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. Super excited today. We've got a great guest. And also, of course, Quentin is here. Quentin drinking his bubbly or what is it?
[00:00:38] Speaker C: Yeah, yeah, Buble, bubbly. I don't know.
I quit sugar pop, like, a couple years ago. So this is my. My bubbles.
[00:00:48] Speaker A: Buble gives you the greatest burps ever.
All the carbonated beverages. I am like, if my wife goes, oh, no, there comes the belches.
[00:00:58] Speaker B: You're putting Quentin on. All right, go quick.
[00:01:01] Speaker C: No, no, I'm not going to belch on.
[00:01:05] Speaker B: No, no. All right, well, everyone listening should go over to Breakthrough reipodcast ca.
You know, connect with all of our past guests and also listen to all the new shows that we're putting out and, and then go over to itunes and leave us a rating and review because it really helps the show. I know that we've been getting out there to more people lately, and so that's great. And new people looking for information is our general audience. You know, we've got some longtime list, though, too, that come back every time, but I, I, we really want to reach those new people who can use this information more. So go over to itunes, rate and review us, and that would be super helpful.
Quinton, what's new with you?
[00:01:45] Speaker C: I've been traveling. I, I just was in France climbing Mount Blanc, and unfortunately, we didn't summit. We get called off because of the weather, so we were, you know, two thirds of the way there, and it was, it was tough, but we ended up doing via ferrata after, so it was. That was a lot of fun. Kind of. It's a, it's kind of like climbing and mountaineering at the same time. It's a lot of fun. You're basically on the side of the mountain and, you know, just adrenaline rush. So that's been good. And then I was in Banff at the beginning of September with. With my. My wife, and we were enjoying Banff and Lake Louise and did about 10 days out there. So I had had a good time, and, and now back again, getting ready for. I'm gonna do Hadrian's wall in the UK next week. So I'll be. It's about 130km. 120. 130km.
And I'll do that probably over four days, five days, we'll see.
So, yeah, I'm having fun. I also just dealing with a lot of paperwork on the back end now that I'm, I'm back in town. I've just dealing with a lot of back and forth. I'm finding cra, just from a lot of discussions with different investors are seem to be targeting real estate investors more and more for those who are owned corporately, particularly after that whole shimmer role, whatever you want to call it, when they were looking at different, the, the different structures of people who is partnered with who when they were collecting all that information and then they canceled it all afterwards. Yeah, well, all of a sudden, what we've seen, and this is informally, but I, I would say that, you know, we'd, we've seen a lot more audits of real estate investors over the last year and a half and surprisingly, you know, it's. It came after that, all of that happening also, I mean, the CRA has a lot of employees compared government departments and even if you compare that to the number of the, you know, the equivalent in the US we have tons more staff.
So I'm not surprised at that. But yeah, you know, just dealing, dealing with that sort of thing and trying to work through some refinances that I have. How about you, Rob? What are you working on?
[00:04:19] Speaker A: Actually, I gotta hang on a second there, Quinton. You just opened an entire Pandora's box of conversation there, by the way, in that little update. Update there. I don't mean to jump over you there for a second, but there's an awful lot there, guys. And, and if you're listening, pay attention, by the way.
[00:04:32] Speaker B: Well, you know, what I was going to say too is I saw some of your posts and you guys like, that looked crazy that climbing you were doing.
[00:04:40] Speaker C: I know it's definitely not for your average person, but it is a lot of fun and I like to try to push myself a little bit and that helps me to grow. And also like, I found that I'm a kind of person that I need something else to look forward to in order to kind of push myself. And I find that climbs or big tracks or things like that kind of help to keep me my, in my fitness goals in check too. So that, that's really cool. I appreciate that, Rob. Yeah, it's, it's fun. I, I love it. Like.
But.
And to your point, Russell, Yeah, there, there's a lot to, to go in with, what's happening with CRA and, and stuff like that too. So.
[00:05:25] Speaker A: Yeah, and who would have guessed that they started collecting more data on things and even though they didn't need it, lo and behold, we have all this data now. Oh, what are we going to do with it? Yeah, who would have, who would have thunk?
[00:05:36] Speaker C: Yeah, I think we all did, didn't we?
[00:05:40] Speaker A: Well, just, just wait until they start opening Pandora's box about, oh, you had to report all your homeownership transactions over the last little while too, is. Okay, well, now let's start, let's start taxing principal residences on things. So.
[00:05:53] Speaker C: Oh, yeah, there's, there's a lot. I mean, I was, when I was in the, in France, one of the guys that I was with was from the uk from Scotland, and he was telling me about the tax regime for secondary homes in the UK.
So they have a 10% flat tax on top of like regular taxes on the value of the property.
So you've got. So anybody who buys a second, a second home has that 10% flat tax. They're also looking at within, I think what the, I forget what they called their, like the municipal bodies, but they're within that, that locality. They're looking at taxing secondary homes additionally, like an additional property tax annually.
Like, it's, it's when you have such a, you know, a need, a government need for taxes and you've pushed out so many people on the top end. And he was telling me that a lot of his friends, he was younger, he was 23, but he's been working since he's been 19.
He's been saying that a lot of his friends are leaving the UK and going to Dubai and other places because they're tax free. So on the bottom end, you have the young people who feel like they can't get ahead because of the tax regime. They're moving away too. So what's going to happen is you're going to squeeze and squeeze the middle class eventually. Like, I mean, I just took to go to do my Hadrian's Wall. I have to pay for Evisa, I guess you'd call it, to the UK that just started in January, was not, not, not necessary before. And listen, like, the questions were, are you a criminal? Like, I'm. If I was a criminal, I'm going to check that off the visa. Like, have you, you know, have you been arrested for? I'm like, this is the stupidest thing I've ever Seen, this is a money grab on in the guise of whatever you want to call it. So you can tax people coming in because you cannot control your spending as a government.
[00:08:03] Speaker A: Yeah, right. Yeah. Well, welcome to Canada where we spend, spend, spend, tax and then get surprised at. Wow, all our productive people are actually leaving the country. Why is that possible? Right. And we sit there and look at somebody in our midst here, Mr. Rob Break. Who's going? It goes. I just. The environment to operate in here just doesn't make sense. I'm going, I'm going south.
[00:08:26] Speaker B: Just gets reinforced every day. Every day there's a new reinforcement of oh yeah, I remember why I did what I did.
[00:08:32] Speaker A: Yeah. You know, I say that, I say that tongue in cheek on a little bit here a bit too is.
I'm also extremely grateful for living in Canada. Like, you know, I know how nice of a privilege do we have to be able to complain about these things?
Because we have it really, really, to be honest, we have it really good. To be brutally honest, it breaks my heart a little bit. Now I know you're not like this, Rob, but I see this an awful lot that a lot of people sit there and have made extreme amounts of wealth, you know, particularly within real estate within Canada. Right. And then all of a sudden now the tides have turned in certain markets and the, maybe the waves have gone out. And then there's some people that are just really, pardon my language, they're shitting all over Canada and they're just really mad. They made so much wealth in Canada and they're not grateful what they did. I grateful for what they did. And then they're moving to another market and then it's just all, you know, they're bad mouth and where they made all their wealth from at the same time. And you know, don't get me wrong, it's probably the right decision to pivot markets. It's probably 100% the right decision in certain markets to pivot. But be grateful for you got all that wealth from, to be able to afford the luxury of pivoting.
Yeah.
[00:09:43] Speaker C: And you know, I, I'm a proud Canadian as well. I like, I'm, I'm happy to be where I am. I'm just not happy with the direction that the country is taking.
And, and, and as a free Canadian, I should be able to express that to, you know, without being criticized and you know, so like for me, I agree with you. I, I'm very happy and thankful for where I've gotten to in my, from my real estate investing but at the same time, I know that we're taking away the opportunity from other people to be able to succeed in the same way. And I mean, we came to Canada with nothing and we've built a lot together as a family, but like, as new Canadians. And I think we've done, we're doing a disservice to not only our young people, but newcomer as well. Because we're, we're, we're over taxing people, we're creating government services that are useless. You kept building things and sorry, like, and, and, and it pisses me off when I see we have a, and I've mentioned this before, but we have a affordable housing project going in, In Barry that's 215 units. And, and it, and it costs 200. So it underwrote at 215 million.
[00:11:12] Speaker B: Right. So that's, that's, yeah, yeah. So I would.
[00:11:17] Speaker C: And that's what it underwrote at bucks each. Now it's at 500 million.
[00:11:23] Speaker B: Oh, really?
[00:11:26] Speaker C: By the time they finish, you know where we're going to end up.
So why don't they just buy condo units and like, not even bother, like with this waste of our, our hard earned money.
[00:11:39] Speaker A: Yeah, like, I, I think, and I know we'll get off our soapbox here, we'll get into this, but I just, I'm loving the conversation. Sometimes just off the cuff conversation is the best. I, I, and it's funny, I just had dinner with a good friend of ours who you know very well, guys, Arlen Dahl. And we just had dinner last week and we came to the conclusion the following. I think in my personal opinion, the reason why maybe we're feeling a little bit frustrated is it's almost like the analogy I used is it's almost like cheering for the Toronto Maple Leafs every year. There's such a promise and there's so much potential and they have everything going for them and they have all the right pieces and all the right players and every year it gets mismanaged or it gets underperformed and it's just, we're underperforming as a country.
Like, we are literally sitting at our feet some of the greatest resources in the world, things that the world wants, and we put up more roadblocks to be able to sell our goods and services to the world than it actually is. Welcoming people to come in to our country and let's provide to the world what Canada has. And it's just like, we're just misrun, we're mismanaged by idiots.
I'M sorry to say that. And I'm not trying to make myself all high and mighty. It's a totally. It's a really difficult job. But it almost seems like it would take more effort to mismanage Canada than it would be to run Canada correctly.
[00:13:08] Speaker B: Yeah, yeah. Yeah. I mean, I don't want to get started because to me, it doesn't seem possible to keep making these types of decisions that are clearly in the wrong direction, you know, without it being intentional.
[00:13:25] Speaker A: Yeah. And, and, but to be honest, us, Us, us carrying capitalists, all three here. I know we're, we're an echo chamber of three here. If we had other people, there would be different, different opinion. But I, I just sit there and I go, we, we literally could have the world's greatest support programs and help programs and welfare programs and food bank programs and unemployment program. We could have the world's greatest. If we actually just decided that we are an energy country, an energy superpower that exports and even just take care of our own needs first. Like, why are we bringing energy in from Saudi Arabia into Atlantic Canada when we're, we're sitting on an abundance of resource here? And why do we not have a business case for selling a natural, Clean, natural gas to Europe when.
Sorry, I'm getting fired up here, boys. Getting fired up.
[00:14:17] Speaker C: Well, we, you know, but we've been saying this for a long time, right? Like, I, I don't know, like, I'm a little kind of ticked off at you, Russell, because, you know, like, 2008, you pretty much look the same today as you did in 2008. Like, you never age or something. I don't know what's going on.
It's pretty much, I mean, I Remember back in 2008, we were talking about the same issues, really, but we were talking about, you know, we are an energy superpower, but we've given away that advantage in so many different ways because we've, we've gone down this route where, like, it's almost like self, Self deprecating. Like, we're, we're, we're. We're really, you know, an energy superpower, but it's not a good thing.
[00:15:01] Speaker A: Yeah, right. It's like, it's almost. We're embarrassed and I don't understand why that's the case. It would be like saying, like, okay, let's take a sports analogy. Might be easier for me to understand. Simple, simple. Guy from Saskatchewan, Canada, is really good at hockey. Like, we're a world power when it comes to. We're one of the greatest countries in the world for hockey. Right. So we sit there and go, we, that, why don't we play to what we're really good at? Or oh, hey, let's develop our basketball program and our soccer football programs because. And let's abandon hockey because you know what? We don't want to be really good at something. Let's, let's just, you know, let's, let's simmer down here a little bit. We wouldn't want to be known as the best in the world at something. Like really, let's, let's pour all our energy. And what's wrong with being winning. What's wrong with the gold medal? What's wrong with being the best at something? Even though we may be lacking in basketball and soccer and football and lacrosse and all those other kind of things. Let's just be known for something.
[00:16:01] Speaker B: Yeah. If you look at it the other way, if the goal of the Canadian hockey team was net zero goals, maybe that, maybe that would make more sense then. Right. Like, you know, let's just play it that way.
[00:16:15] Speaker A: Yeah. See, see foot, shoot foot, repeat next election.
[00:16:21] Speaker B: Like what, what the heck is the net zero emissions idea? Like how, you know, it's a, it's a ridiculous cause in the first place. Right. It's like literally impossible to achieve yet like lock down all of our resources in, you know.
[00:16:39] Speaker A: Yeah.
[00:16:39] Speaker B: It's reach this goal.
[00:16:41] Speaker A: I believe from what I have. Understand I'm not the smartest guy in all of this. It's, I believe it's the, it's the simplest to measure and it's the one that can get the most virtue signaling that they're actually doing something even though it might actually be the wrong thing.
[00:16:56] Speaker C: Well, I think that if you looked at from a carbon footprint perspective, Canada has so many trees that actually were probably a net decreaser of carbon rather than increaser.
[00:17:09] Speaker A: Yeah.
[00:17:10] Speaker B: And I can't remember the numbers, but I think I've heard people's, people talk on the fact that, you know, even if Canada was at net zero, what does that do on a global scale? Like practically nothing.
[00:17:20] Speaker A: Yeah. And if we were, if we truly were really serious about that and people were really 100, that is the way to go.
Why in the world are places firing up coal burning power generation plants and not trying to.
[00:17:34] Speaker B: Maybe we have to make up for their mistakes that they're making.
[00:17:37] Speaker A: I guess so. Yes. That's. Yes.
[00:17:39] Speaker B: By the way, everybody, we're talking with Russell Westcott. We didn't really introduce you.
[00:17:43] Speaker C: Sorry.
[00:17:44] Speaker B: We just got into the Conversation.
But Quinton, you've got a little, little bio for Russell, so I'm gonna throw.
[00:17:51] Speaker C: It out the window. I'm gonna say that I've probably known Russell since 2008 when, way back when, he's the co author of two books that I've both read. 97 Tips for Canadian Real Estate Investors and Joint Ventures. The Canadian Investors Guide to Raising Capital and Getting Deals Done. And I would say that Russell is one of my mentors for raising capital. I have learned a lot from him, particularly when I was getting started. He was very inspirational for me. He's helped many investors start, grow and scale their portfolio and their dreams. And his presentations are known for being passionate and entertaining. I know I still recall a lot of his quotes and kind of quarterback to him sometimes because I, I remember sending him a big package of meat and he was, he was, you know, he used to use this quote, you know, you know, be careful, you know, it's all, he's giving us all the meat and no potatoes. Right. So I still remember that. And you know, he's reached, you know, hundreds of thousands of people over the years. He brings 30 years of real estate experience and he's, he built his first million dollar portfolio within a year of starting and is growing and managing his holdings ever since. So.
[00:19:13] Speaker A: Wow, you're, yeah, thanks. Chat GPT could, Chat GPT couldn't wrote better itself, eh?
I, I'm, I'm joking obviously. So I, I, I'm, I'm, I'm honored guys and I'm grateful for the conversation here. I do want to say both of you guys for a long time known you guys both for a long time and I'm, I'm honored to have this conversation.
[00:19:35] Speaker B: Yeah, it's going to be fun. It's already been fun.
We did have you on before. You've been on and I looked it up and that was of October in 2018.
So.
[00:19:47] Speaker A: Wow. A lot is, a lot has happened in that time.
[00:19:49] Speaker B: Yeah, a lot has happened. Obviously you look the exact same as Quinton said, but a lot has happened.
[00:19:54] Speaker C: Dude doesn't age. What the hell is going on?
[00:19:57] Speaker A: I'll tell you what has, has happened. An awful lot is as I go back over the pictures, there's been an awful lot of gray hairs in the beard that I don't have any hair in my head. So if I did, there would be a little bit of strip around here and it would be silver and a lot of gray hairs have happened. And I consider that to be a lot of wisdom, as has happened over the years here. And we got the young whippersnapper over here, Rob. He's just sitting there. And Quinton and I are going, well, sonny, we better turn up our amplification on our hearing, on our, on our.
[00:20:25] Speaker B: Our pod, so we can.
Yeah, my hair is the exact same. I like, if I let it go a little too long. It's all silver through here.
[00:20:35] Speaker A: Yeah.
[00:20:36] Speaker B: Like, no, that's not right.
[00:20:37] Speaker A: It's called. It's called l' Oreal Wisdom. That's what it's called.
[00:20:43] Speaker C: You've been investing for 30 years. Well, I mean, you know, you. You've probably had lots of evolutions here within the real estate and real estate investing.
[00:20:52] Speaker A: Yeah. Now, just. Just for 100 clarification, I did, I did round that up to 30 years. It is, it is coming on 30 years here soon. It's getting closer to 30 than it is to 20 and, and closer that as well. And it just sounds, you know, when people ask, how long have you been investing for? I often joke, well, I've been investing since the turn of the century.
Wait for it. Wait for it. Yeah.
No, there's been an awful lot of lessons learned, and it's been awful lot of.
A lot of changes, a lot of waves. And sometimes it almost. The more things change, the more they stay the same in certain respects.
And I'm working on kind of a thesis that I've been living.
I live this. When it comes down to my real estate investing, I like to keep it really, really simple. And really, it comes down to three pillars of investing in real estate. What you buy, where you buy, and who you rent to. Okay. And that's for buy and hold properties. Okay. So what you buy, where you buy, and who you rent to. With the most important of those three pillars being who you rent to.
Very few people actually start their investing journey with talking about who they want to rent to, who their customer is, who their ideal avatar. Who do you want as a business partner living in your property? Identify who that investor is, who that person is, jobs they do, magazines they read, where they hang out, cars they drive, everything right down to the T. And then you take that avatar of that tenant, and then you find out where that tenant wants to live. And then you. You put them in a house that would align with what they want to live in, where they want to live in, in a business partner with that tenant. And that in and of itself is.
I've. Every time I've made a mistake, I've deviated from that. From that. Those three Pillars where I found something that was cheap. Right. And lo and behold, it was a crappy tenant profile in a really scuzzy area town. And I had a bad, bad experience of that or I had the tenant profile and I tried to, I over built something in an area and tried to put them in a Taj Mahal and a property that the tenant profile would never be able to afford or do do that as well or it built it in an area that just didn't make sense. And I was forever struggling with, with vacancies. Every single time that I have deviated from those three pillars, something has fallen off the rails. Now I'm not saying everything has turned out roses and everything's perfect, but you stand a greater chance if you have an alignment of, you know, where you buy, what you buy and who you rent to. If you have those three things in an intersection. If I had a big giant Venn diagram or the diagram here in the center of those three circles is the ideal investment avatar for opportunity for you. Now that pivot and that changes for different people, obviously, but it saved my bacon. And every time I've, I've re pivoted or I've gone into and did something different, I always go back to that three pillars and that three fundamentals and start from there. Always.
[00:23:55] Speaker B: Yeah. So you're saying that it's best to like.
So this is kind of funny. So if you were to actually reverse engineer it for some of those, for some of those properties that you bought that were mistakes, then you would have been like, well, my ideal avatar for this place is probably someone who doesn't get out of bed. And if they do, they roll over to grab the crack pipe and, and get back at it.
[00:24:17] Speaker A: Yeah. Don't get me wrong, if, if that's your ideal avatar, then invest in areas and invest in types of properties that would support them. Right. And be good for them.
[00:24:28] Speaker B: I made that mistake myself before. I've had like some really bad stories of, of things going wrong when you invest in the, the wrong area that brings the wrong tenants.
[00:24:39] Speaker A: Yeah. And you know, you've invested in the wrong areas in the wrong tenant profiles. When you have the, the city police that have you on speed dial and they're, they've, they found you through their, through the title searches of things and they're calling you directly and say, oh, did you know you had gunfire at your unit? And I go, oh, thanks.
So. And I, I've had, I've had shootings, I've had. You know, it's very sad to say I've had a few, you know, fatalities and the first property I ever bought, it wasn't a fatality. It wasn't any kind of a, you know, hand of another person. The tenant of my first property I ever bought passed away in the basement unit, right? So it was like you learn, you learn the lesson very, very quickly and you slowly pivot from there. Which is, which has been the reason why I've slowly evolved as an investor over 30 years. Like I haven't, you know, rested on my laurels of, you know, what happened back in my day is we should do this and you young whippersnappers should never be able to do this is sometimes you have to pivot and you have to adjust. And, and about 10 years ago I made the conscious decision to get into new construction properties. It was maybe a little longer than 10 years ago, so, so back it up. When I first bought, I was buying older properties, older townhouses, some older condos in bad areas, bad tenant profiles. They just, you know, they didn't, they didn't perform very well, you know. And holding them for quite a while, quite a while. They actually some of them went down in value, some of them didn't go up in value a dollar and all you did was you just had headache that whole time along, right? So I owned an awful lot of those properties for a long period of time. And then a little over 10 years ago I pivoted into new construction, into new areas, new communities, new development. So I found, I found some good quality builders that builds rental quality spec products, houses with suites. And I bought a whole bunch of those as well in many years.
And it virtually eliminated one of the biggest expenses and that was maintenance. Maintenance was, was virtually eliminated. The other was I found is I had very little tenants turnover at the same time into a new property as well. And I also had lower management costs of owning a new, a new property. So I kind of got really, the bug bit me at that time about brand new properties and Now I'm, it's 10 years have gone by since I bought them. I'm now starting to divest of those 10 year properties now before the maintenance starts kicking in, before any deferred maintenance in. I'm now passing that along to the next owner. I'm selling a lot of those port properties and four years ago now it would be three years this coming winter.
I saw a little bit of the reading of the tea leaves and I saw a little bit of the writing of the wall on especially in the city that I invest in which is Edmonton, Alberta where they were wanting to grow in and up as opposed to more out. So most cities, you know, it's easier to urban sprawl. Okay, Edmonton has a lot of urban sprawl. As a matter of fact they so much irvin sprawl they need to start building inwards and they need to start growing. And I read a couple reports and they were talking about that this is just the city I pick and this is the education for you would be pick your target market and find do this research for yourself. But Edmonton was is forecasted to add another million more people in the next 10 to 15 years. When that report came out, it's been pushed out a little bit but they're talking about getting to two and a half to three million people and they're just a little over a million right now. And then they're talking about instead of doing urban sprawl they're talking about being more efficient and start building in infills, greater development, building up a little bit more on that. So about four years ago we decided to buy our first piece of land which was an infill property in Edmonton. And you guys would be shocked that we actually paid for this three years ago. It was a 50 by 150 lot inner city on a. In a city of like a million, 1.2 million people. Like seven minutes from the downtown core. 50 by 150 lot. So 7,500 square feet and we were picking them up sub 300,000. With a house on it. With a house on it. We picked up whole pile at about 287,000 we picked up. The highest price we paid was three and a quarter for those kind of things.
And then with some new bylaw changes and some new development changes we then went through the work of what would be an ideal property to put on this. This piece of land that would make sense, that would be a good livable property. It would be affordable and it'd be something that would fit our three pillars of real estate. What you buy, where you buy and who you rent to. So then we went down the process. We took literally six months of different designs and we went through all kinds of different designs and different process. And you're sitting on an empty piece of land. But it was. The costs were marginal when you're only paying, you know, sub 300,000 for it.
And then we went through that process and we just started. We just started building. We just started building the first model that we built with side by side duplexes. With suites and garage suites that evolved into seven. Seven units. Eight units.
We just started building all these things and here's the thing people are going to say as well, you know, three years ago. So you're still, still in the development phase, are you? No, we actually have. Some of these have been completed over a year ago and we've had tenants in the place for over a year.
We were doing that process of buying, doing all the design, going through the entire process and constructing all that in 11 months.
[00:30:13] Speaker B: 11 months, that's great. So three.
[00:30:17] Speaker C: That's impossible in, in Ontario.
Well that's not even.
[00:30:21] Speaker A: You get a development permit. You get a development permit in 18 months.
[00:30:25] Speaker C: Yeah, no, sometimes it takes three years or four years. It depends on what you're. You're doing small infill, maybe like it'll take you 18 months to 24. But like even that you're. It sounds like you're completed your construction at that point.
[00:30:42] Speaker A: Quinton, We're a year into the properties being tenanted on. On two. On two of the properties a year. We've just got our, we just had our first year of operation on our first ones. Our second one comes due in early January and then the next later in. In the year for a year of operations.
And it's unheard of in many cases, but it's a little bit of a double edged sword in some cases. Some cases.
[00:31:08] Speaker C: What do you mean?
[00:31:10] Speaker A: What I mean by that is Edmonton is a dream to work with for a developer. Right? Like an absolute dream. But in some cases it's almost too much of a good thing. And the people, the unsophisticated are people who don't care about the tenant profile, the livable units or the developers that are building things just for the sake of building things.
They don't make the intentional decisions now and let me back up and I'll explain this a little more. It's. The term I use is in Edmonton especially is just because you can doesn't mean you should. Okay. Where they're building things that are three stories high, mid block infills or they're building things, everything is 100% to code and they're putting eight, nine units on a mid block lot.
But they're, they're building really bad tiny little dungeon properties.
No different than what's happening out in. Out your neck of the woods at the boxes, the dog crates, condos. To steal Ron Butler. I love Ron.
And to steal that is. They're essentially instead of them being a giant box in the sky, they're a giant box in the basement and they're not good. And I'll give you a real life. Here's the real life example.
Take a guess in Edmonton how many parking spots you need to have per units, per livable unit?
[00:32:34] Speaker B: Guess?
[00:32:35] Speaker A: Yes, please.
[00:32:36] Speaker B: I was going to say 0.
[00:32:37] Speaker A: 0. So they leave it 100% up to the developer and the builder to determine that. So what do you think most builders and developers are going to do? They're going to build as much rentable, livable space and put as few parking spots as. They don't care. They're building it, they're moving on. They don't have to worry about the renting of the property or the ownership aspect of the. After that they don't have to build extra things and have all the garbage cans and different enclosures and things like that. They don't. I don't care. So. But what we do is we actually go the opposite where we will actually over park our properties. The amount of things that my consulting clients that send to me that they've seen from somebody or Facebook posts and say, oh look at this, 21 units. We sit there and count. Yeah. You know there's nine parking spots for 21 units. Yeah, that, that dog don't hunt where I come from. Like for example. Let's give you one example. On one of our six unit builds, we actually have four interior parking spots, garages. We have four parking pads long enough on those garages to fit another vehicle behind that. And we have two parking pads on each side of the garage. We have interior and exterior parking pads for 10 cars. Okay. That's before we even start counting the corner lot that it's on and probably can put another six to eight on the corner if need be as well. And that's only for six units.
Right.
[00:33:57] Speaker B: Just imagine you're, you're building them for yourself. Right. You're building them because you are the end user. Not, not the end user but the, the end owner.
[00:34:06] Speaker A: Well, I, I have to own these things for 10 years.
[00:34:09] Speaker B: Right.
[00:34:09] Speaker A: And I have to rent them out and I have to talk to 10, no brainer.
[00:34:14] Speaker B: Who, which, which place they move into.
[00:34:16] Speaker A: Yeah.
[00:34:16] Speaker B: I had a question for you.
[00:34:17] Speaker A: Yes.
[00:34:18] Speaker B: Going back to when you bought the properties three years ago, were the bylaw changes already in place so you knew that there was going to be more potential for infill when you bought them or was that something that is just a pleasant surprise?
[00:34:34] Speaker A: Well, one level of bylaw changes were already in place and we did our designs based upon the current bylaws at that time, and they were favorable to do these infill builds. So we built them based on that. And we've actually had three different bylaw changes since, some different modifications and changes. And some of them have been good, some of them have been bad.
A couple of them, you know, one of them, we actually poured our foundations and our pads too quick because they changed the bylaw that stated that you could then move your garages off the back alley. You can move them closer to the house, and you can actually have longer driveways into the garage. You could have longer parking pads in the back if you wanted to. So there's been lots of changes and there's still going to be more. And to be honest, it's a little bit of a game of whack a molecule in some cases that when the little. The little mole comes up and you'll try to whack it and then they change and they pivot. But I'll be honest to say that the city of Edmonton moves quickly and they do listen to people, they do listen to feedback. But in my personal opinion, I think they've created too much of a good thing. And when I say good thing, too much of a developer's good thing. Okay.
Because they do need to have a little bit of governors on some of these things. Like, for example, the parking, some of the things of offsets where you have. There's a lot of people taking their things and they're turning them sideways. And the entrances and exits of the property literally look into another house. It just doesn't make sense on a lot of things. And the amount of designs that we threw out, because it just didn't make sense. It made no sense from a livability perspective. Go back into that place I shared with you that we did six units and we had 10 parking spots on it and things like that. We could have legitimately, on a corner lot, put nine units on it legitimately. We had plans and designs for nine units.
We made the choice be based upon the area, based upon the tenant profile, based upon the demographic. It just would not have gone well in that area. We decided to go bigger units, fewer units, and we forego three units on that as well. Like, don't get me wrong, my spreadsheet took a hit. But at the end of the day, you don't buy real estate based on a spreadsheet. You buy real estate based upon people living in it for the long term. And you babe, real estate based upon fundamentals of where you buy what you buy. And who you rent to.
[00:37:02] Speaker B: Yeah. And also your theoretical spreadsheet said one thing. The real one probably doesn't look so bad.
[00:37:10] Speaker A: Our first one, the one that's done and we just had our first 12 months and we have hiccups and when at the beginning of any operation is when you have the most hiccups and you have some vacancies and you have to fill the properties, our six unit properties after one year of operation, average per unit, about $220 cash flow per unit for, for the, for the year. Now I fully expect that to go up over the course of time. That was the first, that was the first year of operation.
It did really well. And we even, you know, this is an entire other hot potato if you want to get into this too is we even went down the whole road of MLI select financing at 5% down, 50 year amortizations. And we put as little capital into those projects as possible. And some of these projects before our GST rebate that we're banking on to get back, we're into them for about $130,000 for six unit infill project.
[00:38:05] Speaker C: Wow, that's incredible. That's, that's insane actually.
[00:38:09] Speaker A: And they're cash flowing and they're doing very well. And you know, I'm not here to do raw Raw Siskumba and cheerlead and get to tell everybody they need to do it. I honestly, it's not for everybody. It really isn't. You. You 100% need advice and need guidance and need a team of people and need someone on your side to do it. Like here's when I started this, I was 24 years experience, bought hundreds of place and when I got into it and first started, I had no idea really what I was doing. And then I developed a team. I hired the experts, I got the consultants on my side, people that knew a lot more than I did about this whole process. I interviewed them all and I was behind the scenes literally for the last two years. Been extremely quiet about this. I have not gone out on my YouTube channel or anybody's podcast and have not publicly broadcasted any of this because I wanted to make sure this worked and I wanted to make sure this worked within our own inner circle clients first. And I wanted to make sure it it before I start promoting it, or promoting is a bad word, before I start advocating that this is a viable opportunity, is that it worked. And we've proven, we've got the receipts to prove it that it is working. And to date in the Last two years. Personally, within our inner circle, my personal inner circle, we've done four projects at 25 units within the last two years and I've consulted on, I would bet at least another 42 projects of people anywhere from 6 units up to 104 units. And our team that we work with probably is probably getting close to 80 to 90 projects over the past three to four years of doing this. So we just slowly have been just designing the process and making it that investors are driving the bus, not the build like the investor and owners are driving the bus, not the builders and developers that are driving the bus. Because sometimes we make decisions completely different parameters, right? For example, I as the owner and investor want a good rentable, livable unit that's going to attract good tenants over a course of time. That's my, my mandate. A builder might sit there and go, no, we get paid based upon the square footage. We do. We want more units. We want more square footage. All our profit margins built into our per square footage. Construction costs. Build more, build more, build more. Is there is their attitude. And I'm saying no, wait a minute, let's go back. Will people actually live in these things? Right? Let's not just build units for the sake of building units. Let's actually build units that people want to live in and more importantly in about 10 years that people will want to buy from us in about seven to ten years from now.
[00:40:44] Speaker C: You know, Chris Davies was on, I think it was the last podcast or the podcast before and he was sharing some of the insights that he has on the secondary apartment building market in, in Edmonton as well. And I actually had him at Dormari I presenting a couple days ago or sorry, last week and you know, he was sharing some of the same things that you're talking about. Although the, the way that you approach things are a little different than in our market because you want to ensure that your tenants stay there and continue to pay for, for years and years and years. Whereas we, we in a rent control market want to see a little bit more turnover because that's how we're able to increase the noi.
But what, what I, I know from all my friends that have invested in the Edmonton market and in Alberta because you know, like I Susan's, you know, 20 years in, in there and like, you know, there's people that have gone through lots of cycles and what I, I understand is that Edmonton is a boom and bust cycle and it. And although maybe the pattern varies as they have tried to diversify the income and the Just like in Oshawa, you know, we're not an automotive town in, in Oshawa anymore but it's still a large industry and it still, you know, reflects some of the economy of the area in manufacturing.
Now in Alberta we see. It just seems to me that there's like if you're in a bus cycle, you could be in a bus cycle for 10 years and if you're not prepared to, to, to withstand it, you can be in some big trouble. And I, and you have seen a lot over the years. You've been there, you know, for a long time. So you've seen those boom and bust cycles. You, you probably have seen the time as when it was turning and the, you know, what was going on there.
[00:42:47] Speaker A: Well, that could be another conversation in and of itself. And, and so, so a couple things that I would share with you is I 100% agreed with everything you said but I also on the other side, I believe Edmonton specifically I'm more familiar with Edmonton than Calgary and other areas.
They have actually are going to embrace more boom. Meaning they have foretold that they want to grow their population, want to grow their city up to this kind of thing and they're embracing more of that boom. Now I will get to a little bit more of the 10 year bust cycle which I'm sorry to say, Ontario investors and B.C. investors. You're about to experience it.
I made my forecast, I can almost go back and probably pick it out of the archives. That was right around February of 2021 when I started seeing a little bit of the writing of the wall, that people were going to conferences and they're going, oh, I just made $57,000 equity in the last six months and I'm bulletproof and everything goes up in value. All.
It's funny, one of the sayings I see from people, and this is no slight against people that host real estate seminars, it's just something that I've observed and it's just something that I'm going to keep observing to see if this holds true. Anytime somebody on stage comes out and says it's not the timing of the market, it's the time in the market that makes more sense. Now don't get me wrong, that is 100% a truism, right? The longer you're in the market the better. But it's typically the person that's saying that is their market cycle has turned and they're trying to give a reason to people in that market to keep buying the promoted products that they're doing at the same time. Because if you asked anybody, anybody that would they rather have bought it, the peak in 2022, or would they rather bought their place today, what would their answer be?
[00:44:48] Speaker C: Oh, today, today 100.
[00:44:50] Speaker A: They would have said I would. Oh yeah, I'd probably be paid. I would have paid hundreds and hundreds of thousands of dollars of less. So, so don't tell me that timing doesn't matter. It 100 matters. It absolutely matters because that person that bought in a peak of, you know, 2022 is gonna be potentially be catching a falling knife for the next five years and then it's gonna start coming up and it could very well be 10 years before it gets back to where it was, what they bought it for.
Now, I'm not saying that's going to happen. I hope people it happens sooner for most people.
[00:45:25] Speaker B: I've already seen it happen. Yeah.
[00:45:27] Speaker A: But I made that forecast and all my clients at that time of anybody who wanted to listen in 2021, the start of 2021, I strongly encouraged every one of them to divest of B.C. and Ontario properties. You have a, I said you have probably a solid year of really good gains to still to sell into a really good market. And it's now time to start chips off the table and move them over to Western Canada, Alberta again. And you know, I'm not saying I'm any smart person or anything, I just was reading what and, and how did I learn this is because I went through the opposite of that. I really did, where I bought at at the peak of it and I sold at the bottom and stuff like that. And I just said I'm not going to do that again. So what were the things I learned from the cycles I went through? And sometimes you have to do the opposite of what things are. And, and, and maybe it's another analogy is maybe it's the reason why I love golf in some respects. Like golf is a game of opposites. You want to hit the ball up, you have to, you know, if you want the ball to go up, you hit it down. You want the ball to turn to the left, you hit it to the right. Everything is almost a game of a thing of opposite. And that's the same within real estate. Sometimes you need to be selling when people are buying and buying when people are selling. And I know it sounds so simple and, and it sounds, everybody goes, yeah, everybody's nodding their head and goes, that's so right. But when you're in it, when you're right in the frenzy of the market peak in, you know, early 2022 and Covid things and things are still going up gangbusters and all that kind of stuff. We're in the frenzy of it. You're right in the middle of Vegas, right in the middle of, of, of the, the energy and the excitement. It is impossible to tell somebody, well, you know, you should be looking and taking some chips off the table. Now should be a good time to sell. Let's wait for a market cycle down the bottom side and let's start buying on the way up again in. It's, it's hard to do. It is easy to say hard to do.
[00:47:21] Speaker C: Yeah, it's, it's quite scary. I, I, I know myself. You know, I, I am what I would consider a long term thinker in, in real estate as well.
And you know, I'm heavily invested in the Ontario market and we probably stopped purchasing a couple years ago.
And you know what I think as we always bought for cash flow in our market. So we've never really put ourselves in too much of a challenging position and we're in it for the long term. So we're here for the long term.
What I found now is that people are so scarred from what's happened over the last two years and they're seeing properties that make sense from a cash flow perspective. They could get a five year rate, they could purchase and be in a great position and not have to do a lot of renovations or adding suites or things like that in order to be in a good position. But they're so scared that they don't want to move. And they're 100%, they're not, they're not purchasing and they, even though they understand it makes sense. And, and I think that if you can, you know, get into those type of properties and you're looking to, to do it for a longer period of time, you know, I do think you're, you have an opportunity. It's just, you know, what do you want? Right?
[00:49:02] Speaker A: Totally agree.
One of the, now you're, I know I'm not gonna out think you on this, Quentin. You're like the king of, king of economic fundamentals and research and stuff like that. But one of the things that I follow very closely is, is affordability. I follow affordability indexes of different markets and just pragmatically simple speak is that if people can't afford a house in a marketplace, they won't, won't buy said property. They won't.
And now there's lots of factors that go into those Kind of things. And there's you know, cost of the borrowing, cost of the thing, cost of the asset price and stuff like that. But if you just start following just the trends of affordability, I, I believe that's will help you better than just doing something off the, off the, you know, the kneecap, right? And just willy nilly. And I'll give you a real life example.
Like for example, I know we chat about this a little bit about Alberta and Edmonton and one of the knocks on Edmonton a little bit is that they can build really, really quickly. They can add supply to a marketplace extremely fast. And I 100% agree, I'm living it, right? I live it and I 100% agree.
And there's always the ebbs and flows of things like so for example, they can add a lot of inventory and a lot of supply to the market which keeps a good cap on affordability. If you can add supply to the marketplace, you keep a good affordable housing inventory. And I firmly believe, now don't get me wrong, if I was just an SOB real estate investor, I want to cap that supply. I want my properties to go through the roof. I want triple, quadruple, triple decker digit returns on all my properties. I don't want them to build anymore.
But it's actually healthy for a city, healthy for a community that you can add supply to keep the housing inventory affordable. And you will see that as it goes through it's keep following those things. Because the one variable that nobody wants to see happen, which but very well could happen in the housing affordability is the asset valuation could very well, which it already has dropped.
And to buy something, you know, now versus two plus years in certain markets you're paying a lot less and it could very well be in about seven years. The signals will say now the market is a lot more affordable and now we're going to start getting back into it. And little Johnny and his fiance can now move out of the house and afford to buy a condo, right? Or can afford to buy a property and they can now afford to stay local as opposed to moving somewhere else. But I think, I think affordability in and of itself and affordable, not affordable dog crate condos in the sky. Affordable, affordable livable properties like supply.
You know, and here's the term as a lot of people say is everybody says Canada has a housing supply issue.
On one hand I agree. On the other hand I, I would actually put a disclaimer on Canada has an affordable housing problem, right? There's an awful lot of inventory in certain Markets, you go down where I am and all the condos and all the towers and all the boxes in the sky, there's, there's thousands of them there. Downtown Toronto, there's thousands of them. There's lots of inventory, but it's just not affordable inventory that people want to live in. So if you actually be part of the solution, not part of the problem, build properties that people want to live in, make it affordable, get good clean housing, good clean accommodations, you will, you will have value in this market going forward long term term. Yeah.
[00:52:49] Speaker C: I do think that affordability has come down quite a bit, you know, for, in the GTA market. But I think the counteracting force right now is that unemployment has really skyrocketed in southern Ontario and even northern Ontario. Like we're, I would say we're like 7, 8% in Southern Ontario, but in Northern Ontario we're, we're probably 9, 10%.
[00:53:15] Speaker A: Yeah. And, and because I heard that already, just wait until, and I've already seen it all the, sorry for getting political again here but our, our, our spend and tax government is now sitting there going, we're gonna say we're gonna save everybody. Let's, let's crank up the money printing machine and let's, let's get the things cranked up again and let's save everybody. Well, yep, sometimes you have to let free market economies do what they need to do without intervention because you're just prolonging what could be more pain down the road.
[00:53:45] Speaker C: And, but I don't think as a society we do that here anymore. I think we've gotten so soft when it comes to pain that we can't adjust for it. I mean you, you, you, you, what you would need to do in that type of situation is cut industry cut cut in, in places where it doesn't make sense, where you have, have bloated or bloated administration costs, bloated management costs like and, and that could be in health care, that could be in education, that could be in government services.
And nobody is going to vote to change that. And that is on us. It's not just the government is on, it's on us. Because if we, if we don't change our point of view, it just gets more expensive for us. And people just don't make the connection. They, they can't see the connection between quantitative easing and prices going up. They don't see the, the fact that it's not the, the inflation, it's about the value of their dollar deflating.
[00:54:55] Speaker A: Yeah.
[00:54:55] Speaker C: And at a Pace that they're not being told, they're being told inflation, but they're not being told deflation from a value perspective of the dollar. And my. That house I bought in 1970 is the same bloody house. It didn't change.
Sometimes the house has the same paint on the inside, but it's worth, what, 20 times as much, 30 times as much. Why? Yeah, not because the house changed. It's just the devaluation and, and people. I don't think people are ready for this.
[00:55:29] Speaker A: That Russell. Well, and, and I hate to really throw a blanket on things or maybe it's for a conversation. Another day is just wait until we started throwing the AI gasoline on that. On that as well. And it's.
I don't know. We're in, we're. We're in for some interesting times. And advice I would give people is times they are changing, but the more things, you know, change, the more they stay the same and to really just focus on getting good help of people who have been through the ringers, right? People who have seen the market cycles, people that have go through and can help guide you through that. It's funny, I was just at a conference last week and I was having a conversation with somebody. They walked up and they're all excited and they're ready to go. And they were somebody I knew from 10 years. And they're going, yeah, we're getting back in the game and we're looking to go. And I've got myself a coach. And they said, but I'm a little. Unfortunately, my coach only has about a year and a half to two years experience. So I said, well, I don't doubt that they have a lot of ambition and a lot of drive and can probably help you in certain respects, but, you know, is that going to get you to the next level, what you're doing? They go, yeah, probably not. So. So just seek out people who have been there.
Seek out people who have been there that are also willing to adapt and pivot and have foresight of what's next. And you know, I consider my, you know, pardon if I'm going to toot my own horn for a second, but I'm also going to.
I consider myself an extremely good coach. I also consider Quinton one of the best coaches as well, too. So.
[00:56:59] Speaker C: And I don't coach anymore. So you're done with wrestling.
[00:57:02] Speaker A: I enjoy, I enjoy. I don't do it full time. Like, I take a handful of people that are extremely coachable and I help them along the way, but by and large. They need to do the work and they need to be coachable. And I work with a select group of people that just want to kick ass really. But I don't do it on a grand scale anymore.
[00:57:22] Speaker B: Can you tell us about your inner circle program then?
[00:57:24] Speaker A: Well, you know, when I say inner circle, it's, it's, it's myself and some people within my, my, just my team and I work one on one with people is really, that's really what I do is I, I have somebody that has a need and a desire that they want to get somewhere and maybe they don't want to go do the group route and they live remotely or they have big giant goals and nobody that they've seen. I've got 77 units and I want to take this to 177. There's nobody out there I see that can actually coach me. Right. So I work with those kind of people that want to take some big bold next steps and I customize a program for them one on one, hold them accountable to what they say they're going to do and their goals and their dreams and aspirations. And don't get me wrong, I also help people that are getting started, but they have to sell me pretty hard on their goals and their vision of where they want to get to for me to really lean in and help them. But at the bottom line, they need to be coachable and they also have to have a grand vision and they just need some support and guidance along the way.
[00:58:23] Speaker B: That sounds awesome. And how do they reach out to you?
[00:58:26] Speaker A: Just the simplest is just, just find my website. Just google russellwestcott.com and you know, maybe along the bottom we'll put a little. Couple of things here for how people.
[00:58:36] Speaker B: Can get ahold of me.
[00:58:37] Speaker A: Yeah. And the simplest is just if they reach out to me, I will kick it old school.
I'll maybe send you as technologically as I'll get is I'll send you a link to book a time in my, in my calendar. And after you've booked that time, what we'll end up doing is just seeing if I can help you. I'll find out where your goals are, where you want to get to, where you are now, where you're structured, where you're stuck. Can we build a little bridge? And then are you prepared to do the work? And if you're prepared to do the work, we'll, we'll get busy. If not, no problem. No, no harm, no fun.
[00:59:05] Speaker B: There's going to be some people out there interested in reaching out to you. So thank you again for sharing with.
[00:59:09] Speaker C: Us and that, that was really awesome. I just want to say that, like, Russell is definitely the real deal when it comes to this. I, I've, I learned about my raising capital and mindset and a lot of that from, from Russell. So I would encourage you, if you enjoy, you know, in looking at building your portfolio and you know, to reach out to Russell, definitely, you know, give him a two thumbs up.
[00:59:35] Speaker A: Well, I'm, I'm honored guys and, and let's let.
Sorry for inviting myself back, but let's, let's not, let's not wait seven years.
[00:59:43] Speaker B: Well, you know what? The thing is, there's so much we didn't get to here.
[00:59:46] Speaker C: I know, I know. This is.
[00:59:48] Speaker B: Yeah. And the time just flew by. So I want to thank you for coming on again. Appreciate you taking the time.
[00:59:54] Speaker A: Time. Happy to help. Anytime, guys.
[00:59:56] Speaker B: And Quentin, how can people get in touch with you?
[00:59:59] Speaker C: You can come out to Durham REI for one of our meetings. Happy to have you out there. Or if you, if you want to talk with me for 15 minutes, I don't mind give you 15 minutes of my time, go to quinchandesouza.com and we can talk real estate or income or whatever you want or you need help with.
Other than that. How about you, Rob? How can people get in touch with you?
[01:00:22] Speaker B: You just email me. Robert. Mr.Breakthrough ca same as always. Thank you guys for listening and we'll see you next time.
[01:00:29] Speaker C: Awesome.
