Getting Started In Real Estate Investing ? Do These 5 Things

[00:00:00] Welcome to the Canadian Real Estate Investor, where host Daniel Foch and Nick Hill navigate

[00:00:06] the market and provide the tools and insights to build your real estate portfolio.

[00:00:13] Welcome back to another episode of the Canadian Real Estate Investor, myself Nick Hill, joined

[00:00:19] by Daniel Foch, new episodes every Tuesday and Friday morning.

[00:00:25] And we've got a great episode for you today and we're going to start this episode off

[00:00:30] with a review as we like to do when we get great reviews and a very cool story.

[00:00:36] And then we're going to get into the the me or the episode here.

[00:00:40] Yeah, and then we'll get into the five things that everyone should be doing this year,

[00:00:46] especially if you're looking to break in a real estate investing, or if you're early in your

[00:00:50] journey, so more of a beginner episode. But I think it's lessons that will be of value to

[00:00:57] someone no matter where they are in the real estate investment journey. So first off, let's read

[00:01:02] this great review. It says number one real estate podcast in Canada. I like that math.

[00:01:08] I'd expect nothing less from these two beauties. That's in all caps by the way with three exclamation

[00:01:12] marks. Keep up the good work. So you know, you know what they mean when it's presented like them?

[00:01:17] More real world deals, more guest speakers, more market update episodes and do a full episode on

[00:01:22] M.O.I. Select please three exclamation marks. This looks like me when I'm emailing a client.

[00:01:31] Hate the Drake is the name there, I guess they are not a fan of maybe it's a Drake hotel in Toronto.

[00:01:37] I don't know. It couldn't be, it couldn't be Drizzy Drake. No, nobody can hate him. Maybe Drake

[00:01:42] from Drake and Josh, that's like the only Drake that is anyway. Yeah. Drake, there's not hate or hate.

[00:01:50] H8 is like a license plate, right? Great plate. Yeah. Just love and support for you here. So

[00:01:58] thank you. We appreciate it. And if you're listening and you like that review, go and

[00:02:03] see if you can beat it. Give us a better review. I did try. We've had some great ones.

[00:02:09] Any idea, right? Speaking of love and support, we don't usually do this. It might be the first time

[00:02:14] we've ever done this but I got to read this email as well. Now this is exchange between myself

[00:02:20] and one of our amazing listeners that reach out to us. Again, email is in the show notes. Dan

[00:02:25] are just regular people. We are quite busy but we do get back to everybody that reaches out to us.

[00:02:30] So says, hey, Nick and Dan, I've been listening to Simone and Braden's podcast since inception

[00:02:36] and by proxy, I started listening to yours by weekly. Really great content, by the way. And I have

[00:02:41] learned a lot over the last 100 plus episodes. I've been interested into investing into a

[00:02:48] mic for several years now. And I tried to invest into a private mic, but unfortunately my territory

[00:02:55] of residence, which is the Yukon territory and my net worth made it impossible to do so. So I

[00:03:01] instead invested in a publicly traded mic versus the private that he was trying to do as a liquid

[00:03:07] publicly traded mic. I would prefer not to be tied to Mr. Markets mood swing. I love that powerful

[00:03:15] consumer sentiment, the invisible hand that moves the market. He goes on to say I think for the

[00:03:20] passive hands off real estate investor out there, makes should be discussed in your podcast as a way

[00:03:26] to get your foot in the real estate world without that midnight phone call about a clogged toilet.

[00:03:32] Yes, that that favorite phone call that every landlord gets every Saturday night.

[00:03:38] He signs off with email. Anyways, I am surely not the only Canadian looking for this type of investment.

[00:03:43] Deal have a wonderful day. Raphael PS trekking into the Peruvian and ease at the moment.

[00:03:51] So I respond, hey, Raphael, thanks so much for listening and reaching out to Peruvian and ease.

[00:03:56] That is awesome. Yes, we have been meaning to write a full episode on a mic. For a while now your

[00:04:05] request will be met. Thanks for the support and safe travels. And as always, it gets cool.

[00:04:11] Raphael responds, thanks guys. Looking forward to new episode every week. I'm actually going to be

[00:04:16] doing a solo trek on the Heo Hash circuit in the Andes on Saturday. And I'm going to be bringing

[00:04:23] a bunch of pre-recorded podcasts with me at 5,000 plus meters. There you go. So if you don't leave

[00:04:29] us a review that's better than the other review, try listening to our podcast at a higher altitude

[00:04:35] than Raphael. I think we're going to have somebody on it. There's a couple of mix that we

[00:04:41] work closely with and we've actually been in talks, potentially having a fund, a white labeled

[00:04:46] fund ourselves for something that we're passionate about which is ADU and detached ADU construction.

[00:04:52] I'm like modular ADU construction because nobody's financing those things yet.

[00:04:56] So discussions that we've been having so we will likely have, we should get the two

[00:05:03] original. We talk about it. Yeah, we get into it in the episode. Yeah. So anyway, how cool is that?

[00:05:10] This guy on an epic adventure hiking through one of the best trails in the world and we are going

[00:05:14] to be in his ears the whole time probably right? Yeah, I mean, it's kind of like we're there,

[00:05:20] right? Kind of. Yeah, not really, but yeah. The Andes are the highest mountain range outside

[00:05:26] of Asia in the longest continental mountain range in the world, by the way, which is this huge

[00:05:31] highland along the western edge of South America. Wow, so you're basically telling me lots of

[00:05:37] time to listen because it's a long mountain. Yeah, I think you plan the trip just to get time

[00:05:42] to listen to the podcast. Just to get away and listen to us and peace, yeah, Raphael, we really

[00:05:46] appreciate it. And actually this the high circuit which I'm pronouncing horribly and correctly

[00:05:52] is actually one of the top 10 most beautiful hikes in the world. So there you go. I'm going to pull

[00:05:58] up some pictures of this while you're babbling on. But he sent a picture. He sent us a picture.

[00:06:02] I'll send it to you. It's awesome. He was like his base camp. It was really cool. Yeah, so let's go

[00:06:08] through our own epic adventure here on this episode. We are going to be looking at the five things

[00:06:12] that you can do if you're just getting started in real estate, but you can also be doing these and

[00:06:16] should be doing these things if you're an experienced investor as well. There's this concept called

[00:06:21] beginners mind. I think it's like it actually comes from like Buddha where it's like looking at

[00:06:24] everything as if you're a beginner. So, I think like some more advanced people,

[00:06:30] Naval or Avicant talks about this as well, right? So beginners mind. So what's the first one?

[00:06:35] The first one is educate yourself. Yeah. And what's what we're going to do is there's the five

[00:06:41] things underneath each one of them. We're going to give you some suggestions on where and how

[00:06:46] to accomplish these things we're recommending here. And the first one under educate yourself is

[00:06:51] attend events. It's so easy. We just did a whole episode on networking at these events to go

[00:06:57] listen to that. Take the insights that we've given and see which ones align best with your personality

[00:07:03] and then go execute them at these events. There are always events happening and so many great

[00:07:08] opportunities to meet great people and learn great things at those events. So if you get a,

[00:07:16] if you learn by Osmosis, if you learn by connecting with people, there's a whole world out there

[00:07:21] waiting for you to be discovered at these events. So tons of education get out and get active.

[00:07:27] If only there was like a national podcast that had like a network of events that happened every

[00:07:34] second Tuesday of every month. Yeah, you know, locally. Yeah. You could find it in the show notes

[00:07:38] of the podcast and yeah, directly you meet up on the homepage and then you could just join one.

[00:07:44] And if you wanted to, if you felt so compelled and said, oh, there isn't one in my city,

[00:07:48] you could actually just start one on your own and they would give you all the resources to do that.

[00:07:53] Great idea, Daniels. That sounds like good guys over there. If somebody did that, I would consider them

[00:07:57] to be smart people. The next piece of advice under the educate yourself on brella is books and podcasts.

[00:08:06] Well, congratulations. You're likely a podcast listener because you have been listening to Dan and I

[00:08:12] books and podcasts short form and long form content and even YouTube videos. There's an insane amount

[00:08:19] of free content and free information out there. I mean, Dan, you and I haven't charged a penny

[00:08:24] for these 160 plus episodes that we've done now with an average listening time about 42 minutes.

[00:08:30] Wait, you haven't been building listeners? I DM everyone who leaves us a review and send them a

[00:08:34] paper. Here's my Venmo fill it up. Yeah, I mean, you know, we've created hundreds of hours of

[00:08:43] free content here as well and we're just a small piece of this industry. So, you know, outside our

[00:08:48] little operation and there's so much amazing business investing in a real estate material out there.

[00:08:53] So go take advantage of it. I can comfortably say that before I started creating content and

[00:08:58] really stepped up my real estate investing game, all I did was consume as much content as I could.

[00:09:04] Yeah, you did. You really, really did. I remember when you and I met each other. That's how we met.

[00:09:08] Like you were consuming a bunch of my content and then DM me told me that it sucked and you could

[00:09:15] make it better or something like that. No, but like you're more diplomatic than that maybe,

[00:09:21] but yeah, something like that. Yeah. So I would say you really, really are a testament to this,

[00:09:26] especially seeing that you're now a leader in the space. So, appreciate it. Pay attention

[00:09:31] what this guy says on that one. The next one is invest in yourself, which is I mean a lot of this is

[00:09:37] there's free education like I remember when I started off as a realtor, you know most of us,

[00:09:41] I'm like say say this like really, really straight up like the whole like courses,

[00:09:47] gurus all that stuff like most of what that is is community and accountability

[00:09:53] and consistency and they aggregate it they parse it so you don't have to parse to go through like

[00:09:58] all of the YouTube videos to find which ones are the best and do other trial and error to see,

[00:10:02] you know what I mean. But when I first started I was just doing I would just go and listen like

[00:10:05] Brian Bafini for realtor's right? I would listen to his videos on on YouTube. You can do the same

[00:10:13] thing for real estate investing. And then if you want to take that next step so go through free

[00:10:18] education once you've realized that free education it might kind of illustrate to you that you

[00:10:25] want to take things to the next level for personal and professional development. And the next step

[00:10:30] after you've kind of consumed or like taken in as much information as you can is to start paying

[00:10:36] for it and paying for almost more of an accountability system creating immersing yourself in a community

[00:10:41] full of people other people who have kind of you know who are like I guess coaching is another word

[00:10:46] for it. I mean we just paid for coaching on how to run a course business and it's definitely

[00:10:52] to come work as some. Yeah like there's a lot of dough but it many mean on those calls that we're

[00:10:57] on were surrounded by other people who are running businesses like this that are absolutely crushing

[00:11:01] it and that alone like you get to learn from their successes their failures just having access

[00:11:07] to that I mean it could be you know thousand like what I think you know these courses are thousands

[00:11:12] and thousands of dollars but that's probably saving us thousands and thousands of dollars of like even

[00:11:17] if it's Facebook ads that we don't have to run because we've learned you know and I mean somebody was

[00:11:23] we were talking about our course to somebody the other day and I was like I actually think like a lot

[00:11:27] of people from our course have said oh while real estate investing is really hard and risky in 2024

[00:11:32] I'm just not going to do it this year right like maybe I'll do it later but like right now

[00:11:36] I'm not going to do it and I think had had some other had this existed two or three years ago and

[00:11:42] people could pay two thousand dollars to have that experience to talk them out of investing in 2020 or

[00:11:49] 2021 that you know the ROI you know you're seeing some of the losses but losses posted in the market

[00:11:55] right now all this like lost porn that people post on Twitter and whatever people losing 100

[00:11:59] 200 500 thousand dollars I mean to pay two grand to realize that investing is too hard and risky

[00:12:04] in the current market seems like a pretty decent tradeoff from my perspective so and it doesn't

[00:12:08] have to be that but like you invest in your 100% right yeah and just just to add to that point

[00:12:13] thing because I because I love that you know in in the course and not to go too deep on here

[00:12:18] because we're not just here trying to try to find out. We are you know you're a guru Nick. Yeah

[00:12:23] if you know if you take the course and you realize hey look uh you know the traditional sense of what

[00:12:29] people think about real estate investing you know go buy duplex and tenant did and whatever

[00:12:34] that might not be for you but hey guess what there's a ton of other ways to invest in real estate

[00:12:38] through REITS through MIX through GPLP structures right so we get into a lot of that and

[00:12:45] and I think you're right Dan right like it's all about getting that mindset right and a lot of

[00:12:49] a lot of having exposure to these not only the content which which is obviously a great piece

[00:12:56] of it but the the community I think is is what's really the driving force and what really is going

[00:13:01] to have the immense value so you know you got you hit a certain point it's time to invest in

[00:13:06] yourself and get your mindset right then the next piece of advice you're on on the kind of educate

[00:13:12] yourself silo would be write a business plan you might have already done this this might seem like

[00:13:18] you know an arbitrary task or a waste of time but business plans change when the market changes

[00:13:26] and the market has changed drastically so maybe it's time to redo the business plan maybe it's

[00:13:31] time to update the business plan maybe it's time to write a business plan for the new market or

[00:13:35] your new investment thesis and business plans don't have to be you know 20 pages they can literally

[00:13:41] be one page and I'll give you a really simple outline of what it should include your executive

[00:13:46] summary which is you know your main mission or your goal some of the highlights you know you

[00:13:50] could have your company or brand description in there so you know what what industry or what

[00:13:55] product or what asset class you're going after a little bit of a market analysis so this includes

[00:14:01] your target market demographics and any trends you've you've analyzed your organization so whether

[00:14:07] it's just you or others other team members what kind of structures that look like that's your

[00:14:11] power team who's doing what then of course your your product or service so that could be hey my

[00:14:16] product is apartment buildings or my services managing apartment buildings your marketing sales how

[00:14:22] you're getting deals how are you building your network how does that how does that how are you

[00:14:26] finding tenants to backfill your your properties and how you're getting that next deal financial

[00:14:31] projections very important how much money do you want to make this year how much money do you need

[00:14:36] and that's the last one is funding so specify your funding needs your sources and your future

[00:14:42] requirements and then of course if you're bringing other people on and you're building this business

[00:14:46] plan to show them what kind of rates of return are your assets going to spit out for your potential

[00:14:53] investors and partners great exercise to go through yeah I think it's it's a really a more practical

[00:15:00] version of of goal setting and just like actually we talked about this in the course too it's like

[00:15:05] you know imagine your goal is at the top of a flight of stairs there's like 13 steps to get

[00:15:10] of a flight of stairs right to get to that goal you got to see what each step is and and

[00:15:15] mechanize what that looks like to go from step one to step two otherwise it's just like you're

[00:15:20] just aiming at something and no path to get there you know it could be maybe your goal is to

[00:15:25] get to the top of the high awasha trail while listening to the best podcast ever high awasha I don't

[00:15:31] know but you know that's a big old mountain you're looking at it right probably some cool at

[00:15:36] top but you got to take a lot of steps to get there so they're just remember a simple business plan

[00:15:41] should be concise and easy to understand Eric rising the lean startup talks about this quite a bit

[00:15:48] just a one-page business plan they kind of lean bit lean business model canvas is actually something

[00:15:52] they happen I mean he's probably a little bit extreme from a real estate perspective like

[00:15:58] you can't really do that like a startup where it's like bring an MVP out like bring out like the

[00:16:01] worst version of your product and then like let people criticize it and fix the problems

[00:16:06] you can't really do that with a duplex yeah I'm just gonna be wouldn't be a good idea yeah

[00:16:11] yeah but your real estate business should be as simple as possible boil it down to its key parts

[00:16:16] right and you should be able to communicate that simplicity to partners investors finance years

[00:16:21] and everyone else if you can't explain this is why I love Twitter if you can't explain something

[00:16:25] succinctly you probably don't understand it well enough you've got 140 characters

[00:16:31] it's 280 now but it started oh wow yeah it started as 140 because it was text-based right it

[00:16:37] was like SMS so you would SMS to Twitter yeah like you're only you recognize your number and then

[00:16:42] it would publish it to the website then I and fun fact or twer open on Twitter since that was a thing

[00:16:50] she's crazy that's impressive yeah 35,000 followers later and here we are you're still crushing it

[00:16:56] so if anyone doesn't follow Dan on Twitter make sure you go do that by the way yeah thanks thanks

[00:17:03] the uh the next one here Dan create value right not the thing we talk a lot about the first one for

[00:17:10] me is finding people now how does that create value well real estate is a people business I personally

[00:17:19] have made myself very valuable to my partners in a few of our different businesses just based off

[00:17:25] my ability to find and develop relationships with with good people we then bring those people

[00:17:31] into our organization or utilize them in whatever expertise they have and that's created a ton of value

[00:17:38] for us yeah for sure the other one is find deals right like and this is something that

[00:17:44] we talk a lot about on the course too talk a lot about it on the show the easiest way to create

[00:17:49] incremental value is to get a good deal like if you if you can go and negotiate a deal below market

[00:17:54] value and you bring it to an investor you've built in equity for them and that's usually equity

[00:17:58] that you can ask for part of right you could say look I got you this deal it's worth a million bucks

[00:18:03] I'm going to go shade at 900k with whatever favorable terms you know there's 100k equity that I just

[00:18:10] am handing you it's a pretty good position to put yourself in so so it never goes out of style

[00:18:15] literally never people finding people can lead to finding deals but they're not a lot of ways

[00:18:22] to find great deals in this market so there are a lot of ways to find great deals in this market

[00:18:27] the big question is in a lot of cases who's willing to do it right yeah exactly and that goes back

[00:18:32] to point number one right you got to find the good people the next piece in the creating value column

[00:18:38] is by creating content Dan you and I know a thing or two about this if you decide to go this route

[00:18:44] though first of all proceed with caution because the content game is a long fears and fickle

[00:18:52] place to be but you but the content piece can also be it can be it can be fantastic I also think

[00:18:59] it can be detrimental to your brand if done incorrectly and I think we've been talking a lot about

[00:19:03] this not that you know we consider ourselves experts in content creation but I think we've done

[00:19:09] half decent so I do want to do some kind of episode on how to present yourself online from like a

[00:19:15] real estate investor real estate professional because I think a lot of people put content out

[00:19:21] and it's great to see it I'm never going to knock anyone for putting stuff out but you really

[00:19:25] got to think of just like everything right reverse engineer that's always what we talk about

[00:19:30] is your content adding value to the viewers who's your end user and user of that content what's

[00:19:36] who do you want to do like what do you who's the person watching and what do you want them to do with

[00:19:42] it is there a call to action and you know you should be entertaining but also adding value

[00:19:49] and you should be able to give a lot and expect a little bit a little you know very little back in

[00:19:55] the content game so go back to that mindset piece have an abundance mindset put valuable stuff out

[00:20:01] and don't get too consumed with the likes or the shares and all that counts up it's taken

[00:20:06] Dan and I literally years and years of doing free content and failed businesses and all the

[00:20:13] stuff just to get to where we are now from a content perspective yeah there's a book called

[00:20:19] the science of getting rich it's pretty woo woo but but it is it's a great book as well and I mean

[00:20:25] it's really simple like it's a short book it's like one of those books that's in the public domain

[00:20:29] like I think you just go read a PDF of it online but yeah because it's like so old but it was

[00:20:34] this I mean it backed and it was profound it's like literally how to get rich it's like always

[00:20:38] give people more money or more more value than you're asking for in money back and if you can do that

[00:20:44] then you have satisfied customers and you can grow but and and so that's like really I think a lot

[00:20:49] of people don't lead in content creation from that they think about it as like purely marketing not

[00:20:54] not giving away information or not like being an educator and that whole thing is it's

[00:20:59] tough like if you're spending money out if you know let's let's say you're a real estate professional

[00:21:02] you're gonna spend money on marketing your brand you're gonna spend like a hundred K a year

[00:21:06] you gotta just think about it as that it's like you're this is saving you a hundred K a year

[00:21:10] you got to give that value back to your audience if you're gonna expect to get some sort of return

[00:21:14] out of it yeah for sure I the only thing odd to to to the content piece because I know we're

[00:21:20] gonna do a full episode is leave ego at the door right this is if it's like a vanity project kind

[00:21:26] of thing from the content side things people smell that real quick and I think that turns a lot

[00:21:32] of people off so yeah lead with value yeah for sure next would be connect good people don't be

[00:21:41] afraid to connect people and don't expect to monetize it I used to have that problem in I would

[00:21:46] set two people up for a deal and I'd expect to get compensated for it you know just sitting there

[00:21:51] learning it on the side yeah I mean I learned pretty quickly that was just dumb but I was the

[00:21:56] young and naive and just so learn from my mistakes like if two people are meant to work together

[00:22:00] and you can create value by introducing them just do it and don't expect anything of it because

[00:22:06] they will not forget that and you'll always get it back in the fullness of time I think

[00:22:12] if you're gonna building relationships with which I mean I think Nick you're a great example of

[00:22:16] this like you're one of the best relationship builders that I've ever seen making connections with

[00:22:20] new people you know and you're good at staying in touch with people you can play a really really

[00:22:25] powerful role in real estate investing just by connecting people to one another honestly like don't

[00:22:30] discount the value of that yeah exactly and as you said Dan you know it's one of those things

[00:22:35] that and unless there can be money made here we're not saying that that's not the case right if it's a

[00:22:40] more traditional referral then you know you're not out of line to to expect a referral fee but

[00:22:48] if it's not a more you know that more traditional transactional route where here's a mortgage

[00:22:53] agent or here's a real estate agent or whatever connect good people and it will pay dividends in

[00:22:58] the future now speaking of dividends great segue into the next piece of advice here the next bucket

[00:23:04] we're talking about which is financing you've got to figure it out 2024 is not gonna be the same

[00:23:11] as the last few years the same as last few decades from a financing perspective so you gotta start

[00:23:15] thinking how much money do you need what are you gonna be doing with the money what will the returns

[00:23:21] of that investment money be what rates will that money be at and for how long all things to think

[00:23:27] about then there's a couple other nuanced pieces they're gonna play big roles I think in the

[00:23:32] next 12 to 24 months and that's understanding vendor take back mortgages or seller financing so

[00:23:38] we've talked a bit about this we'll do a quick refresher here and then I think probably we're do for

[00:23:42] another full episode on this stuff dangerous because it's appeared so much in the news recently

[00:23:47] so vendor take back mortgage allows the seller of a property to become the lender so that seller

[00:23:54] becomes the lender for that buyer now this options used when a traditional mortgage

[00:24:01] don't really work or aren't available or the seller incentivizes the buyer to buy it and that

[00:24:08] buyer may have had a hard time qualifying in the more traditional sense so well it might not be

[00:24:14] the ideal solution there are circumstances in which the both the buyer and the seller would

[00:24:19] probably consider taking one of these mortgages because if done correctly it can be beneficial for both

[00:24:25] yeah the buyer is still required to make payments to the seller in these scenarios and there's

[00:24:31] some good tax advantages as well so just like any other lender the interest rate is determined by

[00:24:36] the seller and agreed upon by the buyer it's typically higher it I mean functionally it becomes

[00:24:43] like a private mortgage right like the seller is basically giving you a private mortgage on their

[00:24:47] own property so you should expect pricing to be somewhere between a private mortgage and where

[00:24:55] your traditional mortgage with land yeah and then I guess the that amount of money like the actual

[00:25:02] portion of the VTB as well that can vary it can be enough to cover a closing costs or tax or it

[00:25:07] can be a much larger part right I mean we could we've seen VTBs in the hundreds of thousands and

[00:25:14] and even more so you know the bigger the deal the bigger the possible VTB so definitely something

[00:25:19] to be aware of something to understand these are a little bit more complicated and not everyone

[00:25:25] knows how to put one of these together or how to propose one or negotiate one so something to be

[00:25:29] aware of if you want to have that upper hand and stand out the next the next piece here is partnership

[00:25:36] structures so what role do you see yourself playing within a real estate investment and who do you

[00:25:42] need right let's let's talk about the GPLP structure in real estate which is you know a division

[00:25:48] of roles and responsibility between the general and limited partners the general partner

[00:25:54] otherwise known as the GP is responsible for managing the day-to-day operations of whatever project

[00:26:00] that is they make the decisions they oversee the project execution and mostly take on more risk

[00:26:06] and the the GP they make contribute capital to the investment and they are also liable for losses so

[00:26:13] then now on the other side of things tell us about high level what a limited partner does.

[00:26:18] Yes so an LP I mean they're limited in such that their risk is limited their exposure to the

[00:26:24] deal is limited but also their activity and an upside is limited in the deal as well so often

[00:26:30] referred to as an LP they're the passive investors there's a capital so you know GP obviously

[00:26:35] has some capital in the deal you want a GP as some skin in the game but I would say like you know

[00:26:39] if you're to get a little mark assist on you here not actually but marks kind of came up with

[00:26:44] the difference between labor and capital labor would be your GP or they're doing more of the work

[00:26:51] in the deal not actually labor like manual labor although you can see GPs who are contractors

[00:26:56] and stuff like that the LP would be more the capital so I have always funny about labor and capital

[00:27:02] like my Instagram thing says like labor and then it has one job and then capital and then another

[00:27:09] job landfeg is so it's just like that that's really the best way to think about it is kind of

[00:27:15] the labor and capital relationship but LP typically have limited liability so they're not

[00:27:19] they're not like a director on the corp or whatever but they also see a share of the project's

[00:27:26] profits based on their investment percentage GP LB structure allows individuals and entities with

[00:27:31] specific exposure expertise and experience to take on the active management role while attracting

[00:27:37] passive investors who you know just want to put money in a deal and invest capital without being

[00:27:42] directly involved in the day-to-day operation so kind of hands off passive investment it is important

[00:27:48] to note that the specific terms of these agreements can vary based on the investment the project

[00:27:53] and all the negotiated terms between the parties involved and it's something we don't talk too much

[00:27:58] about on the show because it is really like very directly within the scope of someone who's you know

[00:28:04] lawyer or an accountant like it it's not something that a mortgage broker and a realtor should be

[00:28:11] talking about too exhaustively and that's why when people ask about them on the course or if they

[00:28:18] want to know more about the stuff we bring in experts to talk about stuff that we aren't experts in

[00:28:24] which is just about everything just two guys sitting around talking about real estate toys a week

[00:28:29] yeah great stuff Dan the next piece in figure out your financing bucket is

[00:28:36] research different types of lenders right we've talked a lot about this look up lenders what

[00:28:40] the what the rates are associated with different lenders um you know where are you finding your capital

[00:28:47] how much do you need for how long will and be paid back what kind of return you promise your investors

[00:28:52] you should be educating yourself on the big six banks and they're mortgage products or they're

[00:28:58] lending facilities credit unions monis lenders financial institutions privates look at the

[00:29:05] private mortgage space as well and start to build contacts within all these different verticals

[00:29:10] in the lending space and do that in a strategic way that will align and complement whatever investment

[00:29:17] thesis and strategy you've landed on for sure i think a big case or a big uh

[00:29:25] use case of this is when we're talking about earlier about mix right our friend hiking through

[00:29:30] the andes mountains was asking us to do a full episode on mix while we're going to as i mentioned

[00:29:37] a little bit earlier like there's a couple people we have in the space that we'd love to bring on

[00:29:41] to talk about it great friend of the show and a mentor who is gonna be a guest soon and he can tell

[00:29:47] kind of about all the inner workings of a mick and what he's doing with his mick right now and

[00:29:52] and i'm actually doing an article with uh roiders right now about mix and sort of what's happening

[00:29:57] with them in the market because there's a bit of a redemption issue a bit of liquidity crisis

[00:30:01] happening i think in in the mix space right now so yeah let's maybe just quickly take a look at

[00:30:09] what a mick is so a mick is mc is mortgage investment corporation it's a company that pulls money

[00:30:17] from investors and lends it in the marketer so rather it's it is private capital like it's

[00:30:21] like a private mortgage but rather than you lending on one single mortgage and taking the 100%

[00:30:26] of the risk on that deal it would mainly fund uh sorry it would pull the capital together and then

[00:30:31] you know you'd be exposed to 10 different deals as an example so mix distribute the mortgage

[00:30:36] interests income received from borrowers as dividends to shareholders yeah exactly and investing

[00:30:41] in a mick allows Canadians to diversify their portfolios and allows an entrance into real estate and

[00:30:48] that non-traditional route now mix a few interesting things they're not subject to income tax so

[00:30:54] they avoid double taxation which increases investment returns however mix must follow specific

[00:31:01] rules outlined in the tax act for example they can only deal with Canadian properties and must

[00:31:05] invest at least 50% of assets into residential properties or deposits and up to 50% of assets

[00:31:12] can be investing commercial mortgage so they're forced to diversify a little bit and I guess

[00:31:17] that's kind of going back to that hedge fund model right down there you want kind of the long

[00:31:22] and short or you know you have to essentially pay both sides a little bit so you're not too

[00:31:26] exposed to one thing additionally to that make should have a minimum 20 shareholders with no single

[00:31:33] shareholder controlling more than 25% so high level Dan how does a make work yeah so a mick is

[00:31:40] a flow through entity so they distribute all their net income directly to the shareholders so this

[00:31:46] is how the mick doesn't pay tax itself this makes them similar to kind of mutual fund trust or MFT

[00:31:52] which is actually another way that people will will set up like GPLP structures or structures with

[00:31:58] investors and that basically just allows any earnings from a deal to flow through to the end

[00:32:03] users same as a reate right a reate is very similar vehicle where the reate itself doesn't pay tax

[00:32:08] on the income the investor who's invested in the reate who pays tax on that income through the dividend

[00:32:14] so dividends are distributed to shareholders based on how much what percentage they own so

[00:32:20] investors purchase shares of a mick and then they get a according amount in dividends most mix

[00:32:27] function is private lenders so they lend mortgages to probably you're typically not your

[00:32:33] this stuff that a the same bucket let's call it the your a lenders are going to be in

[00:32:38] so a little bit more risk but at the same time they obviously get a much better return so that's

[00:32:42] where you're gonna you know you're not gonna see people are charging 9 10 15% they have to take on

[00:32:48] risk obviously to command those kind of returns on a mortgage and mix often manage this risk by

[00:32:53] setting a maximum ltv or loan of values which are trying to keep mortgage terms short the most

[00:32:58] mix you're seeing in like one and two year terms and they often focus on more major urban markets

[00:33:05] so your Ontario the air so your GTA's your munchy all zero bank hoover's right so they'll

[00:33:12] stay kind of close to the course yeah yeah great great high level overview and again something will

[00:33:18] do a full exploratory episode on and have a real live mick own recumbent and chat with us on it so

[00:33:26] the last piece that I added in here and we won't touch it too much because it comes up almost every

[00:33:31] episode now in some capacity and we as per multiple requests we will be doing a much more in-depth

[00:33:38] episode on on Cmhc's MLI select program and the reason I put this in figure out your financing is

[00:33:44] there's all these new products out there there's markets that don't have development charges there's

[00:33:50] markets where cmhc's MLI select is a lot more possible to achieve points whether you're in like

[00:33:56] you're looking for the affordability or energy efficiency so this is you know there's a bunch more

[00:34:02] stuff that could be here but the point of figure out your financing is it's not gonna be the same

[00:34:07] as it used to be you're not gonna able just go to the bank and you know everyone gets a mortgage

[00:34:12] this isn't the upper win free show you get a mortgage you get a mortgage you get a mortgage

[00:34:16] you gotta be a little sharper these days because things have changed so let's leave it there we'll

[00:34:23] close out that bucket of advice and figure out your financing now we're under the final two here Dan

[00:34:28] and this one starts off with niche down okay so identify and pick a trend there's so many

[00:34:37] goons right now literally we say this all the time to renaissance period meaning that it's a

[00:34:42] period of great change and great invention and a period where we're seeing a lot of opportunity

[00:34:50] that can be grasped by the people that are willing to do it so we talk a lot about how to spot a

[00:34:55] trend both here in the course in the course in community you know an old example of a trend just

[00:35:00] so people know what we're talking about would be the burn method right that was a huge trend for

[00:35:04] for a while whereas a new trend is multiplexing right that seems to be kind of the next frontier so

[00:35:10] looking to stuff like multiplexing understand zoning understand construction and adding units and

[00:35:17] if you don't understand that stuff go read about it go listen to it go to events and find builders

[00:35:22] and contractors if you drive past a site and someone's doing what looks to be you know putting

[00:35:27] four units into an old house go stop by and talk to them um that's the way you're gonna figure out

[00:35:34] this this side of things and and and be able to properly identify trend yeah I think um

[00:35:41] this is something like i'm just right rewriting our um

[00:35:45] the picking a market section of our course and um something that's going to be a big theme right

[00:35:51] like i think in our last episodes we talked about a cmhc identified that you know this

[00:35:56] house low uh municipality processes permits is basically the leading leading driver

[00:36:03] on affordability in that market and so the as an investor if our goal here is to to create value

[00:36:12] and to create units you have to be selecting municipalities that are capable of doing that for

[00:36:18] you or helping helping you do that and and so and there's kind of two different streams here

[00:36:23] and it's interesting because there's basically a line drawn at five units right so and each each

[00:36:28] side of the line has a has a distinct advantage and i know a lot of people try and you know are

[00:36:33] trying to figure out ways to get it both advantages where if you're below five units in a lot of cases

[00:36:38] and this is true in bc but it's also going to be true this is true in Toronto where there's no

[00:36:43] municipal development charges up to four units so if you're foreplexing something that's in

[00:36:46] neighborhoods you heard of the yellow belt being up zone to four units if you're doing that no dc's

[00:36:51] so instantly doing that you have a arbitrage almost and like this is actually close to a

[00:36:59] literal arbitrage i can know people joke about like guru saying the world word arbitrage with

[00:37:04] real estate all the time like you know the arbitrage at arbitrage is the simultaneous buying and

[00:37:08] selling of something like you get to buy something at a cheaper price and sell it at a higher price

[00:37:13] so you're selling this the unit on a monthly basis you're renting the unit out at the same price

[00:37:19] let's say you know i mean Toronto so so poorly planned that uh let's say there's a high-rise building

[00:37:24] and you know 10 minute walk away there's a old Victorian mansion in like Corso Italia right

[00:37:31] and there's a high-rise building 10 minute walk away and 800 square foot unit in each building is

[00:37:35] going to rent for the same amount really it is going to or very close very close yeah maybe

[00:37:41] you actually get a premium for the old old Victorian home i was gonna say i'd feel like more people

[00:37:46] would prefer to live in something like that right and so you can put a unit in that old Victorian

[00:37:51] home for 60 thousand dollars less than the high-rise builder on a fee basis and that's before even

[00:37:58] accounting for construction costs the high-rise builder is also going to be paying like 800 dollars

[00:38:01] in creation costs and you're gonna be paying like 250 i think all this construction cost guide just

[00:38:07] came out so that's below four units is like so below four units you get the arbitrage in city of

[00:38:12] Toronto and it's starting to happen in most other markets the same way where you don't have to pay

[00:38:15] development charges to add up to four units then above five units now all of a sudden so five and

[00:38:22] above now all of a sudden you have to pay development charges so you're on the fee basis you're

[00:38:25] competing with these developers but now you have access to CMHC's MLI selection i know we've talked

[00:38:30] a lot about this we're not not gonna be to dead horse but on that you get the best interest rate in

[00:38:34] the market the best amortization in the market and the best loan to value in the market because

[00:38:38] you're building purpose built rental at five plus units and so there's so much opportunity for small

[00:38:44] cap investors right now because a lot of these big investors don't want to be doing less than 10

[00:38:49] units really so if you're a small cap investor doing a building up to a fourplex or a five to 10

[00:38:55] unit building absolute slam dunk deal opportunities out there right now and if you can't do it in

[00:39:00] a like we can't find a market where you can find land or projects that fit in the scope you're

[00:39:06] probably looking in the wrong market and you need to be looking in a cheaper market because as we

[00:39:10] just covered in that kushman report and we're actually I just saw that Samantha rebooked in with

[00:39:14] us so we're gonna have her on the show yeah yeah which is really exciting yeah i'm very excited about

[00:39:18] that on that were um you know there's five markets in Ontario where the yield the cost is really

[00:39:23] meaningful enough for you to develop in today's market with rates cap rates etc where they are

[00:39:30] there's probably 50 across the country where the yield the cost makes sense find them right don't

[00:39:37] don't just think you got to do it in your own backyard because you know it well because there are

[00:39:40] so many good markets coast to coast that need this kind of brought the our population is growing so

[00:39:44] much it's going to spill over everywhere everywhere not just in the course yeah completely Dan so again

[00:39:51] that's that's just that's just good solid advice let's let's do a quick recap before we move to

[00:39:57] the last one here right so educate yourself that's attending events books podcast investing

[00:40:04] yourself courses writing a business plan then there's creating value do that by finding people

[00:40:10] connecting people creating valuable content finding deals is literally the code to that one that

[00:40:17] one will always stay in the test of time next piece of advice for for this year and beyond is figure

[00:40:23] out financing understand vtbs understanding partnership structures understanding the lending

[00:40:29] environment such as mix and reets and see mhc niche down which we just finished talking about

[00:40:37] and that's you know picking a niche and jumping in full swing so whether that's I'm going to be

[00:40:41] the lame way sweet person or the garden sweet or I'm going to be an expert in converting single

[00:40:47] family to to multi multi family or building five or more units or four units whatever it may be

[00:40:56] this brings us to the last piece of advice and this goes again if you're just starting out

[00:41:01] if you're in the first couple years or if you're a seasoned investor my piece of advice is

[00:41:08] execute something this year literally from Nike just do it and this could be a bunch of

[00:41:16] different things this could be executing a deal this could be executing a partnership

[00:41:20] referral transaction again you could bring a deal to an investor and stay in for equity

[00:41:25] there's so many things that you can do but the thing is you got to do something

[00:41:31] yeah i couldn't agree more i think and i think like even if it means like the easiest place for

[00:41:36] somebody to start if they're just looking for something to do to execute to get a win

[00:41:40] i can't remember what book i was reading recently now but it's about sort of like how

[00:41:44] how rich people and like wealthy people are very successful like hot people are really high

[00:41:49] achievers how they kind of like stack habits i don't know is it is it is that within

[00:41:53] atomic habits i can't remember what it is but it's basically like habits so maybe that's what i

[00:41:57] was because i did read read that one recently but you know it's just getting like some wins

[00:42:01] under your belt this is why i make my bed every day right he starts start i thought that's

[00:42:06] because you were an ex-swiss military yeah no no yeah so like i think if you just get a win and

[00:42:13] what's a win a win is like and and i don't i don't recommend that most people act as like

[00:42:17] wholesalers right but finding a deal is probably the easiest win to stack right and it's like and the

[00:42:21] win like you got to pick your outcome too like but what would you consider a win well the win is like

[00:42:27] find a deal that's so good that you can convince an investor to tell you it's a good deal like

[00:42:32] that's it they don't have to do it right and then the next piece i think after that is

[00:42:37] you know like what's another example of a small win that you can do it's maybe find a mentor

[00:42:42] right like it doesn't have to be you don't have to you don't have to go and put a million bucks on

[00:42:47] the line and and execute executed deal but it's like what's the first what's the first thing that

[00:42:53] you can do from this list that we just gave you to advance here and and i would consider myself a

[00:42:58] pretty advanced like you know i think i'm pretty far along in this whole journey of being a real

[00:43:02] estate investor and stuff like that man i wish i got a mentor earlier honestly like that's one

[00:43:07] thing like and it's just like here and so and so and i and i said that on the show a couple of times

[00:43:12] but i can't really like it's so easy to think you know it all or it's just like in a lot of

[00:43:17] kids is just getting introduced to a little bit more perspective and so sometimes people might want

[00:43:22] to listen to an episode and like this and be like oh yeah it's like five things for beginners it's

[00:43:25] like if i followed all of the advice in this episode i would be 10 times as far as i am so

[00:43:30] and and and i'm and again like i'm not i'm probably like a intermediate to advanced person in

[00:43:35] the real estate profession and investment etc you know i would still do all of the things in this in this

[00:43:40] list yeah i mean i honestly i built this list in because you and i are doing all these things right

[00:43:46] we literally just paid for coaching we still ingest tons of free content we go to the events

[00:43:51] i'm still looking for new mentors in all the different ways we're still trying to keep up and

[00:43:56] identify new trends still creating content so this list came from what we were doing because

[00:44:01] i think we're doing a half decent job and i wanted to share with everybody so on that no thanks

[00:44:06] so much for listening we hope everyone new intermediate and experienced got a ton of value out of

[00:44:13] this and if you want to get involved and you know get involved in an event or reach out to us and

[00:44:18] we can read an amazing email on the show or anything like that if you like what you heard reach out

[00:44:22] to us we love to talk to all of you so thanks so much for listening we'll see you soon

[00:44:29] the Canadian Real Estate Investor Podcast is for entertainment purposes only and it is not

[00:44:36] financial advice nick hill is a mortgage agent with premier mortgage center and a partner in

[00:44:42] the g and h mortgage group license number one zero three one seven agent license m two one is zero zero

[00:44:51] four zero three seven deno foch is a real estate broker licensed with rare real estate

[00:44:57] a member of the Canadian Real Estate Association the Toronto Real Estate Board and the Ontario Real Estate

[00:45:03] Association