Greetings, my fellow Wealth Hackers!
I shared an article on my Facebook and Instagram last week from the CBC about Epic Alliance’s collapse. 👇👇
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Here’s the link to the article: Real estate company collapses, 500 homes affected, $10M from investors across Canada missing.
If you’re unfamiliar with the story from the article:
- Founders of Epic Alliance, Rochelle Laflamme and Alisa Thompson
- They were everywhere: podcasts, webinars, real estate investment groups (side note, they were never featured on anything Cherry or I have hosted. I agree they were everywhere. I try to be different on this show, so I don’t book guests who’ve been everywhere. That and I reference check anyone I don’t know personally)
- There’s mention of affordable housing in Saskatoon…. Which I find odd. From Reddit, I’ve seen examples of rents over $1,500 per month on a house worth around $200,000. Sounds great for the investor and not that affordable for the people of Saskatoon…
- In January, the founders hosted a 16-minute Zoom call to investors to let them know the business had collapsed and the privately borrowed money was gone.
- The provincial securities commission issued a cease and desist order in October 2021
- An Accounting firm has been appointed to investigate by the courts and will present their findings in court in late April.
- Over 500 properties affected; numerous out of province investors.
I first learnt about issues at Epic Alliance back in December when we had the guys from the Financial Independence Garage on the show. The Mechanic, a pseudonym to hide his true identity from his employer, shared there was a hiccup with his investment with Epic Alliance. He didn’t want to get into details which is fine, and I put that away in my mental database for red flags.
Personally, I’m very risk-averse, I have new opportunities coming my way every week, and knowing how the best of the best invest thanks to my decade-plus of networking, interviewing successful folks here on my podcast and masterminding with 7-8 figure entrepreneurs and investors with 8 figure net worth… you come to realize “it’s all relative” after looking at a lot of deals like I have since 2008 being a part of organized real estate.
Since 2008, I’ve witnessed several epic collapses of real estate investment companies. Some small, some still in court for hundreds of millions. Several private lenders, even mortgage brokerages who originated the private lending, have deals go bad.
As Warren Buffet said, “only when the tide goes out do you see who’s swimming naked.”
My first exposure to an epic collapse was a husband and wife investor who taught about joint ventures and was promoted by an organized real estate networking group. Let’s call them “Mark.” Mark had over 50 properties with joint venture partners; he would speak from the stage of his experience and how to raise capital. Mark contributed to the organization’s joint venture education program.
Then as Warren Buffet describes it, the tide went out in 2009 during the financial and credit crisis and recession. The naked moment was Mark had taken out a blanket second mortgage of many of the investment properties, and he used the lawyer who was a sponsor of the organized real estate networking group. This was 2009.
I started taking real estate very seriously in 2008 after already owning a couple of houses with partners. However, this event opened my eyes to how even influencers can not be trusted.
In speaking to friends who had invested with Epic Alliance, the passive investors are now actively scrambling and taking over control of the properties, their experiences working with Mark I’ve seen repeated many times since then. Investors and business owners have great ideas and visions; executing small like 5-10 properties goes fine, scaling beyond gets progressively hard with more variables like tenants, contractors, staff, etc.
Each of those variables is a challenge in itself.
Add to that time and cash flow pressures, e.g. if you are a private borrower, some have made the mistake of starting the clock on interest payments when the private mortgages are signed. This places pressure on the borrower to be doing business. No different than having salaried staff.
The lesson is to only start the interest clock.
Many bigger investors have shared with me the pressures of needed constant deal flow of investment properties to keep their salaried staff busy. Some even take on break-even projects to keep their staff busy so they don’t seek work elsewhere.
Add in tenant problems, a pandemic and a 500+ property portfolio like Epic Alliance’s, you have many moving parts.
I was chatting with a flipper client of mine in Hamilton about Epic Alliance on the weekend and how Rochelle, one of the owners of Epic Alliance, shared on her Instagram that she bought 10 houses in a single day. My flipper friend who flips for a living had trouble getting his head around how many trades he’d need to pull that off.
The thing with tradespeople is, we’re in the middle of a housing boom, and they are in high demand and can get great jobs and benefits working for the union.
Note these are not turnkey houses. I’ve read and heard from those invested these are rough properties; many are boarded up in a not-so-nice part of town.
Not saying it’s impossible. I just don’t know anyone who could pull it off, and I know quite a few people… operational excellence would be needed, which is rare without high-priced talent.
From friends who’ve shared their experiences with me, one sold Epic Alliance a house for under $200,000. Then, out of curiosity, they pulled the title to find three mortgages that totalled just over 30% more than he had sold the property to Epic Alliance for.
Sounds like a red flag!
Another client of ours, a new Stock Hacker, shared with me that the house she joint-ventured with Epic Alliance on and felt deceived by the appraisal she received that was 20% above market on a house that’s boarded up, not tenanted and needs a lot of work. So now, she has to take control of a property in Saskatoon, which she’s never been to before.
Not the easiest thing to do as the articles I’ve read state there are around 200+ properties that are not tenanted within this portfolio, so it could be months if these investors are lucky to start seeing some rent come in.
Now there are many lessons to be learned from here and questions. I do believe in innocence until proven guilty, but one red flag is enough for me to say “No, thank you” to even learning more about an investment.
Like Warren Buffet says, it takes a lifetime to build a reputation and mere minutes to destroy it.
Now, my questions are as follows;
Securities laws are quite clear around not soliciting investment from the public; speak to your lawyer about this. How is a company with 500+ properties not listening to sound legal advice?
How many investors have never inspected their properties ever? For example, I have passive investments in a REIT, and I personally toured three of their apartment buildings, and that’s after being friends with the owners of the REIT for over ten years.
I’m told many of Epic Alliance’s properties were transacted privately, as in not on MLS nor Realtor.ca, which can be great for saving commissions. Still, those who participate are doing so without licensed professionals representing their best interests. Not just Realtors, but what of the appraisers? When I get a mortgage with the bank, the bank chooses the appraiser.
In these private deals and private borrowing, who chose the appraisers? I know if I wanted inflated appraised values, I would hire an appraiser who would work with me.
I don’t have all the details, but there are definitely more than enough red flags for me.
For Cherry and me, our investing will remain the same, boring and predictable. We’ll own mostly duplexes ourselves without partners, some passive investments in our registered accounts in land development and apartment buildings REIT.
Stock Hacking for cash flow as our students in 2021, if they followed the shared trades to the T, would have achieved between 12-15% cash returns. Past, of course, does not predict the future.
I know it sounds slow and boring, but I’ve never found a more repeatable path to getting rich and retiring comfortably.
If you’d like to be educated on the slow, best practices to getting rich, I can’t recommend you be on our email newsletters and attend our real estate or stock hacking events. Simply go to www.infinitywealth.ca/events to sign up!
Your future self will thank you!
This episode is brought to you by me! We don’t have sponsors for this show, I only share with you services owned by my wife Cherry and I. Real estate investing is a staple in my life and allowed me to build wealth and more importantly, achieve financial peace about the future knowing our retirement is taken care of and my kids will be able to afford a home when they grow up. If you too are interested in my systematic strategy to implement the #1 investment strategy, the same one pretty much all my guests are doing themselves, then go visit www.infinitywealth.ca/events and register for our next FREE Online Training Class. We will be back in person once legally allowed to do so but for now, we are 100% virtual.
No need for you to reinvent the wheel, we have our system down pat. Again that’s www.infinitywealth.ca/events and register for the FREE Online Training Class.
This episode is also brought to you by www.stockhackeracademy.ca where everyday real estate investors learn the best practices in stock investing to earn cash flow in about 15-30 mins per day from their mobile phones. After real estate, Stock Hacking is the next best hustle as you’ve heard from many past guests on this show. Among our students last year, 31 trades were shared with them. 30 were profitable for an over 96% success rate. I will be giving free demonstrations online, similar to the one I gave my kid cousin, a full-time musician who just made a 50% return in 2021. Past of course does not predict the future but if you’d like a free demonstration, go to www.stockhackeracademy.ca in the top right, and click FREE Demo. At the demonstration, I’ll have special bonuses. We do not advertise publicly for all my favourite listeners and I only have two more demos to give in the next few weeks.
Don’t delay www.stockhackeracademy.ca, what I consider the future of side hustles with real estate so unaffordable for many.
Just a friendly reminder that we are hiring more investment Realtors who want a full-time challenge to help our clients, regular everyday people, mostly from the GTA, invest in the top investment towns west of the GTA.
This is for driven folks who want to multiply their current incomes.
APPLY HERE: https://www.infinitywealth.ca/hiring
HELP US OUT!
BEFORE YOU GO…
If you’re interested in being a successful real estate investor like those who have been featured on this podcast and our hundreds of successful clients please let us know.
It is our honour to give back and educate others on how we build cash flowing real estate portfolios using all the best practices shared on this podcast, from the lessons of our hundreds of clients and of course our own experience in owning investment real estate.
If you didn’t know already, we pride ourselves on being the best of the best real estate coaches, having the best property managers, contractors, handy people, cleaners, lawyers, accountants, everyone you need on your power team and we’re happy to share them with our clients to ensure your success.
New investor or seasoned veteran investor, we can help anyone by providing our award winning coaching services and this isn’t all talk.
We have been awarded Realtor of the Year to Investors in 2015 by the Real Estate Investment Network, 2016 by the Canadian Real Estate Wealth Magazine and again in 2017 because no one told the judges no one is supposed to win the award twice but on merit, our peers deemed us as the best. In 2018, we again won the same award by the Real Estate Investment Network.
Hopefully being the most decorated team of Realtors in Ontario will make you consider us for your first or next real estate investment. Even if you don’t invest in our areas, there’s a good chance I know who would be ideal for you.
I’ve been around for a while, some Realtors are talented at servicing investors there are many with great ethics. The intersection of the two, talent and ethics is limited to a handful in each city or town.
Only work with the best is what my father always taught me. If you’re interested, drop us an email at firstname.lastname@example.org.
I hope to meet you at one of our meetups soon.
Again that’s email@example.com
Infinity Wealth Investment Network – would you like to know how our investors returned 341.8% on positive cash flowing real estate over the last five years? On average, that was 68.4% per year.
Just imagine what winning in real estate could do for you.
If you would like to know how we did it, ask us how by calling 289-288-5019 or email us at firstname.lastname@example.org.
Don’t delay, the top markets we focus in are trending upward in price, so you can pay today’s price or tomorrow’s price.
Till next time, just do it because I believe in you.
Hamilton, St. Catharines and Toronto Land Development, Real Estate Investor, and soon to be builder.