Get Real Wealthy

Episode Summary

In this episode of Get Real Wealthy Season 2, Quentin talks about a unique basement conversion that he did in the past to help people who are starting out or working on their first few properties. 

Quentin says that in a market where it's hard to cash flow, basement conversions can create great cash flow. He shares a project that he did in Courtice, Ontario. It was a single-family house, but it was actually connected by the basement. In Clarington, you could convert such properties. One of the issues that he had with the conversion was the parking, but as he was on a corner lot, he actually had the parking that was needed to do the conversion. In this particular unit, the stairs were actually in the middle of the house going to the basement. 

He was able to solve this problem by sealing off the dining room and putting a door where the sliding door was into a common area. He put a door on the other side of the entrance to the basement to seal off that particular unit. So, he made it fire code safe and did this all with permits, but by having the entrance to the basement from the back, he was able to create space for the unit in the basement. He adds that the motivation behind these conversions was that he wanted to bring his properties to their best and highest use. Which is something he was able to accomplish with this conversion.

Quentin adds that in each municipality, they'll have different rules to make sure that you can do the conversion legally. Sometimes, they'll have green space requirements. So how much green space do you need to have? What type of parking access do you have? The egress and lighting rules are usually provincial or statewide. However, the way that municipalities interpret building code is different. It is something that varies and you need to take it into consideration before undertaking any project. 

In conclusion, he says accessory dwelling units are a great solution for affordable housing, and  “increasing the density of current housing will be a lot easier than creating new housing, and if we can create a lot of these accessory dwelling units that would help to take some of the load off what's happening out there.”

Important Links

• https://EducationREI.ca
• https://GetRealWealthy.com
• https://DurhamREI.ca

Episode Summary

In this episode of Get Real Wealthy Season 2, Quentin talks about his first investment property.

Quentin shares his journey so that others could learn from his experience and mistakes. He says that he started by reading and educating himself about real estate, started going to meetups, and joined an organization to prepare for his first property. He bought a condo townhouse with a realtor who helped him identify a good cash flow property. There were three units, one on top of the other but it was called a townhouse that there was an underground garage as well. It was in 2008, and he was able to put 5% down at the time because the rules were different for financing. 

He was getting decent cash flow from that property. This gave him the confidence to buy multiple properties. By scaling, he was able to get three to four properties. There, he says that he learned a lot about asset and tenant management from owning these properties. He adds “Being able to increase my income was a good way to be able to increase the cash flow and make that asset work harder for me, and so that was something that I learned and I found very useful.”

In conclusion, he suggests that you should get started by finding something that's cash flow positive, don't buy a negative-yielding asset where you're trying to include the mortgage pay down as part of cash flow when it's not. If money comes out of your bank account to pay for a rental property, it’s a negative-yielding asset. This helped him leave his job as a teacher to pursue real estate investing full-time. 

Important Links

• https://EducationREI.ca
• https://GetRealWealthy.com
• https://DurhamREI.ca

Episode Summary

In this episode of Get Real Wealthy Season 2, Quentin talks about investing with friends and family.

While often a touchy subject, here are a couple of tips, warnings, and things to watch out for when you decide to use funds from someone in your family. First of all, you need to define your roles. Who is going to be doing what specifically? What are the expectations from them? What are they expected to do? You need to have a written document that outlines these roles. It could be a partnership agreement, a co-venture agreement, or a list that is signed. Next, you need to identify a process of reviewing that these roles are being carried out. This will ensure that everybody's doing what they said that they were going to do, and avoid conflicts and unpleasantries. 

Quentin further suggests “don't allow business to cross over with personal and family events. You don't want to be discussing about the property and what's going on and if there's a problem, and you know, this and that, when you have a family event, you're at Christmas, you're at Hanukkah, you know, you just shouldn't have that conversation at that time.” He adds that you may also need to identify a system or process for handling issues that come up depending on what the role is. That way you have expectations in place, and everybody clearly knows the expectation. 

He says that communication issues are the major cause of conflicts when investing with family members. In conclusion, he says that you should make sure to review your exit strategies. Make sure that there are clauses in your agreement that outline exactly how an exit will take place. These tips will help you navigate investing with family and friends in a much smoother manner. 

Important Links

• https://EducationREI.ca
• https://GetRealWealthy.com
• https://DurhamREI.ca

Episode Summary

In this episode of Get Real Wealthy Season 2, Quentin talks about interest rates in Canada.

As a real estate investor, interest rates are really important and they matter for several different reasons. First are the effects that they have on property prices, at least what is said in the media. Be careful when you hear the media associate increases in interest rates with increases in property prices, as it doesn’t necessarily work this way. Similarly, a decrease in the number of sales, doesn't mean a decrease in property prices. 

As for the cap rates, they are a combination of different things. For commercial assets, an interest rate increase means that you're actually going to see increases in cap rates because a third of the cap rate, the value of that comes from interest rates, but also remember cap rates are the quality of the asset and the location of the asset. So, what happens when we lower interest rates? So, when we lower interest rates, we're actually bringing forward purchasing from the future to today. When we're pulling forward those purchases today, we are affecting the future purchasing power, depending on what exactly or who exactly is doing the purchasing.

The Bank of Canada looks at CPI, which is the consumer price index and inflation, as well as employment. when they're considering interest rate increases. They also look at the value of the Canadian dollar, the real GDP, the US funds rate, etc. Housing prices are also connected with different rules that have come in over the past. Quentin says that if the Canadian government really wants to see a change, they actually need to work on the supply side of the issue.

Quentin adds homework for the listeners in this episode. He says “I want you to go and look at the amount of debt that the Canadian government has compared that to the last few years to where it is now. And I want you to find out what is the interest amount that the Canadian government pays on its debt. Now you've got to remember that that interest rate right now is quite low. Okay. And let's say we have an interest rate of 0.25% and the interest that is paid on that debt is $1. And the interest rate goes to, let's say, 0.5%. That means that interest that's going to be paid is let's say approximately $2 That can be a huge change depending on what that rate is. And if you find out what that answer is, and you send me a tweet or you send me a message on Instagram at @Qmanrei, I will send you a free copy of the book of your choice that I've written. So the first person to do that I will send you that book…”

Important Links:

• https://www.instagram.com/qmanrei 
• https://EducationREI.ca
• https://GetRealWealthy.com
• https://DurhamREI.ca

In this episode of Get Real Wealthy Season 2, Quentin talks about making your mortgage tax-deductible.

Quentin says that this episode is specifically for Canadians. As for the Americans listening to this, their principal residence mortgage is already tax-deductible. One of the ways to convert non-deductible debt to deductible debt is by using the Smith Maneuver strategy. There are a few different things that you want to consider when it comes to this strategy. Number one, talk to your accountant and make sure that you get professional advice. Then, spend some time figuring out what the benefit of this is going to be overtime for you. As for the process, you're taking a mortgage on your principal residence that has a home equity line of credit on it. As you pay down the principal, your home equity line of credit grows. The way that you can do this is by using the home equity line of credit to invest in a rental property. So, when you take the funds from the home equity line of credit, and you use it to purchase a rental property, the interest on the home equity line of credit now becomes tax-deductible.

Quentin adds that there are a number of different things that you can do with rental properties that would accelerate the process of making your mortgage tax-deductible. So, as you pay for the principal residence, the line of credit becomes available. As long as you can do additional payments on your principal in that home equity line of credit, you end up converting your debt quickly from non-deductible that deductible debt. As for the drawbacks, one consequence of the strategy is that the borrower’s net debt remains the same after many years, rather than being paid down. The second drawback is there never really is a strategy to pay this off. The third drawback is that when you decide to actually pay the interest back then you lose that deduction.

In conclusion, he says that this is something that you want to keep in mind, both the benefits and some of the drawbacks associated with this strategy, so that you can make an informed decision that is best for you.

Important Links

• https://EducationREI.ca
• https://GetRealWealthy.com
• https://DurhamREI.ca

Episode Summary

In this episode of Get Real Wealthy Season 2, Quentin talks about negotiating your purchase and sale agreement.

Quentin says that if you're working with a realtor, they'll help you with the purchase and sale agreement. However, if you're going to work on a private sale, there are some typical clauses that you should include. The first would be a financing clause. If it's a single-family home you may have five or 10 days financing clause in order to submit your property to your bank. Then, an inspection clause where you hire a third-party inspector to come in and evaluate the property. A third clause is an ability for both of you to review the purchase and sale agreement with a lawyer, so that it is agreeable both and correct. 

The other thing that you are going to want to negotiate in a purchase and sale agreement is the deposit structure. You might also include some broad terms about fixtures as well. Another thing is the appliances. You want to ensure that the appliances that are there are the ones that you're buying, but they're not switching them out with something else. Quentin adds that if you are just starting out, make sure that you work with an experienced realtor first and also have a lawyer go through the agreement before signing it. 

Furthermore, he says that there are a lot of different ways that you can differentiate yourself in an environment where you have a tight market and you need to give firm offers. One thing would be to include a personal letter to the seller, explaining who you are and the property, and appealing to them emotionally. In conclusion, he says that “You want to be careful. I know you want to buy the property, but you also don't want to overpay. So, you want to not get emotional about winning the deal, but making sure that it makes sense to you financially and that the investment property still cash flows.”

Important Links

• https://EducationREI.ca
• https://GetRealWealthy.com
• https://DurhamREI.ca

Episode Summary

In this episode of Get Real Wealthy Season 2, Quentin talks about seven ways to turn negative cash flow properties into positive cash flow.

Quentin says that the problem with negative cash flow hinders the growth of your portfolio. If you have positive cash flow and even if the value of your property goes down, you would still be able to hold on to that asset for a longer period of time. The other reason is that banks will continue to finance. If you have one negative cash flowing property, maybe two and then you'll get financing because you're betting on the appreciation. You want to have a high debt coverage ratio when you consider rents versus the debts that you have on your asset, and that is why you have to have cash-flowing properties. 

Important Links

• https://EducationREI.ca
• https://GetRealWealthy.com
• https://DurhamREI.ca

Episode Summary

In this episode of Get Real Wealthy Season 2, Quentin talks about vendor take-back mortgages.

A vendor take-back mortgage is when you have financing that comes from the seller. When you have financing that comes from the seller it's usually because the seller has paid off the existing mortgage on the property and it's owned free and clear or they have enough equity in the properties that they could offer you a mortgage in the second position in order to lower your down payment on the property. Vendor financing or seller financing can help you to increase your ROI and also make a deal make sense.

Oftentimes you're including terms in your purchase and sale agreement that outline that the seller is going to carry back the first mortgage or a second mortgage on the property. Your lawyer outlines those terms and can set up a mortgage for you and sometimes people make it out that it's some complex thing and it really isn't. Oftentimes, it's possible to even cover closing and land transfer costs into your seller financing. It just depends on how you negotiate that in your purchase and sale agreement.

There are a lot of different and creative ways to do it. You can take possession of it through the mortgage, you could use a joint venture agreement in order to help you to use the existing financing on a property, and then once the work is done, flip that to either yourself or through a sale to the third party. Usually, it's just what you negotiate with the seller from a terms perspective.

In conclusion, there are lots of benefits for vendor take-backs or seller financing for the buyer and the seller. And it's a great tool for you to include in your toolbox for being in real estate investing. 

Important Links

• https://EducationREI.ca
• https://GetRealWealthy.com
• https://DurhamREI.ca

Episode Summary

In this episode of Get Real Wealthy Season 2, Quentin talks about how to succeed in real estate investing.

Quentin shares some of the things that he has learned over the years and will hopefully help you to get going with your real estate investing. The most important thing before you start investing in real estate, is the mindset. Mindset is important to help you to get to the place where you want to go. There are lots of great books on this topic, such as Mindset: The New Psychology of Success by Carol Dweck. The second one is understanding where you are in the real estate cycle. All markets, all areas go through the real estate cycle. You want to know where you are and you want to have that understanding of the real estate cycle. 

The third is goals. You want to have specific goals when it comes to investing in real estate. Those goals need to be numbered. It needs to be categorized in a way that relates to you. What are the most important things for you and set those goals and write them down. You can use Quentin’s book The Action Taker’s Real Estate Investing Planner to help you with goal setting. The second last strategy is to buy and hold apartment buildings. The last one is, remember that there are tactics used to implement strategies that are out there to help you to get your other goals done. Remember to be proactive, and not reactive.

Important Links

• https://EducationREI.ca
• https://GetRealWealthy.com
• https://DurhamREI.ca

Episode Summary

In this episode of Get Real Wealthy Season 2, Quentin discusses the BIG DEAL Formula. 

There is a BIG DEAL Formula scoring system on DurhamREI.ca, which is a free tool that can be used to analyze properties. In the BIG DEAL Formula, ‘B’ stands for below market value. You want to buy properties that are below market value so that you can have some instant equity. The idea behind this is that you're usually solving some sort of problem. Next, ‘I’ stands for income-producing property. We want to see cash flow, because cash flow helps us to hold on to an asset. If we can hold on to an asset for a long period of time, we're going to be able to see that hockey stick growth.

Lastly, ‘G’ stands for good fundamentals. We want to see an area with a population that's growing, has infrastructure investment at the municipal, provincial or state, and federal levels. The next thing we want to see is job diversity. As for the DEAL, ‘D’ stands for the downpayment. How are you getting the downpayment for your asset purchase? ‘E’ is for equity. You should be equity owners of a property if you are simply getting interest from a private loan, as equity is important to have in any deal.

‘A’ stands for asset value, which we want to build. Adding value is an important part of the BIG DEAL Formula. The last one is location. You can do a lot of things to a property, but one of the things you can't do is change the location. So, having a key location in a good area of town or a city makes it a lot easier for you to see appreciation and growth in an area.

Important Links

• https://EducationREI.ca
• https://GetRealWealthy.com
• https://DurhamREI.ca