**Transcripts are auto-generated.

 

Erwin  

Welcome to the 300th episode of The Truth about real estate investing show. I am shocked if you’re new to the show, that is one episode per week since March 2016, we posted our very first episode, which was part of a six episode experiment, which is very long time ago feels seven years ago. Each interview is about an hour long and if you were to go back and try and consume all 300 episodes, that works out to about 12 and a half days but I do not recommend to consume all 300 episodes. I personally listen to almost everything audio on usually at least one and a half times so you can probably get through it faster than 12 and a half days Greetings my fellow investors This is the truth about real estate investing show for Canadians are you bringing you the truth and nothing but the truth? We’re not interested in peddling get rich quick schemes or hyping up unrealistic dreams. Instead, we provide you authentic, successful real estate investors, leaders of industry with authentic insights, practical advice and invaluable lessons from experts who’ve been through the ups and downs of real estate investing. This week is no different. Our guests in Nicaragua who co founder and CO owns Rockstar real estate brokerage with his brother Tom kharadze. Unfortunately, Tom is feeling under the weather he’s losing his voice. So we’ll rebook Tom for a separate date, but the show must go on. Both Nick and Tom are mentors of AI to charity. Their business includes running a real estate brokerage specialising in real estate investing to service other businesses and also service other businesses, which is like the Rockstar inner circle, a real estate education business that offers amazing value to its members. I know because I’ve been a member since about 2010 ish. The monthly fee is only $50 per month after a small initiation fee of $500. However, my referrals do get 50% off the initiation fee using my discount code, all caps, er w i n all caps. Education is an investment. Good value is good value and all good investors comparison shop. gym memberships cost more than the Rockstar inner circle membership, let alone playing golf once a week or once a month. So get educated first, so you can learn how to get rich slowly, in a very safe manner in real estate so you can afford that golf membership. Remember that that is the dream that passive investing pays for the niceties of life and for living. I’ll never forget the first significant nice thing Sherry and I bought for ourselves, which was a hot tub paid for when we refinanced the duplex that we’d held for several years. As a frugal investor, we definitely don’t spend much on ourselves. And because we know what kind of returns we can make when we reinvest money into our real estate portfolio. I look back at what our clients purchased in May 2013, which is just 10 years ago, again may 2013 10 years ago paying an average or classroom paying an average of under $300,000 For detached properties, houses and on average those houses appreciated if you’re sitting down, be sitting down those houses appreciated on average at 260%. So assuming a 20% down payment, and for simplicity of math, we’ll exclude cashflow and mortgage pay down these properties did cashflow as the highest best for that time in period in neighbourhood and town the highest best use for those investment properties back in 2013 Western rentals and those houses again, assuming 20% down our clients averaged a return over those 10 years of 800%. Yes, again, this is data from properties our clients bought, so we know exactly what to pay for and the addresses and everything. And because we’re active, we have a pretty good idea what those hazards are worth today with all the international students, the colleges and universities are recruiting student rental business has never been better. Note that our college and universities need international students as their tuition has not kept on like domestic undergraduate students. So for anyone reading the news, funny enough, a lot. The liberal media, which is generally the media leaves out the fact that prices are capped on domestic students hence like Guelph was in the news just recently, but they’re having trouble balancing their budget, even though they have a good number of international students. You know, the government should have seen this coming. So international students and yeah, those folks who are making up a humongous percentage of the people that live in Canada, most recently in housing has not kept up. So our investors are benefiting from the complete imbalance of over demand and under supply. The benefit of being a longtime investor is, you know, the market is our friend. Same as cash flow, which allows our smart investors to weather times like today where we have elevated interest rates, so they can weather the storm. And unfortunately that there are many who are over leveraged or who speculated so we’ll be seeing more listings hit the market over the next 12 months until we see an interest rate cut, which is looking like mid to late 2024 next year. Once we see a cut that will be a signal to the market to get in and we’ll likely see a whole bunch of people who’ve been sitting on the sidelines, get back into the market. I’m talking about specifically for buyers and pushing us for have a balanced market to a seller’s market. And I only generally observed the markets that we invest in for target, but we invest in for target investments. So that’s generally well east of the GTA and wild west of the GTA, where we can actually cash flow on property. From what we’re seeing on the streets, good quality income property still draw multiple offers, for example, a property in Hamilton, Ontario that ticked every box, that property still drew five offers, unfortunately, we lost on that one, while smaller markets such as like Niagara Falls, or Belleville, Ontario, and especially small market, really small market like Trenton, Ontario, the showing traffic and offers is way off as an dropping low. Same thing with the tenant applications. And so and based on seasonality, they’ll trail off further as we head into summer. So what does that mean? If you have a property sell, that’s bleeding your money and no longer serving you. If it’s my client, I’d be suggesting to them not suggesting I’d be advising them to get aggressive on their pricing. As buyers are rightfully being picky, buyers who waited patiently and prepared for a fearful market, you probably have a better 12 month window before that breakout happens maybe a little bit longer. And then we flip back into a seller’s market. And that’s the long term trend. Because we are in a housing crisis, nothing has changed long term quality income properties will still be a winner. So make sure you only own winning investment properties. And if you’re unsure, reach out to us and we’ll let you know, let you know that is if you want to work with if you want excellence on your real estate investment Power team that delivers exceptional results in last year in 2022. Our clients properties sold for 90% higher than the average comparable properties. Specifically, there’s a client’s properties that are we listed for our clients. I believe that’s an indication of that our clients bought right they renovated for a return on investment. And honestly, we believe in being excellent at what we do. You heard earlier that our clients from 10 years ago achieved 800% return on investment over 10 years. Of course past does not predict the future. I do not think the next 10 years will be nearly as profitable, but I do not see a better investment. And there’s also a reason for that we’ve we have 55 star reviews on Google as we are here to set the standard for performance and client satisfaction here at Iwan real estate. If any of that interests you, let’s get on a call. Email us at Island Anthony wealth.ca. And let’s understand your goals determine a strategy get you where you want to be revealed the remarkable venture that is the world of real estate investing. And we’re only talking about truths here. But enough about our clients. On to our 300th interview with Nick corretta. Nick is a real estate investor who discovered the power of leveraging real estate through boot camps starting at age 21. That was a long time ago. Nick’s an old friend so he is older than I am. So yeah, so 21 When age 21 was a long time ago, he bought renovated flip properties for profit, but realise that wasn’t generating the desired cash flow to replace his job income and it was a lot of work. A lot of work. To flip a property with your own hands is a lot of work. Nick shifted to rental properties achieving monthly cash flow and recouping his investment. Nick founded Rockstar real estate brokerage Inc. and the Rockstar inner circle with his brother to assist real estate investors. Nick publishes a newsletter shares, online articles teaches classes, hosts events for their 1000 Plus Rockstar inner circle members. That’s a paid membership. And also Nick co hosts with his brother that your life turns podcast, I’ll have links in the show notes for all of this, of course, Nick remains an active real estate investor, he consumes an endless amount of economic news and collects some silver Gulf of gold. Wow, Freudian slip, not golf, gold, and Bitcoin. Please enjoy the show. Hey, Nick, what’s keeping you busy these days?

 

Nick  

Oh, man, everything. We’re in a world where you have to be an economist to understand what’s going on to try to figure out what your next moves in life are so it’s like constant studying of, you know, different markets. We’re always asked what’s going on in real estate. Hey, what do you see what’s what do you think’s happening with interest rates? What do you think you know what’s happening with this? So that’s what keeps me busy and tied to maybe my phone looking at different articles and stats more than I want to but yeah, I mean, outside of that. We got family. We got the gym, we got a little bit everything. Try to balance things as best possible.

 

Erwin  

Yeah, you’re actually a lot. So I think the listener knows I’ve been a part of rock stars in 2010.

 

Nick  

Was it 2010? I remember man, I respected you. You came into the office. We didn’t know each other.

 

Erwin  

No. I knew you because I read up on you. I read your book, I read through your blogs, did you

 

Nick  

because we didn’t even know how much stuff we had out of that time. But I guess because we started a few years before that. So there would have been some stuff that we’ve written online quite a bit. But yeah, you brought up a Napoleon Hill book. I think. second meeting.

 

Erwin  

That is a big one. Yeah, it’s another one of his big Yeah.

 

Nick  

Yeah, good conversation. I didn’t want to just go along with it. Yeah, I was just like, he seems like a good guy. back then. I mean, it’s a weird barometer to use, right? If you’re like, oh, we should do something with this person. Like, are they they seem or you know, whatever, quote, unquote, normal is to you, right? And they seem like a good person. And that’s like the barometer these days. For me. That’s how I’m making a lot of decisions. And I don’t know if that says something about me or The society in general that you sometimes it’s harder to find good people than you would think, if that makes sense. But anyways, yeah, worked out.

 

Erwin  

Yeah. Worked out. I didn’t bust by accident or my mark. So, to me, it was important. But my average for the Korea course is to become a realtor for listeners benefit, like, think my average was like 96

 

Nick  

Oh, mine was like, the second exam. Well, did you were you open book or did you have like multiple choice? Multiple choice here? Oh, yeah. Okay. Oh, yeah. So we had short answer open bucks. So the first the first one I studied, and I did pretty well, I forget what I got, you know. And then the second one, you know, I was supposed to open book I mean, I’m not gonna study well, why am I gonna set this up? I’m gonna take 21. At this time, I’m just just getting it to bind somewhere on properties, right? So why am I gonna study so I just showed up with a textbook to write the test. And this one was way more. She was all about the real estate law and that type of stuff. I’m like, I don’t know any of this stuff. So then I was like, flipping through the pages. I’m trying to write this long paragraphs as possible, trying to get part marks like I was the like, Excuse me. You had to write paragraphs? Well, yeah, it was a little short answer and stuff. So I had to do that. And I remember that second exam, I think, I think at that time, the pass was 75. If I remember correctly, yeah. And I got the 75. Right off. So yeah, I’m not gonna compare marks with you.

 

Erwin  

Oh, no, after I realised, like, none of it really mattered. When I got into my articling. It just just passed. I was busy. I was busy with doing business doing. Sure. Do the article, game articling tests. Yeah, just pass the law one.

 

Nick  

Those ones where it’s like just just random stuff. But I didn’t. I don’t even know what the full process is now. So I know a couple of people in the office actually going through it. So I could probably ask them, but I haven’t gotten a chance to actually someone today is in the course. Actually, some of the office right now.

 

Erwin  

It’s a lot harder than it used to be. But yeah, it worked out. I always refer back to this picture from my first team event at Rockstar. Rock climbing. Yeah.

 

Nick  

We have one of those on the wall, I think yeah, we do. We do. We do. Oh, the rock climbing gym,

 

Erwin  

the rock climbing gym, repelling, but

 

Nick  

the rock climbing gym was we built a pyramid. Yeah, he wouldn’t pyramid. Yeah. Because we’re the team was small enough to do it. Yeah. Did we fall on each other? At the end of it? I

 

Erwin  

think we did. Okay, I think we couldn’t get the person at the very top. Okay, that’s sketchy. It got sketchy. But yeah, you know, I think that picture is a great analogy for my career at Roxxor. Because my knee is in Toms lower back. Pain is back. I was smart, though. Because I’m like, I looked at everyone around like, people are pretty fit. And I don’t want to be on the bottom row. So I was on the second one, the bottom row.

 

Nick  

It’s funny, we still get some people that were that have been with us since then. They’re like, man, you know, was so nice when it was just really small team stuff. And, and I agree, you know, there is something to be said for that. It was nice, right? But it’s nice now as well in a different way. But yeah, so depending on who you are as a person and what you’re like, you know, might be better or worse, depending on but, you know, we’re still a pretty close knit group. For the most part, we’re fortunate in that way. Which has been, which has been nice. As part of the process. I feel like, you know, from the outside, maybe the people working with us Don’t you know, won’t see it the same way. I don’t know what you think. But we’ve tried our best to keep make it feel like a more of a, you know, a real team, liquid of a family versus just like a bunch of faces and people coming and going.

 

Erwin  

Yeah, a true team, family culture versus people slap those terms on anything. Yeah, obviously, it’s harder for like, 1000 person organisation. But something that I’ve always admired about you in in Tom was that you were always not afraid to scale up. But you did as controlled as you wanted. And also, for example, like, you could have had multiple franchises outside of the office, but you chose not. Yeah. So it should have been a lot bigger, but you chose not to.

 

Nick  

Yeah, I mean, there’s something there’s a good aspect to that for sure. Right. We’ve have we left opportunity on the table. Yeah, for sure. We’ve been asked open franchises in different parts of Canada and things like that. But part of that would require management of those. And with young kids at home, now the kids have gotten a little bit older. But with young kids at home, we want to make sure we had time for the family. And we had already been travelling a lot to different conferences for to just enhance, you know, our own skills and marketing or investing whatever it might be, but to then manage things in different time zones and different areas. I don’t know if we wanted to take away from our personal lives in that in that capacity. And we’ve got we know, we gave up some opportunities for that, but think we’re comfortable with it. You know, the the flip side of that, too, is yeah, we give some opportunities, but we’ve saved ourselves a lot of stress, because at the same time, we would have had to find people to operate those for us. And it’s really not easy to find. Well, I mean, you and Sherry are both business owners. You guys get this like to find good people. It’s not easy. And you know, very often in real estate or in other professions where there’s a big financial incentive on a sale insurance comes to mind about picking on insurance people, but I know for some life insurance policies, there’s a hefty commission to be paid on depending on the size of the policy, right. So sometimes those incentives will cause people to force a sale where there might not be a sale to be made there. And I know You know, everyone’s heard the stereotypical horror stories about realtors. But you know, some people in real estate and again, other professions will chase Commission’s and we would never want someone under our name chasing a commission, anyone that’s part of the company it would bring all of us down because that’s not how we operate. And I guess that would be a concern for us, you know, so you always got to find good people. And I know you like over time, you know, how many times have you talked to investor out of buying a property because you felt that you could find them something better? Right? So this, but there’s a lot of people that be like, Oh, you want this one? Okay, no problem. Let’s bring up the offer. They just, they’re they’re chasing that commission, versus saying, Hey, okay, like, I know, this one seems good. I know, you’re interested in Oh, that’s cool. Let’s like back up for a minute, let’s not buy this one, I can get you something better. And you’re putting your word and your effort on the line to do it for them. And I think that, you know, that makes a difference. And it’s what’s allowed you to build your business certain way into to have have your client base around you for so long and loyalty because you kind of watch out for them. So it’s a similar principles that way, I think if you remember

 

Erwin  

Margaret, longtime Rockstar member Yeah, I exactly that we’re looking at properties, or I’m gonna ask her Yeah, and you know, like, there’s a lot of properties that Okasha our dog’s breakfast. Yeah. But for someone who’s new to that market, they don’t know. For example, my original portfolio. You know, I had a house that was built in like, 9018 80s. Yeah, right. So the foundation was logs. That literally law really,

 

Nick  

I haven’t actually seen that before ours, we have one that stone, it’s like crushed stone all put together, but not locks.

 

Erwin  

I had logged, every time it rained water went to the basement, and therefore anyway, my point was that I didn’t have much context what a good deal look like. Yeah. So for example, once I became went to join Rockstar, I would, before I was working with clients, I’d go once a week to go look at everything that fit my client’s profile. Right? And so like, for example, once someone sees 100 houses, now you kind of know what the top 20% looks like. Yeah, you get it? Yeah, you get it. Right. And so like, like, That’s my strategy. I want to own a top 20% property rent to the top 20% of tenants. So exactly with Margaret, I have exactly that conversation, like, would she be interested in a property like, No, we can do better. Like 20 problems, veterans are small, incited, a lot of houses are cited, there’s hiding problems, right. So I wanted something more, you know, less old, their home construction. So like, at least three times out two or three times? I was like, No, we can do better.

 

Nick  

Yeah. Yeah, we learned that the hard way. One of our early properties that Tom and I bought was McMaster and we just looked at the numbers. And the numbers looked good. Remember the 1%? Rule? Yeah, time when that was like a rule that hey, you know, you’re a student? Yeah, for sure. So the numbers looked good. And we’re like, oh, we should proceed with this property, not taking into account a lot of these other factors. Or once these tenants left, what it would have taken to get it up to par with the other properties in the area to maintain though that revenue stream and things like that. And yeah, she’s an early lesson for us, like we were blinded by the numbers. This was literally, I think, our second or third property. So it was very, very early. And we were, you know, so focused on the numbers that we just didn’t take other things into account. And I mean, we own that property. Until today, still, so it’s worked out very well for us. But at the time, we just feel like, oh, we overpaid for that property, we could have got a better property for the same same amount of money. But you know, we made it work. But it’s an early lesson, right? And remember the year the year that we bought it? Yeah, I would have been if it’s probably about 20 years ago, something like that. Yeah, I don’t know exactly how long we’ve

 

Erwin  

had it pretty much paid for roughly yet

 

Nick  

to want to say 250. I don’t think it was two, three, I think we ended up paying 250. And we should have paid probably 220 or 234. And it’s, you know, knowing what I know now. And that lesson that we learned we needed, we should have paid a little bit less for it. But yeah, it might have been 250 or 230. But the guy that we bought it from get this, he had owned it for a number of years, a decent amount of time, I forget how long but he had only ever put an interest only mortgage on it. So he had bought it for I think it was like 50 or 60,000 bucks. And he had only ever put an interest only mortgage and renting all this time. And then he cashed out. That was his that was his process. So it sounds funny, but it went up. It must have been more 50 grand because we pay 250 Because what we laughed about it saying over 60 grand and we paid almost 250 Because we said okay, so if his multiple went up four times, or roughly four times in this amount of time, we were joking, we were calling it the million dollar student rental. So this property’s gonna be where it could be worth a million dollars one day like we know it sounds ridiculous, but with what was happening with, you know, with what’s happening with rates and the financial system and money printing, they’re gonna inflate things away. This could be a million dollar property. We kind of all laughed about it. We were talking about in a team meetings. I remember back in when we were in the Burlington office, we would be laughing about the million dollar student rental. That property is not worth a million dollars today. But it’s not that far off. And if the last tenants have been there for a number of years now, because always a couple stay. And so we can’t raise the rents back to market because they’re always one or two this thing because we just don’t usually rent. We don’t raise. I know you can’t raise much. We don’t even raise our student properties if they stay because they’re only usually there for two or three years, but they keep backfilling with people. It’s easier for us but Then we haven’t raised the rents again. So I’m gonna want to be worth today. But it’s not quite a million, but we’re on our way there, like the joke that we made all those years ago is actually coming to fruition now.

 

Erwin  

How much do you understand about economics 20 years ago, like money printing and not much debt that the government goes into?

 

Nick  

Yeah. 2008 is when when we got serious about that, right? Because after the financial crisis, we looked around, and we said, What the heck just happened? What’s going on? And why do we have like no idea how this stuff works. And that’s when we got serious about trying to understand that financial system, it was weird when that financial crisis hit in the fall, we were in the US at a mastermind meeting. And Americans up to that point, whenever we’re in this part of this group, they’re very aggressive, you know, with their moves in real estate at that time, they were just, you know, everyone was just almost all in huge portfolio. Yeah. Like, they were very, almost, they were all brash, I mean that in a bad way, but they were just like, very confident, very just outgoing. Like, yeah, we’re gonna crush this, like, you know, it was nothing to stop them. There was no no barriers for them. Good. Lord. That sounds familiar. And then And then yeah, when that financial crisis hit, we were at this meeting, and I’ll never forget what what went down that one morning, I was like, Did you see what happened? You see what happened? And it’s just like, you’re in their faces. And we’re just like, what, what’s going on here right now, you know, so and that that was the start of of all that stuff. So that’s when we got serious that we had to try it out a little bit, understand this, and, you know, kind of go deep because it was starting to really impact our everyday lives. And we’re like, if this impacts our everyday lives and everything we do, why do we not understand it at all? So that’s when we saw 2008 was when we really got into it

 

Erwin  

for the listeners benefit. What happened to your associates in the US, who had large portfolio built up a large portfolios in the run up to 2000, rather

 

Nick  

than walk to had to walk away from them? Yeah, a lot of them have to walk away from they were they were very, very highly leveraged, no focus on cash flow. Oh, yeah, wholly focused on on appreciation and just acquisition as much as possible that put them in some bad situations, we do know some, some people that started to do some what they call strategic defaults. So they would, they would even hold on to the property for a period of time at that time, because they knew the bank was going to take a while to come and foreclose on them. So they weren’t paying the bank, but they were collecting rent. So they were using that as a stream of income. And then they were walking away from the property afterwards, when the bank came to foreclose on them finally, so because they were just like, we’re finished anyway. So this is what they’re going to do. And then they’ve, you know, they’ve since I mean, one guy that comes to mind, particularly since rebuilt, his portfolio changed a little bit, definitely focused on income and cash flow versus just kind of acquisition and appreciation and, you know, has looked back and been like, wow, I really kind of didn’t see didn’t understand what I was doing before. Now, I’m really kind of, you know, got a narrow focus on what I’m trying to build. So it’s changed for them. But I think it woke a lot of people up there was a lot of a lot of them went through some turbulence there for sure. dark times is probably a better term. Yeah, I don’t want to say turbulent, dark times better than turbulence. That was rough for them, for

 

Erwin  

sure. Because even the mutual friends of ours like they had I know, we’ve been Florida, they had like, 100 property portfolio in Florida, during 2008. Like the investment, really unhappy.

 

Nick  

Yeah. Because the you know, when there’s no income associated with it at all, and you’re not taking that into account, it gets really tough. What was interesting that happened on the flip side is some of even the heart the hardest hit places, rents almost didn’t move. Even as as property prices came down, you know, a lot in some areas, rents almost didn’t move. And in fact, even though they might have adjusted downward slightly, initially, they then ended up turning upwards, because from the amount of people lose their homes, they needed rentals afterwards. So the demand for rentals increased. So anyone that bought with, you know, certain kind of fundamentals in mind actually didn’t end up doing too poorly through that they were able to hold on to their assets and continue forward. So that’s, that was interesting to me. And it’s something that it’s a lesson that I’ve always taken back to our area, because we’re in a rent controlled area. So we don’t have rent control, we because of our rent controls, our rents are held artificially low, right? Overall, I know when you when people move out, they can we can put it to market rents, but overall, as a rental market as a whole, because we have some people that are well under market rents, there’s downward pressure on our rental amounts. And we’ve seen this at least in the past as well, that the rental market has held strong, even during times when things have kind of not looked good for the real estate market. So COVID is a good example, people were still paying the rent because that was one of the first things they had to pay rent, actually, the percentage of rent increases for a lot of REITs actually increased for the rent payments. So it’s something that we look at and we’re like, Yeah, I think that if that lesson holds true and I don’t know if it ever would or not, but if history is an example and using them as an example that it’s good to know that if you buy a property now and you can rent it out for X number of dollars, the chances that you can rent it out for X amount of dollars in the future is very, very, very strong. And you know, that might be your worst case scenario for the income they can generate. You know, and there’s other variables to that for sure. But But it’s good to know that you know, if you believe that and then you can basic calculations of that.

 

Erwin  

So having like, personally, even though it wasn’t your own portfolios getting decimated in the US in 2008, like you kind of lived it, you kind of live vicariously through others to go through that.

 

Nick  

Yeah, but we, from afar, we were sheltered. Yeah,

 

Erwin  

I know, that’s kind of where I’m trying to go to is that you had property, you own property in 1008. And you had clients, what was that? Like? What was your experience? Like? is back here in the GTA?

 

Nick  

Yeah, well, our clients at that time, many of them were able to pick up their property legally, in hindsight. Now, looking back what they were doing at that time, they were, they were taking advantage of the opportunity to be able to negotiate with builders even and ask for extra things they weren’t getting before or negotiate different deals or better terms on deals. So they were using that to their advantage. But the majority of our clients and the investments that we do, there are long term. So that was then an opportunity for people that had a certain timeframe of investing. Whereas I find when the market really starts to overheat or get get really hot, or it’s just real estate’s talk spoken about everywhere, the short term prices or whatever and focuses on but that wasn’t the focus for anyone. So it was it turned into a really good opportunity for them, because they weren’t worried about if they bought in February, they weren’t worried about what the property was going to be worth in May, they were worried about what the property was going to be worth, or what the numbers would look like, in three, five or 10 years from now. And that’s what interested to them. And that’s why they were what they were buying the property. So I think it was just a different a different mindset for the majority of people that we work with, whenever there’s a little bit of question marks or fear in the market. There’s also a segment of people also that are just like, I’m going to hold off, and they put their hands in their pockets. And they’re like, I’m just gonna wait and see what happens. And that’s fine, too, which is two different approaches.

 

Erwin  

So I’ve been talking about how, because of what the work I do, I speak to people from all different schools of thought around real estate investing, for example. And I think that, for example, I like rock stars a first place that explained to me why gold was a good term investment but savings plan. I don’t know what the right term for it is to explain the hardness and heartless for gold, and also the business case, why it made sense to hold some hard assets. And then if you believe in gold, you shouldn’t theory believe in owning real estate. But I think a lot that was actually a lot of groups don’t discuss that at all. So where I’m trying to go to is that also, yes, you and Tom do a heck of a lot of research into economic like governments sort of what central bank policies are, how bad they are, you mean how bad they are? Like, like the thing was Tom that first that first mentioned, like, what the next currency might be like, holy shit, where am I? But you guys very much behave like you have fiduciary duty to your 1000 Plus client numbers.

 

Nick  

Right? Yeah, real estate has always been a means to an end for us. So it’s never

 

Erwin  

we don’t enjoy just a home. We don’t love being a landlord.

 

Nick  

Yes, but look, I have a friend that he wakes up every day. And he goes on the Toronto real estate board and we’ll look at listings, like immediately. He’s like, Yeah, hey, laundry, my coffee the morning. I’m just looking at listings. Like he just he loves it. He loves it. This was even but he recently got his licence. This was before he got his licence, you know, he would he would be on just to put the public websites where you can get access some sold data with new listings, and he’d be all over it. I’m like, it’s just, he just loves it that way. That’s never nothing’s really spoken to me that way to where I want to do that every morning all the time. But it’s up to you. Yeah. Yeah, yeah. But you I slowly got to drag my butt to the gym. I’m happy once I get there. But somewhere in the middle of the winter, man, I’m driving to the gym and it’s cold and it’s dark. And like, why am I doing this this time in the morning again, and I’m so

 

Erwin  

happy hour type of gym time. So

 

Nick  

once I get there, I’m happy for them and watching the

 

Erwin  

YouTube like we do folks about YouTube. You’ll see Oh, Nick looks like he enjoys going

 

Nick  

to the gym six days a week. I love it. I love that five year. Yeah, no anymore. I will do a little bit later. Because what happened is that that 6am class got so full that I don’t do the class right to my own stuff. So I kind of get into 630 to start doing a little bit warm up to about seven and I start working on that. So I do sleep in later now.

 

Erwin  

But back to like your friend is passionate like crazy.

 

Nick  

Yeah, so real. estate’s always been a means to an end, right? So like our whole thing, which you know, right? But our whole thing is the reason it’s called Rockstar with mistakes people when we started the electrical would call their company name, Rockstar, you know, like some other real estate companies were like, well, I don’t know if you know the history of your name. But that doesn’t make sense to us. The history of our name so you understand it is just that it’s we believe you invest in real estate to live your life on your terms of record your rockstar life and that is whatever it is you want it we want to do. And so that’s the means to an end is for some flexibility, some freedom, some freedom of choice, financially, whatever it is, is to live life on your terms. And because of that, we feel that there’s more to that than just real estate. Now real estate has played a very effective part in that for us and many people that we’ve worked with, it’s played a very important role. So I’m definitely biassed towards real estate because of that, but we feel that real estate does an OP rate in a vacuum, there’s all these other factors that impact it now, right now is a great example like the interest rate rises that we’re seeing. That’s a really great example of something that impacts us. And it’s a great example of something that impacted us for the last 10 1215 years or so, when rates went super low, it was fuel onto the fire of real estate, and people that own properties, or assets, in general really benefit from those low rates. Now, we’re in this contraction phase. And then, you know, we see what happens in the future, but we have to understand that type of stuff. So no different than when we’re talking about central banks, and the financial policies and their fiscal policies, is that when you understand what’s happening with the value of our currency, or our purchasing power, and I know, you know, this, but I mean, you just realise you’re like, you know, is it really the price of real estate that’s going up the way it is? Or is it the value of your dollar that’s going down. And when you think about any sort of understanding that you’re like, you know what, the real estate’s not really going up the real estate, the real estate, it’s actually the value of your dollars going down. A great analogy to Tom use one of his newsletters that he wrote, He took our parents house and our parents house, they bought it for just under 100,000 bucks, we call it 100,000 bucks, right? And they bought that now, probably about 40 years ago or so, say put the $100,000 on the front lot. In $100 bills put 100 grand there, they have the property. That was 40 years ago, you could fast forward to today, that property now they haven’t done too much work to it as a lot of some of its original, but they have a new kitchen some stuff, right? But they you know, there’s a pool, so you know, four bedroom, home and Mississauga. So that property is worth about 1.5 or something called, you know, somewhere in that range. Who knows, we have the $100,000 on the lawn still. And we have the property over the last 40 years, what changed, the property didn’t change. It’s the value of that $100,000 of real change. That’s why it’s worth $1.5 million. Right? And when you start understanding that type of thing. It’s just like, holy crap, this changes the equation. And that’s why there’s a lot of people that invest in real estate theory and understand the problem. Yeah, it’s a defensive move for them. Now you understand the problem? Now go find a solution. Yeah, but they shouldn’t have to because we have this crappy currency. So if you have 100, shouldn’t have to, but we have. Exactly, it’s defensive, because otherwise you get robbed of your purchasing power. Right? It’s this weird dynamic that happens. But so anyway, once we started to understand that we felt it was very important, and we’re like, we need to share this with people. So they have an understanding of what’s happening. So that’s why we went down that path and when we understood it, and that’s why we share that stuff. Because people might disagree, maybe it’s not important to them, and they might be 100%. Right, we will be way off. But for us, it’s very important. And that’s why we share it because we think it’s part of a bigger picture,

 

Erwin  

right? Again, I don’t think most people know this problem. If everything and understand this problem. There’ll be more protests, they’re gonna be pissed.

 

Nick  

It’s not spoken about, you know, can they tell us like, I mean, their official inflation rates, you know, up until recently is hovered around 2%. But that mean, that’s not the case. It’s not the case. If you look, if you look at the things very simple, well look at your Cassville like anything, I’m gonna take it just take away the last 12 months, or 15 months, when inflation started going up, take those ones away. And take the years that you’ve been told inflation is roughly hovers around two to two and a half percent, maybe dips below two, a little bit of your expenses only gone up 2% a year. Let’s know it now. It hasn’t happened. We took the average Toronto real estate price, we went back to 19. I think it’s 1969. And Kyle in the office, grab these numbers. And this was up until September 2022. So about a year ago. So since then, the property prices probably went down a little bit and probably have come back. So we’ll probably have pretty close price levels. So they’re pretty accurate. But anyways, it’s not gonna be skewed much anyways. Because going back to 69, the average price is I believe it’s 7.06% is the average yearly increase. I should go look at it again. But it’s just it’s about 7% So inflation they’re saying is 2% but houses are going up 7% Right? Do you think the cost of oil I don’t have all the numbers in front of you, but I’m telling you like, the things that you really want in life haven’t gone up 2% A year that’s not the way these things I’ve worked

 

Erwin  

cars I’m gonna like that cell phones. Laptops, well, the equation they

 

Nick  

used you know, they use this remove replacement equation. So to do it so like so if they were using a T bone steak as an example or any steak isn’t say well, you know, we have for groceries, we have to include some protein sources. So we’ll include the state well, once the steak gets too expensive direct Well, the steaks expensive now, so we don’t need to include the steak anymore in our calculation of what it costs. We’re going to replace the state with protein so we’ll just make it hamburger. Right so now it’s now it’s a hamburger.

 

Erwin  

Well, it’s still beef. Well, yeah, but not steak. It’s

 

Nick  

good because two different things. So now what like what’s next, you know, isn’t hotdogs next? Because I mean, are those beef or beef hot dogs? Are the beef though? I don’t actually know all beef hot dogs. I say they are but I don’t know if they you know, they don’t have a cow. They don’t look like beef to me when I look at them. But yeah, you know, so that’s the type of thing that happens and it just

 

Erwin  

but this is what you do if trying to manipulate inflation numbers. Yeah. Now,

 

Nick  

if you understand that you’re like, okay, okay, so that’s the game. So now we understand the rules of the game. So if we understand the rules, we’re playing this game It’s very unlikely we’re going to be able to change the rules in short time ourselves or whatever the case may be. Right?

 

Erwin  

We don’t have enough votes, we always been failing so

 

Nick  

well, and you know, I mean, our leaders don’t think about models like monetary policy, they come on, say that like when? Right? Yeah, so they’re not going to go downtown, right. But anyway, so, but you understand the rules of the game. So then play within those rules, like, are you playing the game to win or not, because if you’re playing the game to win, well, then you got to play within those rules, and you got to exceed that, at least play to defend yourself. Totally. If we call real inflation, I’m just gonna say 5%. Just, you know, just for a simple number. If over the last 10 years, inflation has been 5%, that means if you’re not earning 5%, on your money, you fall behind, so and everyone that earns a 10% yield, which think is like 10%, as decent investment return for that people look for right? So especially when it is low interest rate environment. So 10%, you think you’re doing well, but if 5% of that is inflation, your real returns only 5%. So your hurdle rate is 5%, for everything you do? And if the inflation number was higher, you know, where do you go. So I don’t know that stuff becomes super important. And I think if you it doesn’t have to make the decision for you. But I feel really strongly that it should be taken into account with whatever financial decisions you’re making, because it’s not going away. It’s there. And we got to do something about

 

Erwin  

1. I’m always looking for, like, how to take advantage of information. So for example, if real inflation is 5%, and for the longest time, we were able to borrow at two or 3%. That’s as bad. That just makes it makes sense. Yeah, to play the game of borrowing for cheap. And trying to make better returns.

 

Nick  

Yeah, until rates go up until rates go up. Right, that’s the downside. So you’re right one on 100%. Because they need negative rates to inflate away the debt. So negative real rates, which means that if inflation is five, and the boring cost is 2%, you take the two you minus five, you’re negative 3%. So that’s negative real rates. So you can arbitrage that. And that makes sense. But at the same time, when that flips like it has right now, carrying costs going up, you do need capital, you need enough liquid capital to get you through these times. Because if you over leverage, you’re in a bad situation.

 

Erwin  

Right? Which leads to something I was discussing before we were recording is, I feel I can be impartial on things. Like I observe many investors, like rock star members, or my own clients or rock star clients. Is it fair? Extremely well, in this downturn? Yeah. Overall,

 

Nick  

I mean, I mean, I don’t like the cashflow numbers have been really squeezed for some people. And it’s been harder for some people to carry the properties for sure. It’s hit them. But overall, it seems to have worked out quite well. I think one of the things is that there was different people to different things. But overall, overall, there was never a focus on any get rich, quick type strategies. And if you’re investing for, you know, that kind of principles, you’re taking some kind of core principles or fundamentals into account when you’re investing, it makes it easier to ride through some of these ways. Does it make it easy? No, I’m not saying makes it easy, because there’s some people that have, you know, a few properties, interest rates have spiked up variable rate mortgages with a bank that has adjust adjusting their payments, and their cash flow squeeze or their negative now where they were 1000s Positive before. So there you have to ride through these times. But it’d be far far cry if they didn’t have that cash flow early on. And they were just investing for appreciation or already negative thinking that real estate prices only go straight up and only go straight up forever. And then they’re in a much different situation. It also helps when you have assets that are relatively easy to liquidate, if you need to cash out. And we’re seeing some investors do that. They’re like, hey, look, the portfolio overall is doing pretty good. I just want some breathing room. So I’m going to take one of these properties, we’re going to cash this one out, gives me a little bit of profit, maybe that one was my least performing for a monthly cash flow standpoint. So it eases the burden there a little bit I can cash out some profit and I’m in a good spot. So received some investors that will just unload like a part of the portfolio usually it’s really just one property and then it gives them some breathing room so that they’re in a comfortable spot again, but I think that’s been the difference like it’s the quality of the asset matters. Yeah, some people like when the market of last few years was just kind of jumping you see people get into it investors and just regular homebuyers. They get FOMO and they’re just buying anything you know people will walk into a new home sales office and be like well here’s how many condos you got here give me three of these condos what are the closing I don’t know how we’re going to finance them I don’t know but are you just give me three because the price will go up I’ll flip them or something I’ll figure it out that and then they’re just in a bad situation after right it’s not uncommon

 

Erwin  

they’re probably in a lot of hurt right now.

 

Nick  

Yeah, well that whole market yeah, there’s there’s gonna be some pain I think there’s just challenges to close on properties like someone people are having problems with that right. also doesn’t help that some people are fed that like a guaranteed profit source. Well, I mean, the you know what happens? Right? So

 

Erwin  

it just never made sense to me buy a pre construction condo when I can buy the exact same thing used and pay a lot less. Never made sense to me. Yeah, unless that building exactly what you wanted no location. You want to 10 out of 10? Everything is up to you to pay for

 

Nick  

Yeah, but the difference is people always think it’s we joke that it’s like it’d be easier to sell people the magic code on the remote control that you can push into have money spinning on your TV than it is to, you know, teach them properly principle Based Investing, say this is like, this is the type of principle based stuff that’s worked for decades and decades, right? This is kind of like a path to follow. Yeah, there’s some work, there’s going to be work involved, there’s going to be some ups and downs to it. 100%, you know, but it’s, it’s believable, and it works, versus the remote control secret code doesn’t work. And it’s almost not believable. But I’m telling you, people will buy that, because that’s what they’re looking for. Everyone wants the easy button. They want the easy money, so they can get easily blinded by that message if they meet someone that they feel that they can trust that gives them that message. We’ve seen people do some really interesting things.

 

Erwin  

I know there’s lots of condo specialist investors who you know, have massive teams that this sell hundreds of condo is probably 30 condos or when the weekend whatnot. So I actually think there might be a glut of condo supply coming on the market

 

Nick  

thinks there’s going to be some challenges in closing, we’ll see how it gets absorbed. But yeah, there’s definitely that potential for sure. Yeah, I’m curious to see what happens

 

Erwin  

here. Like we have no skin in the game.

 

Nick  

I joke with everyone in my dorm was to account because I missed out on that Toronto condo boom for 10 years, 10 or 12 years that

 

Erwin  

existed, Madame trying to focus on cash flow. I know. I was so

 

Nick  

jaded. Like when I was young and Mississauga, they were growing, that’s when the square one area. While I mean, they’re they’re pumping buildings up there again. But initially, they had,

 

Erwin  

they have built a bunch of crazy, you have to keep pumping them out. So but

 

Nick  

that time when the market turned in the early 90s, there they some people that my family knew that own condos there, those prices didn’t rebound for a long, long time. And they weren’t in a good spot because of it. And I’ve just always been slightly jaded by condos, for whatever reason, I’m like, if the market turns, they get hit the hardest, usually the fastest, because you have the same unit as everyone else. So you know, it’s the same, you know, I mean, you can do small changes to it, but it’s just different floors is the primary differential. And so I’ve just always liked things that I control a little bit more. So if that’s why I’ve always kind of move towards that single family market on land on that, yeah, for sure. I didn’t, we didn’t see it at the time. But over time, it started to become very clear to us that buying these single family lots is kind of like a little bit of land grab now. No, because it’s a lot harder to get into grabbing land than it was 20 3040 years ago, because of the prices. When we had people coming here I remember I grew up in the Mississauga area. So a lot of European immigrants were coming in, and some of them ended up going up to these smaller areas at the time. So out to you know, the Georgetown, Milton, north of Milton or whatever. And they were buying land and they were kind of holding on to that land, because because they code at the time and it worked extremely well for them. Because now they’re developing on that land, things like that. So to buy those plots of land now is not nearly as easy a lot of institutional money, that’s, that’s buying that stuff up. So individual investors a lot of a way to land grab is that single family building lot because you can take a single family put the second suite in it, put the garden suite on it, all of a sudden, you’re now able to just increase the value of that thing. So we’re seeing kind of more of that. And then also like the single family. One thing that always stuck out with me is you know this, I don’t know if everyone knows this, but our family and was lost, like everything in that real estate crash in the kind of late 80s, early 90s. Our dad was flipping paper, he was literally getting a property out of the trailer theatre of these big fancy sales offices that they were selling the properties in like a trailer, and he was getting the contract and flipping in the parking lot. And he got stuck with the placement cyberwar, that container was the starter home. And at that time, it was a big luxury home in that area. And you got stuck with it for a long time couldn’t rent it out conventional for cash flow. Basically, the stress from that I think definitely contributed to our parents divorce, like it created a lot of a lot of problems with the family financially as well. It’s always stuck with us because we always thought that if we wanted assets, that would be important to have assets in real estate that are as liquid as possible. And in the starter home category, it doesn’t matter what the market if the market is super hot, if it’s cold, if it’s really expensive, it’s really cheap, whatever that entry level is in that market, that’s where the most amount of transactions are always happening. So it’s the the most people are looking to get in if you’re looking to get out. So it’s just the more illiquid market. So if I have an asset, if I’m building an asset base, just like the gold here, we’re talking about, there’s a demand for people to buy gold. I don’t want to build an asset base of glass balls because no one wants to buy my glass ball because they’re everywhere but I just know that if I if I have a liquid asset that people want in different markets, then that’s generally the ones that I want all so that’s why we’ve kind of always stuck with that market and gone down that path or it’s appealed to me a little bit more but at the same time like you said you missed on Macondo you’re crazy into I’ve missed out on it too. So take it with a grain of salt but I benefited from this one so you can have everything I’m okay with it.

 

Erwin  

Yeah, I’m okay yeah, okay. Yeah. So still still single family home. That’s the basis of your what you think investors should be going going forward? Because for example it before recording I know you don’t Keep tabs on social media when other people are promoting whatnot. But for example that’s probably why you’re mentally healthier than I am. I have more hair than I do. The more hair, I’m sure you guys have never really gone after any fad. Like, for example, apartment buildings are a really big fad right now. Airbnb, massive fad. Like Are any of these announcing their bad investments? I love staying Airbnb ease, or any of these you think core investments that you yourself would do or recommend to clients?

 

Nick  

Like I would 100%. You know, if I get the right property, what I do is on some short or medium term rental, yeah, probably we have that place up in Collingwood that we’ve got recently still got a big pile of dirt in the backyard, and there’s no grass or anything. So we couldn’t even really short term. I mean, we could short term renting, but it’s not very appealing, since he like just stay inside and don’t leave, because there’s dirt and mud everywhere. But we’ll be looking to do some midterm rental for that type of thing. During a season when we’re gone. Like the summer, we’re in Europe for a chunk of the summer, we’re not going to be here to use it when we look at that maybe we would. So I’m not opposed to it. But ultimately, to me, it’s the asset that matters the most. So I would look at the asset first. And then I would look at what strategy I can apply to that asset to make it successful. Whereas I think sometimes investors are looking to get into the market and they’re like, Well, I want to do Airbnb. So I’m just gonna go find a property that I can fit into that mould. And that’s great, that’s not a bad way to do it either. I just feel that if I get a good asset in a good place, then I can apply multiple different strategies to it. And that’s generally what I like with investing. So if you look at the solo, take one of the properties by the mountain Hamilton close to Mohawk, well, there’s a hospital up there. So you can rent it, you can rent it to some hospital stuff, right? So there’s, there’s always demand for that there’s a student, others Mohawk up there, so you can rent to the students that way, right now, it’s actually was a rent to own initially, then it turned into student property. Now it’s a long term rental, we’ve already used three different strategies on this property. You know, there’s we’re probably for that particular one, we’re not gonna use Airbnb, just location stuff, I don’t need to but I want the property first, I want the asset. And then I’ll look at strategy. So I think that’s really what’s appealed to us most. And maybe that’s why we’ve stayed in in that lane. And we’ve just never had a need to go and start using these other strategies. But if we had bought, decided to invest some vacation properties on lakes in the courses, well, obviously we’re gonna look at Airbnb as a much different strategy versus a long term rental, right, just because of the income that we can generate from it. So I’m not against that. You mentioned fads, you know, I’m not against them at all. It’s just, we’ve just had no need for them. But I still believe in the asset first is most important if I’m going to have to pay this thing off somehow. So if I’m boring to own it, and I’m going to rent it out, I want to make sure it’s the best possible asset that I can have that I have the most flexibility with.

 

Erwin  

Speaking of property first, when I first joined Rockstar, rent to own property first strategy was a massive strategy. And again, because you ignored everybody else, there’s a whole bunch of people saying, oh, tenant versus the beta go, yeah. And I think like a market like now is an example of why tenant firsts, for example of a tenant chose a property in a small market Ontario. And they left and now you’re dealing with a no,

 

Nick  

yeah, but I mean, see, I think, you know, as well as I do, like, there were some numbers were being thrown around early that the buyout rates on tenant first are very high and things like that. And I don’t know that that will ever came to fruition. I mean, I know what people told me, but then I also know this that realities, I was told a later time, that was never the case. And many people were left holding the bag on property.

 

Erwin  

Yeah, yeah. Well, the landlord, the tenant bailed exactly, they’re

 

Nick  

full of properties they didn’t want. So it’s the same thing. Like, you know, when we did that, we call them home hunters. You know, at the time, we did some of that it was a definitely a small fraction of versus the property first ones we did. But even when we did that, we told the tenant that we had to find a property that also fit the mould for the investor. And we couldn’t buy certain properties. But it goes back to what people are promised people were promised a solid return turnkey, no, you don’t have to do anything. You just buy this thing, you sit there, and they’re gonna buy it from you, and here’s all your return. And it becomes very appealing to people. Right? But then when they looked into it, or they got into a net, and lived through it, they’re like, oh, there’s a lot more to this than what we were told. Right? And I mean, I’m sure we’re not perfect for trying to explain all the ins and outs of investing but as best as possible through other classes and stuff, we try to give a real life situations like you know, here’s kind of what’s involved in it. It’s not buy a property, put someone in there, just sit on your couch and do nothing. Even if you have management even if you have a commercial properties with managers in place, you still need to manage those managers. You know, before we started where I was talking to you about the guy we know with 500,000 square feet commercial in Burlington, yeah, he’s gonna manage those properties. He’s looking for tenants, sometimes they have to do work, you know, upgrades to the properties. They’ll even have it not just for the tenants that are going in on new leases, but the common areas and things like that because when ticket To attract tenants, you got to make those things nice. So even that type of portfolio where you can look at him, him as like a full time investor, because really that is the business just owning and renting real estate. That is there’s work to be done, you know, so there is some effort to maintain all these properties. But it works out

 

Erwin  

just from knowing so many business owners, even though it does, it’s not completely passive, it takes some work. It’s been incredibly profitable, oh my God, because again, like, I know, lots of entrepreneurs, no different than yourself, you and Tom, you have to put in blood, sweat, and tears, yeah, seven days a week, how many hours you have to put into manage a portfolio,

 

Nick  

the number is so small, I don’t want to, I don’t even know. It’s once it’s up and running. And then there’s managers in place and the systems are in place. It’s a small number. But there are times that you’re doing some stuff that you don’t want to be doing like this sucks. And it’s like, you can let the emotions get the better of you. But I did do a one time it was the same property by chance it was the same property. The one by Mac that I mentioned earlier, I was sitting in that basement sucking up water, I had the vacuum between the bottom of the stairs and the laminate that was butted up against it because you know, there’s like a little seam there. So I could suck up the water there was underneath the laminate, I was just sitting there, I think dump out like, I don’t know, it’s probably like 10 buckets of a little a little wet vac. So I was going up and down sitting there running it. And I was like, am I sitting here on a Sunday afternoon, I just want to I was about to barbecue steak house, I just want to have that steak go home, you know, but while I was sitting there, I started doing math in my head about okay, what is this property worth? How much income is brought in? How many hours have really spent here. And I forget the numbers that I was running through my head. But at that time, I was like, holy cow. This is some of the most profitable time that I can be doing. Right? So I’m like, okay, I’d like I’m not so bad. So just sitting here holding this vacuum down here and walking up the stairs every now and again. You know, and I mean, usually it was Sunday afternoon. So I went down to handle that. But even during most things at that time, someone else can handle that stuff for you. Right. But it is it has been incredibly profitable. I’ve never looked at it on an hourly basis of for exactly that number. But on hourly basis, there’s it’s been quite profitable. Yeah.

 

Erwin  

Is there ever there was a period this before the pandemic where your typical house in Hamilton like was going up between $2,700 a month to $3,600 a month. So if that vacuuming costs you two hours, four hours, yeah, even at $2,700 an hour. Now I just buried myself because I’m not good at math. But that’s over $6 an hour. It’s not so bad.

 

Nick  

But it’s the emotional side. It’s the emotions, you’re feeling right at that moment. And that’s where it’s tough for investors, because you have to handle that emotional rollercoaster. Because the calls, there’s never a good time for a tenant to call you and say, Hey, like, you know, I just need this, this and this, you know, when do you ever want that call, you never want it? Right? But at the end of the day, it’s like such a minor issue. But if it comes at the wrong time, sometimes you can feel it’s a big issue. But that’s where systems and your systems guy, you get it. I mean, it’s all you know, you put the right systems in place, and things get handled. And it’s not, it’s not a big deal.

 

Erwin  

Also, the other way to just simply spin it like sucks. I’m gonna get called by a tenant. But thank God, I have tenants here new rent.

 

Nick  

Look, there’s no something to this day that I still like one thing from investing that I really kind of enjoy is when whenever I sign a new lease, and I’m just I’m driving home, and I’m just like, you know, I just feels good, because I just feel like, that’s just an income stream that I solidified for my family, whatever it is, oh my God, that’s, that’s pretty good. Like, that feels good. Sometimes during stream rental season, if you feel two or three properties in a day, which it has never really been hard to do. Now, during these days. It’s really not hard to do, right. But there’s been times when you know, if each one is bringing in, what’s that 40 to $50,000 a year call it or at least at that time, some of the ring and far more now. But that’s what if you just feel two or three or 100 $150,000 in income that you just kind of shored up for the year and that day, you’re like, Wow, that’s a pretty good feeling any salesperson be happy with that day? Yeah. And there’s expenses associated with that. That’s not all profit, of course, and that type of thing. But I mean, those are good days, you’ve earned them. You know, it’s over time that you earn those days as well. Right? I don’t know if someone listen to this just thinking it’s like, oh, yeah, it’s just greedy landlords. It’s not about that we’re providing a good place for people to be like, there’s a lot of not so good student properties that you were talking about earlier. They can be living out we’re providing a really good, safe, clean, large space for people to live in the market. Yeah, we’re giving them an opportunity. Right. So it’s, you deserve it.

 

Erwin  

So there’s some questions I need to get out of the way before we get going. What are you telling newer Rockstar members, clients of newer people to real estate investing? What should they be looking at right now? And it’s even now the right time to be buying?

 

Nick  

Yeah, I think it’s understand what they want. So what role is it that you think real estate is going to fill for you? You’re building a real estate portfolio for what objective? And once that objective is clear, then it makes sense to start looking at what type of investment strategies areas properties, whatever the case may be there then it makes sense to look at those and start building the portfolio that works for you specifically, this was again was an early lesson for me like I, one of my first, my very first investment property was a flip. I was investing, because I wanted enough passive income coming in, you know that time, you know that term passive was used loosely. But because that didn’t work. I wanted enough passive income coming in, by the time I was 30, to pay for my mortgage every month, that was my initial goal when I started investing. And then I went to flip the property. So the strategy I used got me 0%, closer to what I was actually trying to do, like 0%. So I’m like, why am I doing this? And that’s why I started looking at other strategies that aligned more. So there’s two things, there’s a financial side of things and understanding what your objectives are, and then going out and building the portfolio properly is going to match your objectives on the financial side, but there’s also the lifestyle component to it. Because what are you willing to commit to these properties, we have some people that come in, and they’re contractors, they’re like, hey, look, I want to be able to buy a property, I’ll give it a look, I want the lift I’m going to get by putting the second second suite in, and I’m gonna use that strategy. So I’ll get better cash flow and stuff. And but I’m gonna do the work, no problem. You know, I have the time I’m willing to do that if the context, there’s some other people that are like, look, I’m really busy. I’m not a contractor, you might have no skills in that regard, can’t do that stuff. I don’t want that I want a different strategy that doesn’t require that and they want something more turnkey, because they don’t want the time commitment. They’re so different people have, you know, a different amount of time, or a different lifestyle they want to lead and how their investments will fit into that where some people will self manage, versus some people will get management. And I think those are the important conversations to have when you’re starting out versus Well, I think real estate’s a good investment. So I just want a property, let’s go find one. What’s a good one? Right, I think that, you know, just a little bit of thought beforehand can kind of go a long way, when you’re building things out. And it makes a difference it like it almost that thought early on will compound the return over time. And when you look back in five or 10 years makes a big difference. Well, that’s

 

Erwin  

one market to look at some neighbourhoods or towns you like,

 

Nick  

I like any self sustaining area, I don’t like the bedroom communities as much. So usually the self sustaining areas, meaning there’s going to be like, you know, jobs in the area, and they don’t have to travel for everything they want good employment there. Obviously we like there’s other things like public transportation and infrastructure and population growth. There’s all that type of stuff too, but but in a nutshell, is a self sustaining area. So areas that have the employment, because that draws the other things generally. So, you know, for a long while, Milton was like, I’ve just a bedroom community of Mississauga, there is more jobs and things and more development stuff that has gone on there in recent years. But for that long while I would be less interested in investing in Milton versus a place like Mississauga, as I use the example or even like a Hamilton at that time Kitchener Waterloo, Kitchener Waterloo, Cambridge is right down the highway for one from their

 

Erwin  

way more jobs than Yeah, cuz they happen up in Melton,

 

Nick  

exactly. So those they’re self sustaining? will sometimes that gonna cost me more like, is it gonna cost me more to invest in Hamilton versus well, and yeah, I’m gonna pay a premium to invest in the Hamilton area. But I feel like I’m getting something for that premium. I’m not just paying more, because it’s in Hamilton, I’m buying every less risk. Yeah, I’m buying the economic activity of that area. So anything that really has a self sustaining what I consider ourselves thing, community that way, I’m more interested in having said that, I just might might, the one I have to close on in a few months is a is a new construction in Oakville that I don’t know what it’s like not the, you know, doesn’t really match that as well, you know, but that’s, that’s for my kid. That’s not for my kids to give to them. The idea with that was to buy this property close to home, because I’m going to drag my kids there to manage it, I want them there at the beginning picking blinds, I want them you know, meeting whatever other contract, we have to meet there for him to go meet the cable guy to set up the internet the first time I want them coming with me to see what’s involved with it, I want them meeting the tenants when we go to show the property. And the idea is that I just whether they decide to ever invest in real estate or not. I want them to understand the way it works. So they know how there’s just different opportunities in life. And then, the way I’m bribing them is I’m like guys, if you help me with this, and you’re involved in this process, they basically will get half that property. Because the way I look at that is that’s their foot in the market. So they’re nine and 12. So we’ve lots of time, but doesn’t matter if the market goes up, down or sideways. This is their foot in the market and then they can leverage that however they want. So if they have half a property that’s you know, pretty much paid off time they’re looking for their own property that property can they sell that take that half of their their cash and go and buy it on the property, they can leverage it keep it rented out by their own property, but that is their foot in the market today. That’s the way I’m looking at it. That’s how I’m trying to bribe them. I have no idea how it’s gonna go. It could be a disaster. It could be I could fall on my face with that one. But that’s it. That’s the idea sounded good at the time when I bought it. I’ve taken my kids to my Hamilton property. So yeah, I’ve taken my two but they just this one. I’m like, I want them there for everything. Oh, so that’s why I had to be close to home. So it’s like three blocks is less than is about a five minute drive. So there’s no real conditioning or no real complaints other than like, I just want to hang out with him. hands on with like your friends can wait for them to get there. To get there, meet someone and come back is like a 30 minute thing because there’s a Dairy Queen on the way. If I have to bother with Dairy Queen as well I can do that too. Whenever I whenever I need to do.

 

Erwin  

The funny thing is like if I have any listeners over the age of 30 they’re like I wish liquid adult me and make this my problem.

 

Nick  

Yeah. Oh, trust me, there’s other things that I don’t do so well, I’m sure.

 

Erwin  

Because you wouldn’t have mentioned this in our in our meetings long time ago, like I remember always you referenced like European cities, where anyone young, they don’t buy, they rent, there’s never an opportunity to buy unless you had family wealth flexing in the family wealth. And that’s kind of in a story here in the GTA Golden Horseshoe for the last decade or so. Yeah, especially now.

 

Nick  

Yeah. And then real estate is left to the family. Right. That’s, that’s how it works. And sometimes the family decides to sell it and they squander the money, or do you do something worthwhile with the money and then sometimes they decide to hold on to and they leverage it for future things. But I can’t find an argument that makes really good sense to not own assets in your life. Because I really feel strongly that I own the assets you’ve leveraged against the assets gives you much more opportunity. So you continue to build that asset base, versus cashing out. We’ve seen it time and time again, like that’s how you’re really able to, you know, you need a cash flow component, because you have to pay off that leverage. So you need cash flow to support the leverage that you’re getting on those assets. But if you have that data,

 

Erwin  

elaborate on where cash flow is coming from business, employment, yeah,

 

Nick  

anything, anything as long as you can pay for it. So like, so I won’t use a real estate example. But we’ll use a sock example. When I was actually Oracle this time to I was there just for a period of time, Tom spent more time there. But Larry Ellison was getting a big billionaire, right. And it was talking about his credit line that he was getting to do to do whatever he was doing. I don’t know if it was NetSuite and Salesforce at the time, wherever the case may be, why is this guy getting a credit line, like he’s got lots of capital, but he would use the stocks he had as collateral. And then instead of selling the stock and cashing out, he would then borrow against it, and then use it to generate other income, and then use that income to pay that that and now he had the new assets, any of the old assets sell. And I was like, holy cow, I think at that time, it was at that time was mind blowing to me. I’m like, Oh, my God, this is a guy that has bucket loads of money. But he doesn’t get rid of the asset, he keeps the asset, and you leverage the asset to do other stuff. And like, wow, that’s, to me, that was just mind blowing. I’m like, I get it. Like, I totally get it. And that’s why that’s the beautiful thing about any assets were this specifically because it’s very easy to leverage. But you need, whether it’s business income, rental income, employment income, you need that to pay back the leverage that you’re getting, right? So like, if you because of you over leverage, and you don’t have the income, then you’re in a bad situation. Right? So there is you got to be careful with that. I feel like it’s still gonna be a powerful strategy, even though rates are a little bit higher. They’re still low, historically. Right. So but but yeah, so that’s the way I look at things.

 

Erwin  

You mentioned the term we need, you need to be able to survive, you need the capital, cash, whatever to get through this. How long do you think this? Whatever in lasts until things change? Well, just for example, as a, Nick, things are rough on negative $200, on my on each of my five port properties, so I can weather it. Yeah, how long do I have to survive?

 

Nick  

Yeah, I mean, I don’t have a crystal. I feel really strongly that we’re in the eye of the storm, I think there’s going to be a little bit more pain to come not necessarily the risk to market in the economy. And I think that pain comes, I think comes this fall, I could be wrong, but I think it comes this fall early next year. And then I think there’s got to be a policy response to that, if they because of the amount of debt in the system. Now, if they allow that pain to be prolonged or too much for people, it’s not about your $200 a month and other people that are kind of having cash flow situations at home and more worried about going to the grocery store, they’re less worried about that more worship with the banks will have real problems, because the banks are so leveraged that if there’s real problems, paying back funds, or if real estate starts to change course, and in a large way, the government has to step in, because it just the whole system, basically is at risk. Because of the amount of debt. This isn’t a situation we were in in the past. Because some people will look at today’s mark and be like, Oh, it’s eerily similar to like, you know, the late 80s, early 90s. And the right in some ways, I don’t believe the right in some other ways. And some other ways are definitely not right, and the amount of debt that’s in the system. And I think that really impacts things with the amount of debt that’s been put in the system. So the amount of Felician that’s been happening has contributed to price levels as well hasn’t been really accounted for a lot of those arguments. So I think that that there’s a policy response that comes in and that’s where things get a little bit ridiculous. And I think a lot of that money that comes in to shore things up. I think it starts you start seeing asset prices. do strange things, I think he starts to see aggressive price moves upwards and asset prices, I’m not talking real estate I’m talking, there’s going to be like, there’s a lot of correlation with the amount of liquidity in the world. So that’s kind of like money creation and printing, there’s a lot of correlation with that, and asset prices. And when that those floodgates open, and that comes rushing in again, I think we see a spike. And then I think there’s got to be this policy response to start it tried to bring it back. And they try to draw that back down. And we kind of see things go up and down and teeter totter for a little bit. That’s kind of what I what I think based on some past history charts, and the different decades that we’ve seen environments like this shaping up, so but I really think there’s a little bit of pain coming. I know, I mean, it’s just want to prepare myself for because we’re trying, like, I’m just kind of staying more liquid, keeping more cash than would have typically got on the sidelines. So that if it needs to be deployed in certain places, it’s available, you have the business to worry about, we have payroll to worry about that, as a business owner, at least, I think you would feel the same way you feel some responsibility to that. So it can’t it’s not just us, like we have to kind of take the whole picture into account so we got to worry think about that stuff too. and plan accordingly.

 

Erwin  

Anything else besides being more liquid holding more cash? Gold, silver, Bitcoin? Aetherium Dogecoin whatever other

 

Nick  

look, I’m the worst trader in the world. So if you’re looking for anything, I’m assets, I’m the old school boring asset guy, buy a property, hold it for a long time and rent it out. ever buy another one? I like gold. I like Bitcoin, because you can own it. I know some people think that’s ridiculous. I’d like to find it

 

Erwin  

monotonous amount of bitcoin, no, nor gold, whatever you’re comfortable

 

Nick  

with, you know, whatever you’re comfortable with, I just think I would prefer to keep my savings in assets that I feel are an inflation hedge. So real estate has served it very well as an inflation hedge for me my life. Bitcoin has been far more volatile. Yes. But from when I got involved in in, you know, through some multiple purchases, it served very well as an inflation hedge. For me, gold has served well as an inflation hedge for me as well, you know, maybe not as exceeded it as much as like real estate has and things like that. But you know, is it getting ready for a movie, it could as well, but I just like those types of assets that I can hold. So anything that I feel is like that quality of an asset I’m willing to have. But yeah, I think you’ve just got to be a little bit more prudent. And maybe in the past, if you thought that you could invest for the shorter term, if you’re looking at shorter term things, because of what might happen in the economy, it might impact exit plans. So if we get liquidity events, meaning like when it dries up, so lending, it’s harder, and you think that you have a property that you’re going to be able to exit at a period of time, you might not be able to. So if you’re investing for the short term, you might want to also as a toddler, stay a little bit more liquid, expand your time horizon and case you can exit when or how you want to what’s the backup plan to that, I think it’s always important to have that backup plan and make sure that that’s suitable for you as well, during times when it’s like very likely that we’re going to be in a recessionary time. And, you know, there’ll be a little bit of fear, there’ll be less money sloshing around for a period of time.

 

Erwin  

And that would include getting into a different more difficult time in your finances than anything for sure.

 

Nick  

Yeah. 100%. Anything that applies to real estate really applies to a lot of stuff. I’m just a real estate guy, certainly well, but you can do that, like with other things as well. Like businesses are no different. Like you can buy business you can leverage against the income of business generates, buy another business, like there’s all sorts of things you can do. Just real estate seems to be the most accessible for people. And it’s it’s like a business in a box. Because you’re like, there very little marketing needed for the clientele to be attracted to the product that you have. Right? Especially, especially Yeah, for real estate, especially where we are right now. Right? Because we were like supply demand, something that

 

Erwin  

a whack. Throw up a Facebook marketplace ad and you’re flooded my gosh, it’s like unhealthy in its way. Right?

 

Nick  

Yeah, we don’t. I’m so sad for this generation. Yeah, we don’t we don’t want it there’s got to be a little more thought put into I’m not anti immigration at all. But I mean, at this point, like, there’s gotta be a little more thought into it like, hey, when you’re gonna do this immigration policies have what you think about roads and hospitals and housing? Don’t you think those should be part of the equation versus just some random number? It seems like you’re picking up out of the hat

 

Erwin  

in the international student number. But yeah, oh, yeah. Yeah. Yeah. The

 

Nick  

number of real numbers are are ridiculous. Ridiculous was basically that the universities if you think about it, and maybe we’ve already thought about like this, but the universities are dictating our immigration numbers. Right. So these are for profit universities, Kyle just did a chart you should see it. The average tuition, maybe he did it or share it. I don’t know if it was from someone else. But the average tuition for a Canadian student versus the international student, the international student has jumped by about over the last five or six years by 30 something percent, and the Canadian students have a state about level. Right, right. And not to mention the number. So we’re doing a little bit more research into the programmes they’re going into and stuff we’re gonna release a report about it. But the so the universities have their targets, they’re moving overseas. There’s no mandate for them to tell the government how many of these these nonprofit residents are bringing in, because there’s

 

Erwin  

no cap. They’re not regularly. We have many students, they can bring it over.

 

Nick  

They’re the ones dictating our immigration numbers. It’s not even the government. Those are just the permanent resident numbers. Like it just makes no sense at all. There’s no thought going by This at all?

 

Erwin  

Well, it was a provisional government that put the caps on to tuition for domestic students, though. Schools have no choice. Yeah, well, it’s worth it. Yeah. Then like, well, even just to survive, just like us, we’ve had rent caps implemented on us rent control. Yeah. How are we supposed to keep up?

 

Nick  

Yeah, you’re talking to an ex government worker that I saw, when you talk about the, the amount of budget being used and where it could be allocated? I’m a little bit jaded from my past life as a regional employee. Right? Because I think that, you know, through efficiencies, there’s there’s a lot of money that could be saved.

 

Erwin  

Good. So we can cap property taxes to the right,

 

Nick  

we could look, there’s a lot. I don’t know, find something the government got involved in this helped with prices and helped keep them down and there wasn’t a lot of waste put anywhere. It’s slippery slope, go down the slope, just trash them? No, I’m not saying there is no need to trash them. We all know what’s going on. But it’s nice when you think about it. Like it makes no sense.

 

Erwin  

It actually makes me really upset when you go down and like ask questions and dig and all that sort of stuff. It’s actually hard to maintain a healthy mindset.

 

Nick  

Have you seen the hiring chart? Over the last few years?

 

Erwin  

The Federal Yeah,

 

Nick  

let’s think about this. Right. So the central banks raising interest rates, one of the big things that they’re waiting for is the unemployment numbers go up. So first of all, just think about that this is your these are like, well, they’re not elected, but the elected officials kind of place them there. So this is like a kind of national institution that is saying that we want unemployment to go up. So just think if you’re someone that’s employed, you’re not gonna be great. So you’re looking for some of us to lose our jobs. Like that’s your stated goal. So if that’s not problematic enough, the federal government they’ve been on this hiring for they’re outpacing any anyone else and the Trudeau Government is far above any previous government and the number of people they’ve hired, right? So the Bank of Canada’s when you find employment, us to go up, but yet the federal government keeps hiring all these people keeping the unemployment number low. Like, isn’t this character like? It’s almost like they’re working against each

 

Erwin  

other? They’re stimulating the economy. It just makes no sense. That’s basic economics. You’re stimulating the economy by putting more money in the system. You’re trying to slow the economy down as you try to slow the economy with it by raising interest rates. It makes no sense. You’ve said it’ll but it’ll balance itself. Yeah, we’ll stay mentally healthier.

 

Nick  

I have more important things to think about in that arena. Okay. Did you remember to remember that that speech? You forgive me if I say that I’m not thinking about like monetary policy, I have more important things to think about. That was something like that. And I that wasn’t an exact quote, but it’s not far off at all.

 

Erwin  

We might be happier people if we accept that. So we’re not happy with what was great here because

 

Nick  

the prime minister can take the best selfie in the world. I’m convinced Okay,

 

Erwin  

damn it. I

 

Nick  

know. I know. So in look, at least we’re a global leaders in something. Are we ending on? I hope we’re not ending on No, we’re not even gonna say something. We gotta say something. Yes.

 

Erwin  

No, Kisan. Yeah, let’s get more upset. Nick, where can people follow along? Because I know you have a really popular podcast, I’ve been recommending the rock centre circle a while you know, like when I have like a novice investor that wants to learn about smart real estate, and evaluate just like I’m a value investor, I believe. I believe in only paying for valuable what I consider good value real estate training, for example. So I’ve recommended clients to Rockstar inner circle

 

Nick  

and we appreciate that for sure, but only if it’s a way for someone so if anyone just goes to Rockstar inner circle.com They can find all sorts of videos, articles or like anything they want there and podcasts is the your life your term show. So we cover real estate stuff and investing macro stuff. We just had a jeweller on the show today.

 

Erwin  

What do you say? What do you see?

 

Nick  

These are Kalani jewellers. You know, Kalani they do all the jewellery for a lot of the NBA guys and unless guys they’ve created like a kind of little like not little they’ve created pretty much like a global brand for themselves. A lot of the soccer guys fly to town to go see these guys. Very, very cool story. Very cool story. I mean, you see some of their pieces that I guess the point is sharing that as we do a variety of different things. It’s not just kind of we don’t just do real estate so we try to talk about a bunch of different stuff that just interests us in general so

 

Erwin  

I found with him with anything that anyone there’s something to learn from them also they deal with the high end market

 

Nick  

all these guys do their back room with all their custom pieces are just just outrageous. But a lot of the hip hop guys Raptors Blue Jays, a lot of NBA guys when they come into town, we’ll go there for their pieces. And some of the some of them they can share their names. Some of them they prefer to keep it quiet. But yeah, really cool story. Really cool. So but there’s always lessons. Yeah, I mean, these

 

Erwin  

are gonna guess they’re not really feeling a recession.

 

Nick  

So no, I mean, I think there’s everyone’s feeling it it just to different extents. So everyone’s feeling it a little bit. And then just the inflation numbers too, because they’re trying to open up other stores and different cities like don’t preface for my Okay, okay, there’s just just the same forces impact everyone

 

Erwin  

very, as business owners, I’m just more interested in like, how does your clientele feel at

 

Nick  

the very high end doesn’t feel that they’re not impacted? Right, but But I mean, when there’s more money in the system, there’s also more people going into a place like that, that’s they’re spending money that wouldn’t be spending money otherwise, they’re not buying the, you know, the 150,000 or $250,000 pieces, but they might be buying something worth, you know, five to 10,000 bucks that they wouldn’t be spending that five to 10,000 bucks. Now. Well,

 

Erwin  

again this like I always find there’s something to be learned from any right everyone versus I have a friend who works at spends time and maybe I should have named our jewellery company in square one. So I asked him his business and just to get a gauge for what the retail level was like, but it’s kind of funny still, because I remember him telling me like a one carat diamond rings a one carat diamond ring doesn’t matter what it costs the minute

 

Nick  

Yeah, if it’s an engagement ring. Yeah, I think

 

Erwin  

I think it’s fascinating human psychology. Yeah.

 

Nick  

Yeah. I don’t know if this is true or not. But I think the the other pieces if you’re looking to get married, you need an engagement ring. You’re gonna buy an engagement ring.

 

Erwin  

Doesn’t matter. That’s fascinating. But the other

 

Nick  

piece is, I don’t know. I think things might be like, maybe there’s less time. Branson’s gonna die.

 

Erwin  

I don’t know. That’s what he’s saying. The other pieces, there’s less less demand for Yeah, yeah. So just to give you again, I’m just looking for insight into how the market is for sure. I

 

Nick  

love talking. I’m always asking people in different industries, right. I haven’t spoken to a single person that isn’t saying on their everyday life. They’re seeing differences. Like the I feel like the recession has almost started already. It’s just we’re just seeing it on the on the streets. Now. We just lost the backwards looking data that the government’s looking for yet. You know, but everyone’s feeling I mean, how can you know, this is an historic pace of increase of interest rate increases? Never done this before. Everyone’s feeling it like there’s just no way not to.

 

Erwin  

Nick, thank you so much for doing this.

 

Nick  

I appreciate having me.

 

Erwin  

Thanks for so much for the honour. 300 episodes.

 

Nick  

Yeah, that’s something that’s consistency

 

Erwin  

that like you said, You always said it. You always said from the beginning back into 2010s beacons. But it’s the hardest thing to do. I think that’s I don’t think I’m just gonna start a podcast and start a podcast I forget the number is how many podcasts actually go beyond six episodes. Oh, I didn’t know. I didn’t know. But that is probably not a lot about your 80%. Don’t make it past six episodes. Well, we

 

Nick  

get a lot of people that will say like, Hey, I’m gonna start the weekly email, I’m gonna start the weekly, ama, hey, don’t start weekly, you can always ramp up to weekly because if you start we I mean, you can if you want, but when you start weekly, it’s it’s easy to fail, because the next week, it comes quick, you know? So you know, kudos to you, man. Congratulations on making it. Notice that really everything you’ve done to this point, you’ve always been an implementer you’ve always implemented a lot of different stuff. And you’ve always you know, so it’s kind of a testament to you for kind of doing all that stuff

 

Erwin  

haven’t been so good at sticking with CrossFit. Like you got me here, what you do. And I’d like to thank you and Dominic for the mentorship because you’ve given us a lot of great ideas that was backed by hard data. And so yeah, you know, without the coaching and mentorship would have gotten this Oh, cool,

 

Nick  

man, you ensure you’re awesome

 

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.

 

 

 

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