Episode Transcript
[00:00:01] Speaker A: If you're looking for the skills and tools to succeed in real estate investing, you've come to the right place. This show is about breaking through barriers, breaking through limiting beliefs, and breaking through to the life that you want to live through the power of real estate investing. You're listening to the Breakthrough Real Estate Investing podcast. And now here are your hosts, Rob brake and Quinton D'Souza.
[00:00:29] Speaker B: Welcome back, everybody. Thanks for joining us again here today. Another beautiful day to talk about real estate and, and the state of affairs and all the other kinds of stuff that we like to talk about here on the show. And of course, my name is Rob Break, and with me again is Quentin D'Souza, Esquire.
[00:00:47] Speaker C: Hello.
[00:00:48] Speaker B: Do you have an escar?
[00:00:50] Speaker C: No, I don't have an Esquire. It's just Quentin D'Souza. I'm having fun. We're having fun here at this. I love doing these podcasts because we meet great guests and we have some good conversation. And so we have a guest today, Tom Sullivan. I've known him for a long time, so this is going to be some really cool conversation. I know Rob's known him for a long time as well, so this should be a lot of fun. So Tom's grew up in a average family household in Cambridge, Ontario. Tom personally and along with joint ventures, part partners have purchased and sold over 30 properties. Currently his portfolio of properties is value exceeding $10 million. He's a creative financer, he works with to force appreciation on his properties. It has allowed him to use very little of his own capital to purchase properties and he used joint ventures, purchasing single family homes and forced appreciation by adding secondary suites in addition to purchasing properties. He's a multiple award real estate investor recipient. He loves to talk real estate, share knowledge, and he's been featured in Canadian Real Estate wealth magazine, a guest speaker throughout Ontario and featured in many prominent real estate investing podcasts. And he is actively lobbying on behalf of landlord rights. So with that, without any further ado, Tom Sullivan.
[00:02:28] Speaker B: Hey, Tom, welcome.
[00:02:30] Speaker D: Thank you guys for having me on today.
[00:02:32] Speaker B: And I should say that we have a new, a new website.
So if you go over to breakthroughraipodcast ca, you'll see it's, it's much cleaner, very well laid out and, and still with all the same information. So go over there, listen to our old shows, get in touch with any of the guests through the show notes and go over to itunes and rate and review the show, please. There was one up there the other day, Quinton. I was going to point it out, but it disappeared.
[00:03:02] Speaker C: Oh, well, that's okay. Well, we just need to keep going and get those reviews on there. We really do appreciate it. There's, there's a lot happening in real estate. There's a lot happening with interest rates. And I think that, you know, we just got to keep the conversation going so that we can improve our, our real estate investing, increase our wealth, make our lives better, you know, make sure that we stay healthy and that we continue to be wise. So that's what this podcast is really about. It's about, you know, communicating that to other people and giving them some opportunities. Right.
[00:03:43] Speaker B: Very good. And Tom was actually on our show six years ago. It's been six years since we had you on. You were on episode 84.
[00:03:52] Speaker D: Yeah, it's been a long time. Wow.
[00:03:55] Speaker B: We're happy to have you back.
[00:03:56] Speaker C: So, Tom, what's, what's been happening in the last few years? Can maybe you can update the audience?
[00:04:02] Speaker D: Well, the I, I found that the market has shifted drastically.
A few major changes was, well, we had hyperinflation in Canada, driving up the price of real estate, mass immigration, which drove up rent. But the cost of carrying a property changed. So it became a lot tougher for investors to become cash flow positive or even find enough forced appreciation to pull out money.
That's slowly changing back, but it's had to make us shift our model. So. Well, I used to look at just doing a single family to a two family. Now we are having to look at maybe a three or four to even a five family property to make cash flow. So a lot of people start moving into more of that multifamily middle, middle from like a six unit up to full apartment building. So it's a drastic change to what the model was when I first started.
[00:05:08] Speaker B: And what were you doing when you started?
[00:05:11] Speaker D: So when I first started, I started investing in Hamilton, Ontario, because like I mentioned the beginning, I grew up in Cambridge, so I kind of like investing initially in my own backyard.
So Hamilton worked. Then I moved to the Durham region and the rent at that time were horrible compared to the price purchase.
Most landlords in Durham that I found were actually owner employees of gm. So they bought these homes for next to Nothing. They're charging 500amonth. They're actually cash flowing. But that model didn't work. It wasn't until I learned about building a secondary suite into a property. So turning a single family home to two. Now all of a sudden, the numbers worked. And that's what I specialized in for the majority of the initial stages of my career of investing in real estate.
[00:06:09] Speaker B: And what year was that when you started in Durham or in.
[00:06:16] Speaker D: 2015? And now it's after I was diagnosed with a tumor in my sinus that broke into my brain cavity. And working in middle management, it's at my age that was kind of like the death age in the sense that literally dying. But if you lose your job, it's hard to find another job that pays you the same or because they always think you're overqualified. So I really realized, hey, I had to take real estate investing extremely serious and build up my portfolio. So when I started in 2015 and I talked to a few agents and I said to all of them, I have a big goal. My goal was to buy 10 properties in 2015, I actually bought 11.
And was it because I was trying to figure out the number that I would need to help replace my income if I was to lose my job.
And since then it's just been adding to it. And as in the real estate phase of natural real estate, because as we always discussed at Durham rei, there's a phase for real estate investors of your growth stability. Defend. I'm on the defend stage, so I'm.
I don't need to grow anymore. But actually, the hunt is the, the funnest part of being an investor.
After you bought that property, it's like, oh, okay, I got that now. It's a shiny object kind of thing. Like your children on Christmas day, they have 50 toys. They see after five minutes, they're not excited anymore because they played with the toy. And that's. I find that was real estate investing. It's finding that deal. And that's adrenaline. After you find a deal and you close on it, you're like, okay, now I gotta do the, the boring stuff and the repetition by, okay, how do I make more money out of this? Not necessarily always making money, people. I think tenants get the wrong idea from landlords thinking we're only in it for money. We're also there to help provide affordable housing. And not necessarily affordable housing, but provide housing at the best possible price that we can while we make a small profit.
[00:08:42] Speaker C: You know what, Tom? I just want to jump in here because one thing that I think we've. We've misnomered in Ontario and perhaps in Canada is the, the idea that, that there is affordable housing. All housing is affordable. The fact that we add housing to the housing stock for people to rent or buy, that is affordable. Because what ends up happening is if you put new housing stock on the market, it brings down the rent in older stock and the older stock brings down and rent the other older stock. All housing is affordable housing. It's just adding to the stock of housing. And I think that when we start to call, you know, like what we're, what we're trying to call affordable is some sort of, you know, left side of the, the, I don't know, area, you know, some sort of interpretation of it. The fact that we, what we need is more housing. Right. And different times the, our system adjusts for that. So for example, like downtown Toronto condos, a good example, rents are going down. Why? Because there's lots of property that, that are available. Right. So I think, you know, we should never be ashamed that we're having housing. Whether you want to call it affordable or not. We should be proud that we're offering housing to people because it's a service that other people don't want to offer. Has anybody actually seen some of the government run housing?
[00:10:24] Speaker D: Like they, they're actually in the worst condition because they don't actually fall under the rta, which. Small lane, not small landlords. All landlords in Ontario fall under except for the government.
[00:10:35] Speaker C: Yeah.
[00:10:36] Speaker D: They don't have to follow their own rules. I'm like, yeah, how does that make sense? I don't.
[00:10:42] Speaker C: It does it. But you know what? Like, see, people don't know that because they're not in the business enough to know that that's the case. Right. You're absolutely, you're absolutely right. And you know, if you look at the quality of the housing that's offered in these projects and the cost to build them, it's, it's insane. Like, I think Barry Aurelia is building an affordable, what they called affordable housing. And the cost per unit is ridiculous.
[00:11:15] Speaker B: Right? Astronomical.
[00:11:16] Speaker C: It's, it's ridiculous. Like it's, it ended up. I can't remember.
[00:11:20] Speaker B: I don't, I can't remember either. But we read the article.
[00:11:23] Speaker D: Yeah, it's, it's cheaper for them to actually give the money to investors. And I don't even like the word investors. We're business owners. We're not just investors. So we're real estate business owners providing a service which is called housing. And I hate, I do hate that word, affordable housing because it's like you mentioned, everything is affordable. What they should be working on is affordable living.
So people should have the ability to pay rent or pay for a mortgage, but we don't. That's the problem. The government's not focusing on delaying the blame on a group. So it takes the blame away from them.
[00:12:11] Speaker C: Yeah, exactly, Tom. And you know, they do that, they do that to the farmers. They do that to like, truckers. They do it to like, whoever they can figure out next is the problem. So what, I mean, like, instead of, instead of. Nobody in, in government seems to want to, to take responsibility for what's happening, which is the role of government responsibility.
[00:12:37] Speaker B: Affordable living is a lot more difficult of a goal than affordable housing. You know, like, I can see, I can understand the whole reason behind this. And then that's always been the case, though. You know, any, any, any government programs that come out really don't help all that much. Well, especially, especially when it comes to the taxpayers. The taxpayers end up paying for all of that.
[00:13:01] Speaker C: I mean, the fact that we, you, you drive something from one province to another province and it costs you more to drive it from one province to the other province isn't, isn't because of the truckers, and it's not because of the trucking company. It's because of stupid interprovincial rules that are causing us to pay more. So, like, if it's not the fault of the government that they're not doing it, then whose fault is it? It's bad.
Municipal, provincial, and federal governments, they all work together to be stupid. As far as I can see.
[00:13:40] Speaker D: Just to tie onto that Clinton. Back in 99, I worked for GE Capital and we were loaning funding out to different groups. One of our biggest groups were transfer truck drivers, and we did asset based lending. And one of our first questions was to anybody that was coming in for a loan for a transfer truck is what would you do when diesel hits X? Cents.
And that big word is cents, because we wouldn't even have a dollar at that time.
But. And now diesel is what, a $50? And transfer truck drivers still make money because they learned how to work within the system. So why are we not always, why is the government not always looking at experts to actually take care of it in the issue instead of trying to take care of it themselves? They don't know how to do it. I know in my business, I'm not electrician. I know how to do basic electrical, but if I need to do something major, I have to bring an electrician because he's a specialist. Let the specialist do their job. And we are the dean specialists when it comes to housing. Let us do it. We can do it more efficiently for you. So stop wasting dollars. Oh yeah, come talk to us. We're showing you how to do It. But you guys don't want to listen to us.
[00:15:09] Speaker C: Yeah. Tom, you've been a very good advocate for landlords over the years. Just in different, you know, social media and you know, talking to, willing to talk to young people who are, you know, getting involved in, in real estate. So I want to commend you for that for sure. I think that, you know, there, there has been an outright hands sticking out by every level of government to investors which has caused them to want to leave. Right. Like the inefficiencies. So municipally we have what development charges, we have fees, we have licensing, landlord licensing, blah, blah. You can add, add, add. And all this is, is hands out. It's not about helping anybody. It's about hands out, give me money.
Provincially, you know, we have that, we have the same sort of thing. We have mismanagement at the landlord tenant board. That where it takes it. I've been, I invest in Florida and I can get an eviction done in three weeks or four weeks for non payment. There should not be, it should not be a process that takes 3 months or 12 months or 8 months. Makes no sense. So that's at the provincial level then at the federal level you have vacant home taxes, you can have, you know, oh, we're financializing the blah, blah, blah, blah, then whatever, whatever it is. So all these levels of government are causing us to have these issues, but they don't see that. They see them as the person that's helping us. You know what I mean?
[00:16:51] Speaker D: Like yeah, and the landlord tenant board is not helping anybody.
And even as a seasoned housing provider, we just finally had one tenant removed. We were out $50,000 in rent and then we had to do renovations. A year and a half now. Thankfully I have a portfolio that could absorb that. It's not like I could absorb that day in and day out.
But the average real estate investor in Canada has two to three properties.
Imagine trying to lose $50,000. That would triple them.
[00:17:34] Speaker C: They'll be finished.
[00:17:37] Speaker D: Yeah, I own that property with other people and we've owned it now for just under 10 years.
That one loss took away all the profit of 10 years and then some.
And like I don't look at and take all the money out of the my properties. When my properties are cash flowing, that money basically sits in an account and it's there as a nest egg. And I do use it for other things such as lending out to other investors to make that money grow. But it's not money that I'm spending. But if I was spending that I would have had to come up with that $50,000 to pay the bank. I would have been crippled. I would have been.
That would have caused me to collapse.
[00:18:29] Speaker C: And that's what happens to most people. Most landlords are not in like Tom is more than the average like property owner. He's. He's, he is like you know he's got a portfolio. But if you had one property. I've seen it happen again and again. You see it all like on the Internet. How because you have these that you have tenants who are only taking advantage of the system. What did your tenant do in it to enable them to stay for a year and a half?
[00:19:07] Speaker D: So actually they were a tenant for about six years and about year and a half ago. Two years ago they just stopped paying rent. The that she did lose her job and we tried to work with her but she had a job almost like within a month. But she like going oh I don't have to pay rent. And she went on to different social media boards and they heard oh you could just take your landlord for a ride kind of thing. Stop paying. You go to these online hearings instead of having in person hearings or 10 times more efficient than these online ones. They she just made a delay and have it to have it rescheduled. And the rescheduling is taking was a six months. And actually our case did fall through the cracks a bit at the LTB because it is. We call it. A lot of us call it kangaroo court because it's not and then it's not. These officials adjudicators are not getting properly trained and they're overworked as well. So it's. Even though they're hiring on there is a lot more efficiencies that could be done. And I'm not badmouthing the people that work there. It's a system that they created that they have allowed on I I've gone on to different groups and they actually have strategies of how to make the hearings inefficient such as they'll go on there, they'll pretend they're speaking in a different language or they'll speak really soft saying they're having computer issues. So now they have to have an adjourned or they'll have multiple people join the room because anybody can join any room even though you're not there for a hearing. And they make a lot of noise and it's just, it is purposely done to cause chaos and to cause delays.
Then there's a section, section 83. So financial hardship or you would have a difficulty finding a place. Okay, what about the financial hardship on the provider?
They're going through a lot of stress too. Like, okay, you get to walk away from your debt if you don't pay because it's really hard to collect afterwards now from the homeowner, we don't get to walk away from the debt. The bank doesn't care. I can't call up the bank, hey, my tenant hasn't paid me, so I can't pay my mortgage. Is that okay? They go, sure, but here's your papers that we're coming after the house.
[00:21:39] Speaker B: So, and again, like this, this is all stuff we're talking about. The things that, you know are, are troublesome with real estate investing, right? And there's, there's always things and there's many more than what we've just mentioned here. But, but there are like, a couple of things that you can do to combat this happening, you know, at least to, to, you know, a more severe level. And, and one of the biggest things is, I don't know what the form is called in any other province, but Ontario is like if, if you're listening to this and, you know, Quinton and, and Tom were pointing out that, you know, if you have one house or you have one investment or two investments, this kind of thing can be very detrimental to you.
So you want to make sure that as soon as that rent is not paid on the second day after it's due, you would file the, the N4 in Ontario, right. Notice to evict for non payment of rent.
And, and you know, nine times out of 10, they'll end up paying before you can take that in. But that is the number one thing that everyone listening has to do.
[00:22:50] Speaker C: Yes. And they have to do it properly. But even before you place the tenant, there are definitely steps that you can do. Tom, can, can you share some of the things? Because I know you do your own placement, right? So, yeah.
[00:23:02] Speaker D: So one thing I do, like a lot of my advertising is on social media.
And if anybody responds to an ad, my first thing I do is I look at their, their own social media. So that's my first screening. If they, if they don't take the time to clean up their social media and because I don't allow smoking in my places, so if I go on and I see every second picture they have, they got a cigarette in their hand kind of thing, you know what? I will respond to them politely saying the property is not available or we have enough applications, we're going through it.
I'm not lying to them. I'm just telling politely, you're not the type of tenant I would like to have. So that's the first thing. And I actually learned that at work. You know, a lot of employers will look at your social media and they don't look at just your social media. They go and look at your friend's social media because you might clean up your. Yes. Social media. Your friends still have all the pictures of you doing stupid things. And you know what? That's how we screened. I'm not sure I've done that companies.
So that's one thing. And then, then I'll send them a questionnaire. They answer the questions. And while I'm waiting for those answers, I'm checking different websites because everything, anytime you're taken to the LTB that the result of the LTB positive or good is supposed to be published in Canli. That's a legal document, legal repository. However, Canley is very slow because they don't want an evicted tenant to have a hard time finding another place right away.
But there is two other sites that do the exact same thing and because it's public information, it can be posted without any retribution. And they're called Openroom CA and LandlordEasy CA.
[00:25:08] Speaker C: We'll put these links in the show notes.
[00:25:10] Speaker D: And they're not just for landlords. Tenants allowed to post their stuff too. So it works both ways. So it helps tenants to stay away from bad landlords and landlords stay away with bad tenants. And I know we're talking about a lot of doom and gloom right here, but reality, 95% of tenants are great tenants and 95% of landlords are great landlords. So it's. We're just talking about some of the bad stuff. But there is. If it was all bad, we wouldn't be doing this and we wouldn't be on this call today. We're doing it because it's. Go Back to the 8020 rule 20 of the people will give you 80% of your headaches. And not, like I said, most of them are good. So it, it's not a bad industry. There's. We're just trying to find ways to make it better for everybody. Tenants and landlords and the government.
So after all I have, I have a meeting with them and I do the showing. I ask all the same questions again just to find out if I'm going to get different responses. And then it comes down to your gut. You could do all your checks and you're still going to be given fake documentation.
[00:26:23] Speaker C: Do you do credit checks to confirm?
[00:26:25] Speaker D: Yes, I do a credit check. But the credit check, you have to take that with a grain of salt. Like, we got a lot of landlords out there, and they look at just the credit score number, that score. The number doesn't tell you the whole story. It tells you a snapshot. Doesn't tell you how they got there, how they didn't get there.
We're all married. Imagine all of a sudden, you get divorced. Any one of us, you know your credit score is going to drop 200 points, if not 300 points.
And now you're moving out of the family home, and you got to go find a place to rent, and you could have potentially had an 800 credit score. And just going through the divorce, it goes down to 600.
Is 600 a bad score for a tenant? Maybe, maybe not, depending on what type of property you have. Right. So if I was just looking at your credit score, Quinton, and it said 600 because you just went through a divorce, that doesn't. That's going to go, oh, I'm not going to take you on. But you could be the best tenant I want.
[00:27:34] Speaker C: Yeah.
[00:27:35] Speaker D: Yeah.
[00:27:36] Speaker C: It's the whole picture.
[00:27:36] Speaker B: I'd let you live in my place, Quentin.
[00:27:39] Speaker C: Oh, thanks, Rob.
Yeah, but I have to travel to Costa Rica.
[00:27:45] Speaker B: Well, you know, one of my places there.
[00:27:48] Speaker C: So I think. Yeah. So it's like telling, like, following the story and making sure that the. This. The tenant story correlates to their credit record. And even if it's a lower credit score, that's why they're renting.
[00:28:04] Speaker D: Yeah.
[00:28:04] Speaker C: Yeah, right. It makes sense. So thanks for. Thanks for that. Any other tips about tenant placement?
[00:28:12] Speaker D: Well, I will usually drive by the current residence, and that'll give me an idea how they're maintaining the outside.
And a lot of times I want to sign the lease at their place, not at the place that they're going to be renting, because that's going to be my last final check.
And if the place is not up to stuff. So all of a sudden, oh, you got five dogs. You told me you only had one dog.
Maybe I don't want to vent to them now.
[00:28:43] Speaker C: Have you ever. Have you ever turned away and said, yep. Oh, you have?
[00:28:47] Speaker D: Yeah.
[00:28:48] Speaker C: Interesting.
[00:28:49] Speaker D: I usually make a polite going, oh, I'm not able to make it today, and let's reschedule or let's reconvene. And then I went, you know what?
I come out going, you know, you told me this, and I saw this if they can't answer it correctly right then and there, it's like, okay, you know what? You've lied.
I don't like starting a relationship. It is a relationship. A landlord tenancy is a relationship. I don't want to start that on the wrong foot. So it's. I don't think it's a good fit.
All the best with you, your search. And I leave it at that. I don't write any bad reviews against the person. All that because for some people, like, it's hard to find a place, especially if you have pets. A lot of them don't want pets. I can tell you right now every one of my rentals is pet friendly.
I'm a pet owner, so it's hard for me to say I'm not pet friendly. And I know the rule of after they move in, they can have a pet. So why should. Why would I limit my potential tenancy pool from day one?
[00:30:03] Speaker C: Yeah, makes sense. And you've also, aside from the tenant, I know you've done a lot with like joint venture partnerships and things like that. Like, you've, you've really grown your portfolio over the years and you've had some interesting experiences on that side that I think would be beneficial for everybody.
Tom is smiling and laughing because he knows what I'm talking about.
[00:30:29] Speaker D: Yeah. So there. If you're going to do a joint venture with anyone, it's screen them more diligent than even your tenants.
[00:30:42] Speaker C: Maybe you can explain what a joint venture is so that people, some people might not.
[00:30:46] Speaker D: Yeah. So a joint venture is one or two or even more people coming together and purchasing a property together.
And it's. It's not a partnership. So be careful you don't use that word, partnership. We all say it, but when it comes to doing certain things, don't say it because it's not a partnership. So it's a joint venture agreement. And you can write this up any way you want. And it's. You want to write it up that it's a win win for everybody.
So I know Quinton's alluding to a certain person. Can't say it because that person's still being investigated for different things.
He's up on potential fraud with the government.
So he has done a lot of shady things. He actually deals down in Costa Rica there too. Rob. So.
[00:31:42] Speaker C: But it's not Rob. Just so everybody.
[00:31:45] Speaker D: It's not Rob. So have you ever.
[00:31:48] Speaker B: We almost did a deal together, Tom, but it didn't go through.
[00:31:51] Speaker D: Yep. Up in Peterbowl. Yes.
[00:31:53] Speaker B: Yeah.
[00:31:54] Speaker D: So if you do ever want to know his real name, I can say it off air.
[00:31:58] Speaker B: You can tell me after. I'd be interested to know.
[00:32:01] Speaker D: Believe it or not, I did a whole podcast on this person.
We never used his name.
[00:32:06] Speaker C: Yeah, it's another lessons learned. Right.
[00:32:10] Speaker D: That's a big, big lessons learned.
[00:32:13] Speaker C: What would be a. Like, a big lesson that you could share around that?
[00:32:17] Speaker D: Well, that one was. I was new into the real estate industry, like, investing industry, so I was more of the. I'd call the silent jv.
[00:32:28] Speaker C: Okay.
[00:32:29] Speaker D: Now I'm never the silent jv.
[00:32:32] Speaker C: You are silent.
[00:32:34] Speaker D: Yes.
So inside it is like you have no role in the job. You. You.
[00:32:42] Speaker B: You have all the money. Give the money.
[00:32:45] Speaker D: Yeah, my job was actually mortgage qualification in that one.
[00:32:48] Speaker B: Okay.
[00:32:49] Speaker C: Okay.
[00:32:50] Speaker D: So. So and other person did all the other stuff. So that person was an active person.
[00:32:55] Speaker C: Okay.
[00:32:56] Speaker D: He did everything shady, right down to the appraisal on the property being falsified.
[00:33:04] Speaker C: Whoa.
[00:33:05] Speaker D: And then at the end of it, I've had to go to court a couple times. Of course I've won. He lost everything. And now that he's been taken to court by a lot of other investors, and believe it or not, I'm not the one who initiated the. The legal proceedings. I just like, okay, done with you. Let's walk away.
[00:33:29] Speaker C: But I'm sure somebody did, because that person was investigated by the securities commission as well.
[00:33:36] Speaker D: Yep, that's still going on.
[00:33:37] Speaker C: Yeah. Interesting. Wow. Okay. And then you've also had a situation where you had your main partner pass away.
[00:33:47] Speaker D: Yes.
[00:33:48] Speaker C: So how. So this is one of the, like, I mean, Tom has lots of lessons learned.
[00:33:56] Speaker D: So this.
He would. John was my primary JV partner.
We met, believe it or not, and I don't want to say it the wrong way, we met at the back of a van. We're on a tour of looking at properties. And the real estate agent.
I knew I was going to come out.
[00:34:22] Speaker C: Was it a white fan? Like, no, sorry, sorry.
[00:34:27] Speaker D: We're going downhill.
So we're looking at properties as a group of different investors, and there's a property that, on paper, it didn't look like it was a property I would be interested in. But after I did the walkthrough of it, I knew I wanted that property and John already wanted it on paper.
[00:34:51] Speaker C: Okay.
[00:34:52] Speaker D: And I. We started talking, and I. I was actually very blunt, and I said, you kind of got two choices.
You can joint venture with me and we buy this together, or you walk away because I'll outbid you.
And that was the first of 12 properties we bought together.
[00:35:17] Speaker B: Wow.
[00:35:18] Speaker C: Amazing.
[00:35:19] Speaker D: And unfortunately, about seven years ago, driving home.
[00:35:23] Speaker B: Long ago.
[00:35:24] Speaker D: Yeah, actually five. It's between five and seven years now.
[00:35:28] Speaker B: Yeah.
[00:35:30] Speaker D: I'm driving, and I was in the country, like, north of Peterborough. I mean, Pickering. I might have been driving up to Peterborough to go look at something, and I get a phone call from his wife, and she asked me to pull over. This is a Saturday morning.
She told me John passed away the night before.
He had a heart attack playing hockey in Markham.
[00:35:57] Speaker C: Yeah. And he's so young, too.
[00:35:59] Speaker D: Yeah, he was about 50, but he. He was. He looked like he was in perfect shape. Wow.
[00:36:07] Speaker C: Yeah, he was a. He looked like he was a bodybuilder, like.
[00:36:10] Speaker D: Yeah. And he did have. From what we found out, he did have a bit of a mod. I mean, heart issue. But he didn't tell anybody.
And he was. He was putting a lot of strain and stress on himself, so.
Unnecessary stress. So, like, there's already enough stress being a business owner and. But the lesson learned out of all of that was to have your JV agreements written well, so it would be easy to continue on. So his wife, Deidre, she just stepped right into the role because she knew where all the documents were and all. Everything was already in place. And we had a great working relationship with John, so just brought it right into fold. And it was almost.
Almost a seamless transition.
Wasn't the same, but of course, yeah, two person. Two different. Different person. But the thing. Because it was. We had everything structured well, it was almost nothing that she had to do on her end, like she had to sign some paperwork just for the transitioning, because everything John held was held in a corporation. So it was just a tiny bit of work over there. Not a lot. But a poorly written JV agreement could have caused a huge turmoil in my business.
[00:37:43] Speaker C: Right.
[00:37:45] Speaker B: And John. John was a character.
[00:37:48] Speaker D: He.
[00:37:48] Speaker B: He was on the show. I can't remember which episode, but if. If anyone's interested, that was a great show. We had a good time with them on there. So, yeah, we'll put a.
[00:37:59] Speaker C: We'll put a link in the show.
[00:38:01] Speaker D: If you think I'm loud there, Quentin, I. I'm a mouse to John.
[00:38:08] Speaker B: I just, you know, and I think I was on that real estate tour where you guys met. I think I was with you guys.
[00:38:14] Speaker C: Oh, my God, this is going downhill. Three guys in a van. Three guys at the back of it.
[00:38:22] Speaker B: There was. There was a bunch of people there that day, but.
But, yeah, yeah, that was. I'm pretty sure I was there.
[00:38:31] Speaker D: Wait a minute. It was another. An agent that's part of Durham rei and that was his bread and butter bringing people around. And believe it or not, that wasn't the first JV ever formed in that back of that van.
[00:38:51] Speaker B: You gotta see it that way.
[00:38:53] Speaker C: Wow, you're really active in the back of the van. Hey there.
[00:38:56] Speaker D: What? Not. Not me. I'm just saying other people, but yeah.
[00:38:59] Speaker C: Oh, gotcha. Gotcha. Okay. Okay, that's good. Okay, well that. I mean, there's definitely some. Have you ever had to exit a joint venture and like in any way or have all your joint ventures continued to this day?
[00:39:17] Speaker D: I've.
I had another one and the same agent warned me against this person. And John and I partnered up with this other lady.
She's a little loony, but my word is my word. I. I already agreed with her before I was given the warning. And I'm like, if I was given that warning before that, I would have walked away.
[00:39:46] Speaker C: Okay.
[00:39:47] Speaker D: And believe that I did two deals with her and I accident both of them. And unfortunately now Deidre that's taken over for John. D.J. and I are suing this JV.
[00:40:05] Speaker C: No.
Oh.
[00:40:08] Speaker D: And it's a countersuit because she's trying to double dip. Suing us for money she stole. She stole money from us and then she tried to take. Is suing us for the exact same money she stole from us. So we're countersuing for everything back.
[00:40:25] Speaker C: Wow.
[00:40:26] Speaker D: Yeah.
[00:40:28] Speaker C: So choose your. Your joint venture partners. Like you choose like a. A life partner almost, right?
[00:40:35] Speaker D: Yep.
[00:40:36] Speaker B: Maybe go on a few dates first.
[00:40:38] Speaker C: Yeah.
[00:40:39] Speaker B: Yeah.
[00:40:40] Speaker D: I have still like another 10 other JVs never ever had it issue with.
[00:40:49] Speaker C: 8020 rule 80 20. Same again.
[00:40:52] Speaker B: There you go.
[00:40:54] Speaker C: That's crazy.
[00:40:55] Speaker B: So what would be like, how. How would you determine whether or not the. The relationship is going to go sour? Was there clues there that you. You could point out now if you, you know, were put back in that same situation?
[00:41:14] Speaker D: Yeah.
One of the things is you want to have the same goals.
So it's kind of going on placing tenants. If I have senior citizens living upstairs, I'm not going to put teenagers downstairs because they're not going to gel together.
And this one that I'm having an issue with right now. She is.
We'll use that same analogy. I'm a teenager to her senior. So like she's a senior and I'm a teenager.
So our goals and our timeline of owning the property did not align.
I did not unders. Realize she did not have the skill sets because like even Most of my JVs are not silent. Like, we're all active partners.
[00:42:09] Speaker C: Okay.
[00:42:09] Speaker D: This one, even though she owns some properties, I assume that she knew what she was doing.
She doesn't. And so all of her roles she could not achieve.
Like, she had an issue.
And I don't like to badmouth people. How to open up a PDF.
[00:42:31] Speaker B: Right.
[00:42:32] Speaker D: So one of the things I do is. Is anytime I have a bill that I'm paying, be that a utility bill or we're buying something for the property, a copy of that receipt is sent out immediately through our phone. You can use QuickBooks, that will scan it, or you can use CamScan or Adobe Scanner, anything like that. So all of our receipts are being sent to her. And she keeps saying, at the end of the year, I didn't get any receipts. When I look at your email, she goes, I don't know how to use that. What? Like, she's back in using fax machines and sending everything by mail.
[00:43:12] Speaker C: Wow.
[00:43:13] Speaker D: Which is not efficient. And she's mailing stuff registered to me and Deidre and billing me in Deidre for her personal expense of mailing it to us. We didn't ask her to mail it. We asked her to fax it to. I mean, to scan it to us. So I want electronically. So it's little things like that.
Just making sure you're the same type. Well, I guess, same goal.
[00:43:38] Speaker B: Like, you sit down and I know. And I know who you're talking about. And I remember maybe one of. One of the properties that you guys bought together. And there you guys were butting heads the entire time on what should be done for the renovations. And. And whether you were going to do this or you were going to do that. And so I think that, you know, one of the things that you can do, especially if you're going to. Well, first of all, I mean, in an ideal world, there's only one partner who's active. Yeah. But in your case, it was in that deal anyways. It was all three of you. And so that can really be challenging.
[00:44:17] Speaker D: Yes. So she wasn't supposed to be active.
[00:44:19] Speaker B: No. You got to sit down and make sure that everyone's on the same page, what you guys are going to do and the budget you have to do it and where that budget's coming from and all that kind of stuff would probably have helped a lot in that circumstance.
[00:44:32] Speaker D: And we did that. John and I said we would look after the entire renovation if as soon as our budget would go, we would refinance it and pull out money to continue the renovation, when that time came, she didn't want to do it. It's like she wanted more cash injection. And one of my main objectives in this whole real estate is using other people's money, using as little of my own personal money into my investments. And that's, it's all leveraging. That's the power.
[00:45:05] Speaker C: So really. So the other people's money in this case, what, it was the bank's money?
[00:45:10] Speaker D: It was a bank's money. Yeah, yeah.
That we pulled out of another property. It wasn't money pulling out of my bank account. Right.
That's not an efficient use of funds. And we don't. What.
[00:45:24] Speaker B: So it can be challenging even if you've got, even if you've got like. Because you, you mentioned, and I'm sure it was in your JV agreement that said once the, once the renovations are complete, go back to the bank refinance. Like all that stuff is outlined in the, in the joint venture agreement.
But when somebody just says, no, I'm not going to do it, or they can even say, sorry, I'm not in the financial position to be able to do it, or whatever, whatever they want to say.
[00:45:53] Speaker C: Well, that's why you have to have penalties in your joint venture agreement. And most people don't do that unless you see, and I've learned this over the years as well, if you, you, there is carrot and then there's stick and you need to have the carrot and you need to have the stick in the joint venture agreement. And if you don't have the stick, the, it doesn't make a difference. So the stick could be if you don't put your, the money in when you're supposed to, it's 18 interest and you lose equity in the property, right. On an ongoing basis until the money is paid back because somebody else has to bring that money in or in this case, you know, does something like there's some sort of penalty. You have to be careful though. It's a balancing act because that could be seen by, through like the legal system as being onerous.
So there's a balancing act. So like in your situation, did you have any penalties in your agreements?
[00:46:59] Speaker D: Not. We had some.
It was if you're investing money and other people didn't you earn 10% interest on your money? You got to think at that time interest rates were 2 and 3%. So 10 was, was like you're 18. So I was like, so we're trying to find out how much is needed because she's saying she's putting Money in. Well, like how much you give us a ballot.
And she could never give us a ballot. But I did have to pay her the 10% because she put money in.
Do I ever. Have I ever received the proof? And the unfortunate part was, and this is why we're suing her for it is the property was in her name. Because in the JV for the financing, for obtaining financing, it's only in one person's name. You become legal owner through your tax system.
So it was in her name. So when we sold the property, she recouped all of this 10 interest, even though we were trying to pay for it. But if you go back to jv, she's entitled to it. But she couldn't provide us with any documents like soundproof documents. And she has the full control because the property's in her name. The sale of the properties in her name. The check from the lawyer went into her account and her name and she sent us the disbursements now. So I was happy to get out of it. That one. I was out. I was, I was out.
[00:48:30] Speaker B: It sounds like a nightmare.
[00:48:31] Speaker D: It was. So, like, this is where your, your JV agreement is a living document. So what you learned from one. Yeah, you update your next one for. So now I will have better penalties on both ends next time if I do another jv. But like I mentioned, I'm on the defense stage. I'm still looking to find the right deal, but it would probably be more in the. The middle market, the single family, the two family and even going to the three and four family.
There's not enough to me experience in that yet to bring the cost down. So it is. Cost is money intensive.
I think it's less money intensive to follow your steps of buying an apartment building Clinton than putting in these coach houses right now.
[00:49:33] Speaker B: Yeah, right. Yeah, I would agree. And again, I guess it. I guess it also depends on what you're planning to do. Right. I think you could do well if you were like flipping.
[00:49:49] Speaker D: You can do well in anything if you know what you're doing.
There's a strategy at every different stage of the real estate cycle. I think personally right now rent to own is. I'm shocked people aren't doing rental owns. I did rent owners at the beginning of my stuff. Rentals are an amazing way to get into the market with little capital and little risk because it's. You're leasing a property to a buyer, so that buyer, your tenant is doing the repairs to the house and doing upgrades to the house.
I had one Rent to own client in Kitchener. They probably put in a hundred thousand dollars of renovations before buying the house off of me. So if they didn't succeed, I would have had a property with a hundred thousand dollars of free renovations for me.
[00:50:42] Speaker B: Right. I wanted, I want to say one thing about what we were talking about before we moved on to this and what I, what I always do if I'm selling a property with where I have a joint venture partner is. And nine times out of 10, all my joint venture partners hold the mortgage.
So what I'll do is I'll send the joint venture agreement along with like an explanation, like a, like a synopsis of it. Right. Like what the agreement is to the closing attorney.
Right. And so then I'll be in on the, like a chain of evidence that basically they have all the information.
[00:51:27] Speaker D: For.
[00:51:27] Speaker B: How everything's paid out.
I've done that right from the beginning, like, and actually, yeah. In. And it's not that I've had any problems with these joint venture partners. Well, there was probably some, I'm sure, but you know, you know, nothing major, but just so that I'm in there and the lawyer can confirm and say, yeah, I acknowledge that you've sent this to me. Yes, I can see that, you know, you're getting however much of, of the deal.
[00:51:58] Speaker C: Yeah. You have an interest in the property, right? Yeah, yeah, that, that, that makes a lot of sense, I think. You know, Tom, we, we've really shared quite a bit of, you know, we went all over the place. We do. We went on the housing provider side, we went on the joint venture side. What's, what do you think is like, like the ne. Your next steps? Like, what do you, what are you doing now? I know that you're, if a good deal come along, you'll, you'll pick it up. Are, are you focusing on anything else right now? Like how.
[00:52:31] Speaker D: Well, I, I was looking internationally. I was looking for a combination of personal residence and retirement property rental property in Mexico. But unfortunately with the Canadian dollar going down so much, that's not really a strong strategy right now. I, and I think the Mexico market is going to be looking at a correction in the next couple years. So I'm trying to pull up some more capital and I'm taking advantage of some of my properties as they become vacant to put them on the market and offer creative financing back to other people as well. Because.
[00:53:16] Speaker C: Interesting.
[00:53:16] Speaker D: I do private money lending as well, so I don't mind doing the private money lending on a potential property that I'm selling.
Come May 1, I should have two properties vacant, go in, assess if they need renovations, and they're both going up.
[00:53:34] Speaker C: On the market as a, as a first mortgage vtb, the single family.
[00:53:42] Speaker D: If I get the right price, I would do a single first position vtv.
[00:53:48] Speaker B: There you go.
[00:53:49] Speaker D: And then the other one, because the other one is a joint venture, there might be opportunity for a second position vtp, because I don't know if the joint venture is going to want to leave money in that deal. And depending on the market, I. Another one of my JVs, we would consider putting the property up for sale again.
Not again. Like we were talked about putting it for sale before, but. And I was able to get the tenants to leave at that time and I almost doubled the rent.
[00:54:27] Speaker B: So why are you, why are you out of curiosity, why are you wait. Well, on the single, why are you waiting for them to be vacant?
[00:54:35] Speaker D: Higher. Higher selling price even for the duplex? Yes, because of this, what we talked about at the ltv, a lot of the. These duplexes are being bought by homeowners now, like owner occupiers. And if you're buying it with a tenant, the tenant goes along with the sale of their house.
[00:54:54] Speaker B: Right.
[00:54:56] Speaker D: Even if you're giving the N12, a lot of tenants are holding up the N12 and waiting for a hearing. So people are not willing to buy it with a tenant, especially if the main floor is rented. Downstairs is not as much of an issue. But if as soon as the main floor is vacant, I, I can get more money and I can utilize that capital more efficiently than just that property, I could take that either do private money lending, because I can't. I have a lot of debt equity sitting in the property because the property values have gone up to, not quite to what they were in 2020, but I mean 2022, but we're going to just use a number and the price is not. I'm just using a fictitious number used to be, but the property might be worth a million, but the bank might only be willing to finance up to 600,000 right now on it as an investment property. So $400,000 is sitting there doing nothing for me. So now if I take that money out, I can potentially go buy a six unit or go buy an apartment building or just lend that money out. I'm.
I'm getting to the age that I want to slow down. And as I'm slowing down, I don't want to have as many roofs, so maybe the same number of units. But let's consolidate that maybe into an apartment building or a couple multiplexes.
[00:56:26] Speaker B: If people want to reach out to you, Tom, how would they be able to do that?
[00:56:30] Speaker D: They can reach me at my email. Best choice rental properties.gmail.com or. I don't even mind giving my personal cell phone number out. If you want it on here, go ahead. It's 289-923-9086.
[00:56:47] Speaker B: There we go. So anyone that is interested in reaching out to Tom, learning more, maybe join, like joining a partnership with them. Who knows?
[00:56:56] Speaker C: All kinds of apartment building.
[00:56:59] Speaker B: Apartment building, exactly. Maybe you got a lead on an apartment building. Tom wants that apartment building. Give him a call. The. His phone number and his email are going to be in the show notes. And I want to thank you, man. Thanks for coming on and sharing all this with us.
[00:57:13] Speaker C: Yeah, this was fun. This is fun.
[00:57:15] Speaker D: I love doing this. It's fun.
[00:57:18] Speaker B: We'll have you back on again before another six years.
[00:57:21] Speaker D: Okay.
Maybe I can talk more about other things then.
[00:57:27] Speaker B: There you go.
[00:57:28] Speaker D: I won't be handcuffed.
[00:57:32] Speaker B: Quinton, how can people get in touch with you?
[00:57:34] Speaker C: Yeah, so the. If you want to book a 15 minute call, we can chat. Go to quintessousa.com and I'm actually trying some new stuff on my Instagram. So if you go to Qman REI on Instagram, I'm posting some daily kind of tidbits on my walk. So you could go and check that out. Also on YouTube@getrealwealthy. I don't know if it's a dot com. I don't know.
[00:58:00] Speaker B: It's a Get Real wealthy.
[00:58:02] Speaker C: Get Real Wealthy. Yeah, check it out. I'm trying to post some.
[00:58:04] Speaker B: You'll be able to find it daily.
[00:58:06] Speaker C: Daily videos.
[00:58:08] Speaker B: Okay. Everyone can reach me at Robust Breakthrough Ca. If you want to talk about Ontario, real estate, Costa Rica, real estate, whatever, anything. Give me a call or give me an email.
All right, everyone, thanks again for listening and have a great day. See you next time.
