesse  

Yeah, we’ve built a business based off of managing risk with 40 years of intelligence, and we still are learning. So to have an individual with no underwriting experience and risk experience, that’s a big task. And now, sure, you couldn’t do it and make it work for you. But I also even look at deal flow like, like the most important thing as a, as an investor is going to be given the right opportunity. And the way the market has evolved in Canada is your banks that are getting bank loans, they’re getting the top end of the credit curve, and you’re getting B lenders, let’s say they’re lending out a prime plus one plus two, they’re getting those type of deals, then you’re getting alternative lenders, private lenders, mix are part of that space mix make up 95% of that space. So you think to yourself, Why am I getting this deal? You’re getting the deal? Because it’s been kicked down the credit curve, to the point where you’re getting the opportunity, are you going to jump in? Are you the greater fool? Why would the MC not want to do this loan? Are you pricing it right? Are you managing it right? So there’s a tonne of questions to ask yourself. And

 

Erwin  

I asked a dealmaker to my desk and like, Why do all these other people pass it? Yeah,

 

Garrett 

exactly. And then you got to think worst case scenario, too. So you go do you want to manage a foreclosure or power of sale? Like that’s worst case. And that’s, that’s a full time job, takes a lot of work. And then the other part of the private lending, too, is if you’re doing it, and you do a deal, and so you get paid out in a year or whatever. You got to find the next deal to keep that that rate of return, where it should be like you think, okay, you’re getting paid 11% on this deal, interest, and you get paid out. Okay, now what you better find a deal quick to be able to keep up with returns that mix offer,

 

Jesse  

you have the money sits idle for three months, and you annualize that now your 11% is actually 8.75. So what have you really done, and you have to invest a lot of time and energy into properly underwriting so there’s a tonne to consider, and you know, if any of your listeners are thinking about it, we’re happy to discuss it. And it could work and we’re happy to give you underwriting tips and let you know how to kind of how we would think about it because we want to see our industry succeed. And if they’re being directed to the what’s the guy’s name in in Victoria, that’s being accused.

 

Erwin  

Yeah, so we’ve $58 million is missing. If the public is

 

Jesse  

being directed to the Greg Martel’s, then that’s not good for our market. That’s not good for Canadian so we’d rather give our information and guidance at no cost and then have it go to what is allegedly a fraudster and Greg Martell.

 

Garrett 

Our industry is scrutinised that much more after these things. Oh, yeah. So

 

Erwin  

there’s gonna be a reckoning. Yeah, for developers and for all of whoever else is going on under our private lenders are having massive issues. Yeah, we’ll

 

Jesse  

see the downturns in the market bring to light who’s swimming naked?

 

Erwin  

Yeah, it wasn’t always swimming naked though. Apparently. The receivers accusing him of also you know, having private jets and luxury condos in several cities and obviously supercars. And that seems to be a commonality that people who have that stuff, but you can wonder.

 

Jesse  

Whereas Garrett and I are here in Ontario over supercars, pinching every penny, we’re literally we literally decided for our shareholders benefit that we like each other so much that we’d roomed together for this weekend. So like, that’s how focused we are on the bottom line.

 

Erwin  

In the book, Good to Great by Jim Collins. It was actually mentioned several times. Great companies are quite frugal, right, like, my cousin works at Walmart. The Walmart head office in Mississauga went to visit them. They don’t have a cafeteria. It’s a Tim Hortons and it’s they pay rent, nothing subsidised. You want to have a meeting with someone So there’s so no frills, right? They truly are,

who they say they are. And that’s how you get the lowest cost.

 

Erwin  

Right? Yeah. That’s how they get to. Yeah, that’s how they keep their prices down. So damn, yeah, yeah, that’s it. That’s probably the truth for real estate investing. Most real estate investors are not flashy at all,

 

Jesse  

no, and most, most truly wealthy individuals are not flashy at all. When we mean get we’re mentioning on the flight here, like, I’m looking on Google LinkedIn, for some of our most successful clients. And there’s not much you know, there’s no pictures of them driving Ferraris, or stories of them living in villas in Hawaii there. They’ve got themselves to the place for a reason.

 

Erwin  

Yeah, lots of people are very quiet about their wealth. Because why would you want to be so public? What what benefit?

Is it? There’s no, yeah, just put a target on

 

Erwin  

your back. Yeah. Yep. So sorry, I cut you off. We’re talking about him getting mortgages. And then he has moved into a MC format. Well, no, we were

 

Garrett 

at a different company completely. And it’s funny, because Jesse actually hired me twice, I was hired to Cedar, he left two months. And I was very happy with him because he left me but but he left and then I joined over at Calvert, like five years later, and now been with Calvert for four years. And, and this is the MC model where we take in investor money and diversified across 800 mortgages in our portfolio. So there’s just that it’s still considered a high risk investment when you consider Calvert and a MC. But it’s diversified across 800 mortgages, instead of just being on one mortgage, and we’re managing everything. So when it comes to a power of sale, or foreclosure or whatnot, we’re gonna manage that. So you’re not you’re still hands off. And even though we had all these power of sales, and when not that many, we had eight, we return that 10.76 to you with no management, right? Do your masters Yeah. So

 

Erwin  

in how often is I paid annually, once a week, once a year, once you’re

 

Jesse  

paid annually, usually goes out honour before May 10. financial year end, February 28, auditors come in and review our books, we build our audited financial statements for board review board meets just before the end of May, and we push out our returns and our information commercial person. But from the standpoint of Garrett mentioned, high risk, from the Securities Commission standpoint, we’re considered a high risk investment reason is as a private company, we don’t have the same disclosure standards as pub coasts, and also the liquidity like we’re not publicly traded. So if you needed to access your money, you could only access it with us annually. So you would you would put it in a redemption request. And we would pay that out again, honour before that may 10. Every year, we also have a gate on the fund where we’ve seen some funds run into trouble is they don’t have gates. So the gate on the fund that we have is up to 10% of of the whole fund annually. Luckily, we’ve never hit that 10% We’ve been able to honour every redemption request we’ve we’ve ever gotten. But there is liquidity like to me, one of the bigger risks of investing in any private placement is liquidity. So you gotta be prepared to have your capital sit there for at least a year at a time, if not more,

 

Garrett 

we’re very transparent, like we have very detailed financials that we send out and you can see our entire portfolio and where we sit loan to value wise, which is at 59% right now, on average. So we where our money

 

Jesse  

is placed, like you can see the loan to values on the whole book, you get to see where we’re lending which communities what we’re lending on residential versus commercial, a lot of great detail which our analysts were are really sophisticated investors love that type of reporting. We try to report to a professional company to a sorry a public company standard and operate to publicly company centred as it relates to how are governed and an audited

 

Erwin  

today. So what what is your budget for reporting? Well, I think we’ve always had a staff or and they’re just doing a report

 

Jesse  

on on with with on our accounting team. Our accounting team is made up of CFO, Carl, we have a treasury manager DOM and then we have five staff accountants. Okay. And that’s that’s a lot and then also a comptroller Eric. So yeah, we’re a financial institution, we need to operate as such. So we’re happy to spend money where money shouldn’t be spent. And to us it’s it’s on reporting and managing our investors money.

 

Erwin  

So somewhere north of a million a year yeah. And salaries just in your counting to you. Yeah,

 

Jesse  

yeah. Oh, yeah. Keeping in mind we earned over 30 mil.

 

Erwin  

So obviously going for more, don’t tell them don’t tell them.

 

Jesse  

No, no, we like to strategically invest where it makes sense and to us. Risk is is a huge part of what we do. So So hiring the best underwriters and risk managers and accounting is our two big things for us.

 

Erwin  

So is this an MC? Is that the official term for each investment company, but just because you’re in Alberta, you’re regulated differently.

 

Jesse  

The securities regulators in Alberta regulate mortgages differently. So everything that is not one person on one title is considered a security.

 

Erwin  

Also, soon as this indicates no security Interesting. Yeah, so you don’t hear. So

 

Jesse  

what’s happening in Ontario and BC, is they don’t have that type of regulation, although I think they’re going that way. And I think this downturn will help them get that way. Because you’ll see, again, these private individuals who really didn’t appreciate risk and didn’t appreciate underwriting where it worked for them for 20 years, because the market is able to mask those mistakes when it’s going up 5678 9%, on average, whereas on the downturn, that’s where you learn, oh, shoot, I shouldn’t have been in that second mortgage at 85% loan to value on a $2 million house where I’ve lent 200 grand that 200 grand is gone. Now. Plus, I can’t I can’t even protect it, because I don’t have the means to pay up the first mortgage. So we’re regulated more closely in Alberta. And a big reason for that is the amount of private investing activity in Alberta, not real estate, like oil and gas, they start up to raise a lot of money through those means. So the security commission put a lot of good regulations around that. And in turn mortgage just got captured in that which, you know, 10 years ago, I remember it, we went through that process in 2010. So I guess, 13 years, dating myself, but at the time you look at it as a business operator, and you say all this red tape all this stuff, why do we have to do all this, but in retrospect, it really increased the level of professionalism in our industry, and truly did protect investors, which was their goal. So it worked out. Right, because don’t get me wrong. Red tape always doesn’t work out like that.

 

Erwin  

No, it doesn’t. But it might have prevented, like some of the massive losses we saw in Ontario like fortress. Yeah. Paramount equity. missing somebody. But yeah, yeah. Yeah, I know, lots of people personally, that are great lost money. And those things are not they’re hiding under the mortgage regulations. So that, to me, there were securities they were not, yeah, not not transparency, not enough

 

Jesse  

transparency, even how the business was being ran with, I’ll use fortress as an example. They were they were a development company that didn’t really know development. And they were raising money to lend to themselves. So it was a, it was not a good model for success.

 

Erwin  

I think if people if they were if they were more transparent, for example, like right away, because I got an idea what their marketing budget was, and I knew what they’re paying for commissions. And then like, then the investors caught home the risk for not a proper, to my opinion, a risk of proper risk adjusted return.

 

Garrett 

Yeah. And that’s the big benefit to Calvert. And something we always say is the fact that we’ve been in business for over 40 years. So a lot of these companies come up, and they’re newer, and you got to do your due diligence on their background and how they’ve done in the past. That’s a huge part of

 

Jesse  

how much money that principals have invested alongside you is important. Like our money, the bulk of our net worth is literally right alongside or, we’re prep shareholders, and so is you if you were to invest in us. But also, I like what you do, you’ve mentioned, marketing budget, which is something that we’ve done in a really another way we provided value to our shareholders to hit that those high returns, is we don’t really pay for capital. So our average cost to raise $1 is significantly less than the rest of the market. Garrett and I and our CEO do it mostly through relationships. And because we have had the ability to manage risk, have that long track record, and really transparent financials, we can go to sophisticated investors and raise money. So we’re not having to raise money from, you know, grandma with $50,000 TFSA, we can raise an average check size of significantly higher, so that makes us more efficient. And it also makes us a better company, because we’re getting to work for really sophisticated investors who challenge us and ask us good questions that make us better. Whereas, Granny with $50,000, God bless her is probably not asking those types of questions.

 

Erwin  

Can you share? What is the track record of return? How far back can you go? Well,

 

Garrett 

we can go all the way back. But I think the two most important numbers that we throw out to our investors is five year tenure. So 10 year, we’re at 10% and five year we’re right around 10.7%.

 

Jesse  

And we got to say that this year, and we got to say that past returns are not indicative of what the future holds. We’re not here to peddle our security. But yeah, that’s what our return has been. And what I love about the tenure is it includes the tail end of the financial crisis, because that was the last real big risk event. And through the financial crisis, we didn’t lose Any shareholder money, and we’re able to provide a positive return the lowest return gotcha was just under 5%.

 

Garrett 

Yeah, we see those averages. But whenever we’re talking to investors, we’re typically telling them that we expect between eight and 10. If we’re lower than eight, we’re doing something drastically wrong.

The market, something’s happened in the market, that’s happened.

 

Garrett 

But we’re all striving for over 10. Because like Jesse said, we’re all shareholders in this company, we want to see it grow and, and get those big returns for investors.

 

Erwin  

So then my question like, how member is asking, that’s trying to get a call to get on a call with you? So my question was, why would someone private land, willing to just be a shareholder of Calvert, and to be diversified across 800 mortgages

 

Jesse  

or advice, poor advice, maybe the brokers self motivated for them to lend their money, they make the commission. So poor advice, poor research, they haven’t understood all the opportunities, but also sometimes they’re like, for us, we don’t accept money from non accredited investors. So unless you have an income of over 200,000, or a million dollars, now, financial assets were not an opportunity for you. So unfortunately, you may, you may choose to go that route because of that, which is even worse, because those people don’t really have the financial means to be taking on that risk.

 

Erwin  

Most of the people I’m talking to are accredited, they’ve already exited a piece of real estate, they don’t have lots of money. Well, we

don’t have a marketing budget. So we’re not splashed all over either. Like it’s

 

Garrett 

not selling our investment much. But sometimes people just want that control to teach us what to do the work. There’s some people that just I don’t want to troll too, but I know my limitations. Some people just want to take it on themselves. They think they can do it and have outer. But yeah, it’s a good question. Because we offer similar returns with with no work self.

 

Erwin  

So I find that as an office investor, who’s looking to invest in Florida, right there Canadian, never done anything in Florida before. They’ll have trouble getting financing, they know. But then the suggestion came out, she came up with something that’s been suggested to her. It’s just borrow private money as her primary financing. But it’d be like 10%. And I’m like, in my experience, that’s expensive. And that’s for short term use. Yes. Right. And they’re like, oh, as long as the numbers make sense. And like, I don’t know what deal with that makes sense. Yeah. Because if that deal made sense, it should make sense to a lot of people. Right? But yeah, you gotta make money lending out. Yeah, even you think 10% is not something you do for long term.

 

Garrett 

It’s not sustainable. That’s why we want to be that short term option, we make sure there’s an exit. You don’t want

 

Erwin  

to lend for long term. You

 

Garrett 

know, we

want we love short as possible. Yeah, you’re

 

Erwin  

getting a great rate. You don’t even want it out there.

 

Garrett 

Yeah. And I think I think a lot of people know that we do a lot of financing for real estate investors. But we also love just any sort of short term stuff, like a bridge deal where the purchase and sale dates don’t line up. But there are other incidents,

 

Erwin  

actually, because I’m hearing a lot of bridge loans are needed these days. Yeah. And we’re happy

 

Garrett 

to do them like those are, those are great loans that are quick, and people just are in and out. So the interest rate is less relevant, right, when it’s a month bridge. But the other one, too, is is just

 

Erwin  

so how long does it take you to put together a bridge? It’s usually usually you’re finding out late or you can close the deal tomorrow?

 

Garrett 

Well, maybe not that quick in Ontario, but in Alberta,

in Alberta, tomorrow

 

Garrett 

48 hours right?

 

Erwin  

Late in the process. So we need to bridge

 

Jesse  

where’s the 11th and a half hour, my bank fell through here’s why

 

Garrett 

helped me. And there’s also when you’re saying the elevens and a half hour, it’s the same with when the bank has a bunch of conditions and we’re coming up on the on the date, they’re going to purchase a property and maybe the appraisal comes in and says the property’s fair condition or doesn’t look the way they want it. And they’ve got three days to close, like, what the heck do I do? So we’re that option that’s super quick for clients. We do our internal values, so we can turn it around really fast, fund it for you. You can maybe do whatever the bank needs you to do, and then jump right back to the banks and hold it long term. And maybe that’s their primary residence. They just couldn’t get the bank financing because they pulled it last minute or something like that. causes delays and closed happens all the time. Yeah, yes, we want to be that short term solution. But there are other things that we do. Other than real estate investor focus stuff like this, where it doesn’t have to be a big Reno or something. But we want to be that option for people new

 

Jesse  

like like new to Canada come with capital and the job but they don’t have the job history, or the credit history got to be a citizen, but you got to be a citizen. They see a house that they love. Good value. We see a clear line to them getting bank financing in four or five, six months. We want those loans So what you said is, yeah, we’re getting a great rate for our risk. But risk is the key thing there. And when we’re getting paid out, the risk goes to zero. So we love recycling our money. It benefits our shareholders benefits, our risk profile. So so that’s what we want to do see your friend who’s buying in Florida. Let’s say she was buying in Calgary.

 

Erwin  

And I mean, just the tour, just for the price point. And

 

Jesse  

there were a clear, let’s say she had to go, for whatever reason, new to Canada couldn’t close quick enough with the banks, whatever. But there’s a clear line for her to get bank financing. We want that loan, and then we’ll work we’ll coach her if needed. We’ll get her with the best mortgage broker, we’ll do whatever it takes to see her succeed and getting rid of us. That’s where we see successes when they exit the loan.

 

Garrett 

Yeah, like most people know us as the real estate investor focus, which we are like, we still love doing those deals with people who are flipping and burning, but we also do so much other stuff to be able to finance things short term. Yeah.

 

Erwin  

And then so what kind of investor deals are you looking for?

In terms of real estate investor,

 

Erwin  

real estate master deals? Well, it’s

 

Garrett 

like we talked about before, we’re we are focused, not as much on the GTA you typically houses that are $800,000. And last, but we still go above it. So we want to be in that sweet spot. And then we also want to make sure we’re in in around the urban centres. We don’t want to go too far out. So we’re not going wave rural Ontario,

 

Erwin  

what’s a population minimum floor, so 50,000, within,

 

Garrett 

within a city that has 10,000 people, we can land inside that city, so it can’t be outside that city. And then we do cities with 50,000 people within 10 kilometres of that. And then 100,000 People will go 25 kilometres outside of that. So it’s urban centres, we’re wanting to stay close to some sort of city.

 

Jesse  

Yeah, I was just looking in in our portfolio composition for Ontario. 82% of it is 100,000 population and within the 25k off. So that’s the bulk of what we’re doing. But really, yeah, who we want to support is firstly, real estate investors that we see them making money on residential projects, short term flip, or book,

 

Garrett 

or two main underwriting criteria for flipping houses, are they going to be successful? Like, are they going to be profitable? And do we think they are going to be via our valuation that we do internally by our internal evaluators? And then two is do they have the money to complete it. So that’s the downpayment, the renovation costs and the carrying costs. So seeing those two things, and then we obviously review the rest of it, AP credit, notice of assessment there, I feel expertise. And if they have a lot of expertise, we probably won’t have to dig in as much as we would new investor and make sure that they have a good plan in place to be successful. Because ultimately, this should be mutually beneficial. That should be okay, you’re coming to us short term, but you should also be making money on the back end, whether it be a burr or, or a flip.

 

Jesse  

Yeah, we want to work with these clients for life. And we’re not going to get the opportunity to do that if we don’t set them up for success. And then finally, mid floor half of the market, we don’t like high end stuff. Because what we’ve seen historically is when there is downturn, that high end stuff gets beat up the most. Also, there’s just less of a market for it, right? Like, there’s just more liquidity in the mid to lower half when economic turmoil hits a floor usually establishes for real estate, but the height usually gets compressed quite a bit. And there’s just less transactions in the high end space. So we love mid to lower. And for that reason, most of our investors are already looking at that. It’s not like we have to say no, don’t buy that $5 million house and renovate it, because they’re not considering that.

 

Erwin  

Yeah, very cottages. Is that something that? No, no. Yeah. Because the

 

Jesse  

because of what we just talked about, exactly. Like it’s great until it isn’t. And it’s amazing how many investors thought it was great over the last three years. And now that people are holding the bed struggling with with with really big payments, they’re letting go those cottages where their supply, it’s in some of the rural cottage areas, there’s no supply in urban centres where people are working and living. Right.

 

Erwin  

And also that seems a problem for him. For many people bookings are low on Airbnb, or maybe yeah, when

 

Jesse  

the economy struggles, those discretionary type income endeavours to get cut back and you always need a place to live for but you don’t need a place to vacation necessarily.

 

Erwin  

I do think part of is because our borders are completely open. So I think more people are leaving as well. They’re choosing other vacation. Yeah. Because my friend that went to like, where she goes she went to Italy in like October and Why’d you wait till October like your past your most past shoulder season? She said that Italy was sold out in September.

Yeah, a lot of pent up demand for travel. Wait. Yeah, there’s

 

Erwin  

still lots of money out there. Yeah, yeah. It’s an interesting world of haves and have nots. Yeah, folks need to make a decision which one they want to be part of? Yeah. All right. Where can people follow up with you, if they want to learn more about this

 

Garrett 

website, check out our website, ch mmic.ca. We have Instagram, Facebook, check those out, we have a lot of educational content that we post. Yeah. And our contact information is on the website to check that out.

 

Jesse  

Yeah. So everything you see on our website and social is going to be geared towards educating real estate investors and borrowers on how to make good decisions. If you are looking for investment information reach out to Garrett or I, we don’t publicly have that information available. Because we’re not allowed to or you know, for multiple, we could technically, we choose to for a few reasons, it does go into the grey area as it relates to securities rules. But also competitively, we don’t like to have it out there. And also, because of how relatively guarded we have our shareholders, we like to be relationship based. So we don’t want every person in the public calling us to be a shareholder. So we’re more than happy to share our information. Like we’ve said, we really take pride in our transparency. So you can reach out to Garrett or I, our emails are just our first names at ch fmic.ca.

 

Erwin  

And I don’t know if you notice, but what you just shared, right? They’re so different that people who are trying to raise capital on social media. Yeah, I guarantee you call me anytime of the day.

 

Garrett 

The disclosure was even thrown out there. So yeah, yeah, I hope it’s Yeah,

 

Erwin  

so So listener and trying to highlight the fact the difference between when your licence insecurities and how you present opportunity, versus how someone that took a weekend course reforms, that’s opportunities on social media. Thanks so much for doing this. Thanks for coming all this way, just for me.

 

Jesse  

It was just for you, or when. Thanks for having us. And thanks to your listeners, for hopefully, getting a little bit of education but we love we love what you do. We love your platform. We love the fact that your mission is education and something that we hold near and dear to ourselves.

 

Garrett 

Yeah. Yeah, we appreciate it. And thanks for having us.

 

Erwin  

Before you go if you’re interested in learning more about an alternative means of cash flowing like hundreds of other real estate investors have already then sign up for my newsletter. Find out for yourself what so many real estate investors are doing to diversify and increase our cash flow. And if you can’t tell I love teaching and sharing this stuff.