The Sylvia Ho Podcast Clients' Mortgage Stories

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Sylvia Ho is joined by Jenny who, with her husband, just purchased their first investment property. Jenny shares the anxiety she had going into the process and how she overcame that anxiety by getting good advice and trusting professionals and her own instincts.

Sylvia learns why Jenny and her husband wanted the investment property; for future retirement security and for additional tax breaks, and assures Jenny those are great motivations. Jenny reveals that her anxiety largely stemmed from it being their first time in the new territory of real estate and not knowing what to expect or how to handle things that came up.

Jenny overcame her anxiety by talking with friends about their experiences, listening to Sylvia’s podcast, trusting their real estate agent, and assessing properties based on whether she would want to live in them or not, to ensure future tenants would feel at home. Sylvia explores all this advice with Jenny and offers additional insight into maintaining landlord books, tax records, and real estate agent costs for finding tenants. This episode shines a light on how a potentially daunting process is made easier with the right research and people guiding your decision and offering support.

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Transcript

Sylvia Ho: [00:00:05] Hey, friends, have you ever wondered how you can pay off your mortgage faster? Or maybe you like to help your kids get into the real estate market, or better yet, retire with some passive income? Well, you're in the right place. Welcome to the Sylvia Ho Mortgage podcast. My name is Sylvia. I'm here to teach you how to achieve your goals simply by owning just one more property. Hey everyone, welcome to the JOMP podcast. My name is Sylvia and I'm going to be your host today. Today we're going to be interviewing a client who just recently purchased their first investment property. So today I want to welcome Jenny. Jenny, thanks so much for coming to the JOMP podcast.

Jenny: [00:00:48] Hi, Sylvia. Thanks for having me.

Sylvia Ho: [00:00:51] How do you feel? You just bought your first place.

Jenny: [00:00:54] I'm actually really excited about it because it's something that we've thought about for a while and now we're finally doing it. Like, it's really exciting, but at the same time there's a bit of anxious and nervous. Like we don't know what's going to happen, but more excited than anything.

Sylvia Ho: [00:01:15] Beautiful. And we're going to talk about the anxiousness, but what got you into the JOMP program? Like you said that you've been thinking about it for a while. Why did you want to do it?

Jenny: [00:01:24] Me and my husband have been thinking about this every so often. It's always in the back of our mind and it's more because for retirement. So every year come tax season, we look at our numbers and we're like, Do we have enough to survive in retirement? Is there anything else we should do to secure that? You know, we're comfortable and we can continue our current lifestyle or even have a little more, you know, because we're in retirement, we just want to chill. So a couple of years ago, we did think about it. And I don't know if you remember, but we did come in and ask Hey Syl, do you think it's doable for us? And at that time you said, well, maybe just have a financial analyst look at your numbers and see if there's other opportunities. So that's what we did. And then the financial advisor gave us the option goal. You know, the market's not too bad. Why don't we just try to invest in other products and see how it goes? So we did that for like three, four years, but things weren't progressing as we had hoped. And we know it's for long term and things usually eventually, hopefully will go up. But it wasn't going the way that we'd hoped. And we're like, okay, let's just give Phil a call to see if this investment property option is still open for us because we don't know, you know, do we make enough? We're not sure where the market is at. So that's when we decided to make the call to you and see what our other options are. And we also wanted to diversify our portfolio with what we already have. So we decided, okay, I'm going to book the appointment, make the call to Sylvia and see where it takes us. And this is where we're at now.

Sylvia Ho: [00:03:01] Okay, that's amazing. So the whole idea behind JOMP is for future retirement security, right? And just to diversify your retirement portfolio as well.

Jenny: [00:03:13] Right.

Sylvia Ho: [00:03:14] Okay, that's great. You had mentioned you are anxious. What are you anxious about?

Jenny: [00:03:21] Well, for me, I'm not familiar with all this whole investment property. I hear about it a lot and I don't actually pay attention to what's going on in the market. Yes, I know there's a lot of condos going up, but no idea of the pricing. So I didn't I'm anxious because I don't know what to expect next. But I think because I have my husband to go through it with me and also because we have you to help us, guide us through, and we have other friends who are going through it. It's kind of helping with that. It's making me more comfortable. I think the anxiety is more like I don't know what to expect and then how to deal with the negative of it.

Sylvia Ho: [00:04:03] Right? And then so basically your mind is like, okay, this is new territory for me. And it's just like now that I have this investment property, what are their next steps and how do I handle things that could happen in the future?

Jenny: [00:04:20] I would go on Google and like listen to other people's stories. And then usually when you do that, it's always the horror story that you find like, Oh my God, is that going to happen to us? Then what do we do? So that's part of it. But I just try to stay positive and my husband is like, okay, you know, we're already in it. Let's just keep going and we have good help on our side, so we'll be fine. So that's why I'm just focused on the positive and go with it.

Sylvia Ho: [00:04:51] Horror stories sell. Humans are attracted to like hearing these horror stories. Right? But we don't hear a lot of, like, the positive part of things, right? Yeah, there are horror stories, but it's not like it's the first bad thing that's going to happen to you like it's happened to other people. So we can learn from other people and what they've done.

Jenny: [00:05:12] Right? So that's kind of what I did too. So I was like, Oh, and I asked my friends who have investment properties, has this ever happened to you? What would you do if it did happen to you? So instead of just focusing on those horror stories. It's just like buying anything. Even when you buy something off Amazon, I would look at all the reviews and then decide, okay, if this were to happen, what would I do? If I do get a bad tenant, you know, what are my options? And then after I do enough research, okay, it's not all bad. And even if it is bad, there's a way to work it out, right? So that's why I'm, like, more comfortable, more confident about it.

Sylvia Ho: [00:05:49] Okay, wonderful. So now that you bought your first investment property, how did you decide on this particular property? How long did it take you to find it?

Jenny: [00:06:00] Actually, we were really lucky. We didn't really look at too many, but like I said, I hadn't really paid attention to the real estate market, so we weren't sure what location we'd want. But we decided to go in a location that we're familiar with, right, because it's hard to sell something that you're not familiar with or you don't know about the location. So we decided to buy where we did because it's kind of close to where we are. So if there's any problems, we figured we can get to the condo quickly and fix or see what, you know, go there and fix it or be there quickly, basically. So, and we also have a friend who's a real estate agent, and she helped us through it. She gave us options. And then we decided on the location based on the price. And we want to start small, obviously, and within our budget. So the main goal was try to stay within our budget and then in a location that we're familiar with. So we pick one weekend we went to see four condos. Actually three of them were in the same building.

Jenny: [00:07:07] So we were able to compare within this building what there was. There was a studio and then there was a slightly bigger studio. And then there was like one that was a little older, or you can see that it was lived in, but the view wasn't good. But we saw three different things and they all had their own characteristics. And then we thought, Hmm, would someone want to live here or even would I want to live here? I know in the back of my mind, or people keep telling me, Don't worry, you're not the one living it. But at the same time, I want them to be comfortable. So that's what I went through when I was looking at the different properties. And the one that we decided on was like, Actually, this is somewhere I would want to live. So even when I'm selling it, I have good things to say about it. And it's not like I wouldn't be ashamed to sell it to someone. Or have someone live in it, I was like, you'd be comfortable. I'd be comfortable, you know?

Sylvia Ho: [00:08:08] Excellent. I really love your thinking in regards to future planning as well. Right? Is that okay if I were to sell this condo back out, what are the things that I like about it? And then just making sure that, you know, you're taking care of in the future as well, like the exit plan.

Jenny: [00:08:24] Mhm. It's kind of like I want to be very upfront about what I'm offering out there, right? And I want people to come and see it and go, oh actually it's so small or it doesn't have enough storage, so I want to make it so they, it's attractive.

Sylvia Ho: [00:08:42] Yep, yep. Yeah, yeah. It's like your selling point, right? Like, if it's, you want it, you want to be able to make sure you can sell your tenant on it and also sell in the future as a selling point, right? At the end, like what you're doing is you've created your own business. This is your landlord business, right? So you're thinking of it from a perspective of, Hey, I'm getting into this investment. How do I, you know, create this investment and make money on this investment and attract the right clients, right? And then what is my exit plan? So basically, that's what you've done. You've started this landlord business of yours.

Jenny: [00:09:18] Mhm. I kind of tried to put myself in a user's point of view. It's like if the view is ugly, do I want to come home and look at this every day? No. Everyone wants to come home and be comfortable at home. So whether it's a tenant or a future buyer, you know, same.

Sylvia Ho: [00:09:35] Yeah, perfect. So you're basically telling me in one weekend you went to go see four properties and you bought right away.

Jenny: [00:09:44] Pretty much. Because, oh, so before we went out to look at properties, obviously we had to make sure we had enough for the down payment. So in that process I started to look on the websites and I was like, Oh, here's a good one. But then in the blink of an eye, like two days later, it was gone. I'm like, Oh my God, I think, do we have to act fast? Like, is this how it's going? Like all those, oh, and also because of the bidding war situations a couple of years ago, I was like, Oh my God, are we going to have to go through that? So that's why like we're the type that as soon as they saw something we liked and it was within budget, we're like, okay, let's not waste time and let's just do it, you know? Because again, time is also money. So the sooner we keep the ball rolling, let's say then, yeah, then we can just get it over with.

Sylvia Ho: [00:10:34] I love your whole process and thinking, I know you'll be an awesome landlord. You're running your business exactly how you should in the sense that you're thinking about, you know, who's going to go in there and what's going to happen and, um, and how to take care of your property. Now, the question I had for you is you mentioned studio versus a one bedroom. How did you choose one over the other?

Jenny: [00:10:54] Oh, again, I went with my, Is there something I want to live in? Like, okay, studio, it's nice and cozy, but at the same time I was like, It's just a small box. Like would my tenant be comfortable living in here, are they going to feel claustrophobic? I might be a little. And then with the one bedroom, they were still a little small, but I felt it would give them a little more segregation and feel more at home. Like I like the coziness.

Sylvia Ho: [00:11:25] All right. Okay. Love it. Love it. You're basically, you're constantly putting yourself in the tenants' shoes and I love that. I love that. What recommendations or advice would you give other first-time investors in the process of buying?

Jenny: [00:11:39] I think the most important thing, and maybe I didn't do enough, was still do a bit of research before you jump into it. Maybe that's where some of my anxiety came from because I didn't know enough before I went into it. And so I feel like, it's just like anything else. If you do enough research, you know what to expect and then you weigh out your pros and cons. Also, I think it was really important to find people who have gone through it and ask them for advice. Because I remember as we were going through it, I also listened to your podcast about someone who just went through it as well, and they had the exact same questions that I had when I was going through it, and I was like, Oh my God, there's other people with the same questions going through the same thing. So I really think if I did more research, it would help a lot to know what's to come and how to prepare yourself for things.

Sylvia Ho: [00:12:31] Wonderful, wonderful. Anything else that you want to add maybe about the mortgage process or about buying process or about this whole JOMP program?

Jenny: [00:12:41] The whole mortgage process because you have always been my go-to for my mortgage, that part was really easy. But at the same time, yes, it was a lot of paperwork and I'm the type that likes to stay on top of it. So for us, as soon as we got your homework list, we stayed on top of it and it made the process really easy. You know, it's just a checklist. You know, you check everything off and done. So I say it's like, stay organized and it will be an easy, smooth process.

Sylvia Ho: [00:13:11] Beautiful, beautiful. Thank you very much for that. We love our checklist also. And we find that a lot of clients love checklists as well. Now, last question before we end this podcast. What's one piece of advice you would tell your younger self?

Jenny: [00:13:30] I would tell myself, don't wait. I mean, honestly. Yes, you don't know what's going to happen, but if you don't try, you really won't know what's going to happen. Even though we did it like probably ten years later than we'd wanted to, it's not bad, but I wish we would have started earlier.

Sylvia Ho: [00:13:53] You're going to be closing on your property soon. I just wanted to give you like a little bit of advice in regards to, you know, getting the property ready for your tenant. Before I go into it, what did your realtor recommend for you to do?

Jenny: [00:14:04] So the condo that we bought is in a building that it's not very big and there's not too many units. So she just suggested, to make our unit stand out a little more, to rent it out furnished. And then we can also hopefully get a bit more rent out of that.

Sylvia Ho: [00:14:21] I love that idea. So in regards to furnishing the unit and then just getting a little bit more, like are there a lot of listings that are for rent in this building or are there not? Like, why did she recommend that?

Jenny: [00:14:34] Um, yeah, actually, there's quite a few. So that's why she suggested it to make it stand out a bit more. Um, and then hopefully we can also attract the other tenants who just want to pick up and move in and not have to deal with all the furniture buying themselves and then, you know, I don't even know if they'd like to put furniture together. But it's more for convenience. Just pick up and move in.

Sylvia Ho: [00:14:59] Okay. I like that idea because you can definitely attract a different type of clientele where you can get a little bit more money. Right? And then eventually get your money back for the furniture. Now, we were talking about like booking the elevator. So my understanding is, is that you can book the elevator ahead of time. You just have to call the management company because I'm sure you're not the first person wondering if you can book the elevator to move your furniture in.

Jenny: [00:15:25] Yeah, for sure, because we're closing on a Thursday and obviously I want to get our unit out on the market as soon as possible. And because we've decided to furnish it, I mean, timing is everything with the delivery, but I wasn't sure if we can book the elevator even before we close. So if we can, that would be great. And we can just get in there on the Friday or even the weekend and hopefully get it furnished and then get the listing out.

Sylvia Ho: [00:15:50] And get it up on the market. Now, in regards to getting it up on the market, are you going to try to do it yourself or are you going to go through your realtor?

Jenny: [00:15:56] We're going to go through a realtor because, again, this is the first time and we just want to get everything done properly and not be surprised by certain rules or things that we're missing or even missing out that would benefit us. So I would suggest if you're unfamiliar or if it's your first time to, you know, like maybe I don't know if you have to pay them, but I would suggest go with a professional first.

Sylvia Ho: [00:16:21] So typically it's one month's rent if you're going through a realtor here in the Toronto area. So if you're renting the place for $2,300, they'll take $2,300 and they'll split it between the two realtors, the listing realtor and then the realtor who found you the tenant. So that would be what they would charge you is one month's rent. Because you're buying furniture, you're going to have expenses. So being a new landlord, very, very important to keep track of these expenses so that when you do your income taxes in April, March/ April, you have these expenses ready for your accountant. There are different ways to do this. How I do it with my properties is I have one credit card that have all my rental expenses on it. When and if I got audited by CRA, I just show them my one credit card and all the expenses on it. That's one way. Okay? Because CRA at times will say, Oh well, how do you know that this is for your rental and not for your personal? Like if you're buying a bed at Ikea, how do we know that you set that to the rental property and not for yourself, right? So little things like that. So that's what I do is I keep my credit card separate. Now I own a lot of properties and sometimes it's not feasible to have a separate account. So the other thing that you can do is with your rental landlord business, have a landlord account and then you could always, like when you pay something, you could always debit that account or just pay directly from that account. Okay? Those would be my two recommendations. But definitely, definitely, definitely keep all the receipts. I hate paperwork. So what I do is you can take a picture of the receipt and then save it to your phone in your favorites under, like the rental.

Jenny: [00:18:03] Mhm.

Sylvia Ho: [00:18:03] So that's one way to do it. Or you could just save the physical copies of it. And then the other thing is travel, talk to your accountant about these things, but if you're travelling, like say some new landlords on a monthly basis, they'll go and see on a quarterly basis, they'll go and check out the tenant, Hey, we're coming down. We just wanted to pop by and just make that aware to your tenant that, you know, every quarter you're going to come by and just make sure everything is working well. So you can now start expensing like gas and a bit of your insurance and maybe your cell phone bills and advertising and internet and stuff. Again, ask your accountant. But for me, those are expenses that I can deduct off of my income taxes. Yeah. So just have a separate account, that would be my recap. And then just make sure you track your expenses so that from now on your expenses are tracked and then you can have more deductions and therefore pay less to the government because who wants to pay more income taxes to the government?

Jenny: [00:18:54] That was another reason why we're doing this.

Sylvia Ho: [00:18:57] Okay. Tell me more.

Jenny: [00:18:58] Part of the whole diversifying our portfolio and to potentially pay less taxes. So me and my husband were just 9 to 5 jobs, you know, so all we had were our RRSPs. Was that enough? I mean, you can only deduct so much. So what are other ways? What are other tax-saving ways? And then this came up.

Sylvia Ho: [00:19:19] Right, right, right, right. Yeah. So a lot of my clients are T4'd individuals and this whole new world of other tax deductions is new to them. So I'm really, yeah, I'm really excited for you to be able to see the difference in less taxes being paid. So that that's awesome. That's awesome.

Jenny: [00:19:35] Always great.

Sylvia Ho: [00:19:36] Yeah. Keep the receipts and then make sure you keep your landlord business and your personal stuff very, very separate. Because when your accountant is going to talk to you about this, you want to make sure that you're well prepared. But I know you, Jenny, you are very organized that way, so I'm sure you will have no issues. And if you're not working with an accountant, please start thinking about an accountant next year. I can refer you my accountant. But this is a time where you want to start using an accountant for T4'd individuals. You may not have all the deductions. Well, you don't have all the deductions, so you just kind of maybe do it on your own. But at this time, now that you're having a landlord business, you want to use a professional accountant to do your income taxes each year. All right?

Jenny: [00:20:17] Yeah, good to know, because we were always the terrible tax people, do it ourselves. I did consider, so next year, should we just keep all our receipts and try to do it ourselves? But since you're saying, well, actually, I said it myself, always, since it's our first time, go with a professional. You're right.

Sylvia Ho: [00:20:35] Exactly. Yeah, go with the professionals because they know, like, deductions that you're like, oh, I didn't know I could deduct that. Right? So work with an accountant for sure. Thank you very much, Jenny. We really appreciate your time on the JOMP podcast.

Jenny: [00:20:49] Thank you, Sylvia.

Sylvia Ho: [00:20:49] So friends, we just heard from Jenny. She purchased her first rental property with her husband. In this podcast, Jenny shared her experience about her anxiety that she was going through, but was able to overcome that anxiety by getting good advice and surrounding herself with the professionals and really using her own instinct. Even though Jenny and her husband invested with a financial planner and put their money into stocks, they believe to better well-round their portfolio was to also put money into real estate as well. They're really, really excited about this. If you guys have any questions in regards to, you know how to get into your first property, please connect with me. I look forward to chatting with you.

Sylvia Ho: [00:21:29] Hey friends, thanks so much for listening to the Sylvia Ho Mortgage podcast. We'll catch you on the next episode. You want to learn more about the JOMP program, please connect with me at SylviaHo.ca. Love to hear from you. All it takes is 15 minutes for us to chat to see if this will work for you. Thanks, guys.

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Sylvia Ho is joined by tax planner Lisa Ryckman of Plan With Pathway to talk about income taxes for landlords. Lisa details the top three mistakes landlords make when filing their taxes and explains why those mistakes can be costly.

The three mistakes are 1) not tracking expenses properly, 2) not recording all deductions, and 3) not tracking mileage. Sylvia and Lisa discuss each of these mistakes in depth so landlords can understand exactly how much money they are potentially leaving on the table by making these mistakes. Lisa helps clients through these roadblocks every day and can walk anyone through how to properly track items.

Sylvia learns what happens when a new client calls Lisa and what they can expect when booking a meeting with her. She also finds out what software Lisa recommends for bookkeeping needs, how to build good tracking habits, and when the best time to start tax planning is. Lisa can assist landlords in becoming organized and claiming all vital deductions on taxes so their real estate endeavors are on strong footing at tax time.

Sylvia Ho: schedule a call | facebook | linkedin | youtube | instagram

Lisa Ryckman | Tax Planner, Plan With Pathway: phone (226) 894-3635 | email | website | linkedin

Transcript

Sylvia Ho: [00:00:05] Hey friends, have you ever wondered how you can pay off your mortgage faster? Or maybe you like to help your kids get into the real estate market? Or better yet, retire with some passive income? Well, you're in the right place. Welcome to the Sylvia Ho Mortgage Podcast. My name is Sylvia. I'm here to teach you how to achieve your goals simply by owning just one more property.

Sylvia Ho: [00:00:28] Welcome to the JOMP podcast. Today we have Lisa, and Lisa is a tax planner. She's been working with clients for the last 15 years, and she's also a partner at the Pathway, which is a full cycle tax and accounting firm. Today, she's going to talk to us about the three biggest mistakes that landlords do when they file their income taxes. She specializes in advising small businesses and property owners how to maximize profits and minimize taxes. She's a natural connector and loves bringing people with a need to others who can solve that need. In her free time, Lisa enjoys spending time with her family, her plants, reading fantasy novels, and finding new ways to make her home a more inviting space for her friends and her husband, who is her partner in her business and her four cats. Welcome, Lisa, to today's podcast.

Sylvia Ho: [00:01:19] Hello everyone. Thanks for listening in to the JOMP podcast. Today we have Lisa Ryckman here. Lisa, welcome to the podcast.

Lisa Ryckman: [00:01:27] Hi. Thanks for having me.

Sylvia Ho: [00:01:29] Thank you for being here. So, Lisa, talk to me a little bit more about what you can do to help my clients. Like a lot of my clients are landlords and landlords are running a landlord business. A lot of my clients are T4'd individuals. They don't know what it's like to, you know, file income taxes with expenses. Right? It's like, what? What do you mean, what are you talking about expenses? My expenses are deducted on my paycheck every single time I get paid. Right? So as a tax planner for the last 15 years, what would you say are your top three mistakes made by landlords? Let's start with mistake number one first.

Lisa Ryckman: [00:02:09] So I'd have to say there's a number of challenges because I always track everything that everybody's doing. So if you come to me as a brand new, fresh landlord, if you just purchased a property, then I'm going to walk you through what my expectations are and we're going to talk about what expenses I want you to track. And we're going to have a couple of meetings to actually go through that. So I'd have to say first thing out of the gate would be just based on purchase, right? So if you purchase a property, you are going to receive closing paperwork. And a lot of people, they're either not reviewing that paperwork or they're either not separating the expenses and they're giving me a clump. So I'm just getting this one total. And one of the problems we have with that is, you know, we've got categories that we have to define on the tax software because Canada Revenue wants to understand, oh, you have $50,000 in expenses. Well what is that? Can you break that down for us. Right? Because we always want to avoid an audit. One of the key pieces that I find is that people are always trying to write off their land transfer tax, and you're not allowed to do that. So I want to be able to make sure that you have everything tracked correctly. So I'll provide you with a spreadsheet if you want to use it. You can, if you don't, don't. If you want to use software, please go ahead and purchase something that works well with you and your personality.

Sylvia Ho: [00:03:43] You're telling landlords to, you know, track your expenses. And one big part of that expense is being a new landlord is the legal fees that you are paying, the land transfer taxes that you are paying, probably some accumulation of property taxes that you paid at the lawyer's office, but not with your property tax bill because it's on the lawyer's bill. Right? Because the other old, the old owners paid it. So stuff like that is just tracking all of that paperwork. And you'll provide as a tax planner, you have a consultation with a landlord and you help them, you give them, would you say, a spreadsheet for them to track all of those things?

Lisa Ryckman: [00:04:21] Exactly that. And I'll ask for that final closing paperwork as well, so that I can take a review and see if there's anything that's amiss so that, you know, we don't have any blended numbers.

Sylvia Ho: [00:04:33] So tracking expenses properly, that's a big part of running a brand new landlord business. And then the big takeaway right now guys, is if you just bought a property, a big chunk of your money is going to pay land transfer taxes. And right now what you're telling us is that land transfer taxes is not a deduction.

Lisa Ryckman: [00:04:55] That is correct, Sylvia. You can't, it is not a deduction.

Sylvia Ho: [00:04:59] Okay. What's mistake number two that landlords have to look out for?

Lisa Ryckman: [00:05:02] Oh not recording all their deductions. I find that there's a fear. So there's a huge fear with people. They're either in two categories, they're in, I don't care if I'm reviewed. I'm going to write off absolutely everything. And then there's the, I'm afraid of Canada Revenue knocking on my door and taking my home. So I'm not going to write off everything that I have. And I hear that all the time. Eligible expenses. You have an eligible expense, your opportunity is to write that off. So let's utilize that. So it's getting over that fear. And I find that most people do have a slight fear of Canada Revenue and making a mistake. But lo and behold, what I found over the last 15 years is they're actually quite lovely to deal with. So I've never had anybody yell at me. I've never had anybody scream at me. You know, they're there to help you work on the problem and get it fixed. So if you make a mistake, then there's always a way to back it out and to fix it. So if last year you did your own taxes and you didn't, you know, file all your expenses and you came to me this year, then I would ask you, based on what I'm looking at, well, how come you have $5,000 more than this year over last year? Because I always take a look at last year and do a comparison. And if you tell me, well, I didn't write it all off, I'm going to say, okay, we need to take advantage of the opportunities. So let's go ahead and make an adjustment. Right? And so then we can go back and we can file an adjustment so that you can capture that expense deduction. And we'll also have the paperwork to back it up. So as long as you have the expenses, the expense paperwork to back it up, then there's no reason why we can't fix it.

Sylvia Ho: [00:06:57] Okay, so you're saying that there are clients that like to expense everything, and that's me. I'm like, here, take it all, expense it all. And then there's other individuals where I never thought about which are scared for eligible. They don't do all of their deductions. So then my next question to you is, as a new landlord that is not used to deductions, what are the eligible deductions that landlords can make?

Lisa Ryckman: [00:07:25] Oh, all the utilities that you're paying on the building, that's a huge one. So even if you have your your tenants paying for their hydro, most likely you're paying for the water. You know, you're paying for the sewage. So you need to remember to keep all of your statements. And if you don't, then that can be a problem in the future because we need to keep them for ten years. Oh mortgage interest, huge. So a lot of folks that I've bumped into have been calculating the mortgage that they're actually paying on the property, rather than taking a look at their final mortgage statement that comes out in January for December. So it'll itemize exactly how much mortgage interest you paid on that property. And that could be really huge. Your property taxes are going to be large, but your mortgage interest is going to be bigger. And so if you have 11,000, 12,000 even, of course, if you're a landlord, you're going to have a bigger number than that, right, of mortgage interest, so that could scare people. Major renovations. Right? So if you have somebody, if you're, you know, you have a triplex and you're redoing it one unit at a time, then you could have so many different expenses. And that's where you really need to sit down and figure out your own personality and how you are most comfortable with tracking all of those types of items. If you're not a spreadsheet person and you'd rather just, you know, log everything in a notebook and keep a shoebox with you, that's fine, but at least put things in envelopes and divide them by categories, right? And if you need assistance with that, then I can certainly help you.

Sylvia Ho: [00:09:13] What I hear about eligible expenses is definitely the interest that you pay on the mortgage, on the rental property. And that number is dictated on the annual mortgage statement that we get from our lenders every January, February time. Utilities are are another expense. Property taxes are another expense. So keep all of those bills. Any kind of major renovation bills, keep all of those. So my question to you is as a new landlord, how about like internet or like advertising or... supplies. How about those kind of things? What are your thoughts on that?

Lisa Ryckman: [00:09:52] If you're out of pocket expense for your tenants, if you're paying for the internet, then absolutely. If it's for you personally, well, it depends how many units you actually have as to whether we're going to write off home base expenses. Supplies...

Sylvia Ho: [00:10:07] Let's talk separately, separate. Let's not talk about a home and rental. Let's just keep a rental on their own, because that's what a majority of clients are. Yeah.

Lisa Ryckman: [00:10:16] So if you have supplies that you need to purchase for that space, then absolutely go ahead and do that and go ahead and write off that expense. If you're, for instance, taking care of the yard work, right? Then you need to purchase fertilizer. You need to make sure that you maybe buy some seed for the grass. You know, there could be plants that you'd like to put in, do your own landscaping. So there's definitely supplies that you can purchase, salt, things like that. Anything that is the cost of doing business, you've got to think of it that way. You now have a business and there's an ownership that you're taking there, right? So any time that you spend money, I would keep the receipt just in case it actually is an expense. Here's one, if you go to Costco and you're purchasing things from Costco for your business, then of course that Costco membership is an expense. It's a write off. So you need to remember that, you know, you've got to keep that receipt when you go ahead and you pay for your membership on it on an annual basis, and the mileage that goes along with that. Right? So if you're going to Home Depot and you're doing all of these trips because you have things to pick up, because you've got to take care of your property, and perhaps you're just putting in a new tab and you went to Lowe's then, you know, yes, you've got the receipt for the supply, but you also need to make sure that you track your miles, because it's important that you don't forget that piece. And that's probably another challenge that I would say that I have with my clients is their mileage tracking.

Sylvia Ho: [00:11:53] Okay. And I'm assuming that, you know, as a client speaks to you and hires you as their tax planner, you'll give them the tips and tricks in how to do all these things.

Lisa Ryckman: [00:12:02] Oh absolutely.

Sylvia Ho: [00:12:04] Beautiful. Okay. So I hear challenge number one is tracking expenses. Challenge number two is actually not claiming all of the expenses, right? So mistake number two, so what would you say to a brand new landlord would be mistake number three that you're, like, please stop doing this. You're leaving money on the table.

Lisa Ryckman: [00:12:22] Oh it would be mileage. It's huge. It's huge. Yes. I'll give you an example. Can I give you an example?

Sylvia Ho: [00:12:28] Yes.

Lisa Ryckman: [00:12:29] So I have a client that I took on a couple of years ago that purchased a property in Woodstock, and that was great. They live in Brampton. They didn't keep track of everything. So you can imagine the distance between Brampton and Woodstock. So they weren't tracking the amount of times that they actually went there. And they went there quite often because they needed tenants and they needed to let the tenants in. And, you know, you're trying to rent your space, but, you have to be there. And, you know, people don't show up, so, okay, people don't show up. So then you have to drive back to Brampton, but you still were there for a specific reason, right? So if you don't keep that tracking then you've just driven your van, which is, you know, not a small vehicle, to Woodstock. You've lost the kilometers on that. The other thing that I'm finding with the mileage is people don't keep their gas receipts, and I need them to keep their gas receipts for their vehicles.

Lisa Ryckman: [00:13:31] So this client ended up buying another property. The second property was in Ingersoll. It still is. And they were back and forth. Brampton. So Brampton to Ingersoll, it's even a further distance, not tracking the miles. So they're a little bit behind in their tax filing. And so we've had a number of meetings, and this is recent because I'm asking them, Okay let's go back. Let's go back, right? How many times did you actually drive to Ingersoll to let tenants in? To let a prospective tenant in? To have a viewing? What did you fix? Were you there for the plumber? What were you in Ingersoll for? What was that specific reason for the trip? And I cannot tell you, we are at 1000km, of course, already, and we've just talked about a couple of trips. So, you know, if you think about it, each trip that you take, I can probably capture $0.61 per kilometer. So. Every hundred makes a thousand. And if you're looking for a really good refund at the end of the year, one of the places that I'm going to look is it's going to be your mileage, right?

Sylvia Ho: [00:14:53] So it almost sounds like, as you're talking, it almost sounds like makes sense to keep record of it. Right? Of what you're doing when you're doing it. Or maybe, I don't know, I just thought about like a little book in your glove compartment. Like, if you are doing these things back and forth, just keeping track of them.

Lisa Ryckman: [00:15:10] We have mileage logs!

Sylvia Ho: [00:15:11] Okay, obviously I don't use them. Um, okay. So that sounds good. So mileage, keeping track of expenses, making sure you write off all of your expenses, would be your top three. Now, as a tax planner, what would a typical client look like for you that you're like, hey, this is a client that I can help, that I can work with, if someone was just going to give you a call and say, hey, my name is Sylvia, I heard you're a tax planner. Tell me, what do you do, Lisa?

Lisa Ryckman: [00:15:40] Well, the first thing I do is I interview the potential client and see exactly what it is that their challenges are. Right. So they're calling me for a reason. And, you know, it may be just to prepare their taxes, but most people have a lot of questions for me. They have something. There's something that they've wanted to know or something that's been bothering them, and they need to understand it. Or perhaps they don't feel that their tax refunds have been substantial enough. I had a client a couple of months back who contacted me. They're involved in a leveraging situation, and they had a feeling that they just weren't getting a big enough refund on that leverage side, and they wanted me to review their tax returns. So that's what I did. So I took a look and they were getting excellent refunds. So it was just being placed on a different side of the tax return. And so because they couldn't see it, it was, and it dawned on me when I looked at their tax return, I went, oh, they only received a 43 cent deduction. Why could, why is this, right? So this is what concerned them, they're like $0.43. Why am I only getting $0.43? Well of course that's a huge red flag. But it was on the other side of the return. So, you know, I pointed that out, walked them through it, explained how the accountant at the time justified the expense, and there was nothing wrong with the way it was prepared. It was just pivoted on to the other side, and they just needed to understand why. And so we just went through it. And so they're happy, they have their answers, and I'll see them at tax time. So I'll have a new client.

Sylvia Ho: [00:17:25] Okay. And then so you'll have a chat with the client, you'll answer their questions, you'll review their tax returns, and then you prepare their tax returns during tax time. So the busy March / April time. Right? And then you'll actually file the income taxes for them.

Lisa Ryckman: [00:17:42] We're going to have a meeting, though.

Sylvia Ho: [00:17:44] Have a meeting.

Lisa Ryckman: [00:17:44] So that's one thing that I absolutely insist on, is that we have a meeting. So each and every year we need to have a connection because I need to understand what's changed in your life. So I have no idea if, you know, your spouse has passed away, if you've had another child, what's going on in your world? Have you started a new job? Is there something new in your life? Right? And why is your tax return not as high as last year? So how come your expenses are down? So I need to understand that.

Sylvia Ho: [00:18:18] So having a meeting. So when you're talking about having a meeting, is that a face to face meeting or is that a Zoom meeting? Because a lot of my clients are here in Toronto and I know you're you're outside of Toronto, correct?

Lisa Ryckman: [00:18:28] That's true. So I had potentially maybe five face to face meetings throughout tax season. All of the rest of them were virtual. So the pandemic has been, that's a positive thing with the pandemic is most people want to actually have that virtual meeting now, which is fantastic, and we can do that at any time. So during tax season, I expand my hours. So I'm available from 7:00 in the morning. If you want to talk at 7:00, I'm available. And you know, we can chat at seven at night and we'll go through and look for opportunities because that's what I'm looking for. So I'll take you through a list of items. So if I send out a list to every single person that books a meeting and I want you to complete that list, and if I look at your tax return and I've known you for a couple of years, then I'm going to ask you, like, what are we doing here? How come we don't have any investments this year? You know, this is something that you normally do and, you know, so we'll have a good conversation about potential opportunities, where you want to see yourself in the future. Do you have, you know, retirement planning happening, and if so, then here's an idea for you as to what that's - so this is the tax planning part. So I'd rather take time to do some tax planning and conduct some tax planning with everybody. If they send me everything in advance, then we can spend our 20 minutes chatting and getting some planning done, and then we'll go from there if they want further consultations and we can book some.

Sylvia Ho: [00:20:11] Okay, so in regards to planning time, when is the best time to start planning for your income taxes? I know everybody's scrambling and like - well, I'm scrambling, I don't know about everybody else - scrambling in March / April to try to meet that, you know, end of April deadline. I'm assuming that there's probably a better time to do that kind of planning? You tell us listeners, when is, in your opinion, is the best time to do this kind of conversation planning? Do we wait all the way to tax time or do we do it earlier? Like, do we do it now?

Lisa Ryckman: [00:20:41] Yeah, I think as soon as you have that thought that you're questioning yourself, when do I do my planning? Then you have a chat with me, right? And because a lot of it has to do with bookkeeping, right? Getting everything set up, getting getting everything organized, understanding yourself, how you track stuff. So you know it has to be based on your personality, not mine.

Sylvia Ho: [00:21:09] So whenever a client is thinking about, okay, it's it's time to start thinking about am I doing this properly? Am I running my landlord business properly? That's when it is a perfect time to have that conversation with you. You brought up bookkeeping. I hate bookkeeping. I've been doing bookkeeping for years and years. It feels like decades, and I'm just like, I've just never found the perfect way. I used to do it all by paper with a shoe box. And then I went on to excel, and I thought I was really, really smart. And then Excel blew up on me. And now I'm using the online version of QuickBooks. Right? So what is your opinion like for a new landlord to start? Just start simple or actually go to a QuickBooks situation?

Lisa Ryckman: [00:21:53] I'd go to a QuickBooks situation.

Sylvia Ho: [00:21:55] Okay.

Lisa Ryckman: [00:21:56] Yeah. So it's very inexpensive. So you do need expenses when it comes to your landlord business. So there's a number of different QuickBooks versions, right? I certainly wouldn't start with the lowest version which is $16 a month, but I would go to the next version. So QuickBooks Essential is I think $28 a month through us. So we resell it. And so it's a lot, it's less expensive than it is online. But QuickBooks, you know, gives you an opportunity to actually try their software. So you can go and try it, get it for a really good price for six months, and then you have to pay full price after that. But, you know, you don't lose your data. So if you decide that you don't like it, your data always has to stay in QuickBooks. So they're not going to throw it out on you. And if you, you know, the software, you decide later on, well, maybe this is what I need to do. Maybe my wife's going to take care of this for me. And she likes QuickBooks so... or my partner, whatever the situation is, you know, I think that it has a lot of value because if you're the kind of person that you go to the gas station and you have a gas receipt, or you go to Lowe's and you purchase something, you have the opportunity with QuickBooks to download the app to your phone, and you can take a picture of your receipt and it's going to upload it to your account. So that's really nice.

Sylvia Ho: [00:23:21] So no more shoeboxes.

Lisa Ryckman: [00:23:22] No more shoeboxes.

Sylvia Ho: [00:23:24] Or piles of receipts.

Lisa Ryckman: [00:23:26] Nope.

Sylvia Ho: [00:23:26] And it's only 16 bucks per month or $28 per month.

Lisa Ryckman: [00:23:32] Yeah, $28 a month. So you know, you've got, what, a $300 expense at the end of the year. You got to think about it this way. How much is your time worth and how much frustration are you actually going to be going through when you're trying to manage your books? So some people like the spreadsheet option and going and writing it all in. I like the report option. I like to go into QuickBooks, and I like to pull up a report so that I can see your profit and loss, and then I can see the areas that potentially you might be missing opportunities, and then we can have a discussion about that. Because if your goal is, you know, potentially you own ten properties one day, you know, you might want to be a real estate mogul, who knows? And if that's your goal, then you need to be super organized in a different manner. And so we need to make sure that you set yourself up for success at the beginning, right? So if you start a habit at property one, by the time you get to property ten, you're going to be teaching that realtor all your tricks about how you're running your realty business, right? Exactly.

Sylvia Ho: [00:24:49] Okay, beautiful. Now, Lisa, for the listeners out there, how do we get hold of you? Is it the best way, is that via email? Is it phone number? What's the best way to get hold of you?

Lisa Ryckman: [00:24:59] Oh, email is fantastic. If you're a phone person, you can call me. Leave a message though. So it's Lisa at... so it's Lisa@PlanWithPathway.ca.

Sylvia Ho: [00:25:14] Lisa @ plan w i t h p a t h w a y.ca.

Lisa Ryckman: [00:25:23] Correct.

Sylvia Ho: [00:25:23] Okay. So, Lisa@PlanWithPathway.ca. Okay. And if they're not the type of person that likes to do email because they're like, I really want to just talk to someone on the phone. What is your number?

Lisa Ryckman: [00:25:37] (226) 894-3635.

Sylvia Ho: [00:25:42] Okay. And they could just leave a message there if you don't pick up.

Lisa Ryckman: [00:25:44] They can leave a message. And I love technology changes. So this is actually our office line. And so you can text if you want as well. So I find that very convenient. If they would like to text they can, if they want to call and leave a voicemail, they can. Whatever they'd like to do. We'll get back to them.

Sylvia Ho: [00:26:02] Excellent. Thank you so much, Lisa. Before we end this podcast, any last minute advice you want to give the new landlords that are listening in today?

Lisa Ryckman: [00:26:12] Don't be afraid to grow.

Sylvia Ho: [00:26:14] Okay. Don't be afraid to grow. Beautiful. Thank you. Oh, sorry. Go ahead. No. Did you have something to add? I just cut you off.

Lisa Ryckman: [00:26:21] I would also like to say, don't be afraid of losses. Because sometimes, yeah, because sometimes you've got to go through losses in order to have, like, a wonderful, bountiful garden of growth. Right? So I think that after speaking to you last week and you talking about landlords who are finding themselves in a position where they're experiencing a lot of loss, if you can afford that loss, you're going to have a wonderful tax return at the end of the year that's going to pay you back for it. So if you can manage the loss for 12 months, just remember your tenants are paying your mortgage. If you let your tax return pay you back for the debt that you've incurred, it's on to the next year.

Sylvia Ho: [00:27:11] Very nice. That ties in nicely with the new program that I have going on right now called Cash Damming. So for you listeners out there, if you are a landlord and you are a landlord that is in negative cash flow and you're trying to figure out how to deal with that loss every single month, and you're just wondering if there is a better way, please be in contact with me. There is a program for you that Lisa totally understands as well, and will put you in a better financial position. Thank you again, Lisa. I really appreciate your time. People know how to get hold of you. If you guys have any questions, do touch base with us. Thank you so much. Talk to you guys all later.

Lisa Ryckman: [00:27:50] Thank you for having me.

Sylvia Ho: [00:27:53] We just heard from Lisa Ryckman. She is a tax planner and she just talked to us about three top tips, mistakes that new landlords make when they file their income taxes. It was really, really eye opening. Even I learned a lot of stuff. So do reach out to her if you have any questions, you can reach her at (226) 894-3635. Again it's (226) 894-3635. She works really well with texting that number as well. Or you can reach her at her email which is Lisa@PlanWithPathway.ca. Again it's Lisa@PlanWithPathway.ca. Talk to you guys later. Bye now.

Sylvia Ho: [00:28:43] Hey friends, thanks so much for listening to the Sylvia Ho Mortgage podcast. We'll catch you on the next episode. You want to learn more about the JOMP program? Please connect with me at SylviaHo.ca. Love to hear from you. All it takes is 15 minutes for us to chat to see if this will work for you. Thanks, guys.

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Sylvia Ho is joined by property manager Sean from the east end of Toronto. Sean talks about how the power of equity from properties he owns has funded some wonderful things in his life. He has valuable advice about what to look for when buying new construction properties and why equity has changed his life.

Sean and Sylvia talk about Sylvia’s recent flood issue in one of her properties and Sean then explains some very important things to look for in investment properties, especially when buying new construction projects. Everything from where the main hot water pipes are located in the building and where the elbow in the kitchen drainage pipe is, to cleanout access point locations. Sean learns this information by asking for the mechanical drawings.

The advice that Sean has about not just inspecting the view, but why you need to consider pipe locations as well as where the unit is compared to amenities access, is invaluable. Sylvia soaks up the information and then talks with Sean about what the power of equity looks like in his life. Find out the amazing things Sean has been able to accomplish and afford through the power of equity. It’s an inspirational episode for anyone considering an investment property or two.

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Transcript

Sylvia Ho: [00:00:05] Hey, friends, have you ever wondered how you could pay off your mortgage faster? Or maybe you like to help your kids get into the real estate market. Or better yet, retire with some passive income. Well, you're in the right place. Welcome to the Sylvia Ho Mortgage Podcast. My name is Sylvia. I'm here to teach you how to achieve your goals simply by owning just one more property. Hey friends, Sylvia Ho Mortgage Podcast. So today we are joined by Sean. He talks about how by having equity, by having properties, you are able to do things that you typically wouldn't do. So he was able to have his dream wedding with his lovely wife and 200 guests in the middle of New York for a whole weekend. So for him, that was a power of equity. If he didn't own property, he would not have been able to have his dream wedding. The second thing Sean talks about is things to look out for when buying a new construction property. As an investor myself that's bought new construction properties, the insight that Sean gives us is immensely helpful. So listen in and let me know if you have any questions. Thanks so much.

Sylvia Ho: [00:01:19] We have Sean here. He is a property manager for actually one of my units that had a huge flood in it. And he was just so nice in helping me navigate this whole what to do when there's water in your unit. And then we got started to talk about, you know, what to look out for for our condo units when you buy them new construction. Sean is a property manager. He's been a property manager, as you said, six years now.

Sean: [00:01:48] Yeah, a little over six years.

Sylvia Ho: [00:01:49] So he's a property manager a little over six years. And he's just going to give us a bit of insight of like, what's been going on after you take possession of a condo unit. So talk to me a little bit more like if someone's buying a new construction property, when we were chatting, you gave this one really, really great advice. I'm like, Oh my gosh, I never thought about that.

Sean: [00:02:09] So here's the management perspective and how it's helped me personally in my own investing. I spent probably four of the last six years dealing with new condominium development with my full time employer, and new properties are kind of a different beast. One thing if you're buying resale in a building that's been around for ten years, it's a completely different scenario if you're buying from a developer or if you're buying an assignment from somebody who just had a set of drawings. And so there's the whole tarry on warranty process that you have to work through. And I would say my perspective as a manager is the average consumer doesn't really understand what they bought. I always tell people a condominium has two things it's units and common elements. So you own your unit, the stuff inside the walls that you're fully responsible for. So even though I'm the property manager, I'm the condominium manager, I'm not responsible for your dishwasher. Right. And so that's a tough message to give to people sometimes when when things break and this is a bit of an indictment on the industry, I would say as a builder - and I'm not one, so don't, I can't speak to this and tell you - this is what I see is you cannot get cheap on the physical construction of the building. Like the steel has to hold up the building. The concrete has to be the concrete. And as the builders gets through the project, then they start trying to save money on things like finishes and fixtures and appliances and stuff like that. So I would always tell a new buyer like, understand when you're buying from a set of drawings and they tell you all about these great European appliances and things like that, expect that they're going to break down in the first couple of years and your warranty's only good for the first year on that. Right? So make sure you have some contingency for those sorts of things. Windows will leak, floorboards will shift and those sorts of things. And typically the builder might have one or two contractor people left after they've given you the keys on the project. And the average high rise in Toronto is three, four hundred, five hundred unit mega-project these days. And you've got one or two people who are here to listen to the concerns of 1000 people. So things don't always happen quickly, and particularly if it's a warranty issue, right? So as the property manager, I represent the condominium corporation. What does that mean? Well, every condo in Ontario gets assigned a number, right? So that number gets done by the land registry office after the builder has sold 50% plus one unit. So when all the units have been handed over or the majority of the units have been handed over, that's when you get into electing a condo board of your fellow owners. And that corporation is a separate entity from the builder. So it gets kind of cloudy in the first couple of years for a buyer of a new property. They look at me as the condominium manager and they go, Well, this is the you problem or this is your fault. And it's like we have to make that distinction between what's the condo's responsibility and what's still the builder's responsibility under the warranty. That gets confusing even for, even for property managers. So that can be confusing sometimes.

Sylvia Ho: [00:05:43] So basically what you're trying to tell me is that as a, I bought new construction properties, I bought four new construction properties myself. So what you're telling me is that, hey, Sylvia, understand the differentiation between what you're buying and what you're responsible for and what the building, the condo, is responsible for and what the builder is responsible for.

Sean: [00:06:07] Exactly.

Sylvia Ho: [00:06:07] They're three different things. It's not all one thing.

Sean: [00:06:12] Right. That's precisely what I'm saying.

Sylvia Ho: [00:06:14] So I learned that the hard way when there was a flood in my unit and I was responsible for the floor because I'm like, Oh, I thought that the floor, because it got flooded, it was part of the condo corp. But that's okay. You explained it to me. You said no, Sylvia, you're responsible for the floor. So we know water is our worst enemy. So one thing you told me was that, Hey, Sylvia, when I go buy new construction properties, I don't look necessarily at the view. I look at what was that called, the...

Sean: [00:06:44] The mechanical drawings. Yeah.

Sylvia Ho: [00:06:47] The mechanical drawings. So they gave you the copy of mechanical drawings?

Sean: [00:06:50] Well, I insisted. The most recent purchase I did was just about three years ago. And this isn't an indictment on the real estate industry, but everybody wants to sell you, like, here's the great water view or something like that. And my strategy going in is this is an investment property. So in as much as I appreciate a good view, I'm not living in it. So I need to be more clinical in my approach here. And so my first question to the sales agent for the builder is I would like to see the mechanical drawings. And she looked at my agent kind of kind of funny and my agent responded to to the seller's agent and said, he's a licensed manager, he knows what he's doing. So can you get the drawings? And what I was looking for is a unit on a floor that doesn't have any pipes running overhead. Because the average person is not an engineer, right? You're a consumer, you're buying a piece of property. And if you're buying in a multi unit facility, what we don't realize is when you turn on the hot water, that water is coming from the roof of the building. And depending on the size of the building, there are series of pumps and motors and that water is in constant motion. And the reason why they do that is if you live on the second floor and that water's got to come from 30 floors above, we want to make sure that it's still hot. It's in constant motion. So some of those pipes run laterally. You see a 30 unit building, but it might actually be like three sections put together from a from a mechanical engineering standpoint. So somewhere in the first half of the building or the first third of the building, there's going to be pipes running laterally through somebody's ceiling that go back up to the roof to recirculate.

Sylvia Ho: [00:08:43] Don't buy that unit, you're saying?

Sean: [00:08:44] I'm saying don't buy that one because...

Sylvia Ho: [00:08:47] You buy the one right above it or maybe two above that?

Sean: [00:08:50] I look for hot water systems. I also look for kitchen drains. And, because people will pour grease down sinks and drains will get clogged and they tend to get clogged wherever there's an elbow in the system that bends at 90 degrees. So we call those offsets in the plumbing world. Whatever your neighbor above you is put down the sink, if one of these offsets gets clogged up, it's coming back through your sink. And there could be ten other suites on top of you that are all connected to the same pipe. So you never want to be in the bottom of a zone.

Sylvia Ho: [00:09:28] Okay. So let me recap. So you just told me, do not be below one of those main pipes that service the whole building, be couple of floors above it. And then another thing is where the sinks drain out, the water drains out of the building, don't be near those elbows.

Sean: [00:09:49] Don't be near the elbows.

Sylvia Ho: [00:09:50] They get clogged up pretty quickly, easily, you probably see that a lot in your everyday life at the building. All right. So water pipes and sink drain out pipes. And then I think there was another one. Oh, don't be at the ceiling where the big water tank is.

Sean: [00:10:09] Those are pretty safe.

Sylvia Ho: [00:10:11] These are pretty safe. Okay.

Sean: [00:10:12] In modern construction these days. Yeah, that's, I kind of get on a tangent.

Sylvia Ho: [00:10:19] That's pretty safe.

Sean: [00:10:20] That's pretty safe. But because all of these mechanical systems tend to be at the top of the building, and everybody likes the nice view, we always sell these penthouse suites at the top of the building, and then they come and complain to me when they hear noise from the air conditioning, the chiller system, or some other pump or motor or something like that. So sometimes that is a design flaw. And again, it goes back to the builder and sometimes it's just an overly sensitive resident because we got to refer to the Ontario building code that says, Yeah, that noise is less than 30 decibels. So you need to hear that air conditioning for the summer. Get used to it. You know, there's a bunch of case law out there where people who don't get used to it, they sued their condo building and have forced them to put additional insulation and things like that in ceiling. So I always say you never want to be at the top of the zone. Because there's probably something in the ceiling you won't like. And you never want to be in the bottom, because whatever people are pouring down the drains can come back through your sink. The other thing too, is even if you don't have - and water is the biggest issue in any high rise structure, speaking from personal experience.

Sylvia Ho: [00:11:40] Yeah. Yeah.

Sean: [00:11:41] This is why we know each other is you've had a couple of water losses in this specific property. Anyways, where I was going, you don't want to be at the top. You don't want to be at the bottom. You particularly don't want to be at the bottom for the risk of backups. But the other thing is from a maintenance standpoint, managers, we talk about these access points where we need to clean things out. So if you think of a pipe just like your like your arteries, they will get clogged up over time. So we need to, we need to go into that pipe. And so it tends to be suites at the bottom of the zone that have those access points where the plumber can go in and clean up. So that's just one more reason we would have to go into your unit. And oftentimes what people put down the drain, and if it's fermented for a while, you can imagine the odor that comes out of these pipes. And so it's not harmful, but it's a nuisance.

Sylvia Ho: [00:12:37] So back up for 2 seconds. So when plumber is cleaning up the major pipes, the major arteries in this building, they have to go into someone's unit to do that?

Sean: [00:12:45] It depends on the design of the builder and the engineer.

Sylvia Ho: [00:12:48] Stay away from those designs. You're saying that's why you wanted to look at these plans, right?

Sean: [00:12:53] That's why I wanted to look at these and say, Hey, there's no cleanout in my unit. There's no copper piping with with hot water system running through my ceilings. There's no elbows near my kitchen because, yeah, I just don't want to have that hassle. So there's a sweet spot somewhere in the middle. Those are the units that I look for when I'm buying new construction.

Sylvia Ho: [00:13:17] When you're buying new construction. Now, there was another piece of advice that you gave is that, hey, don't be near the garbage chute because it could be noisy or don't be near like the elevators or, like, I guess the party room or...

Sean: [00:13:31] You know, people love the amenities. And again, you get sold the view and somebody goes, Oh, great, I want to, I'm overlooking the pool deck and stuff like that. And that's wonderful until you realize that June, July, a lot of these newer projects have outdoor pools. There's a barbecue, there's lounge space, there's the pool, there's the hot tub. And typically condo boards leave those things open until ten or 11:00 at night. And particularly on weekends, younger folks are going to have some kind of party going on or something like that. You don't want the balcony that's overlooking the pool deck if you're a light sleeper. Right? If that's not your gig, then just recognize that, hey, I'm in a building with 4, 5, 600 other people. They don't have my schedule. They don't necessarily have my level of consideration. So, yeah, you're going to, if you're buying one of those units, be prepared to call the concierge because you're going to need to break up the party or something like that if you want to sleep. I'm going to say architects and builders are getting better at trying to put amenities away from living space, but nothing's 100% perfect. That's an example of the pool. I can tell you in just about any building now, they have a gym, right? So somebody's going to complain if weights are getting dropped, right? If you live beneath the gym or if you live next to the gym. So keep those things in mind as well, too, and you're going to be on a floor where the other 500 people in the building are going to come through to access that amenity. Do you want to be in a high traffic area? You're going to hear more footfall. You're going to hear people having conversations in the hallway. So if you're a light sleeper or if you just haven't lived in with a lot of people before, these are things to keep in mind before you sign up for that unit on that particular floor.

Sylvia Ho: [00:15:28] Sounds like you may have found yourself like a side gig helping individuals purchase new construction properties by looking at the drawings.

Sean: [00:15:38] Yeah!

Sylvia Ho: [00:15:39] It sounds like that might be like a side gig for you or something that you should look into, because...

Sean: [00:15:44] I know.

Sylvia Ho: [00:15:45] You would be quite popular.

Sean: [00:15:46] This is, this is great. This is great advice for for me. I thought I was giving advice to you and your listeners. But yeah, there's always an opportunity there. And at the end of the day, we're all human, so we get excited. And a condo is a big purchase for the average consumer. And so I always try to tell people, you need to temper your excitement and look at the drawings, understand the rules around what you bought and what's warranted, and what you're responsible for. We'll go back to your recent water loss.

Sylvia Ho: [00:16:24] Exactly.

Sean: [00:16:25] That's about every, just about every building that's been built in the last ten years has what's called a standard unit definition. And a lot of buildings that are older have what's called a standard unit bylaw. And why do they do that? Well, for all the reasons we've talked about water loss, condo corporations were realizing, hey, I'm on the hook to replace somebody's floor or their cabinets. And so there are all these things that after you buy that unit, if there's damage to it, typically the condo corporation is not responsible for it. So people sometimes kind of gloss over that, they're sitting down with their lawyer, they're sitting down with their mortgage banker and going, where do I sign? And then fast forward, you have a loss and all of a sudden you realize that your special hardwood flooring is not covered. Or you got an upgrade to the cabinets and there's been some damage. So that becomes an insurance claim on your personal insurance. I've seen situations where, particularly investors, where the lease clearly says the defendant should get their own insurance, contents aren't covered. I get to be the bearer of bad news sometimes and try to find a nice way to say, well, that's a you problem.

Sylvia Ho: [00:17:49] Let me explain to our listeners what you're talking about. So basically I told my tenants have to get tenant insurance to cover their own belongings. Right? And what had happened was there was a flood in my unit and the insurance that my tenant got was a cheaper insurance and it didn't cover certain things. I had to be the bearer of bad news. My tenant was like, Well, your insurance should have been covering this. I'm going to have another podcast where an insurance individual will come in. But we go back to where you're talking about, the advice that you're giving to people who want to purchase new construction properties, so that is really, really, really good advice. I absolutely love it. I think, like I said, I think you're going to find a side gig here making some extra cash. But let's talk a little bit more about you as a real estate investor. You're a real estate investor yourself, so talk to me a little bit more how you got into real estate investing.

Sean: [00:18:43] I got into real estate investing by accident, as many investors do. And so this is going back about 20 years now. I'm dating myself. Bought a little condo in downtown Toronto, and then I had an opportunity to go work in the US for a while. And as my first purchase, I did what everybody does and gets the five year fixed. And at the time interest rates were around 7% or something like that. And so I thought, Oh, I might, I might end up selling this place. And when my branch manager at the bank explained to me the whole thing about interest differential and what I would be, what I would be on the hook for if I actually sold my unit, I kind of said, Well, I'm not going to give the bank another 7 or 8000 bucks for the penalty to break to break this mortgage. And so I ended up holding on to that property. At the time, I think I was renting it for probably 2 even maybe even $300 less than what my expenses were. So I was cash flow negative. It wasn't the end of the world because I was working in the US.

Sylvia Ho: [00:19:53] US dollars anyways, right?

Sean: [00:19:55] Great salary and the exchange rate. So actually I could I could easily cover the difference. Plus I was making prepayments on the mortgage. Fast forward a few years, mortgage had come up for renewal, and I asked the bank - I'm trying to remember the story now - I asked the bank if I could get a better rate because I was one of those where I don't shop around, I don't deal with brokers, no offense to you, Sylvia, and what you do.

Sylvia Ho: [00:20:22] No offense but now you're going to talk to me, right?

Sean: [00:20:26] Definitely. I was just one of those like, well, this is the bank where I've always banked and they extended me financing. So they send you out that renewal notice four months in advance and I would just sign the paperwork and go from there. So I actually asked the branch manager, I said, Is there something we can do about the interest rate? And the branch manager said, Well, I can't do anything for you on the interest rate, but we can rewrite a new mortgage for if you want to pull some of the equity. And I didn't quite understand it at the time, but as we're going through the numbers, my payments on that property came down, my monthly payments came down because we stretched out the amortization, and he said, we have to rewrite so he says, What do you want, like ten grand or something like that? I said, okay, I'll take ten grand. And the light bulb went off for me. It was like...

Sylvia Ho: [00:21:23] What do I do with this ten grand.

Sean: [00:21:24] The term, the paradigm shift. I was like, Wait a minute. So my payments went down. I still own the property and they just put ten grand in my bank account all at the same time when I did this refinancing, that's when I realized the power of real estate. And by the way, that property that I had purchased for $152,000 back in the day is now worth close to $700, right? So after you go through that, all of a sudden now you start to understand the power of equity and what you can do with that. So I took that ten grand. I think I, I had a small car payment at the time, so I paid off the car loan with that ten grand. So all of a sudden my cash flow improved, not just on my investment property, but now I'm not paying for my car note anymore. And I still had money left over to put in my TFSA. It was a win-win-win on on all sides. And then after that experience, it's like, okay, wash, rinse and repeat, right? Every three or four years, let's see, let's see what properties are worth. And yeah, and so that's kind of how I...

Sylvia Ho: [00:22:34] That's how you fell into the estate investing, right?

Sean: [00:22:37] I fell into real estate investing because I didn't want to pay that penalty to break a mortgage.

Sylvia Ho: [00:22:41] So I like how you said wash, rinse and repeat. So what I teach my clients is BRRR method, but I added H to it. So that's Buy, Renovate, Rent out, Refinance, Repeat. So buy it again. And then I add in the letter H, which is hold, Hold long term. Because you can see how your property went from $152,000 to $700.

Sean: [00:23:07] Downtown Toronto. We've had a good run. I call that the goose that laid the golden egg, because every time I need to do something now, now that I understand how the whole process works, it's like, this is great. I have a tenant and it's in a great location, this property, this particular property is in a great location, so I've never had to worry about it being vacant. The only time I had it vacant was when I took it off the market deliberately to do some renovations and upgrades inside the unit. And then you reappraise, it's worth more, and the bank's willing to extend you more credit to go buy more property.

Sylvia Ho: [00:23:44] Exactly. The whole BRRR method. Right? I'm just gonna ask you one last question before we end off. What's one piece of advice you would give to your younger self?

Sean: [00:23:55] Start now. Buy now. I follow these headlines right now and everybody's squawking about the Bank of Canada raising rates. And I'm not, I'm not saying that it's necessarily easy, but I'm also looking at it long term. And I'm saying the prime minister said the government wants to let in a half billion people in the next year or two. And we can't put enough - I say we, the building industry - can't put enough housing inventory in the marketplace. So all of these new Canadians are going to end up in Toronto, Vancouver, and to a lesser extent Calgary and Montreal. So I just say the demand for housing is going to continue to outstrip the supply for housing. So even though pricing is down temporarily or whatever, do it now. Buy, because you will not regret in the next five or ten years. Don't follow the headlines about where interest rates are going. And again, I look back at that first point, it made sense to buy a property when it rates were at 7%. The rates on the properties that I have now, I'm paying 3% or I've got one coming up for another, that's going to hurt because I'm paying 1.75 so I'm not going to get that when I go to renew. But it still makes financial sense.

Sylvia Ho: [00:25:16] It still makes financial sense. Looking at the bigger picture of things, right? Mortgages are like little small chunks, right? But the bigger picture is the equity, the growth of holding it long term. Right? Every investment, just like real estate or financial investment, it's going to have their ups and downs. But with real estate, it's a constant, Yes, this thing is, this property is an asset that's going to keep on growing and growing and growing in value. And it's all about pulling out the equity. I love what you said, the power of equity. I love that line.

Sean: [00:25:52] Yeah. It's amazing. I'll, I know you want to wrap, but I'll tell you another story. I recently got married and my wife and I, she's an American, and so we we did a civil ceremony here in Toronto, and then we had a big wedding because we wanted to get the paperwork underway because she's going to move to Toronto from New York. Then we did a bigger wedding later on outside of New York. And weddings are not cheap, but it's nice when you have a home equity line of credit. You can throw the wedding that you want. So again, the power of equity is you can do things when you have these assets behind you, that, so I wasn't, we made a wedding weekend. So we had a rehearsal dinner and we had people in on Friday night. We did a big ceremony on Saturday. We did a wonderful brunch on Sunday and people had a wonderful weekend. If I didn't own real estate, I wouldn't be able to host that kind of event for 200 people. The power of equity is, yeah, I can tell you about how I paid off a car loan or how I put money in a TFSA, but when you build your portfolio to a certain point, you start doing things that are more memorable and you have the resources to do it. And as much as I like my day job, that's not getting me there. It's my assets and my investments that are getting me there to where I want to be. Right? And share those experiences with my friends, with my family. Yeah, that's the power of equity.

Sylvia Ho: [00:27:35] Is about enjoying life. Life is too short, right, Sean, it's about enjoying life and having that property is allowing you to have these experiences that are, these memories of you and your new wife and together and starting up a family and celebrating with 200 wonderful individuals.

Sean: [00:27:54] Yeah.

Sylvia Ho: [00:27:55] Part of equity. How beautiful is that? Thank you so much, Sean. I really, really appreciate you being on the podcast. This information that you're sharing today will be invaluable to my listeners. They'll now know, okay, these are the things that I have to look out for, for new construction property and what the power of equity was able to do for you and your family and to build these beautiful family memories.

Sylvia Ho: [00:28:18] Hey, guys. We just heard from Sean. Oh, my goodness, he gave such great advice. I know I learned a lot. I hope you guys learned a lot. The biggest advice that he wanted to give everyone is the power of equity. And to buy now. To buy now, don't wait. And his advice to his younger self is to buy today. All right. Talk to you later. Bye now. Hey friends, thanks so much for listening to the Sylvia Ho Mortgage podcast. We'll catch you on the next episode. You want to learn more about the J.O.M.P. Program, please connect with me at SylviaHo.ca. Love to hear from you. All it takes is 15 minutes for us to chat to see if this will work for you. Thanks, guys.

View Details

Sylvia Ho welcomes insurance agent Aviva Abraham to a discussion about the benefits of life insurance. Aviva explains the differences between types of insurance and really details the best way to protect your real estate wealth and property from taxes when it’s time to pass it on.

Aviva points out that when you pass, the property and equity investment you’ve been working on will be subject to a final tax return after your death. This impacts the family left behind and may derail the strategy you’ve been planning to take care of your children after you’re gone. She explains why personal life insurance bought through a qualified agent is the best protection against this.

Sylvia and Aviva break down the differences between personal life insurance, group benefits life insurance through work, and bank life insurance. They all fill different functions but only one will ensure your real estate assets are safe in the future. Aviva shares that it’s easier now than ever to get life insurance, that the process has been streamlined, and that as an agent, she can help anyone find the best company to suit their needs or health constraints. This episode sheds important light on a topic nobody likes discussing but that needs to be addressed.

About Aviva Abraham:

Aviva’s focus is on providing small to mid-size business clients customized group benefit plans- helping them to grow their businesses and manage their plans through effective cost containment.

Aviva also works with management and key employees to protect their financial future with life insurance, disability and critical illness coverage.

Aviva started her career in public accounting in New York City, working as a CPA in both the public and private sector, and later moved to Toronto. In 2006, she changed careers and began at CPFG, becoming licensed in 2009.

Aviva believes strongly in the importance of volunteer work in her community, particularly in her children’s schools, involving herself in various fundraising endeavors.

Aviva Abraham’s email at Creative Planning Financial Group: aviva@cpfg.com

Resources mentioned in this episode:

Aviva Abraham on LinkedIn
Aviva Abraham blog
Aviva Abraham at Creative Planning Financial Group

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Transcript

Sylvia Ho: [00:00:29] Hey everyone, welcome to the J.O.M.P. podcast. My name is Sylvia Ho, and I'm going to be your host today. Today, we're going to hear from Aviva Abraham and Aviva Abraham is an insurance agent. And in today's podcast, we're going to talk about the differences between the different types of insurance. But what she really talks about is about how us as clients are in the J.O.M.P. program and how we're trying to build wealth through real estate so that we could eventually pass it down to the next generation, to our kids, and how to protect that plan and how to protect that asset. So let's listen in. Thank you very much, Aviva, for joining us today. We started chatting. We were talking about life insurance and the importance of life insurance and how to protect your real estate investment. As most of you guys know, I promote the J.O.M.P. program. The J.O.M.P. program's all about buying one more property and building wealth through real estate, basically copying what the wealthy people do. The rich people do, right? The rich people never have dead equity, right? They always have debt against an appreciating asset. And right now we have Aviva here. She's going to talk to us about what life insurance is all about. Aviva is giving me five questions here and we're going to go through these questions, a little bit of a different format, but that's what we're going to do today. So Aviva, welcome. Thank you very much for coming on to the podcast today.

Aviva Abraham: [00:02:02] Thank you so much for having me and I love your J.O.M.P. program. It definitely ties in with a lot of things that I discuss with clients as well, helping them protect their assets, helping them pass it on to their family so that they don't have to lose whatever they worked so hard to build to taxes whenever they pass.

Sylvia Ho: [00:02:23] Mm hmm. Yeah, absolutely. Passing is such a difficult thing to think about, people just don't want to think about it. Right? But, you know, we go through so much effort to set up this whole J.O.M.P. program. And if you're not protected at the back end, then you've done everything for nothing, right? Like, I hate for the government to get more money than they really should. So, Aviva, let's go through the five questions that you've given us. So how does life insurance protect our real estate investment? So talk to us about that.

Aviva Abraham: [00:02:50] So in the early years, Sylvia, when the mortgage is high, equity investment is low, you've got debt. If something happens to somebody, again, like you were saying, you want to protect the strategy that you're helping your clients implement, but it takes time. So if something happened to you or your family and they're left with a lot of debt, they may have to sell that property in order to pay. There's that final tax return that people have to file on the death of a family member. So on that death of the family member, it's as if the asset was sold and then there are taxes that are due. Having the life insurance policy that protects the debt so that people can keep that asset and not have to sell it, they can pay the estate taxes, they can pay down the mortgage, really, life insurance provides you with cash so that your family can hold on to that asset that you bought. They can pay off part of the mortgage, they can use it whatever they want. They can even use it to buy a new property if they want. So they have the flexibility there to use that money in whatever way they need and want.

Sylvia Ho: [00:04:01] Yeah. So it's all about protecting your investment, right? Next question you have here is, My mortgage is paid off, no debt. I don't have to worry about any debt. So why do I need insurance for my real estate property? How does that even make sense?

Aviva Abraham: [00:04:16] Right. So that's a great point to reach, actually. And that's what you're helping clients with, right? So in the early years, you're protecting the debt. But once that debt is paid off, like I was saying before, if somebody were to die and you're holding that real estate property, their family then has to file a final tax return that says these are the assets that I owned and it's as if it's sold. CRA wants their share of it. Even though there's no debt on the property, there's going to be capital gains. So what did you buy it at? What is it worth now? And there are taxes on the capital gains and those taxes will come due and the family will have to pay for it. So how will they have the money to pay those capital gains taxes? That's where the life insurance comes in.

Sylvia Ho: [00:05:06] Okay. So help me understand this. Let me run through a scenario with you. So let's just say the house is worth a million bucks. There's no mortgage on it. They originally bought it for 500,000 and it's doubled in value. It's worth a million. No mortgage on it. Let's just say it's under one person's name. Upon death that property is technically sold to, let's just say the husband dies, to the wife. Right?

Aviva Abraham: [00:05:32] So when there is a couple, there is a rollover. So it's really if somebody is single, not married, divorced at that point in time, because if there's a couple - and also it depends how the real estate is held, if it's held personally or in a trust, there could be other scenarios - but ultimately, whether you're single or a couple, at some point in time that real estate will show up on a final tax return.

Sylvia Ho: [00:06:00] Okay, so either you dip into the equity to pay that bill or you use life insurance to pay that final bill upon death.

Aviva Abraham: [00:06:10] Exactly. So if you have no mortgage, yeah, you can't draw on that. If you have no line of credit or mortgage existing, then what's going to happen? The kids are going to have to take out a mortgage on on the property. It gets very complicated and messy. The easiest, easiest way and actually the most cost effective, the cheapest way to do this is through insurance. And it provides cash in a very timely way.

Sylvia Ho: [00:06:37] Yeah, I was just thinking, like as a real estate investment property, you never want to have a property that's free and clear and just sitting there anyways, right? If that's a real estate investment property, like we want to draw down on it again, use that money, go buy another property.

Aviva Abraham: [00:06:50] Yes, that's true. What I find as well is, is that things happen in life that you just don't expect. And so it could be that your client was about to reach out to you and say, let's refinance, let's do this. We paid off the mortgage and then life happens. So that's where it's good to know that you have the life insurance set up. It could be they were about to invest, even though I understand that's your strategy is not to have debt equity. But that being said, we never know what happens. That's also why I said before, you can use a life insurance for anything so it doesn't have to be to pay off estate tax. It could be for something else. It could be the children will then use that money to invest in a new property.

Sylvia Ho: [00:07:43] Okay, so next question I have for you is a lot of times I talk to clients and I ask them, do you have life insurance in place? You are the main breadwinner. And they're like, No, I have life insurance through work. Talk to me a little bit more about that, because my understanding is the work life insurance is really not enough to cover like the funeral costs, let's just say. I don't know. But why don't you clarify that? I always tell people you will speak to an independent insurance agent to get the proper advice because the life insurers through work, in my opinion, I don't think it's enough at all.

Aviva Abraham: [00:08:20] Really, really important topic. And yes, there is a lot of confusion when it comes to that, whether it's group benefits, life insurance or bank mortgage insurance, they really are not as well served with that. So as you mentioned, when it comes to life insurance through group benefits, even if it's one time salary, that is not enough, especially in the GTA, especially with home prices the way they are today. That's not enough to cover off mortgage debt, cover off a real estate property. That's why individual insurance would be a better option. The group benefits life insurance is really designed to help the family cope with not having the income of that person if they die, it doesn't address what other assets they have, what other debt they have, and to pay that off. And it's never at the levels that people need today, it's more a basic level to tide people over for six months to a year. When it comes to bank mortgage insurance, if, say, I signed off on bank mortgage insurance when I took my property, that's where there are certain ways that bank mortgage insurance serves the banks and it's owned by the banks. It's not owned by you. And so there are actually quite a few ways that bank mortgage insurance is not as good for you as an individually owned life insurance policy. I actually wrote a blog on that. There are about five or six different reasons why a personal life insurance policy is better for you. I can share that with your network, definitely. If anybody's interested. It's just good to know that a personal life insurance policy is better, and if you're relatively healthy, rates are actually better on a personal policy than on some of these other types of life insurance.

Sylvia Ho: [00:10:16] Okay, let's back up for 2 seconds here, because I know insurance gets very confusing. Just to clarify to the audience here, we are not talking about auto or house insurance here. We are talking about life insurance and the three different types of life insurance. And Aviva, correct me if I'm wrong, so there's insurance that you can get through work, and typically it's one to one and one half times your salary if they even offer it, right? So that's life insurance through work. Most people have that if they are full time salaried individuals. But the bad thing about the life insurance through work is that it doesn't necessarily protect the needs that you may have personally. And then the second type of life insurance that you just mentioned right now is a bank life insurance, mortgage life insurance. So by law, as a mortgage agent, I have to offer mortgage life insurance to all of my clients. But what I tell my clients is this is just a stopgap between what you actually have and what you actually need and to speak to an insurance agent like yourself. And with the mortgage life insurance, it's on the decreasing balance, so on and so forth. So there's the whole spiel about the mortgage life insurance. And then the third type of life insurance that you are talking about that you're saying is the best one for you, is the personal life insurance policy. And then the personal life insurance policy is where an individual like yourself who specializes in insurance says, okay, here are your needs, this is how much debt you have, this is how much income you have. You have 20 kids. So you need to make sure all 20 kids are protected, right, in the case of you being the main breadwinner. Right? And having the proper life insurance in place. So the next question I have for you is why do people not do personal life issues? Like for me, I understand the importance of it, right? Owning property, I'm going to end up paying a lot of income taxes and and everything I did was for nothing. I want to pass money down to my kids. I want to pass property down to my kid. So for me, life insurance, super, super, super important. Why do people not look at life insurance? Is it because of cost? Is it because they're lazy? What is it like? What do you hear all the time?

Aviva Abraham: [00:12:20] What I find is people don't really, really want to deal with it. It's not a pleasant topic. I'm thinking about when when you die, thinking about not being there, but added to that, when it comes to whether it's the life insurance through your group benefits that's given to you, they didn't have to do anything for it. They don't have to take the time, effort, think about it. They're just given that if they're lucky enough to have it through a job. And when it comes to bank mortgage insurance, you're just signing a piece of paper. You don't have to do any extra work for that. When it comes to a personal life insurance policy, you actually have to answer medical questions and go through a process. You don't have an insurance advisor, find somebody that you're comfortable or you want to deal with. You have to actually set up a time for a meeting. It takes time and effort. You have to go through an application. You may have to do blood work. So it does take time and effort. And again, it's not the most pleasant thing. So a lot of people push it off. It's not that they don't think it's important per say. Most people think that'd be great to have it. But between the time and effort and the additional cost to do that, a lot of people just procrastinate and don't take care of it.

Sylvia Ho: [00:13:32] Yeah, but what's going to be worse is when the other person, when the person passes, and then you have to deal with the estate and then everyone's mourning and crying and upset and and just making those kind of decisions when you're emotionally not sound. Right?

Aviva Abraham: [00:13:46] Right. And so a lot of my clients, actually, that's what they focus on. You know, if something happened to me, you know, I want to know my family family's taken care of. Everybody wants that. But it's actually taking those steps. And life is so busy these days. So what we try to do is make it as simple as possible. And COVID sort of helped with that. Don't have to do medicals as much anymore. And so the process for applying for life insurance is faster and easier than it was before. So it's just good to know that because making things simpler for people these days really, really helps in getting things accomplished.

Sylvia Ho: [00:14:24] Oh, yeah, absolutely. I remember when I was getting my life insurance it took a good month, like a good month, month and a half to even come up with a decision. Now are you telling me that life insurance, like to get an individual life insurance policy, it's much easier? Like how much? How many hours would a client have to put in? Like, let's just say like, I'm brand new, I want to get life insurance, Aviva, we set up a call, we chat, from that period how many hours or how much time do I have to put in and do I have to provide any kind of documents like how does that all work? Or is it like a one hour conversation? You meet, you do medical for one hour, and then you sign?

Aviva Abraham: [00:15:02] There are two types. So first of all, if you're healthy, let's assume healthy, no issues, on the younger end, let's say up to age 50/55. Right? And it's really simple. Like we would talk, let's say one or two meetings, up to an hour just to understand what what it is you need and then make recommendations. Once you're ready to move forward, an application can take, there are up to two or three companies that if you respond to the medical questions, no issues, I'm healthy, I'm fine. No outstanding tests. You can get approved within a few days, but that application itself might take 40, 45 minutes to complete, but then you can potentially get approved within a week as long as your application was clean. No medical issues. So it really, really is a lot faster than it used to be. You have to do the blood work. You don't have to go through all the other hoops. If somebody is not healthy, it will take longer. If they've got health issues, serious health issues, they have any outstanding tests, then that's something that it will take maybe an extra time. So an extra hour to meet with a nurse to do blood work. They may go to your doctor for a doctor's report to answer some questions. And it might be like you were saying, a month. I have some clients that it would take eight weeks till they get all the answers that they need.

Sylvia Ho: [00:16:33] I like that recap. So you're healthy, you're young, under the age of 55, you're saying that at most 2 hours, right? Having a conversation with you, understand their needs and then you explain what the needs are, and then filling out an application. And then that's for the healthy individuals. If there's individuals with, say, some medical issues in the past, then it may take a little bit longer. So now that we're talking about medical issues, is that an automatic decline if someone has a medical issue?

Aviva Abraham: [00:17:03] It depends on the issue. Again, if it's something like somebody had cancer, it's a lot harder to get them insurance. There are a few companies that will offer limited coverage, so you wouldn't be able to get 2 million or 5 million per say, of life insurance, but you could get a lower amount and at slightly higher rates of what a healthy person would get. If it's something like diabetes, which a lot of people have these days, or chronic pain, a chronic condition, yes, it's still possible to get insurance. Again, the insurance company may ask you to pay a little bit more, but it's still financially worthwhile in terms of the taxes we were discussing for them to get the life insurance as opposed to not having any. And that's something that I discuss with clients as well. If for some reason their application comes back and the insurance company says, Oh, we're asking you to pay extra because we deem you as a higher risk, we think you may not live as long as other people, then if it's really not financially worthwhile, I'll tell you. If it doesn't make sense, I'll tell you.

Sylvia Ho: [00:18:18] Being in an insurance advisor, I'm assuming like you have different, like for me, I'm a mortgage agent, right? So I have different lenders that I can go to. So lenders that specializes in self-employed, I have lenders that specialize in high net worth individuals. So for yourself as an insurance agent, do you have like different lenders that specialize in different things? And you're like, okay, with this medical history, our best bet is to go over here.

Aviva Abraham: [00:18:42] Yes, I work with all the top companies in Canada and then some smaller niche providers. Like I was saying, if somebody is hard to insure, there are some companies that are specifically designed to help those people who have health issues and provide them with insurance because it is so important for everybody to be covered, if at all possible. So there are some companies that will take on that added risk and are specifically geared towards those with health issues. Again, if somebody is a female in their forties, rates will be very different than a male in his fifties. So going to the right company with at a rate and yes, somebody has got a minor issue, one company might be more lenient on heart issues, another company might be more lenient on someone who had cancer. So understanding what company to go with and how to get the best rates and the best structure, that is part of what I do.

Sylvia Ho: [00:19:42] Yeah. So the worst thing is, is that people are really scared of getting declined, right? So it's just like, okay, but you're telling me there are options out there, right?

Aviva Abraham: [00:19:52] As long as people are aware of their health issues, some people don't realize what could be an issue. And that's also part of the discussion we have.

Sylvia Ho: [00:20:01] So last question here is what are the top three things we should know if we're applying for insurance today, what are the top three things. If we're going to leave with anything, what are the top three things that we should know?

Aviva Abraham: [00:20:15] So first, we mentioned it already, it's easier than ever before to apply for insurance. For some levels of coverage you don't need to do medicals. And for younger ages, you don't need to do medicals. The application process has really been simplified. We used to have to meet in person and fill out a paper application. Now every company has digital applications which make it easier. As long as tech is working, then it is easier, but it is easier than ever to apply for insurance. Secondly, the best time to apply is right now because insurance is based on age and health and most of us are never healthier and we're never younger than we are today. So if it's something that you have pushed off, like we were talking before about people procrastinating, the best time to move forward on it is right now when you're healthy and when you don't have issues. Thirdly, just be aware, there are - and I'm sure a lot of people are - there are online options these days since everything went digital, you can get your own insurance just Googling life insurance and you can get your own policy without having to deal with or talking to an advisor. But I strongly recommend against that. I believe very strongly in specializing, like speaking to someone like you when you're going for a mortgage and not just spending whatever is offered online because specialists know the ins and outs of what is possible, what the advantages are, what your options are. And we're talking about hundreds of thousands of dollars. So literally, not only can it save you money by dealing with a specialist, but finding the right company, the right setup, getting it set up in the right way so that your family is properly looked after. So speaking to a licensed insurance advisor is the best way and not just relying on the internet for that.

Sylvia Ho: [00:22:21] I'm not even sure why people would do life insurance just by online Googling. To me, that, it's a big decision. It's about life and death and it's about protecting your family assets. And you just want to do that online? This is not online shopping. You don't, it's not like buying a pair of jeans at the Gap or something like that. Right? So, yeah, no, those are really good tips. I love the fact that it's easy to apply now because I know when we were doing it, it was like meeting after meeting after meeting. Now, it's been a while since we've applied for life insurance, but we review it on an annual basis. So I think that's another thing that's very important is to review your needs, right? And then applying for it right now, it's having that hard conversation. Right now is January, it's maybe a slower month, maybe things are just starting to get rolling. It's a good time to have that chat. But at the end, my belief is that life insurance is part of the package of taking care of your family. It's taking care of your entire family. And part of like the saving part as well, right, is taking care of the death part as well. Anything you want to add in here before we end off?

Aviva Abraham: [00:23:30] We covered a lot of different aspects of both insurance and protecting your real estate investment. I think it ties in. There are a lot of reasons why this was an important topic for your clients. And thanks so much for the opportunity.

Sylvia Ho: [00:23:49] Thank you so much for coming, Aviva, onto the podcast and just explaining the importance of having proper life insurance in place for my listeners here, J.O.M.P. is all about owning just one more property and building wealth through real estate. Building these dreams and making these dreams come to realization. Paying off your mortgage in 10 to 15 years, helping with your kids, but not only with your kid's education, but also helping them get into the real estate market in the future. Right now I'm talking about RRSPs versus real estate in which one ends up on top. And of course, I'm a big believer in real estate, and I believe that real estate is a way to help your kids not only for their education, but also for future real estate investments. And then the last thing about the J.O.M.P. program is all about having retirement, passive retirement income. So thank you very much, Aviva. This has been great. Now what's the best way to get in touch with you?

Aviva Abraham: [00:24:39] So I can definitely provide my email, phone number. I'm also on LinkedIn and so, yeah, pretty active there and those are the three best ways really.

Sylvia Ho: [00:24:52] Okay, beautiful. Thank you so much, Aviva. Take care.

Sylvia Ho: [00:24:56] Hey everyone, we just heard from Aviva, and wow this is absolutely eye opening, the amount of taxes that we have to pay to the government upon our death, and if we have an asset, we're going to be paying taxes on it. We're going to be paying capital gains on it, and how life insurance is a way to take care of your family after your death and the importance of it. So really appreciate what Aviva was sharing with us today. So guys, for those who are in the J.O.M.P. program and have bought another property to build wealth through real estate and to take care of the next generation and to pass wealth to the next generation, it's very, very important that we have proper life insurance in place to pay that final bill upon our death. You want to learn more about the J.O.M.P. program? Please book an appointment with me through my website at SylviaHo.ca. Thanks so much for listening. Take care.

Sylvia Ho: [00:25:49] Hey, friends, thanks so much for listening to the Sylvia Home Mortgage Podcast. We'll catch you on the next episode. You want to learn more about the J.O.M.P. program, please connect with me at SylviaHo.ca. Love to hear from you. All it takes is 15 minutes for us to chat to see if this will work for you. Thanks, guys.

View Details

Sylvia Ho welcomes real estate investor Daryll to the show to talk about how his view on debt changed and the one conversation that gave him the confidence to jump into real estate investing. Daryll reveals how he started his property owning journey and how he views debt now.

Daryll and his wife were, in his words, very conservative about debt initially and didn’t want to take on more. But a conversation with his acupuncturist changed the course of his life and led to he and his wife buying their first properties. He now understands debt differently and sees how it can be put to use for future wealth. He talks about this shift in his view with Sylvia.

Sylvia discusses how the wealthy view debt and how they use equity to accrue more wealth. She also asks Daryll details about his properties which include two condos and one house in Niagara on the Lake. Daryll shares part of his Airbnb ambitions for the house. He tells Sylvia that his advice for anyone is to start the real estate conversations sooner rather than later. Learn all about Daryll’s change in view and new enthusiasm for the process in this talk with Sylvia.

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Transcript

Sylvia Ho: [00:00:05] Hey, friends, have you ever wondered how you could pay off your mortgage faster? Or maybe you like to help your kids get into the real estate market. Or better yet, retire with some passive income. Well, you're in the right place. Welcome to the Sylvia Ho Mortgage podcast. My name is Sylvia. I'm here to teach you how to achieve your goals simply by owning just one more property. Today we have Daryll. Daryll is a real estate investor. We're going to talk about his relationship to debt and how him and his wife were very adverse to debt. They're like, Oh, no, we want to get rid of debt. We want to get rid of debt. Until he fell into real estate through a conversation, in a conversation where he found someone that he trusted and guided him through this whole process. And his first two investments were two condos, pre-construction condos, that he bought within the first six months. It's now eight years later and we talk about how he manages his own properties. So Daryll, thank you very much for coming onto the podcast. Why don't you tell me a little bit more about yourself and then we could talk about your real estate investing life.

Daryll: [00:01:37] Thanks, Sylvia. I appreciate you inviting me on to this podcast. You know, many moons ago I used to be an accountant and finally got out of that, started to be something different and eventually landed up doing some training and development work. And that led me to owning a couple of health clinics for about ten years or so. Just recently, I got out of the health care business and I went back to doing consulting for manufacturing and service companies. And so in between that time, I've been looking at, my wife and I've been looking at real estate and see how that could be our next stage in our investment.

Sylvia Ho: [00:02:16] What's your wife and you're thinking about real estate?

Daryll: [00:02:19] We've always thought about real estate, but I think we're always hesitant and probably maybe about eight years ago with the acupuncturist that used to work for me had suggested I talk to his real estate agent. And I talked to her and she gave her story and it kind of said, Oh, this is the right person that we feel comfortable to do our first purchase. And she didn't really push us to buy anything too big. The first one was a one bedroom apartment near St Moritz Market. And so we really thought real estate could expand our portfolio but didn't really know how. And when she came along, that helped us solve that equation, someone to kind of handhold us. I think that's what we were looking for. We are fairly conservative investors. Our house just was paid off for and we were thinking not to expand our debt levels because I don't think we were comfortable at that time. But after our first foray into our condo, I guess the rest was history. Then we started to look at some other properties. I think this was about eight years ago and I think we bought two in a matter of about six months, and then maybe a year later we got another property that's still being constructed.

Sylvia Ho: [00:03:37] Okay, so it sounds like you got into this whole real estate investing through a conversation. And then you've been always thinking about it, but just didn't really know how to get started. But because you had someone that you trusted and someone who can really guide you through this, you're like, Oh, I feel comfortable in doing this. And you just did it in little baby steps.

Daryll: [00:03:56] Yeah. And I think this is where for people to consider is make sure that they are talking to a few experts, people that they feel comfortable with, and they trust, that can guide them through the process. So they're talking to you, talking to you, for us, it was that real estate agent that help guide us through. But there is also a comfort level that our friend had worked with her and he had purchased two or three properties. And so I thought we had a good enough base of expertise there to draw upon from different, to offer different points of view.

Sylvia Ho: [00:04:30] You mentioned something about being conservative, about debt, and then now your idea about debt has changed. Talk to me a bit more about that. Kind of like what you guys are thinking about then.

Daryll: [00:04:44] If I had to characterize our debt, it would be more like a relationship. What is, what's your relationship with money? What's your relationship with debt? I think for us, before meeting the real estate agent, we were kind of adverse to it and I don't think we fully understand how to use it, how to use it safely and appropriately. And I think once we saw that the debt servicing, for example, the mortgage was going to be, it was going to be covered by the renter. So there wouldn't be a lot of cash outflow and there hasn't been any cash outflow for us for that. That gave us peace of mind, I think. So that's where you start to do some planning about how this works. You look at the markets and you're seeing, okay, well, it's a pretty tight rental market. I think we're not going to have any promise to rent it. Even the real estate agent was guaranteeing if we got into her property management program would guarantee us as clients or she would pay for the rent, which I thought was an interesting proposal.

Sylvia Ho: [00:05:48] Very interesting proposal. So it sounds like you went from an individual who are like, Oh, no, let's get rid of debt. Let's get rid of debt. We don't want any debt to Hey, I now understand the power of debt. The power of debt and how it could help me build wealth.

Daryll: [00:06:04] Yeah. You know, I used to think money was bad and you know I don't think money is good or bad. It's the way you use it. And I think that could be also the same thing, is how do you use it appropriately and wisely? You can definitely do too much of it or you can definitely be too little about it. So figure out where your comfort level is that allows you to earn a nice return.

Sylvia Ho: [00:06:29] One thing that they say, you know, rich people, the wealthy, the super wealthy people, they totally understand the idea of debt. They never want to sit on dead equity. So what they do is they, when they buy a place, they buy in cash, and then the next day they turn around and they borrow against it and they go invest that money. Right. And that's the whole idea about the power of debt and how to build wealth.

Daryll: [00:06:54] That makes sense. And so when we were looking at one of our properties at Niagara on the Lake, what we did with this was during the pandemic. We did notice that during the downturn there was some bed and breakfast is being being sold. And we were just puzzled why are so many bed breakfast? And now this is coming up. I think they were selling because they were buying a debt that was for business. They would have been leveraged appropriately to manage all of it. And I guess during the pandemic, that was very difficult to take care of. And so now that we're passed through it, now there's an opportunity to think about, yeah, what's the appropriate amount of debt that we can use to leverage and get a better return than we have just by just purchasing or just having equities?

Sylvia Ho: [00:07:46] You just told us that you bought a property out in Niagara on the Lake, right? Niagara on the Lake. So you manage your own properties, you have condos, you have houses, and you manage your own properties. Talk to me about what that life is all about. Because a lot of people are scared about that stuff. They're like, Oh, I don't want to. I don't want to. I don't want to deal with tenants and so on, so forth. So tell me how you manage it. How do you do it? What do you do?

Daryll: [00:08:11] So I'll split in two ways. We'll talk about the two condo properties that we have right now and then the house on Niagara on the Lake. So the two condo properties, we manage it and they are pre-construction when we bought it in 2020. And so obviously at the beginning of the life of a condo, there isn't much to do. So what we did was use the real estate agent to help us find our first tenants. And so that has been a big help. So I think if you're not comfortable getting your first tenant, then finally we get the real estate agent to do it. Sometimes it's actually worth it. And managing the property of those two properties has been pretty good. And I think it also happens, depends on the relationship that you have with your renters. And both renters have been fairly low key, easygoing and helpful. Some of them, that one of them considers it to be home. And so when you consider to be home, it just makes it easier for relationship to do things. Because of the pandemic I've actually never been to those units since they've been rented out, and I think they're comfortable with that. And I remember one renter, this probably is not going to happen all the time, I think there was a plumbing issue or there was something wrong with the stove and she decided to take care of that herself rather than have us take care of that. So when you find a good renter and they're paying on time, that's they're working really good.

Sylvia Ho: [00:09:35] Okay. So the two properties that you manage downtown, the two condos, they've been pretty low key, not as much hands on. A lot of investors, a lot of my beginning J.O.M.P. Investors, they do buy condos just because condos are easier to manage.

Daryll: [00:09:52] Yeah, and I certainly agree. That's why because there is a lot of property maintenance yet you have for a condo. For our house in Niagara on the Lake, on the other hand, that is a little bit more or a lot more work. I think it's a lot more work that's involved there. So we are planning to Airbnb that in the next couple of months and while we're been managing it for the past year, it hasn't come online. We are eventually going to have to get a property manager just because the city of Niagara on the Lake, I believe, requires that we have somebody that responds to a guest inquiry within 45 minutes and since we still live in Toronto, we wouldn't be able to do that. And so that has kind of forced our hands for us that we have to get our property manager for the Niagara on the Lake property.

Sylvia Ho: [00:10:40] So if I was going to summarize it, the condo, you pay condo fees, but it's easier to manage. But then when it comes to a house, now this one is a little bit different because it's Airbnb and it's out of town. But it when it comes to a house, you don't pay the condo fees, but there's a little bit more managing involved.

Daryll: [00:10:55] I believe so, yes. Yeah, I would agree with that.

Sylvia Ho: [00:10:58] Okay. You kind of fell into real estate, right, through that conversation. So when you fell into real estate, obviously it wasn't like a plan thing. So what do you like about real estate investing now that you've been in it for, what, eight plus years now?

Daryll: [00:11:16] If I say what I like about real estate, it's probably the purchase of a physical asset that's, I'm going to take me out of this amount of debt. But this debt is actually, there's a physical property attached to it versus what happens if I brought some debt out and bought some stocks or something? What's the, what's it being backed up against? And so we felt comfortable with this. And obviously, I think that brings a certain amount of comfort level for the banks or the mortgagor. And so I think that's why we decided to go into real estate. And I think part of this was to round out the portfolio. We understood mutual funds and stocks and how those worked, but we didn't really know about real estate. And I guess you listen, you hear stories of people building their wealth through real estate and just being more curious about that. So that's what led us to the next step to talk to that real estate agent.

Sylvia Ho: [00:12:20] Okay, so you fell into real estate and you wanted to balance out your portfolios. But the one thing that you really love about real estate and I love about real estate is that it's tangible. You see, you feel it. You know, the value has gone up over time, right? So that's what I love about real estate. And it sounds like it's very similar for you as well.

Daryll: [00:12:40] Yeah, I think we've been lucky to get in fairly early and over the number of years there's been some fresh appreciation. And so I guess you need to look at the capital appreciation of the asset, but then also the cash flows on a yearly basis. Do those make sense for your situation?

Sylvia Ho: [00:13:00] Okay. So I am sure that the audience is curious about this whole Airbnb thing. With the Airbnb, how has your experience been in getting it? Because it's obviously has to be a legal Airbnb and you're going to have a property manager. How has that process been for you right now?

Daryll: [00:13:18] It's been a long path. There's two things that were going on. First of all, there are the requirements for Niagara on the Lake for short term rentals, and so those are additional requirements that have to be met. I'm not familiar with the ones in Toronto and other cities, but from my experience, talked to a couple other people, some of them don't have any Airbnb requirements and so it's easier to get up and running. For example, our basement room has a window and it needs to be a proper escape hatch, not just the regular window. And so because of the pandemic and supply chain, things are backed up 3 to 6 months. And so that has delayed us from getting the final approval. It's been an ordeal. We're really close to it. I'm glad we've got this property man that we trust and I think we see the light at the end of the tunnel here. We also hired an interior decorator to make it easier for us to tie in all the elements of the house. And so we're quite happy about that. So the pride of ownership is evident.

Sylvia Ho: [00:14:25] Excellent. So it sounds like you're reaching out to professionals in the area to get this investment going and get this investment started faster. You're happy?

Daryll: [00:14:36] Yes, I think we're happy. We are happy with the professionals that we have interacted. Just part of it is being so far away, we want to turn key and rely on the experts. And so this property manager is not just managing the property. They're also going to manage the Airbnb. So they're going to step, the last thing I think they might do some cross-listings of other platforms. We'll see about that.

Sylvia Ho: [00:14:59] We had just talked about you have a condo that's coming up for occupancy. That was a new construction property that you bought way back when. Right? And you're thinking of moving into this property. Talk to me a little bit more about what your thinking is there.

Daryll: [00:15:15] So there's another property that's coming online in a few months. And just because of the landscape of economic landscape and where interest rates are, it's becoming interesting about how we are going to earn. There's two ways to earn a return from our short time being real estate investor, is the capital appreciation or through the cash flow that you've got on a monthly basis. For this particular property, we will definitely have capital appreciation from that, but not so much from the cash flow. I don't know if we're going to be able to make rent or find a renter who's going to pay that amount to cover our mortgage and our other expenses. And so we are seriously considering moving in to take over that property, rent out our current home, which is kind of a townhome. And then what we stay in our property or this new condo for at least a year so we can actually get the protection of the principal residence exemption about capital appreciation. And so I think the market, it's been interesting. We just had our conversation with my wife just the last two weeks. We've really had to be more deliberate about how our real estate and how our finance strategy is going forward here, because we do have multiple properties on the go and how do we manage it so we're not necessarily out of pocket too much.

Sylvia Ho: [00:16:46] Right. Okay. Yeah. So I find that real estate gives you a little bit more flexibility. Right? So last question I'm going to ask you today is what's one advice that you would give to your younger self?

Daryll: [00:17:00] I would say start the conversation sooner rather than later. When I say start the conversation is, if you're interested in real estate, for my interest in real estate was just kind of lurking about and saying, Yeah, I'm interested in real estate, I'm interested in real estate. But it didn't really mean anything about it until I met my acupuncturist and she just went to the real estate agent. If I was to say, Hey, I've had this thinking in my head about this real estate, I'm not so sure about it. So what's the next step? What can I do to move that football down that field? And thankfully, just the meeting with that acupuncturist, having those two more conversations, has blossomed into being that real estate. And so when you have a few more conversations and you get more comfortable with that then you kind of actually learn to see what's your relationship with that or what's your view on debt or real estate may be correct or incorrect and you start to test those things. And when you have more people on your side then it's a lot easier.

Sylvia Ho: [00:18:00] Beautiful. Beautiful. This has been absolutely amazing. Thank you so much, Daryll, for sharing your experiences in the real estate and how you just kind of fell into it and that your younger self advice would be start the conversation earlier.

Daryll: [00:18:18] That's right. Thank you, Sylvia.

Sylvia Ho: [00:18:19] Yeah. Thank you so much. All right. To all of my J.O.M.P. audience, J.O.M.P. is all about owning just one more property and building wealth through real estate. Doing what the rich and wealthy people do is using your equity that's in your home and leveraging that to, you know, to retire earlier to have passive retirement income. And the advice that Daryl is giving us is to use professionals and to start the conversation earlier. So thank you very much, everyone, for listening. Thank you, Daryll, for coming.

Sylvia Ho: [00:18:48] We just heard from Daryll. Oh, my goodness. He talks about his relationship with debt and the power of debt and how his view changed on what debt is all about, how him and his wife changed their view on the power of debt. Yeah. And then the second thing that he talks about is how he fell into real estate and how he had a trusted individual to guide him throughout this whole process. The J.O.M.P. process, while working with me you go through the whole process and I put together a personalized plan and a personalized strategy to help you understand what it means to own just one more property and build wealth through real estate. I would be your trusted guy in this whole process. Contact me through my website, book a time, I'd love to chat. It's Sylvia. Peace out. Hey friends, thanks so much for listening to the Sylvia Ho Mortgage podcast. We'll catch you on the next episode. You want to learn more about the J.O.M.P program, please connect with me at SylviaHo.ca. Love to hear from you. All it takes is 15 minutes for us to chat to see if this will work for you. Thanks, guys.

View Details

Sylvia Ho talks to two J.O.M.P. clients about managing their out of town properties in today’s episode. The first are Gem and Drex, who purchased in Kingston. The second is Mick, who purchased in Peterborough. Each of them has a different way of managing their property, and they each share their experiences and why their chosen strategy works for them.

Drex and Gem searched Toronto properties before realizing they were priced out of Toronto. So they bought their first investment property in Kingston because that was Drex’s home town and he knew the city well. They use a property management company to run their property and are extremely happy with that decision. Sylvia discusses how the property management company works and why it suits them.

Mick searched Toronto for a condo before realizing that was out of his price range. He bought his investment property in Peterborough because, as he explains, that’s where his agent found the right property. Mick made the choice to renovate the basement of his new property so he could have two separate units in the one house, and two rents coming in. Mick does not use a property management company and he shares with Sylvia exactly why he prefers to do it himself. The tips and honest financial talk shared in this episode will be valuable to everyone considering an investment property. And both clients say to do it now, not to wait.

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Transcript

Sylvia Ho: [00:00:05] Hey, friends, have you ever wondered how you could pay off your mortgage faster? Or maybe you like to help your kids get into the real estate market. Or better yet, retire with some passive income. Well, you're in the right place. Welcome to the Sylvia Ho Mortgage Podcast. My name is Sylvia. I'm here to teach you how to achieve your goals simply by owning just one more property. Hey, friends, it's Sylvia here. Welcome to the J.O.M.P. podcast. Today we are joined by two different J.O.M.P. clients. One is Drex and Gem and how they share their story on how they're handling the negative cash flow with the rising rates and stuff. It's been more difficult and we're talking about how they're handling the cash flow on their rental property and on their owner occupied property and how they manage their property. Their property is out of town, out in the Kingston area. So for them it's like how do they manage it when they live here in Toronto, they have a little one and they have a property out in Kingston. We also hear from Mick, and Mick also purchased a property out of town and he has a different way in managing his property that's out of town as well as we're going to hear from him about handling negative cash flow.

Sylvia Ho: [00:01:17] Drex and Gem are J.O.M.P. clients. They purchased their first investment property a few years ago and we're here to talk about what their experience is in regards to being a landlord. Why did they want to go in to J.O.M.P. in the first place? And what their beliefs are in regards to building wealth. So Gem, Drex, thank you so much for coming on to the podcast. So I'm just going to ask you the first question. Did you ever think that you would be a landlord?

Drex: [00:01:40] Yeah, it was actually always part of our plan. Since early in our relationship before we married, we had always planned on investing in real estate. I remember many years ago saying, Let's let somebody else pay the mortgage sort of thing, and we got delayed on it. We've been married five years now. We just invested in real estate this year, but we got delayed on it just because of the circumstances of life. We had a kid in the meantime, things got busy. We felt the markets weren't good, but we kind of ended up trying to get away from just timing the market and just trying to get in as early as we can stay in as long as you can, you know.

Gem: [00:02:14] It's always been something I'd hoped for, but I didn't know how to get started, how to do it. So, and you've actually helped us tremendously with that. So thank you.

Sylvia Ho: [00:02:24] Okay. The biggest objection when it comes to owning their first property is like it took me so much effort to get into my first property. You're telling me I can buy a second property? Like, is that actually possible? And a lot of people just don't know how to get started in this whole process, right? So that's awesome. You guys have a dream, realized it, made it happen, right? So now you own another property. Talk to me a little bit more about why did you want to get into real estate investing. You said that you've always wanted to. Why? What are the reasons?

Gem: [00:03:00] Because the money is there.

Drex: [00:03:02] Yeah, we understand that real estate is where the money is. And for average people like us, I mean, in our parents time, you could work your job and pay your mortgage and pay down your mortgage and get it paid off and then you're set. But in our time, that doesn't work anymore. In our time, it takes a little bit more. Investing is really, investing in real estate is really the only way that average people like us, I think, can build a significant wealth without spending 80 hour workweeks and that sort of thing. You know?

Gem: [00:03:34] I also remember when I was in college many years ago, a friend was telling me that she bought a condo and then like a year later, she sold it for more than $100,000. So basically her equity jumped by that much. And basically at that time, I was thinking, how can you get that much in a job? It's hard to get a job where you can get 100,000 in a year. This is back in 2001. So I could really see that money was in real estate. It's easy to make money with the property values going up.

Sylvia Ho: [00:04:08] Right. So what I'm hearing from you guys is that we've seen other people do it, right? You saw your friend do it. Our parents. It was cheaper to buy homes at that time, but right now it's like it's more expensive, so it's tougher. So how does an average family here in the Toronto area pick up a second property? And what you're saying is, is that that's where the money is. That's what the wealthy people are doing. And therefore you're like, how do we do that? And we're doing it right now.

Gem: [00:04:36] That's right.

Drex: [00:04:37] Making it happen was was a bit of an obstacle, you know, it's a bit of a challenge. It's pretty scary sort of thing. Just, it was a lot of work too, in getting in everything in place. It was a lot of work. We had this conversation many times, but over the course of the past year, I've said many times, if I'd known it was going to be this much work, I probably wouldn't have done it. I'm not saying that any more now that things are all in place and the rent money's coming in now, you know I'm over it. But Gem was encouraging me all along, No, no, we have to do this, we have to do this. And I was saying, Oh my gosh, it's so much work, it's so much complexity and everything. But she's better at understanding this sort of thing, these sorts of things than I am. And I'm better at other aspects of finances like saving.

Sylvia Ho: [00:05:18] Are you telling you that at first you were like, Oh, this is it's a lot of work to pick up another property.

Drex: [00:05:24] It is a lot of work. There was a lot of paperwork involved. First of all, we had to refinance our mortgage and then getting all that paperwork out and everything. You were a lot of help to us in that, because you were giving us lists of things that we needed to do all along the way. And all we really had to do is follow your list. That was a big, big help to us.

Gem: [00:05:44] But even with the finding of the property, that was a bit of work because like every weekend we would go visit property, several properties at a time just to find the right one at the right price. So it was tiring.

Drex: [00:05:58] You know, we started looking here in Toronto and we put a couple offers here in Toronto before we realized we've just been priced out of the market in Toronto, and that's when we started looking in Kingston, my hometown, and we ended up doing probably four or five offers in Kingston before one of them was accepted.

Gem: [00:06:12] That's right, yes. Yeah.

Drex: [00:06:13] We're talking more than a half dozen offers in total. It was a lot of work.

Sylvia Ho: [00:06:17] Okay. Okay. So what you're saying is that when a client's interested in getting to the J.O.M.P. program and becoming a landlord, there's a lot of initial work that goes into it. Right? Paperwork, finding the right property, you know, putting in offers, spending the time doing it right. But now that you've gone through that, how do you feel?

Drex: [00:06:37] Yeah, exactly. Now that the rent is coming in, we feel a lot better about it. And also too, we understand that it's more work, but it's more work for a reason. Like we could have taken that money and put it into mutual funds. Everybody does that for a reason. It's because it's easy. But people aren't investing in real estate for a reason too, because it's work, but it's more work and it's more payoff as well then you're going to get out of a mutual fund so.

Sylvia Ho: [00:07:00] Things don't come for free, right? You got to put in some effort, right? So. So you live in the Toronto area. Your rental property is outside of the Toronto area. How are you managing this whole thing of being a landlord having a property outside?

Drex: [00:07:17] Yeah. So we've got property managers dealing with the day to day for us and that was a good decision, especially since the property is out of town. I think it was a good decision. They charge us 7% of the rent, which is money well spent really. We bought the place in - was it early August? - and we had a renter in place by September. They had somebody in that quickly. So we can't complain about it. You know, they kind of nickel and dime us for little things a lot here and there. So it's kind of annoying that way. But it really is money well spent to have the property managers take care of finding tenants and collecting rent and the legal paperwork, that sort of thing.

Gem: [00:07:55] I'm happy that we got a property manager because before we got into this, you know, you tell me that, oh, I'm going to get a rental property, I'm going to get a property manager, I'm going to, I used to think that he spent so much on property managers, but now that we're into it, it's actually not that bad. It's, you know...

Drex: [00:08:13] 7% is money well spent.

Gem: [00:08:14] That's right.

Drex: [00:08:15] For what they do. Yeah.

Sylvia Ho: [00:08:17] Yeah. It's that 7% is the cost of doing business right, like if you, if you don't do that then you put your money into investments and you end up paying the management fees on it. Right? But right now you're paying 7%. They handle the tenant. You guys are pretty much hands off it sounds like. And at the end, you know, we don't want to be stressed out about our finances. So being able to give it to the professionals to do it, it's just like, okay, now I can live my own life.

Drex: [00:08:44] That's for sure. Now that things are in place, it's become a lot easier. And that only happened just recently. As of September, we kind of could sit back and relax and say, okay, everything's in place now. The rent's coming in, but it's a load off the mind for sure. Yeah.

Sylvia Ho: [00:09:00] Okay. When you say September, so it took about... no, it took I guess it took 3 to 4 months, right? By the time we refinanced. Got the new mortgage. Found a new place.

Drex: [00:09:10] We started that process in January. So it actually ended up taking about nine months in total. And that was because our process of shopping for properties took so long. We started looking in Toronto, put in a couple offers in Toronto. We were dealing with several real estate agents in Toronto and and then we ended up going to Kingston. So we actually took an extended vacation in Kingston to look for properties as well. It was a long process, probably longer than most people would experience, but that was because we were--

Gem: [00:09:38] -- had to shift markets. Yeah.

Sylvia Ho: [00:09:41] So you had to shift market. So what I'm hearing right now is as landlords, you're like, hey, it was a lot of work at the beginning, but now it's worth it. It took us a little bit longer because we got priced out of the Toronto market. We ended up going to Kingston and you picked Kingston because it's your home town. Why did you pick Kingston? Why don't you pick like Waterloo? Why don't you pick somewhere else?

Drex: [00:10:02] Yeah, it would have been just as intelligent to do that, I think as prices have increased a lot in Kingston over the past year. However, we just had a lot more market knowledge of Kingston because I grew up there, so we knew which neighborhoods to avoid. We knew where the jobs are. We knew, we could look at an address and immediately think, okay, well, that place is going to rent for an appropriate amount and look at other places and say, you know, we need to stay away from this.

Sylvia Ho: [00:10:28] Excellent. You always invest in something that you know and that you understand. So that's what took you guys out to the Kingston area and you already knew the area. So that's good. So I always recommend to my clients, do something that you understand. And if you don't understand that city, study it. Study it, study it, study it. Right?

Drex: [00:10:47] We're actually already kind of planning our next property. And our property in Kingston actually doesn't cash flow positively. We're putting extra money from our income into that property every month. And with the rising interest rates, it's become a bit worse as well. So we're happy with our decision overall, but we think that next time we could probably do a little bit better. And that's why we're trying to research other markets outside of Toronto, outside of Kingston, probably even outside of Ontario, because we're looking to hopefully have a property that will cash flow positively, that we're taking in more from the rent than our expenses are total.

Sylvia Ho: [00:11:26] Okay. So right now you've bought a property here in the Kingston area. It's not cash flowing, so you're bringing out your own money to be able to circumvent that cash flow. Now, I know that I was watching your Excel sheet in your video. We had put aside some emergency money for rising costs, vacancies and repairs and stuff. Have you guys started dipping into that at all yet?

Drex: [00:11:51] We have a little bit. We did some repairs when we first bought the place. We got the basement windows done, a ceiling fan, some painting, that sort of thing. Apart from that, we want to leave that money though, mainly for vacancies. And we do have some more repairs coming up as well. So we're trying not to dip into that money too much just to cover the cost of the mortgage. So we are paying out a little bit from our monthly income into the property as well.

Sylvia Ho: [00:12:18] Okay. Now, now that you're bringing out money, the question people will ask is, do you regret doing it then?

Drex: [00:12:24] I don't regret doing it. No. I mean, I think in the long run, it's going to save us a lot.

Gem: [00:12:30] That's right. That's right. Yeah. And basically, it's good that we're already, we've got our foot in the door, got our foot in the second property. So I think it'll be easier to--

Drex: [00:12:42] -- yeah, I think, I think we can do better the next time around. We were looking at Kingston because that's a market I understand. But I think had we even looked out of Ontario the first time and done a bit more research, I think we probably could have done better the first time than we did. However, doing it for the first time, it was very much an experience builder for us and we understand how to do it a lot better now. And I think probably our third property is going to go a lot more smoothly, I hope.

Sylvia Ho: [00:13:09] And then if you were going to give an advice to a new landlord, what would you tell them?

Gem: [00:13:14] I think get a property manager.

Drex: [00:13:16] Yeah, get a property manager and also get in as early as you can. I think had we done this a year earlier, we'd probably be $100,000 richer by now.

Gem: [00:13:23] That's true.

Drex: [00:13:24] So get in as early as you can. Don't try to time the markets. Just just get in and stay in as long as you can, I think. Same as stocks, same as bonds. Just get in as early as you can. Stay in as long as you can.

Sylvia Ho: [00:13:37] Okay. Beautiful. Now, one thing I wanted to go back to was your friend who bought the property and then a year later sold it for 100 grand. And you said something very interesting. You said, where do you make $100,000 on top of your full time job in one year? And is that where your idea of getting into real estate started?

Gem: [00:13:59] Kind of, I think so. It's probably one of those things. Yes.

Sylvia Ho: [00:14:04] Okay, beautiful. So is there anything else that you wanted to add to tell people about the J.O.M.P. program or to tell people about real estate investing? Like what, is there anything else you want to add for the audience?

Drex: [00:14:15] You've been a big help for us, but also too, it's not it's not just the services that you do. You've got to kind of build a team to to handle a lot of stuff for you. You're not going to know everything yourself. So getting a good real estate agent, like we were pretty picky with our real estate agent. We fired two real estate agents before we ended up finding one that we really liked working with. So you do have to be a little bit picky, a little bit assertive. But building a team of people that can help you. You've recommended some people to us for insurance and accounting and everything.

Gem: [00:14:47] Great people.

Drex: [00:14:48] Good people. So you don't have to do it alone, I guess I'm saying, you know.

Gem: [00:14:53] Like you say, it's very important to have the right contacts, the right team to work with, because I've had this idea of getting a second property for rental many, many years ago. But then all the mortgage brokers I've had in the past, they financed my property and then that's it. I never hear from them again. And I would ask questions about how do I make this work and get another property? And they weren't really very helpful in that sense. So, I mean, you're a godsend because you've answered our questions. You've been very patient with us. You've built a personal relationship with us. So that helped us a lot.

Drex: [00:15:31] It probably never would have happened without you, to be honest.

Gem: [00:15:34] Yeah, for sure. And also, even with the lawyer you recommended, Michelle Caling, she's amazing. I mean, I've dealt with other real estate lawyers in the past as well, and I never heard from them, never got any emails, calls or anything. It was like their law clerks or secretaries doing all the work. But Michelle really talks to you and gets to know what you really need. And she's helped us with our rental property. When we had an issue, she was like, hands on. It was great.

Drex: [00:16:03] Yeah. She is a very good professional.

Sylvia Ho: [00:16:06] Absolutely wonderful, guys. You guys have talked to us about your experience, your journey, your cash flow journey that you want to continue investing in real estate and the advice that you're going to give like a future landlord in regards to, you know, know your area, do your research, use a property manager. I really, really appreciate this. My listeners will learn so much from your experience. So thank you very, very, very much. So friends, we just heard from Drex and Gem and their recommendation is to use a property manager because it makes life a lot easier. Their second recommendation is to start early and it's not about timing the market, it's getting time in the market and owning that investment property. And right now, guys, they're thinking about their third property. How exciting is that?

Sylvia Ho: [00:16:54] So we just heard from Gem and Drex and how they manage their properties. Their first property, their J.O.M.P. property that they bought was out of town, right? And they hired a property manager. Right now we're going to hear from Mick. Mick and his wife decided to get into the J.O.M.P. program and buy a rental property and they also ended up buying a property out of town. Thank you very much, Mick, for coming on to the J.O.M.P. podcast.

Mick: [00:17:17] You're welcome. Nice to see you.

Sylvia Ho: [00:17:19] So just a little bit more about who Mick is. So Mick is a professional business owner. He owns a painting company. He actually painted my house, guys, and I absolutely love him and his team. So this is my plug for Tricolor Painting. You guys want to contact our painter? You've got to contact Mick. So Mick and his wife live here in the Toronto area. He's self-employed. He owns a painting company and his wife works at the management level in a large firm. They also have two kids, right? And one of them is going to be going to post-secondary soon. Like you have a teenager in your house.

Mick: [00:17:47] A middle school teenager as of last week. Yes, but he had grade seven. So middle school for two years.

Sylvia Ho: [00:17:52] Grade seven. And then when will your grade seven kid be going to post-secondary?

Mick: [00:17:58] So seven and eight is in middle school. So nine. So a year and a half from now, he'll be grade nine.

Sylvia Ho: [00:18:03] They'll be in grade nine, and then we go to university in grade 13 now. So maybe about six more years.

Mick: [00:18:09] That's a plan.

Sylvia Ho: [00:18:11] University. Yeah, six more years. Okay. All right. So, guys, Mick came originally to me when his mortgage came up for renewal, and he wanted to know his options, but when his mortgage came up for renewal, he wasn't quite ready for J.O.M.P. yet. He wasn't quite ready to buy an investment property. But 18 months later, he decided that he was ready. So my first question to you is, Mick, why did you want to get into the J.O.M.P. program?

Mick: [00:18:33] Yeah, thanks, Sylvia. It's nice to look back now and be able to talk it as in the past tense. When you said I wasn't ready, I think financially I was ready, but mentally I wasn't ready. Granted, I was in my late thirties, probably 40 at that point, and well-established and positive feeling economically. Company and the country was going, well, why didn't I? Yeah, I think again, back to psychology. My wife is probably less of a financial risk taker than I am. I'm a pure entrepreneur. So I guess maybe we felt between the two of us that we weren't brave enough, we weren't ready to pull the trigger. There's been many things in life, I wish I did a larger renovation when I did a medium sized renovation ten years ago, so maybe I didn't have that voice of reason guiding me or just the confidence to pull the trigger. I wish I had is what I'm saying to you. I was ready, physically and financially, but just not there emotionally.

Sylvia Ho: [00:19:26] Emotionally. Okay. So yeah, it is a mental game when you start changing your mindset in regards to investing into more real estate, because at the end it is a large debt, right?

Mick: [00:19:38] Sure, it's the biggest asset you'll ever buy, right?

Sylvia Ho: [00:19:40] So now that you are a landlord, did you ever think that you would be a landlord where you are today?

Mick: [00:19:47] Yeah, I think so, yes. Just you don't know this, Sylvia might not have even mentioned it, when I grew up I remember my parents - and this is in 1980s in Ireland - my parents had an investment property and I didn't dwell on it too much, but I always knew that at the back of my head. And my father was an entrepreneur and I left corporate world and became an entrepreneur. So maybe I was reflecting back on my past. But no, let's not pretend I was 25 and I said my financial goal is to own my own company and buy investment properties. That was not in my head at 25 or 30, but then in my thirties, I think it's about the numbers here. I soon realized with the Toronto housing market what the word equity means and that I was building a lot of equity in my house, which I was lucky to purchase as long ago as 16 years ago. So that started to wear on me that there's an opportunity, a hidden opportunity there, and that just seed needed some time to grow.

Sylvia Ho: [00:20:41] Okay, so you're talking about building the equity that's in your current owner occupied home?

Mick: [00:20:46] Yeah, for sure. My house is tripled in value. Everybody who bought their house, I don't know, more than ten years ago has a large amount of equity sitting there and equity, to simplify it, is the ability to get debt.

Sylvia Ho: [00:20:57] Yeah. So the whole J.O.M.P. program, guys, is all about pulling the equity that's in your current home to go buy another property. Today's focus is really about managing properties. Actually, I don't know if you answered the question, why did you get into J.O.M.P.?

Mick: [00:21:11] Oh, to grow my wealth and take care of my kids in a crazy expensive market. Where are my kids going to be living in 15 years if they want to be in Toronto? And buying one property doesn't solve that problem. But I've taken a big step in the right direction. So quite simply, financial growth and security. There are high level goals, lofty goals, but that is why I didn't I don't, you know, power trip that I'm a landlord. That's not of interest to me. This is a vehicle to allow me to increase my family's wealth.

Sylvia Ho: [00:21:41] So wealthy people know that real estate is a way to increase your net worth. And basically what you're doing is you're copying what the wealthy you're doing. You're taking out the equity and going to buy another property.

Mick: [00:21:53] You find wealthy to some other people who can't purchase their first home, I'm wealthy, so yeah, that's all relative.

Sylvia Ho: [00:21:58] Fair enough. So today we're going to really focus on two things. We're going to focus on how you ended up buying a property out of town and how you manage that property. And then how are you dealing with today's cash flow strapped, people are getting, or cash flow strap, because the rates have increased quite a bit. So let's talk about the first one where you, did you ever, did you ever look at properties here in the Toronto area and how did you end up in Peterborough?

Mick: [00:22:23] 100% I did. It makes more sense to have the property nearby because physically you know that it's closer if you want to check on it or if there's issues, it's closer or if a child is to live in said property in the future. Pretty sure my kids won't be living where I purchased. But I guess the decisions that helped me through that process. My brother in law's in real estate. Of course, we wanted him to find us, we were looking at a condo. We wanted to spend for half a mil maximum for a property. And in Toronto that does not get you a house. So straight away it was okay, Toronto condo. What will it look like? Half a million dollars. But of course, the monthly management fees really started to mean no positive cash flow. I would borrow an amount of money, the mortgage would equal the rent, and then I would get hit by those monthly management fees. So if I did that every month, I would have to be putting in money from my own private wealth. It would not be paying for itself. It was not cash flow positive, it would have been cash flow negative. And that scared me because we're a busy family with two young kids. I don't have a ton of cash lying around, so I wanted something that would pay for itself and that's just a beautiful thought. My investment property is paying for itself, so therefore no condo in Toronto. Needed to move outside the Toronto market. All of a sudden you can buy a house for half a million in the Kitcheners, the Hamiltons, and in my case, Peterborough. So my brother in law got no business from me, but he referred me to an agent in Peterborough and that is who I started working with. And we went through the process and purchased the house. Oh my God, what was my date on that? Well over about 18 months ago. Yeah. Summer 2020, which was after COVID hit. But I saw that as an opportunity. I thought the housing market might soften a bit because people would be scared to purchase or worried about the economy. So I purchased in a volatile time.

Sylvia Ho: [00:24:15] Okay. And so you ended up in Peterborough. Why Peterborough? Like, why not another city?

Mick: [00:24:20] Well to me, Guelph, London, Hamilton, Peterborough, they're all the same. They're not near my home and this is an investment property. I'm never going to live there. My kids are never going to live there. It's a deed, it's a piece of property, it's a financial transaction. It didn't matter to me where it was. Was I going to start dealing with six agents in six different cities? No, that would have been a nightmare. So I know Peterborough, I go north a lot during the summer, passed by it a little bit. I have a friend who's up there, but even if I didn't, there's no reason not to. If my agent said Guelph, I would have purchased in Guelph. It's just a financial transaction.

Sylvia Ho: [00:24:55] Okay, so you ended up in Peterborough. So tell me about managing this property. You live here in Toronto and your property's out in Peterborough.

Mick: [00:25:04] Yeah, so we're into our second year now. Obviously leases are talked about in years, but for me a goal for me was to find a property that had the ability to have a second unit. I wanted to double down. I wanted two sets of rent rather than one. I could have found a house that had a basement apartment ready to go. There wasn't a lot of those, and I'm not afraid to work with contractors. And that's what we did. So we bought a house that had a good, solid, deep basement and we dropped 100,000 into it in order to build a nice two bedroom, separate unit. So now I have a main floor and a basement unit, and that was, I thought, smarter than just buying a house and just renting it to two or three people.

Sylvia Ho: [00:25:44] That's very interesting. So you specifically in your mind, you went from a condo with condo fees, you're like, forget it, I'm not doing that. It's not cash flow positive. To outside of the city to buying a house that is cheaper price point, right? But you're buying a house instead of a condo now. Your thinking went to, oh, I have to have a basement apartment so I can have two incomes coming in.

Mick: [00:26:08] For sure. I mean, my basement income is not far off the main floor income. So I basically have double and I'm not paying twice the price of the next house next door that only has the main floor. So I saw some real value in having two separate units with two separate rents coming in. Of course, there's extra debt there, the cost spent on the renovations has to be added to the debt of the home. So, yes, more debt, but again, more revenue from it.

Sylvia Ho: [00:26:36] Right. So now that we're talking about numbers. So you bought this place for how much?

Mick: [00:26:41] Five, five-twenty.

Sylvia Ho: [00:26:44] 520,000? Amazing. So 520,000. You put in 100 grand for the basement. So that's 620,000.

Mick: [00:26:53] Yep.

Sylvia Ho: [00:26:54] And how much rent are you getting?

Mick: [00:26:55] I include utilities because even though we did the renovations, it would have been really pricey to separate everything. So I'm including utilities at 2500 for the main floor and 2000 for the basement. That's 4500 bills are around 500 bucks. So I'm clearing 4000 per month in rent before, of course, in 2020 interest rates were super low, which was kind of encouraging everybody to maybe go buy an investment property. At that point, I had over $1,000 a month in profit, if you want to call it, in positive cash flow. My rent was more than my debt repayments. Obviously we've had what is it, Sylvia, 4% rate increase in the last six / nine months. So that's a very real thing and that definitely has been affecting me. I've gone from about just over 1000, maybe 1100 positive cash flow. Right now I'm breaking even. So if interest rates increase a little bit more, I will actually be dipping into personal finances to facilitate that. And I need to do that. Obviously, the mortgages have to be paid and I can't change somebody's rent in the middle of a lease. So yeah, interest rates are very real. Some people in my position might be scared, but I know they're not going to double to 8%. That's not realistic. I know there's maybe a couple more rises coming this year and then I hope it will stagnate, if not reduce again. So I feel lucky. If I hadn't put that basement apartment in, my repayments would be over and I'd be cash negative right now and every month I'd be paying a certain amount to pay the mortgage. So currently I'm neutral, which makes me happy. And I can still say the magic words, this house is paying for itself.

Sylvia Ho: [00:28:31] Okay, beautiful. So we heard earlier from Gem and Drex, they are in a negative cash flow position and they are bringing out their own savings. There is a strategy which is a J.O.M.P. 2.0 strategy, which is called cash damming. And so if any clients are in a negative cash flow position, there is another strategy that we can pull out of the hat to use. All right. So I just wanted to put that in there. Now, so you're managing your negative cash flow with a basement apartment that you were just so happen just to put in and then you were at positive and now you're at a neutral. Do you regret buying an investment property?

Mick: [00:29:13] No, no. Not at all. Somebody who's more risk averse, scared of risks, might be like, Oh my God, you're on the verge of getting yourself in trouble and paying. I would just zoom out and realize this is not a three year strategy or a five or a ten. This is I don't know. I don't have a number 25, 30 year plan when the mortgage is paid, I know that asset will have appreciated hugely and I don't expect interest rates to stay high. So I will go back to cash positive soon and then I will be back feeling really good about it for the long term. It would be crazy to sell right now. I'd I don't even think it's increased that much because I bought in a little bit of a peak. Even though it was COVID, people started spending. No, you could not convince me to sell that house right now. And even if interest rates went up 2 / 3% and I had to put in hundreds per month, I'd be talking to you about that technique and we would be doing it. And yes, times are tough when interest rates increase, nobody can escape that. So it's just a fact of life. So, no, I'm not even nearly thinking about selling. So quite the opposite, actually. I'm thinking, you know, when will I have equity in this new house and how much debt can I handle to move forward and purchase another property?

Sylvia Ho: [00:30:24] Oh, that is very, very interesting. So let's touch upon two points right there. So you just said buy another one. So let's talk about cash flow. So you just said that no, you would not sell even because you are cash flow neutral, but you can understand how someone would want to sell just because they're just stressed out about it. Right?

Mick: [00:30:44] Yeah, mentally. But I don't think that's the best financial decision. But if they're struggling to put in those few hundred bucks a month to pay the mortgage, then they might go, What else can I do here? And only as a last resort, if I was in that situation, would I sell. If I sell, I feel like I'm walking away in my whole couple of years and all that mental effort put into this idea would be flatlining, would all be for nothing.

Sylvia Ho: [00:31:06] Exactly. So how I, how I approach it is I talked to individuals that, you know, that mortgage payment that you're making, a portion of that is your principal. It's really you paying yourself back. So when someone has to bring a couple of hundred dollars or say 500 bucks, it's really you putting money back into your own retirement savings, putting money back into your own savings account.

Mick: [00:31:27] Sure. Yeah. Yeah. The paying for itself almost might might apply soon, and I'll be okay with that.

Sylvia Ho: [00:31:33] Yeah, exactly. So. So I love your thinking, that you're like, Oh, you know what? I can't wait till the equity grows again and buying a second property. You want more than one property. What's your thinking behind that?

Mick: [00:31:44] For sure. Well, in the short term, you know, turmoil in the economy equals opportunities. If everything's rosy and everybody's making lots of money, house prices, they're going to continue to go insane. And they have been and I'm used to it. It's not insane. It is strong growth is what it's called. I see that that's going to slow down a little bit. So if you start looking at property prices over the last five years and this year and next year, there's going to be a correction in the curve. I'm not saying house prices are going to drop, the increases are going to slow, prices will slow down equals good time to buy a house. Other people scared. Interest rates are increasing. Oh, I'm not sure. Oh, Covid's finished my job. I'm not sure. You know all these concerns, those people will not be jumping into the market so they won't be overheating the market. So I think there's opportunities to be purchasing this year. I don't know if I'm financially ready for it this year, but if I was, I wouldn't be scared of interest rates. I'd be doing the J.O.M.P. program tomorrow for my first property.

Sylvia Ho: [00:32:40] Warren Buffett goes, When people are greedy, that's when you should be scared. But when people are scared, that's when there's opportunity. Right now there's a huge opportunity.

Mick: [00:32:47] Yes. It's not a magic wand. Interest rates are on the way up. So, yes, house prices are slowing, but interest rates will make financing more expensive. So someone might say it might come out in the wash, the increase in one might be negated by the other. But all of this doesn't mean don't continue moving forward buying properties.

Sylvia Ho: [00:33:04] Now that we've been talking about your own property that you bought, now you want to know managing. So what happens when a tenant calls you? What do you do?

Mick: [00:33:13] Yeah, sure. So I have not found the need to use a management company. I'm in my second year, so maybe give you an example of my first year. I had four adults on the main floor while the basement was being worked on. Those four adults, two phone calls during the year. One was a washing machine stopped and the other was a kitchen tap faucet was loose and needed replacing. So I had to reach out to two tradespeople and I got those details from my agent. The agent who helps buy your house is someone who's well connected in that area. I reached out to her and asked for 2 phone numbers. I got them. I reached both first time. I didn't have to Google plumber or Google washing machine repair person. Both of them did their visits without me involved. Hey, I need you to go check it out. Owner says X, Y and Z. They'll be there. Please communicate. Here's their phone number. They both did their calls. Solved the problems and I paid the bills. No problem. That's it. It's a very simple story for me. I have had no issues. Do I go there? No. I've been there once in 18 months since I purchased the property, and that was at the end of the first year lease. So during the lease I didn't need to go there once. I was just thinking of the practicalities, like things that people need to think about. I'm paying someone to do the garden and the leaves. My tenants, two males, are totally happy to do the snow shoveling, so I didn't have to do that. But that's maybe something that somebody might think about. I have to think about landscaping and I might need to think about snow. But those are the only people that you might need to surround yourself with.

Sylvia Ho: [00:34:49] Okay. So it sounds like how you manage your properties is you have a group, you have a professional network that you can reach out to. For example, your agent.

Mick: [00:34:59] Yes.

Sylvia Ho: [00:35:00] I need this. This is what it is. Beautiful.

Mick: [00:35:03] I mean, if I didn't have that, I would probably just be brave enough to Google plumbers in Peterborough and I would ring three of them and have three short conversations and have an instinct on who I trust more to go and do the call. That's what I would do if I didn't have that trusted source.

Sylvia Ho: [00:35:19] Yeah, exactly. So you're very similar to me, Mick, in how you manage your own properties. I manage my properties as well, right? And I've been doing this for 20 years, and for me it's all about surrounding yourself with those professionals on speed dial. Your plumber on speed dial, your roofer, your window person, you know, a handyman, an appliance person. So, and it's just, and then if you don't have that database, it's like you said, reach out, surf the internet, go to the Facebook groups, and then ask people that live in the area. So that's great. You're doing exactly what I'm doing. If you were to give one advice to a new landlord, what would you tell them?

Mick: [00:35:59] Oh, my. So they've already pulled the trigger on the purchase. So we're just talking about the nuts and bolts of being a landlord. I think the lease is important. I'm a glass half full kind of optimistic person in life and everything's rosy, and you just kind of need to think about the what ifs in your lease. I'm just thinking out loud here. I included, I include utilities. Like I said, we now have into our second year. So I've got two sets of renters. I monitored the numbers over the first year, so I kind of know what an average, you know, hydro and gas and water rates are. Just recently I was quite surprised only in the second month of the new arrangement where both upstairs and downstairs full, my hydro bill spiked and it was a bit scary. It was like 400 and change on its own. So I thought in the lease, well, I didn't think, I just said utilities included period. All signed, goodbye. What I would like to have done is said I believe utilities on average should cost this amount that will be covered by me. Any excesses of that, I guess, need to be covered by you to put a disincentive into, I won't use the word waste, but using I don't know what happened to to have that large amount of usage, but it's a concern and if that happens every month, it'll obviously tip me a couple of hundred bucks in the wrong way. So my point is in the lease, don't hope for the best. Try and be very specific. And I know just as someone who's in business and deals with customers, if you come up with an agreement and you clarify X, Y, and Z and they say, okay, this sounds reasonable and they sign it, there's no surprises later on. And I think it would have been wise and fair of me to do that. So that's just an item. But if people are not including bills in their lease, which I believe most people don't, then what else? I guess vetting of tenants, like this is just when you're interviewing, all sorts of people came my way. I learned what ODSP is. I didn't know what that was. You're just, I think also in Toronto, it's a bit of a busy city, dual family incomes. Everybody's working hard. I found that in my case, in Peterborough, I had a lot of random people with all sorts of everything going on and not many full time jobs, so it was a little scary. Here I was researching ODSP and I needed to learn about this. And am I allowed to ask you what, you know, try and be appropriate and find out things without asking personal questions? So that was a bit of a navigation.

Mick: [00:38:28] And of course then you come to the well, these people are interested and we don't have many other candidates and it's available next month. And then you look in the mirror and go, Do I pull the trigger here? Because if I don't, that's 2500 bucks next month missed. And then what if, what if, what if, so yeah, just due diligence, I guess. Meeting people in person. The first people were during COVID and we did Zoom calls. The second people, I insisted on being up there. I met like eight sets of people in a three hour window because I wanted to see them face to face. That's just kind of the person I am. I wanted to. I'm not afraid of that. Just gives you an idea of of who they are, where they're coming from, how they present themselves, and ultimately, are they going to be able to pay their rent? Because that's the simple concern with a landlord. I really don't care if there's a scratch in my floorboards. It's called wear and tear. It's called life. What I want is people are going to pay the bills. I'm not looking for the perfect family with the perfect children. Or a perfect old lady. I just want people to pay their bills.

Sylvia Ho: [00:39:29] Yeah. Mick, you sound like you're going down the exact same path that I went down. For our listeners, guys, ODSP are people who are on disability, like permanent disability benefits from the government. When I first started going in the landlord business, it was the same thing. I got a lot of individuals. It was tough because it was like, okay, what do I do, right? My property is going to be vacant as of March 1st. Do I look at these applications or who do I pick? For me, as a landlord, I picked my specific avatar, so my specific target client, right? And I did not sway from that. And the times that I did sway from it, it was not a good decision.

Mick: [00:40:11] Okay. So did you find yourself ever saying, okay, I'm not ready for next month, we need to slow down, I need to interview more and I will wait for another period, another month of rent.

Sylvia Ho: [00:40:21] It's actually funny that you're saying that because I have a unit that was available for February 1st. I put it out on the market on January 23rd because the renovations just got finished. And then two days later, an application came in and I was like, Oh, when do they need it for, oh February 1st. And the first thing is a red flag came up for me. You need a place in seven days.

Mick: [00:40:48] Yeah.

Sylvia Ho: [00:40:48] Why did you leave this to the last minute? So my gut instinct was, no, I'm ready to have it vacant. I want to have the right tenant in there. So you have the correct thinking. And in the past, for me, it was all about I had to meet everybody.

Mick: [00:41:02] Yeah. Yeah.

Sylvia Ho: [00:41:03] And yeah, I had to meet everybody. I had to get to know their personality, get to know them and see them and hear them. Right? So stuff like, Oh, I didn't want smokers in there. Well, I could smell if they smoke or not. Right? So just little things like that. And those are things that I'm doing. I'm not saying that this is the right way to do it. This is what's worked for me.

Mick: [00:41:20] Sure.

Sylvia Ho: [00:41:21] Right. The whole thing about capping utilities, I totally agree with you. Your thinking is absolutely correct. I used to have a duplex. Where upstairs and downstairs, but I wanted to get two separate meters but it was way too expensive.

Mick: [00:41:33] Yeah.

Sylvia Ho: [00:41:34] To separate the meters. And then so I ended up paying the utilities, but I put a cap on it. I said, Your cap is 500 bucks per month, 60% upstairs, 40% downstairs. And if you guys go over it after a one year basis, then we're going to reconcile our account.

Mick: [00:41:50] Yeah, I really wish, because I can't tell, this problem just started.

Sylvia Ho: [00:41:55] So I would, my suggestion to you would be to tell them, Look, your utilities bill I budget 500 bucks.

Mick: [00:42:01] Do I have any legal recourse to do that? I assumed I'd be wasting my time by trying to say it to them.

Sylvia Ho: [00:42:06] I think that you're an individual that would pick the right tenant. Trust your instinct that these are individuals that are responsible. Right? And that would be like, Hey, oh, I'm sorry, this is what happened, or hey, we're starting to use space heaters here's because it's a little bit cold in the basement. Oh, ok, let me get you a better baseboard here. Let me get your oil one instead of, like, an electric one, right? So do find out. That's in my opinion, like, that's what I would do, right?

Mick: [00:42:32] Sure. I need to see if it's going to continue for a second month because I had the conversation. We talked about the time of use rates, but it spiked so much that I'm just concerned. I don't know what's happening. So I need to see another month and then there's no harm. But of course, I'm just concerned that they would say, Well, thanks for your suggestion about changing the lease, but that's not legal and I won't do any of that.

Sylvia Ho: [00:42:51] It's not about changing the lease. It's just about coming to, I always like to assume that individuals, you know, they don't mean ill, right? So it's just finding the bottom, the bottom line of it. Right? So you manage your properties on your own. You have good professional network around you. And then you decided to buy out of town because Toronto just did not make sense to you. We talked about increasing rates and how you handled it. You are prepared to put in your personal savings, of course you don't want to, but because you put in the basement apartment, you're exactly cash flow neutral right now.

Mick: [00:43:26] Currently. Yeah.

Sylvia Ho: [00:43:27] Yeah. And then you're also thinking, okay, how do I build? I'm waiting for the equity to build up on this property to go buy another property. So if you were to give one advice to your younger self about financial investing, what would that be?

Mick: [00:43:42] Do it sooner. Pretty simple. I don't heavily regret it, but now that I'm sitting back going, Yes, I have an investment property and now I'm thinking, when can I get the next one? The logic there is, why didn't I start sooner? And then I'd be further along in this process. Yeah. Don't be scared to speak to the professionals. Sylvia's wonderful mortgage advice. It's people like Sylvia who nurtured me along the process because I don't think people sitting at home on their couch can be all of a sudden going, Oh, yeah, yeah, we're financially viable. Let's do this plan. We can bring the enthusiasm on our set of circumstances, meaning I own this house. I bought it in this year. But we need input from someone like Sylvia to say this is your equation. This is your spreadsheet. Look at the numbers. If this happens, this will happen. If this happens, this will happen. Be informed. And I think that would help anybody make a decision because it's all laid out in front of them. Yeah. So, yeah, do it sooner. I'm 45 now. I wish at this point I had two or three properties and I was talking more about, okay, let's look at a retirement age. My wife, do you want to stop working? We're not there. But those are decisions that might have been different if we started sooner.

Sylvia Ho: [00:44:54] Okay. All right. Yeah. So all of my J.O.M.P. clients, they are like, Why did we not do it sooner? It's the same, it seems to be the same theme over and over again when I ask this one question, what will you ask your younger self? And a lot of times people are like, Well, I just didn't think I could be ready financially. I'm not ready financially, and that's why I never looked into it. But what I say to clients is, you really don't know what you don't know. Right? Maybe the answer is, well, you can't do it right now because you don't have enough equity or you don't have enough income, but at least you have an answer.

Mick: [00:45:26] True. And as a business owner, if I'd looked at it ten years ago and you went, No, you're not there, you need to get to this level, that would be motivator to keep me focused on my business. And by focused I mean target this year should be more like this. I'm a classic entrepreneur. You know, I roll from one year to another and yes, I want growth, but I don't have a goal of 26%. But maybe that would help people get focused. When there's a target, you focus on it.

Sylvia Ho: [00:45:53] Exactly. Exactly. When you have a goal in mind, at least you head in that direction, right? Instead of just kind of wandering through the woods. But if you had to say, I need to get from A to B, well, let's head in that direction.

Mick: [00:46:03] And it feels empowering to have made decisions and be in the middle of a process that I instigated. Yes, you helped and encouraged, but my wife and I pulled the trigger. We did it and it does feel empowering. Now we talk to friends and, you know, if our closer friends will mention investment property and you know, there's envy there, there's oh, my God, good for you guys. Like, wow, wow. Kind of surprise. Whoa, you got an investment property? You know, I thought everybody's struggling to pay their mortgage. No, not really, because it was half a million dollars worth of equity sitting in my house doing nothing. That's a point. Obviously, we took on debt to buy this property, but my wife and I did not save up a cent to put into this property. It's all through financial maneuvering, through debt. So again, my kids didn't have things taken away from them. We didn't stop spending, we didn't stop vacations. We purchased this property without spending a dollar. I know that sounds crazy, but that's the fact that maybe some of your listeners don't know, Sylvia. Maybe they think it's going to require, like when you buy a house at 20% down. Yes, that 20% does need to go down, but it's coming from debt. It's not coming out of your your account. So that's important for people to understand. I didn't think that, I didn't really, I hadn't worked through the mechanism to know that that was in front of me.

Sylvia Ho: [00:47:25] Great point, Mick. A lot of people are like, what? I have to save up. If I want to buy 500,000, I have to save up 20%. I have to save 100 grand. It's going to take me a while to save up a hundred grand. When I get there, I get there and then I'll buy my investment property. But with the J.O.M.P. program, we're actually specifically looking at buying an investment property with no personal savings.

Mick: [00:47:46] True. I mean, I think it's prudent to mention here the security of my primary home is is included in this equation. If the renters disappear and if I cannot rent that property and if I cannot pay my mortgage, the bank could come after my primary house. And in that situation, obviously I would have to sell. But yes, it's not free money for nothing. Your debt is secured by your main primary home. But that's what using the equity means. You're saying I'm lucky enough to have this wonderful asset, let's use it to do other things.

Sylvia Ho: [00:48:17] Exactly. So it's all about the debt equity that's currently sitting in your home. Is there a risk to using your current house to pull out the equity to go buy investment property? Well, there is always risk. It's an investment. It's a business, right? So when I look at this, I look at this as a landlord business, as an investment business. So another option is if you decide not to buy an investment property and leverage the equity in your home, or you decide to leverage the equity in your home, you can always pull that money out and give it to a financial planner, right? And then with a financial planner, it's going to go up and down. You're still leveraging, right? But now my area of expertise is leveraging the money in real estate instead.

Mick: [00:48:56] Yep, absolutely. And you've had longer time in the market to see those gains. Right now I don't want to know what that property's worth. I don't know if it's gone up 5% or down 5%. Neither figure is very exciting to me because it's short term. So I'm looking for the long term capital gain. The property will pay for itself and then, I don't know, half a million dollar house in 30 years, it's going to be closer to a million. Yes, that's not a million of today's dollars, but that is a large help to my kids to get into the Toronto market, perhaps.

Sylvia Ho: [00:49:29] Exactly. And it's funny that you're saying this because that's exactly the J.O.M.P. blueprint, is you go from $500,000 in 15 years, it doubles in value, goes to a million. When you buy it for 500,000, you pay it down, after 15 years, it'll go down to a quarter of a million, so 250. And then now 15 years later, you have a mortgage of 250 that your tenant has paid down. Your place is worth a million just over that 15 year period in this example. That's 750,000.

Mick: [00:49:54] Yep, Yep. Massive. Massive. We all work so hard 40, 50 hours a week for whatever salary it is. Compare those two numbers, right? That could be four or five, six years worth of salaries. That's a lot of work in your office or in your in your business. And here it is generating itself for you.

Sylvia Ho: [00:50:13] Exactly. Exactly. I really appreciate this time, Mick. Thank you so much for being on this podcast and answering these questions. Now, I haven't done this before yet, but do you have a specific question for me? And it's okay if you say no, about how how I manage my properties?

Mick: [00:50:29] Not really, but I can imagine with multiple properties comes multiple phone calls and then it could escalate a little bit. But in my mind, if it got to that situation, I would would look at, I'd be interested to know the numbers on what a property management company, what would they charge me per year to be on the end of the phone to help my clients? That's all. I'm just curious what they would charge. Because if the phone doesn't ring, do they still get paid a month's rent? Do they get paid two grand for potentially making one or two phone calls? That's the equation that you need to study before wanting to talk to them.

Sylvia Ho: [00:51:00] Yep. Property managers will charge anywhere from, Gem and Drex were saying they were 7%. I've heard 10%. I've heard 15%. I've heard one month. And then after it's 10% every month for every rent cheque that they collect. So every property manager is different. You end up paying any kind of repair bills and stuff. That's just their management bill.

Mick: [00:51:19] Interesting. Yeah, for me it wasn't. Look, if the phone had rang ten times and it was becoming stressful, maybe then. But for that to happen, the house would have had to have been falling apart or them really heavy on wear and tear. Yeah. Again, you're asking me for advice to a new person going in. Maybe go without for the first six months or year, see how much work is involved, and then make an educated choice for year two. You know, you don't have to commit on day one and stick with them forever. You're in control.

Sylvia Ho: [00:51:49] Yeah, exactly. Or even do the opposite. Let them set it all up. Have it free flowing and then pay them for the first year and after a second year you're like nothing has happened in the first year. I'm just going to do this on my own.

Mick: [00:52:00] Yeah, for sure. Other than that, questions for you in the future will be when am I in a position to get more debt for for an extra property?

Sylvia Ho: [00:52:11] Yeah, absolutely. We can talk more. It's all about building that equity. Once the equity has been built up, then we can pull again.

Mick: [00:52:17] And actually, I mean, that's just in the J.O.M.P. mentality. My wife and I are always talking here about renovation versus move, so it's not as simple for everybody as in I live in this house and now I just want to own other houses. It's more complicated. Maybe we need to buy up so that you're the same person again to help with that equation. As of today, with my current financial situation, how much more money could I get if I wanted to change homes? So that might be a conversation I'll have with you soon.

Sylvia Ho: [00:52:42] Yeah. Beautiful. Beautiful. Thank you very much to the audience for listening, and I hope you've learned a lot. I know I learned a lot for how Mick's journey has been as a landlord and how he looked at it. And if you have any questions about the J.O.M.P. program, please do connect with me. J.O.M.P. us all about owning just one more property and building wealth outside your 9 to 5. Thank you so much, guys. Take care. Bye now.

Sylvia Ho: [00:53:04] We heard from Drex and Gemma, we heard from Mick. They talk about different ways in handling the negative cash flow and they talk about different ways in taking care of their rental investment property that's outside of town. So at the end, guys, when it comes down to becoming a landlord, you have to know the pros and cons of buying in the city and buying outside of the city. You have to understand the pros and cons between using a property manager versus managing it yourself and whether it's realistic or not. You want to learn more on how to manage properties, how to buy your first rental property, do connect with me. I manage all my own properties myself for the last 20 years. I've been a landlord for the last 20 years and it comes down to having a team. It comes down to having the right people around you and giving you the right advice. I'm here for anyone who wants to learn how to get into the J.O.M.P. program, which is all about owning just one more property and building wealth outside of your 9 to 5. Thank you very much for listening, guys, until the next podcast. Bye now. Hey friends, thanks so much for listening to the Sylvia Ho Mortgage podcast. We'll catch you on the next episode. You want to learn more about the J.O.M.P. program, please connect with me at SylviaHo.ca. Love to hear from you. All it takes is 15 minutes for us to chat to see if this will work for you. Thanks, guys.

View Details

Sylvia Ho talks to Ben Corriveau, a financial planner and insurance agent, and Derrick Ang, a Family Law lawyer, on how to be on the defense about the wealth you gain through the J.O.M.P. program. Now that you have assets in place, how do you protect them upon your death or when your children live with partners in your properties?

Ben Corriveau discusses how to avoid large tax bills landing on your beneficiaries after your death. His advice centers around life insurance. People often think they don’t need it, but Ben says it will add liquidity and 99% of the time you will want it. Get it young so it’s easier and less expensive to get the policy you want, but don’t be discouraged if you’re older. Find out why, and what else he shares with Sylvia.

Derrick Ang talks about prenups and cohabitation agreements (or marriage contracts as they’re known in Ontario). If your child lives in a property with a partner and they marry and the property becomes the matrimonial home, half of that property could be claimed by the spouse in the event of a divorce. Even though it’s your property! Find out exactly what Derrick advises to avoid this situation and who to speak with for the right advice.

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Transcript

Sylvia Ho: [00:00:05] Hey, friends, have you ever wondered how you can pay off your mortgage faster? Or maybe you like to help your kids get into the real estate market, or better yet, retire with some passive income? Well, you're in the right place. Welcome to the Sylvia Ho Mortgage podcast. My name is Sylvia. I'm here to teach you how to achieve your goals simply by owning just one more property.

Sylvia Ho: [00:00:28] Hey, everyone, it's Sylvia here. Welcome to the J.O.M.P. podcast. Today we have two visitors. We have Ben and we have Derrick. Ben and Derrick are insurance agents and a family law lawyer. And they talk about how to protect our wealth. The J.O.M.P. program's all about owning just one more property and building wealth and real estate is a way to increase your net worth. So we want to know how to protect that now. Most of my clients are wanting to learn how to build wealth outside their 9 to 5 through the J.O.M.P. strategy and the J.O.M.P. strategy is all about owning just one more property and building wealth and building intergenerational wealth to pass down to our kids and to our grandkids. Now the J.O.M.P. method is all about offense. It's all about building that wealth. Today we're going to be talking about defense. We're going to talk about how to take care of those assets that we built up over time. And we have Ben Corriveau. He's a financial planner and an insurance agent. And we have Derrick Ang, who is a family law lawyer. Welcome, Ben, and welcome Derrick.

Ben Corriveau: [00:01:35] Thank you, Sylvia. Nice to be here.

Derrick Ang: [00:01:38] Hi Sylvia. Thank you for the introduction.

Sylvia Ho: [00:01:40] You're welcome. Nice to have you guys here today. So I teach my clients how to buy one more property because in my opinion, real estate is a way to increase your net worth by a lot. Right? But there's something called government and tax, right? And someone shared with me, they're like, Sylvia, you know what? You bought all these properties, you have all this wealth. What are you going to do when you die? Like, have you taken care of your death tax? I'm like, what? What is death tax? What are you talking about? Like, I have to pay taxes upon my death. And then so that's where we got into the whole idea of life insurance. So Ben, talk to me about how my clients can protect their assets with life insurance.

Ben Corriveau: [00:02:25] So one thing I keep in mind, especially when working with real estate investors, is knowing that what they're doing is really, it's trying to supercharge their portfolio. They're not like the average investor where they're willing to look at the bigger picture and really control hard assets, which is great. It's fantastic. But we got to really make sure we look at the full picture on what that asset's eventually going to be and what the purpose is. There's two spots to it, so it's growing an asset and then using that as income in retirement. So when I like to start with the plan, let's try to mitigate the risk for the short term. One thing that is necessary for real estate investor is to keep making sure these mortgage payments are maintained. And the key to that is that, hey, we're here to do it. We're here to make these payments. So if husband and wife own a property, they might be relying on two incomes. So if there's all of a sudden in the short term, one income that's not there, that's going to be big, big trouble for the long term picture that they have together. So really easy thing to put in place is a simple term life insurance policy that'll be there to protect in the short term to make sure that whether one spouse is there or not, the entire family is still going to benefit from that plan that they started on. And the second is to think about really the inevitability of passing on those assets.

Ben Corriveau: [00:03:45] So when you pass on those assets, the government is heavily involved. One thing that's true when it comes to money, you can spend it or you can give it away. If you're going to give it away, please don't give it to the government. So when we pass over an asset, there's going to be a tax bill that's in there. So working with Derrick as well, we create an overall strategy. What's going to happen with that asset? Who's it going to be given to? So whenever it's given to somebody, there's likely going to be a big tax bill that's at that point. And working with real estate investors as well, their mindset is like a business. They might not consider themselves business owners, but really they're operating like a business. So when a business has to pay a certain bill, they don't want to use working capital. Working capital is really that hard earned money that's tied up in the real estate. So you have two options. You can sell a piece of real estate. You might have the liquidity that's in there in your accounts, probably not. Or there's something, a life insurance policy that's there at the end to really take care of that tax bill that that's going to be presented to the family. So it's an immediate injection of money that that can be used to pay the tax bill to make sure that the family really maintains control over the real estate assets.

Sylvia Ho: [00:04:55] Let me recap and please tell me if I'm saying this correctly. So let's just say I have a property, I die, my husband dies and we pass property to my kids. My kids will have to pay taxes to the government because we're passing wealth down. Is that what it is?

Ben Corriveau: [00:05:10] In all likely scenarios, that asset is going to have some growth on it. So any of that growth that was created in there, there's a tax bill that's owing at the end of it. So it really depends on the type of asset, it depends on how it's structured, it depends on how much growth is there. We don't know how much it's going to be at the end, but we can plan pretty closely to what's going to be expected there. And then instead of having to sell the asset to pay the government what's owed, you really just going to use insurance money to pay that tax bill and then really hang on to that property for the kids.

Sylvia Ho: [00:05:41] Okay. Okay. Yeah. I definitely don't want my kids selling the properties. It's already so hard to get into the Toronto real estate market right now. In the future, even more, right? First time home buyers are being priced out of the market. So I don't want my kids to sell it, but they have this tax bill to pay. So how do we pay that tax bill? We pay that tax bill via the long term life insurance that you're talking about.

Ben Corriveau: [00:06:02] Exactly. And when you say that, too, you don't want the kids to sell the property. And also you don't want to be forced to sell it on a certain date. Right? So can't time the market. But you don't want to be in a position where you're in a down market and you're forced to sell it regardless of what your future aspirations are. So you really want to make sure they still have control over the plan that you created.

Sylvia Ho: [00:06:22] All right. Okay. Yeah, that's a really, really good point. So what you're trying to say is that if there's a downturn in the market. And upon my death they can't pay and if I didn't have life insurance and they can't pay that bill, they're going to be forced to pay that bill. They're going to make, they're going to be forced to pay it on a downturn. But then they still have this big bill to pay.

Ben Corriveau: [00:06:45] Yes, the not so technical term is a fire sale. Right. So we know we have to sell on that certain day.

Sylvia Ho: [00:06:50] Oh, that is that's absolutely horrible. Now, I'm assuming that there's been cases where if the bill is too high and the sale doesn't cover it, then what do they do?

Ben Corriveau: [00:06:59] There's always going to be a way. So the tax bill that's on there is tied to the value of the real estate. So the real estate's always going to be able to take care of the tax bill.

Sylvia Ho: [00:07:07] It's just whether there's anything left over afterwards.

Ben Corriveau: [00:07:11] They're still likely going to be able to take care of it. But like we said, we did all this hard work for so many years. We don't want to see it crumble at the end. We just want to have these defensive strategies that are in place that aren't going to break the budget, really. So life insurance is never going to be designed to restrict you on making any future purchases that that you want to have. It's just there to be a complement to all, including defensive strategy that's in place with somebody like myself, someone like Derrick that can really just make sure that you have a clear understanding of what's in the whole picture of owning real estate.

Sylvia Ho: [00:07:46] Okay, Because I know the wealthy, they do three things. They leverage, they make sure they have prenups, and what is it? What's the other one? Cohabitation agreements. And they definitely have wills in place. Right? So those three things. And they have life insurance, right? Those are the three things that wealthy people do all the time.

Ben Corriveau: [00:08:05] People sometimes, and they think like real estate investors, if you have a plan of Sylvia, you're going to be a wealthy individual. You're going to grow your net worth. You're going to be considered a high net worth individual. And a lot of people think when they're in that scenario, well, I'm high net worth, what the heck do I need life insurance for? But really, it might not be a need, let's say. So you might not need it to have your kids be able to get dinner, but you certainly will likely want it because it's a complementary piece that isn't going to break the budget, but it's going to add liquidity, it's going to add basically keep building the overall plan that you have. So like I said, so don't overlook it by thinking, okay, you don't necessarily need it, but 99% of the time you're going to want it.

Sylvia Ho: [00:08:51] So now that you've talked about budget, like is life insurance expensive?

Ben Corriveau: [00:08:56] No, it depends on what type of policy that you want. But it should never be expensive in terms of the overall budget. So it should never really break any long term planning goals that you have. It's just a needed piece in there to make sure that if things don't go as absolutely planned, your family is taken care of. So it becomes more expensive as we get older, so a good thing to do is get it young and get it when we're healthy because as we age, prices will go up and the likelihood of our health going astray, it could happen as well. So underwriting is not as difficult as it used to be. For example, diabetes used to be uninsurable, but now with the progression of medicine, doctors are able to basically insure a livelihood for people. So insurance companies are there to basically say, okay, we see the future, we're able to confidently insure somebody. But keeping that in mind, the younger we are, the healthier we are, it's easier to get, the cheaper it is.

Sylvia Ho: [00:09:56] Got it, got it, got it. So what you're saying is that even if I've been declined in the past to still come and talk to you because life insurance policies have changed, where you have diabetes, you have an insurance company that would still insure that individual. Like it's not an automatic no anymore. Is that what you're saying?

Ben Corriveau: [00:10:16] Yeah. So, yeah, don't be discouraged if you've ever had a difficult process getting life insurance in the past, like we said. So one big reason that things do change. Life insurance companies are willing to underwrite things that might not have been in the past, but also working with independent advisors that are able to really shop the full market and see if there is an option out there. And the more experience that you have in this business, the more you're able to communicate with underwriters and properly tell the story of an individual instead of just leaving it as one piece of paper with something that might look scary on the surface. But really, the more you dive into it, the more you can make sense of the case to an underwriter and provide insurability to the client.

Sylvia Ho: [00:10:55] Okay. Got it. So as a mortgage agent by law, I must offer mortgage life protection. Okay, so my clients must either apply for it or waive it. The two answers that I always get is, Oh, Sylvia, I already have life insurance through work. I don't need the life insurance through you. How would you how would you address that?

Ben Corriveau: [00:11:18] Well I'd address it by making sure the client truly understands on the type of policy that they have. Because life insurance isn't something that we like to think about too much. Let's be honest, it's not fun to think about dying one day. So it's always kind of brushed off. And once you see the word life insurance, your brain is automatically going to assume that you're covered because you really don't want to think about it too much. So what I'd say to somebody in that scenario is, let's sit down and really let's just go over and have a clear understanding of what you currently have. If it's a group policy that might be limited to your one year salary, your two year salary. So it's not going to be as much as you probably need. Also, if we're on the top of a group, if you change your employer, you don't really get to take that policy with you. So, Sylvia, when you're when you're offering a client a mortgage, like you said, you're required to offer them some type of life insurance. And really that's in place to protect the consumer because it's so overlooked and so important that regulators got involved and said, you know what? There's too many people that are leaving these massive debts owing when they pass away. So that's why it's required. But there are many, many options. So working with a professional, as I like to say, sitting down with an hour, at the very least, you're going to know exactly what you have and be confident when somebody asks you what type of life insurance do you have? And then you're going to be able to see what the options are and you're going to make an informed decision together.

Sylvia Ho: [00:12:42] How long does it take to get it approved?

Ben Corriveau: [00:12:46] So it's one thing life insurance companies are really progressing on the types of technologies that they offer and really making it a much better experience than it used to be for applying for life insurance. So no longer require, for the most part, blood and urine, which is always the biggest pain to get a life insurance policy in place. Nobody wants to have somebody come to their home, take their blood, take their samples. It's just very intrusive. So for the most part, that's no longer required for individuals, for example, so 50 year olds can get insured for up to $3 million with most major insurance companies in Canada without having to provide the blood and the urine. So with that, it's an application process that takes about 30 minutes underwriting. It depends on the individual, but typically it's within 3 to 5 business days. So we're seeing things that used to take four weeks to get in place can be done electronically within days, sometimes even within hours. Again, depends on the individual, but it's a much, much quicker process than it used to be.

Sylvia Ho: [00:13:47] Oh, that is a much quicker process. So like I said, by law I have to offer mortgage life protection and it's through Manulife. It's a Manulife mortgage protection. And what I tell my clients is that the I don't know anything about life insurance, right? Like I only know about my own life insurance, but I don't know about policies and stuff like that. That's where the professionals like yourself come in, right? But what I tell my clients is even if you think you have life insurance properly in place, you always have to get reassessed whenever you go into more debt, right? Whenever you get a mortgage. Right? So what I tell clients is to apply for the Manulife Mortgage Insurance. Some coverage is better than no coverage. That's the first thing that I tell my clients. And then the second thing I tell my clients is that you can get all your money back in 60 days. So if you cancel this Manulife Life Insurance on day 59, you basically got free coverage and they give you all your money back.

Ben Corriveau: [00:14:38] Very, very crucial point there because a lot of people will say no to something so they can shop around. You don't want to leave yourself that vulnerable at any given time. Unfortunate things happen. And you really you do not want to leave that burden to anybody. So if you're in the scenario of taking on a new mortgage, get the insurance if you don't have anything. Talk to me. Talk to an insurance professional and just make sure you have a clear understanding of what that is. And another point that you made as well, changes do, needs change constantly. The highest that it can be is when we have the most amount of mortgages, we have young kids, but we don't know exactly what the future is. That's why having a plan that can change with you that's flexible is also key. So it's not just one thing that's done and ou're never going to think about it again. I'm going to bug you once a year. I'm going to check in with you to see if anything changed and make sure again that you have that clear understanding as well.

Sylvia Ho: [00:15:35] Beautiful. Are there different types of plans that help someone with their changing needs? Like are there different types of plans?

Ben Corriveau: [00:15:43] The term policy that they mentioned at the start when we started speaking was it's set for a period of time, so it can be a short period, it can be five years, it can be all the way to 65. And then there's also permanent life insurance policies. Permanent life insurance policies, think of it as owning the policy, it's never going away. The term policy is renting the policy. Big difference there. So it's also it's the if versus the when. Eventually we will pass away one day ,the permanent is going to be there for when that happens. The term is sort of the if, if something happened to you in this period of time that we have a policy, your beneficiaries will be provided with that lump sum, tax free money. And with the flexibility part, a lot of companies have conversion options for these terms. So we can always reassess and convert as needed to take some of that term and turn it into permanent.

Sylvia Ho: [00:16:34] Okay. You're saying there's two types of life insurance. There's term and then there's life, whole life, right? And then depending on your budget and depending on your different stage of life and your needs, you could always convert one to another.

Ben Corriveau: [00:16:48] Yeah. So we know that when somebody is, let's say, a young real estate investor, the most important thing is that they're making those mortgage payments whether they're here or not. So that's going to be through life insurance. And then as they age, our concerns are now about what kind of tax bills are we going to be looking at for passing over these properties. So we take those term policies, we convert them to the permanent without having to reapply for a new underwriting basically, so these policies can be reverted regardless of health at that time.

Sylvia Ho: [00:17:18] Okay. Beautiful. Is there anything else that you want to tell our listeners today about life insurance?

Ben Corriveau: [00:17:23] Don't be scared of it. Haven't met anybody that was upset they got life insurance later on down the road. I know a lot of people that have policies that they've had for 50 years and nobody's complaining that they had this policy from the past. So it's really, it's something just sit down with a professional and get an understanding of it. A lot of people, it kind of nags at them. They know they're in the dark to what their actual coverage is. They know they want to have proper coverage. But it's just taking that step to really sit down and review.

Sylvia Ho: [00:17:55] Thank you very much, Ben. Really appreciate your insight on all this. To my listeners, life insurance is very, very important and it's just all about protecting our assets and making sure that we can pay the bills that we can, right? And taking care of our loved ones after we die. Now we're going to go to Derrick. Mr. Derrick. He is a family law lawyer, and he totally opened up my eyes to what a cohabitation agreement is. And what was the other one? A prenup and how the wealthy totally use it and why the middle class don't really think about it. Right? But for those who have purchased that rental investment property, you are wealthy, you are wealthy, my friends, and you need to protect that. And there's two different ways to protect it. So, Derrick, why don't you tell us what are ways to protect it via a prenup and a cohabitation agreement?

Derrick Ang: [00:18:48] Hi, Sylvia. Thank you for the introduction. I totally believe that the middle class is often overlooked when it comes to rental properties and protecting their wealth. And it's a cohabitation agreement and a prenup - or in Ontario, more more or less known as a marriage contract - is used by the wealthy class to protect their assets. Right? Because you've worked so hard and you're trying to pass down this intergenerational wealth to your children, and then all of a sudden, like Ben covered, you're hit with this estate administration tax, right? So when you pass away, there's this tax that you have to pay the government. So I can't stress it enough that I've worked with some of my clients, and, you know, luckily enough, there was a life insurance policy there to protect your assets. But in this case, we're looking at sometimes, you know, your daughter or your son, they might have a partner, they might be married, they might be living there domestically. And that's when it becomes a problem, when they're common law or they're married, your property might be designated as a matrimonial home. Right? And when you own multiple properties, whether it be a cottage or it be a commercial unit, when they share in a joint venture and when they designate that property as a matrimonial home and its intended use, that's when it becomes a bit sticky, right? So I always urge my clients to talk to a family law lawyer, whether it be myself or anybody else, just to get your advice, because I offer a free 30 minute consultation and it's, you know, all my clients come to me after and they're like, Oh my God, Derrick, thank you so much. You know, I wouldn't have known otherwise. Whereas, you know, a year or two down the road you're going to court and it's costing tens of thousands of dollars. So it's really taking a preventative or proactive approach and spending a couple thousands of dollars to protect all of the wealth you've worked so hard for.

Sylvia Ho: [00:20:27] Okay. So let's go through some scenarios because we went through some scenarios earlier and I was, my mind was like blown away. So let's just say. I own a condo. It's under my name and my husband's name, and my kid moves in. That's okay. Okay? And then my kid has a partner and they both move in to that place. In my opinion, I'm just like, Well, this is my place. They have no access to it. So talk to me. Do they have access to it?

Derrick Ang: [00:20:55] That's where it becomes complicated because under common law they have no property rights, they're not entitled to any property. But when they get married, that's when it becomes an issue. Right? So if they become married and they're living there full time, that's when it becomes a bit sticky because if they they break up, they go through a divorce, he is now entitled to half of that condo, even if it's...

Sylvia Ho: [00:21:17] Even though the condo is under my name?

Derrick Ang: [00:21:19] Yes. That's correct.

Sylvia Ho: [00:21:20] That's crazy!

Derrick Ang: [00:21:21] It's again, it's not like 100%. But again, if it's designated as the matrimonial home, he just has to show the court that this is where I live throughout the relationship. And the longer that they live there, right, and then the courts might consider, oh, that's a gift to your daughter or whatever it is. So it's actually, you know, you're holding the legal title. She's actually the equitable title. She's actually the one living there. Right? So that's why it's always important to have a marriage agreement or a cohabitation agreement set up, because even for common law, right, if they use that unit as like a startup for their business, it's a joint venture. There's a co-mingling of funds, right? Your daughter or your son, they open a joint account with their partner. Right? The courts will look at it as what was their intention, what did they intend to do? And it's more important to set out a contract. This is what's mine. This is what's yours. And that way there's no sticky fingers, there's no messy fights at court.

Sylvia Ho: [00:22:11] Okay, So that totally threw me off when you shared that with me. So what do I do to protect that asset? Is it a agreement between myself and my kid that this property does not belong to them? Or is it an agreement between my partner and their boyfriend or girlfriend, depending whether my son or daughter lives in there? Like. Like who? Who has this agreement? Is it me and my kid agreement or what?

Derrick Ang: [00:22:38] There's two ways to protect it, right? There could be an agreement between yourself and your daughter, but generally, it's better to protect your daughter or your son from their partner. Okay. And this happens a lot when there's intergenerational wealth being passed down. And, you know, they get an account with a lot of inheritance from their mom or dad. And, you know, they they sell that condo, right? That was previously in your name. It gets transmitted to them and then they buy another property with their partner. Right? So what happens then is there's an excluded, previously there's an excluded gift that's not shared with their partner. But now all of a sudden they're mixing the money and that's no longer excluded. And that's where the danger is. So it's very important to set out in a cohabitation agreement or a marriage contract that, hey, this is excluded wealth or this property, I own this amount of the property. And that can be done simply with sitting down with a lawyer and it might cost you $1000 or $2000 and it's going to protect you tens of thousands of dollars in the future.

Sylvia Ho: [00:23:38] So it's an agreement between my kids and their spouse?

Derrick Ang: [00:23:42] That's correct. You can do it between yourself and your daughter or your son to make sure that like, hey, this is, even though you guys are living there, it's to be excluded from the family property. It's like an estates kind of thing. I think the protection more or less that's immediate would be the family law protection, which is offered through a cohabitation or a marriage contract. And that kind of just defines, hey, like this property is not a matrimonial home.

Sylvia Ho: [00:24:05] Okay. Okay. So there's two different types of agreements between me and my kid and then an agreement between my kid and their partner.

Derrick Ang: [00:24:12] Yeah. And again, it's really just the intention between the parties, right? It's kind of like a will. So you're protecting - when you get a will, you're protecting your assets when they're being passed to your children because you have to pay the estate administration tax. And any tax is payable beyond $35,000. Right? So that's easily any client base who have one property or additional properties. Right? So a will is to protect in case something happens to you. A domestic contract, a cohabitation agreement or a marriage contract is to protect your children if they ever enter into a relationship and they're sharing any of those properties you've worked so hard to build.

Sylvia Ho: [00:24:49] How does a lawyer teach a client to bring up this conversation? Kind of awkward, right? It's like a life insurance conversation. Hey, right? Like, how do you how do you bring up that conversation?

Derrick Ang: [00:25:00] Yeah, that's an excellent question. It's really just about sitting down with the other party and trying to amicably discuss like, Hey, you know, I don't know my mom or my dad, they worked really hard to pass me down this condo or whatever it is. I want to make sure, you know, you want to enter into a happy marriage or whatever it is. And most of the time it is an insightful conversation and you find out and I feel like it does help the marriage become healthier or, because they might also have wealth that's being passed down from their parents, right? And they want to exclude that as well when they're entering into a marriage. So it's really just about sitting down with your partner and talking about finances. We're being adults here. We're all, you know, putting everything on the table. And it's really talking about your finances and expectations and, you know, not just one party using your condo or whatever to their benefit. And then all of a sudden, when the relationship goes sour, you know, they're taking advantage of your profits or your assets. And really the conversation, if had beforehand, is always a lot easier when everything's happy go lucky. As, you know, before the relationship sours. Yeah.

Sylvia Ho: [00:26:08] Okay. So it's a conversation that I have with my kids, right? And saying that this is what we're going to be doing. We're going to be talking to a family lawyer and then getting, you know, having this agreement in place.

Derrick Ang: [00:26:19] Yeah, you can definitely push your daughter or your son in the direction like, hey, you know, I understand you've been seeing so-and-so for a period of time. I would recommend speaking with a family law lawyer.

Sylvia Ho: [00:26:28] Okay. Okay. And then you said that it costs a couple thousand dollars to make sure that your asset is protected. Now, the scenario we're talking about is where a kid is living in, like, my property, right? And then my kids are living in there with their partner or whatever. Right. What happens if they don't live in any of my properties? Am I protected? Am I okay?

Derrick Ang: [00:26:47] That's when there's less of a concern. But in a lot of my client files, or in just my personal experience working with clients, there's generally an estate that's worth $2 to $4 million. There's multiple properties. The young couple, they run businesses together. They're living in X, Y and Z in like Miami. There's a condo there, there's a condo here. And then, you know, all of a sudden the relationship goes sour and it's just a messy fight for all of the properties. So it really, again, like, you know, and sometimes there's commercial properties, right? And they ran a joint business together. So if you have any sort of contract in writing saying whose is whose, it's a lot easier and you don't have to fight over it and spend tens of thousands of dollars, if not hundreds of thousands, protecting your assets that you've worked so hard to build.

Sylvia Ho: [00:27:32] Right. So spend a little money now to protect your wealth. Okay, beautiful. Anything else that you want to tell our listeners today, Derrick?

Derrick Ang: [00:27:39] Speaking to a family law lawyer or just any lawyer in general estates and just, you know, opening your mind and broadening your horizon just to see what kind of options are out there. And also just be mindful of, you know, when you enter into a relationship, if you have a joint account or you're commingling funds, I would just advise you to be wary and perhaps talk to a legal professional.

Sylvia Ho: [00:28:00] When you're co-mingling funds.

Derrick Ang: [00:28:02] So whenever you're running a joint venture or a joint business together, you know, or you guys have a joint card together, right? So any time there's any sort of joint properties, just be very careful.

Sylvia Ho: [00:28:12] Okay. All right. Beautiful. I really, really appreciate this, Derrick and Ben, for, you know bringing us insight on how to, you know, be on the defense. Right? J.O.M.P. is all about the offense. And we're talking about defense, how to protect the wealth and the assets that we have today. For my listeners here, guys, the strategy of building wealth outside your 9 to 5 is through the J.O.M.P. program. The J.O.M.P. program is all about owning just one more property. And that's an area that I, as a mortgage agent, specialize in. To learn more, go to my website at SylviaHo.ca and let's chat. It takes 15 minutes to know whether you can pick up another property and increase that net worth and build wealth. So thank you very much, everyone, for listening. Thank you very much, Ben. Thanks, Derrick.

Sylvia Ho: [00:28:53] We just heard from Ben and Derrick and how to protect our assets that we worked so hard to get in the J.O.M.P. program. You know what? The number one thing that the wealthy people do is they have wills in place. They have life insurance in place. They have prenups, and they have cohabitation agreements. They do that right away. It's normal for them because that's what they've been taught. But as the middle class individuals that we were not taught that stuff, that wasn't what we did automatically. So when it comes to protecting our assets, we need to rewire our heads and rewire the way we think about wealth and think how the wealthy do it and just really, really copy them. Please contact me to know more about the J.O.M.P. program. The J.O.M.P. is all about owning just one more property, building wealth outside your 9 to 5 and passing it down to the next generation, to our kids and to our grandkids. All you have to do is set up a 15 minute appointment with me. Go to SylviaHo.ca, that's Sylvia Ho dot ca, and book a time with me.

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Sylvia Ho talks with Roy and Hayden about purchasing their first investment property and how they changed their minds about real estate investment. She discusses the opportunity the Jump Program opened for Roy and Hayden, their motivating desire to ensure secure futures and real estate opportunities for their three children, and invest in a comfortable retirement for themselves.

Roy came to Sylvia as the one most reluctant to buy additional properties. He admits he viewed their two existing properties as having a lot tied up in them, hadn’t had the best experiences, and really was of the mindset that their debt should be paid off before additional investments were considered. After he and Hayden attended Sylvia’s seminar, they saw more opportunity in working with a broker instead of the banking institutions both are employed by. With one new property in Calgary to their name, they have plans to buy two more and have encouraging words for anyone discouraged by banks and financial institutions about the potential with a broker.

Roy and Hayden are very encouraged about the equity they will be building with new real estate investments and see great opportunity now to buy property that can add to their positive cashflow and set their kids up for futures in real estate. With one son in university, a daughter headed there shortly, and another child in high school, they understand the market will not be easy for their kids and feel less concerned about having the means to help them out now. Sylvia encourages listeners to take Roy’s advice about starting in on real estate investment as early as possible. Roy and Hayden share very practical advice about their journey in this important episode.

Transcription

Roy 00:00

The mortgages that we're getting through you now are not necessarily with the bank that we work for. And that says a lot because we do get employee discounts, as far as mortgages and things are concerned. However, when I take those into account, they still can't provide the same type of return for me as compared to your own plan. Then that makes me think, you know, clearly what they're doing is for them, not for me. Yeah that speaks volumes. So, you know, when I'm working for a major financial institution, and I'm going somewhere else to get my mortgage, that's something that says a lot.

Sylvia Ho 00:40

Hey, friends, have you ever wondered how you can pay off your mortgage faster, or maybe you'd like to help your kids get into the real estate market, or, better yet, retire with some passive income? Well, you're in the right place. Welcome to the Sylvia Ho Mortgage Podcast. My name is Sylvia, I'm here to teach you how to achieve your goals simply by owning just one more property.

Sylvia Ho 01:03

Hey everyone, it's Sylvia here. Thanks so much for joining us in the Jump Podcast. Today, we have Roy and Hayden, they purchased their first investment property. And it's very interesting, Roy goes from 'I'm not ready to do this' to having a plan to buy three more properties. Listen to this podcast. And if you want to learn more about the Jump program, all it takes is for us to get onto a call for 15 minutes. Go to SylviaHo.ca and book a time to chat with me.

Sylvia Ho 01:31

Hey, everyone, I'm joined by Hayden and Roy, they have three beautiful kids, their oldest son is in university, their daughter is going to be going to university, and then they have another child that is in grade 10. They went into this real estate investment side because they want to do this for their kids. Is that correct?

Hayden 01:47

That's correct. And for retirement.

Sylvia Ho 01:49

And for retirement. So talk to me a little bit more about what your plans were, what you guys wanted to do, and where you guys ended up.

Hayden 01:55

Plans are investor in three properties so we can get enough money for retirement, and also to help our kids out with their education, and help them out with the house later on in life. So that's mainly our goal.

Sylvia Ho 02:11

Okay, so as parents, basically you're saying, I'm doing this for the kids but I also want to watch out for my own retirement as well.

Hayden 02:17

Exactly, yep.

Sylvia Ho 02:19

When you first came to me, what were you looking for me to do for you?

Hayden 02:24

To help us invest in additional properties, with the same amount of payments that we're making overall, for car payments, and whatever other miscellaneous payments. Yeah, so basically, increase our portfolio to real estate.

Sylvia Ho 02:42

Yeah. So when you first came to me, what was the challenge that you guys had? Because I think you've been thinking about real estate for a while now, right? As another investment tool. So talk to me about before you didn't take action, but this time you did take action, what was that difference? And that might be a Roy question.

Roy 03:01

Yeah. Mainly, it was my nagging wife. She's been nagging me for years to buy more properties. And I've been hesitant, just, basically, because my past experiences, or at least my goal was to try and pay off our debts as quick as possible. So Hayden wanted to buy some more properties as far as investments are concerned, because we had a lot of our money tied up in our two existing properties, our home and our cottage, and wanted to diversify a little bit. You know, we have RSPs, and all the rest of that stuff, too. But mainly, we wanted to try and get into real estate, because, you know, obviously, it's a good investment and trying to get our kids in the market at some point, too, because it's pretty challenging for kids nowadays to even think about buying properties in the future. But mainly, yeah, Hayden has been after me for a long time to do that. And I was, you know, pretty hesitant about it, but she finally broke me.

Sylvia Ho 04:05

So what part were you hesitant about? This is very interesting, because a lot of individuals feel the same way as you do, Roy. Where they're like, I want to pay off my debts first, I want to get rid of debt first. So what made you change from let's get rid of all our debts, because you guys are pretty much mortgage free.

Roy 04:26

One of the things that pushed us, I guess, was just the recent influx in the real estate markets. Obviously, prices are astronomical at this point, you know, people are paying outrageous amounts for property. And at least our thought was our kids are never going to be able to afford to get into the market unless we try and help them. And with all the assets that we have tied up in our current real estate, we figured we might as well try and put that money to use. Up until now we've always dealt strictly with the banks for our mortgages and stuff - we've never really used a broker before - and, I think, your method for doing this is something we really hadn't considered or even heard before. So it just kind of intrigued us a little bit, you know, helped push us over the edge to try and make the move.

Sylvia Ho 05:11

Okay. So there's two schools of thinking. There's old school thinking and there's new school thinking, right? And you guys attended my webinar, did that impact you in your decision at all? To do that?

Hayden 05:22

Definitely. Yeah. Because we grew up with the old school of thinking. Go to school, get married, get a job, yeah.

Roy 05:30

Pay off your debts.

Hayden 05:31

That's right.

Roy 05:32

Retire.

Hayden 05:33

That's it. And die.

Sylvia Ho 05:37

Old school thinking. So if we're gonna recap old school thinking, old school thinking is what you just said, right Roy? Get rid of my debt.

Roy 05:46

Yep.

Sylvia Ho 05:47

And then retire, right? And then, so, now it sounds like you guys have moved over to new school thinking. So what does that mean to you? Like, what is new school thinking to you? What does that mean?

Roy 05:56

Beautiful, thank you very much for explaining that. We got to lead ourselves to be able to lead our kids as well, right? So you're leading your oldest son right now, just by showing him all this stuff, just showing him what the Jump Program is all about. Now, you did mention in the past you've just dealt with banks, and now you're working with a mortgage broker. Do you notice any difference between working at the branch level versus working with myself?

Roy 05:56

Taking advantage of the assets that we have built up in our current properties, and also taking advantage of current interest rates are relatively low, they are going up a little bit now. But still, as far as borrowing is concerned, and our financial position ourselves, we can, you know, I think we can afford to do this. And, in fact, it's shown us that we can do this and reduce our monthly output, which is substantial, and ,hopefully, increase our cash flow a little bit, you know? So we're not looking to get filthy rich, we're just trying to make some headway, again, for our kids and for our own retirement, of course, we would like to retire somewhat comfortably. But we don't plan on living an extravagant lifestyle. But, you know, I do want to retire somewhat comfortably. And that's tough to do these days. So with the job market the way it is, and the instability, and so many different aspects of the financial world, I just figured that this was the right thing to do. And the right time, you know, now that I look at it, I wish I had done it a long time ago. But probably wasn't in the state of mind to do it back then. You know, knowing that we were fairly, pretty much like you said, mortgage free, you know, we own pretty much our house and our other property as well. So this just seemed to be the right thing to do as far as making use of those assets, you know, the equity that we have built up already, and it's just kind of sitting there doing nothing. I shouldn't say doing nothing, I mean, it is increasing with the increases in real estate, but it's not really working for us, as far as, you know, trying to put your money in the right places. So we've tried different things in stock markets and RRSPs, and all kinds of different investing, and them just not producing the way I would like them to. And, you know, they are a part of our portfolio. I just think that right now the real estate piece is something that can help us increase that value. And, you know, hopefully, for the future put us in better position - and our kids, you know, for them too, because that's really one of the main things is to try and get a foot in the door for them. At some point, our oldest son, he's thinking the same way. He's only 23 but he's got a good head on his shoulders so he's thinking the same thing, he'd like to put some of his money that he's got into real estate. And so this all kind of makes sense at some point. We're just trying to figure out the best way to do it.

Roy 08:48

Hayden and I, ironically, both work for a bank, and have obviously had our mortgages and finances through that same bank, it's kind of required when you work there. It's kind of a one size fits all, when you're dealing with the bank, it's, you know, they follow a pretty standard model, whether you work for them or not. They're obviously going to do what's best for them, not necessarily what's best for you. And in this situation, I think that we're getting something that's a little more tailored specifically to our requirements and what our goals are, rather than what the bank goals are. Which is obviously to make money. So I don't blame the banks for what they're doing. I just don't think that their mindset is in our best interest. And I think that this plan is a better approach for us as far as our goals, right? So.

Hayden 09:35

I think the banks, basically, they're in the box. You guys are, mortgage broker, you're going outside the box. And that's the difference.

Roy 09:43

I think one of the things there, too, to kind of show that point is, I mean, the mortgages that we're getting through you now are not necessarily with the bank that we work for. And that says a lot because we do get employee discounts as far as mortgages and things are concerned. However, when I take those into account, they still can't provide the same type of return for me as compared to your own plan. Then that makes me think, you know, it's clearly what they're doing is for them, not for me. Yeah. That speaks volumes. So, you know, when I'm working for a major financial institution, and I'm going somewhere else to get my mortgage, that's something.

Hayden 10:24

Yeah, says a lot.

Sylvia Ho 10:26

So now talk to me about this property that you guys bought.

Hayden 10:31

We ended up in Calgary because the market in Ontario is crazy. We just can't seem to find anything. We've put in so many offers in the Niagara area for my son, because he's on a hockey team there, so him and his buddies needed a place to stay. And every offer we put in we were outbidded. So we thought, you know what, let's look around. Calgary seemed to be a lot more affordable than Ontario. So that's what made us purchase in Calgary.

Roy 11:04

Yeah, and I think too, you know, aside from Matthew's situation where he was looking for a place to stay, I mean, that situation's changed a bit. So he's okay for now. We'll continue to look for things like that, we have another daughter going to university, possibly at McMaster, so, you know, we're looking at Hamilton as well to try and find a place out there. Not necessarily for this year, per se, but next year for sure, because she'll be out of residence. So, you know, we're still looking at Ontario. However, with the prices Ontario right now, it's a little bit crazy. And I think Hayden had done a bunch of research looking at different opportunities. I think what really brought you to Calgary was one of those first places you were looking at that, you know, they were building them in the future, and you could invest in them. And then we kind of steered away from that we didn't like that plan. So we ended up finding a real estate agent out there in Calgary that we just really liked. He's a great guy. And he showed us a bunch of different places gave us some options to look at. And we've been working with him. And so we ended up finding a place out there and it was a good deal. Prices are fairly low. You get, there's a decent return on the rental income out there. So, ironically, the rental isn't that far off, the rental income isn't that far off from here in Ontario. But the price to purchase something there is dramatically different. So that's where we started figuring out we'll get in, start small, and then work our way up from there. We still like to purchase stuff in Ontario. But it's got to be in the right place for the right price, so.

Hayden 12:31

Yeah, definitely want to diversify.

Roy 12:33

Yeah, we're, you know, so we're still looking and we're still looking in Calgary too, for other different options out there. But, you know, something good comes up, we're kind of open to anything to a degree. But Ontario and Calgary are where we're looking right at the moment.

Sylvia Ho 12:48

Okay, you guys are buying real estate to help your kids. Matthew, he's currently in university, he's renting a place with a bunch of his friends, I think, and there was something going on with the landlord and that's what kind of prompted this whole hey, let's buy in St. Catharines.

Hayden 13:03

That's correct. Yeah.

Roy 13:04

Yeah, he was having some trouble where he was and... just issues with the landlord and in the house itself. That seems to have kind of sorted itself out to a certain degree. He's kind of backed off on us, said hey I think we'll stay where we are for the time being. So we said, you know, fine. Not that that would deter us from buying out there if we could find the right piece of property. We just actually look at a couple and put some bids in and didn't get them. But now the next focus will be for Keira out in Hamilton way. But, you know, if that works out, great. If it doesn't, then we'll do something else.

Sylvia Ho 13:35

Okay. So right now you're like, hey, instead of putting money into residence or into rent, right, why don't we be the landlords and then let your kids move in there and then rent it out to their friends and then collect rent instead of you giving rent out to another landlord.

Hayden 13:51

Exactly.

Roy 13:51

In the case with Keira going to McMaster, it's, she could be there for quite a long time. She wants to go into the medical science. So she could be there for maybe years.

Hayden 14:02

And that's if she goes to McMaster, right?

Roy 14:04

If she goes there, yeah. Pretty sure that's where she's gonna go, but.... regardless, wherever she goes that's probably the next location we'll look. But it's really easy to try and, you know, try and make the best use of that money. I hate paying rent for stuff that, you know, if I can own it and build some equity. You know, even if I only keep it for three or four years, you know, that's fine. I have to admit that, you know, as far as reservations are concerned, I wasn't keen on being a landlord. But, you know, there are ways to manage it properly and to deal with things and we've kind of learned along the way just recently, dealing with our real estate agent out of Calgary and a property manager out there. So it's working out okay, at this point,

Sylvia Ho 14:46

Are you using a property manager out for Calgary property?

Roy 14:49

We are for now because of the location it's, you know, the cost is quite reasonable for what they can do and because we're not there, it makes it easier. You know, if there's minor issues or even just, you know, picking up keys and dropping stuff off, it makes sense to have somebody there to kind of look at it and keep an eye on it. And it is a condo, so it's, you know, there's not a lot of upkeep to begin with. And it's a fairly new place so we just thought that that would be the best option at this point. Maybe as we get into it a little bit further, we may move away from that and deal with it ourselves. But it all depends on how things go over the next a while. If it was local here we probably wouldn't use a property manager, we would probably do it ourselves. You know, but, for Calgary, that's the best option for now.

Hayden 15:34

Yeah, definitely the best option.

Sylvia Ho 15:36

So now that you've gone through the process, in your opinion, you said something I wish I had done it earlier. But you're mindset wasn't there, right? But in your opinion, now that you know what the Jump Program is all about, do you feel that you had to be mortgage free to do this?

Roy 15:51

Not necessarily, no. Even if you have your own mortgage, like if you have a mortgage on your house, I think if you manage the cash flow properly, and you can make it a positive cash flow, so that, you know - or at least where you're equal to what you're doing today, as far as payments are concerned - then why wouldn't you? Because if it's not really gonna cost you any more, or even just a little more, than it's probably worthwhile, because in the end the equity that you're going to build is going to far outweigh what you're paying. So I think that's the key.

Hayden 16:23

But we never would have come to that conclusion unless we attended your webinar.

Roy 16:29

Yeah, yeah. Because, you know, if we hadn't have gotten involved with that, then I probably would have stayed on the path I was on. The plan was, literally was to pay off any minor debts that we had, sell this house that we currently live in today, and then use those funds and move to our cottage. Use those funds to, you know, help the kids out eventually. And, you know, and have some leftover for us. But now, you know, that plan has changed a little bit. We'll use the income that we're getting from the property, some of them may we may sell when we retire, some of them we may not. This house, we haven't decided what to do with it either. That plan's kind of up in the air again. So we may keep it and rent it out. We may keep it and rent it to the kids, or whatever. You know, whatever works out best. As long as we've got enough money to live on, then, if I can keep my hand in the market a little bit after I retire, I would continue to do that.

Hayden 17:23

Yeah.

Sylvia Ho 17:24

Beautiful. Hayden, did you have anything to add to that?

Hayden 17:27

Just, basically, what Roy said, plus, having three kids, the youngest still in high school, so we still have a ways to go for what we're going to do with this little house. Maybe he may want it? Who knows?

Roy 17:41

Yeah, those options are out there for them, right? So I think this situation that we're in now, with the investments, gives us a little better opportunity to have more options when we do retire. So it's not necessarily set in stone anymore. Whereas before it was, you know, this is what we're gonna do, we're gonna sell this place. This has, you know, this has been the plan and it's been the plan for about 10 years. And now we've got different options we can look at when that time comes. And that's still five to seven to ten years. Who knows when I'm gonna retire. But, you know, I could retire in five, six or seven years. I think under the current situation, if the real estate investments continue to work out, then I could potentially retire earlier. So that works out good for me, because I am getting near retirement. Not real near but -

Hayden 18:36

But 55, yeah.

Roy 18:39

Close enough, so you know, that's always been a future goal is just to retire as early as possible. But I have to be financially set. And I'm hoping that the kids will at least have something to to use when the time for me to retire is in.

Hayden 18:58

Yeah, I wish we had started this a little bit sooner. But-

Roy 19:01

yeah, we probably would have been further ahead. But, you know, everything in good time. But, you know, I think people, if they've got a mortgage that's currently under control, and they can manage it, and can get their foot in the door with real estate investing, then my advice would be do it sooner rather than later. Because you're only going to be better off in the long run.

Hayden 19:26

Yeah, well said.

Sylvia Ho 19:28

Beautiful. So if you don't mind, I wanted to just go over some quick numbers in regards to cash flow. Because I really want to point that out to clients that, you know, your cash flow before you even met me was I think it was like $3,500 per month. And that included your car loan, your mortgage, and everything, right? And then now that you've picked up another property, a lot of people feel that, oh, if I pick up more debt, that means my cash flow is going to be higher, and therefore I'm not going to have that same lifestyle that I want to have that I have today. Right?

Hayden 19:56

Yes, that's correct. Yeah.

Sylvia Ho 19:57

Right, but the way that we have it set up, how do you feel about the cashflow?

Roy 20:03

The one property that we purchased in Calgary, it's going to end up with a positive cash flow, which is good. Now, it's not a huge amount of money. So I don't know what we figured out - about, say, let's just round it off and say it's $300.

Hayden 20:16

Yeah.

Roy 20:17

It's still $300 that wasn't there before. So compared to what we were paying, compared to what we will be paying under the new arrangements, it's a positive. So I don't know how you fault that, really. You know, the plan is to buy a couple more properties and once those are in place, the cash flow, hopefully, will continue. And depending on what those are, right, and that's really where the the issue is, is depending on what you have to put out for a home or another property - whether it's a second, third, fourth property, whatever it's going to be - depending on what your mortgage payments are, and what your income potential are for that home, is really what determines what your cashflow is going to be, whether it's positive, or whether you're breaking even, or what it's going to be. So that's really the key to think about there. And if you can increase your cash flow on the positive side, and continue to have the lifestyle you have today, regardless of what it is, you know, within reasonable limits, then I can't find anything negative about it.

Hayden 21:16

Increase your cash flow, that's one. But even if we don't increase our cash flow, if we purchase another property, as long as we're able to break even, we're good with that, too.

Roy 21:27

Right, you're building equity, and in the long run you're still gonna end up much further ahead. So, you know, again, yeah, like Hayden said, it's the point that even if you just break even where you are today, and you're building more equity than you currently are, then, again, that's positive. That's - I can't fault that. So.

Sylvia Ho 21:44

Okay, so we went from $3500 in positive cash flow, but you're saying that even if it was, you're used to $3500, and let's just say it's a negative cashflow, and you were to bring out like $3700, as long as you guys were okay with that, you're like, we see the bigger picture because in the long term, real estate's gonna go up. Right? So it's like saying, okay, I'm gonna just put aside 200 bucks per month for this potential negative cashflow, if that were the case here. Then it produces this big, huge jump number later on.

Roy 22:12

That's correct. Yeah. That's kind of the goal, right? There's just... I think that's the key, is to get people to look at and focus on this longer term. It's not a get rich quick scheme, it's, you know, I think in, as far as real estate is concerned nowadays - especially on second, third properties, because they're not your primary residence - is you're in it for more of a long haul than anything, right? And I don't mean 20 years, I mean, you know, you're into it for at least three, four or five years, whenever you're going to, whatever your plan is. Longer, if possible, because the longer you're in, the better you're going to be, regardless of what the market does it. And, you know, let's face it, the market bounces here and there, it's not seeing the changes that it did 10-20 years ago, other than the fact that it continues to go up. But, you know, even when they have minor corrections in the market, it's almost always rebounds you still still always end up in the positive. So, to me, it's a win/win. And for me to say that, to where my mentality was before, I think that's a pretty substantial change.

Hayden 23:17

Yeah, like, it's very cliche to say this, but it's not a kind of sprint, it's a marathon. So that's how we have to look at it.

Roy 23:24

The sooner you get in, the better off you are, because you're, like, again if cash flow is good and the equity you're building is good, then the better off you are for yourself, kids, or whatever your future plans are.

Hayden 23:36

Our son in University, I mean, he's already talking about, oh, I'd like to speak to Sylvia, eventually, when he gets a job, and what-not.

Roy 23:45

He's got a little bit of money, and he wants to try and invest it. And, you know, he's not keen on sticking it in the banks and stuff. So he's, you know, he's newer, and, like, he's younger, right - I shouldn't say he's newer, he's younger - he's got that mentality and then he's got the drive, so, you know, the younger you can start, the better, as far as I'm concerned at this stage. Real estate is, obviously, a good investment, or has been for many, many years. So if he can get his foot in the door, even better.

Sylvia Ho 24:12

Right. You talked about having more options. So now that we picked up some extra properties, that option of selling your current home, moving to the cottage, and living on the proceeds of that current home has changed. Where you have more options: where you can rent, sell, move here, move there, how does that make you feel?

Roy 24:31

It's increased the security annual. Before we got into this, I felt that in our financial position, we were going to be fine anyways. As far as what our plan was, I thought, with the money we have - savings, investments, values of the properties - I just felt that hey, we're going to be fine regardless. Now I'm feeling that we're probably going to be a little bit better off. You know, I felt we were going to be fine. I still wasn't, you know, back then I still wasn't sure where the kids were going to be as far as their situation. Now I feel that maybe we've got all those requirements met to some degree. And it's, you know, we're not going to make them millionaires, I don't think. We're at least going to be able to give them a fighting chance to get started. That's a big plus. I mean, a really good example there is if, you know, if our daughter goes to university and wants to get in the medical field, she's in for another 10 years of school at minimum. So by the time she's done, she's almost 30. And if she can get in the market, or we can maybe put her in a position to get into something around that age, or before, then I think that's a huge bonus for her. Because she's, you know, she's gonna have some debts and stuff. So just a positive all the way around.

Hayden 25:41

Yeah, it's like the best of both worlds, right?

Roy 25:43

Yeah. It's looking after retirement a little bit. I mean, retirement's already in pretty decent shape anyway, but this will just kind of be the icing on the cake. And then to help the kids as well, knowing that we're going to be able to do that, is a good thing. Because that kind of concerned me previously.

Sylvia Ho 26:01

Beautiful, beautiful. So, this is my last question to you guys, is if you guys were to give one or two advice to your younger self, what would you say to yourself?

Roy 26:14

Start early, whenever, as soon as you can. Within reason, right? So, like, don't mortgage yourself to the point where you're eating, I think your term was -

Roy 26:21

mac and cheese. That's no way to live. But if you can just get that first property started, right, like that additional property. You get that going. You start, like I said, start small, you don't have to buy a million dollar mansion. Well, a million dollars isn't a mansion much anymore. You know, you don't have to start off huge, start small if you can. Anything to get into the market, get started, and then move, and then continue to do that. Don't be nervous or afraid of it. If you can put a plan in place that proves to you that you can do this from a cash flow perspective, then don't shy away from it. Try and do it. Because it's, like I said earlier in this conversation, I wish I had done it 10 years ago or earlier. But just wasn't in that mindset. So really get your head wrapped around that. I think the younger generation especially can see that. They see the challenges financially. If they can get a plan in place like this and work with someone like yourself, they have a much better chance. Again, I'll go back to the banks, they don't explain things really all that well. And they're, you know, although they make it sound great, you know, their their goal, like any business, is to make a ton of money. And, you know, and most of them are, they're making billions a year. So do what you can to get into the market as fast as you can or as soon as you can. And stick with it. You know, stay with it as best you can. And you know, you're better off to maybe curtail your spending a little bit, and invest, and put that money towards investing in real estate market using someone like yourself, Sylvia, to help them. Rather than trying to go out and buy that first perfect home. Start small. Work up from there.

Hayden 26:21

Kraft Dinner

Hayden 28:06

I echo everything Roy said, but don't put your eggs in one basket. Speak to a mortgage broker, as opposed to just a branch or a bank or institution. Let them go out there and look for you. And that was something...

Roy 28:23

Yeah, that's probably one of the mistakes. Yeah, I mean, banks are great, they'll lend you money, no problem, if you've got a decent job and you can pay the bills they'll give me whatever you want. But they're going to give you what you want based on their terms, not yours. And so, use broker, you know, use someone like Sylvia to get out there and find out what those best options are. What's the best thing for you, not the best thing for the bank. Or whoever your lender is. Like, find out what fits for you and how you can do it. That's the key, it's your money, try and make it work for you. I think that's one of the things I would say is make your money work for you. Whereas, you know, in a situation like ours, we haven't for a long time. We've tied it up in tons of real estate, you know, both our primary residence and our cottage are worth, you know, a good chunk as compared to what we bought them for, we've made a good buck on both of them as far as equity is concerned. You know, our primary residence has more than doubled in three years. And so, and part of that's just the real estate market itself. But the idea is, if you've made that much, then make that money work for you. Don't let it just sit there and do nothing.

Roy 29:28

It's essentially what you do, you just sit on a million dollar piece of property and it does absolutely nothing for you. When you can make that money make more money, right? So that's the key. Invest, invest, and make some, you know, build some equity and then diversify that.

Hayden 29:28

Which is what we were doing.

Hayden 29:43

Yep. Well said.

Sylvia Ho 29:45

Beautiful. Thank you very, very much, Hayden and Roy. This has been absolutely amazing. If I were just to summarize your story, you went from 'I'm going to pay off my mortgage as soon as possible, I'm going to retire with, you know, my two properties' to now, 'Invest and retire with comfort and set my kids up for success so they could get into the market as well'.

Roy 30:11

Yeah, I think that's the key. Yeah, is setting your - a big thing for us, obviously, for any parent - is set your kids up for success. And, in today's market, that's really even more important than it was before. Even five years ago, you know, somebody could afford to get into the market, you know, for the most part. Nowadays, it's -

Hayden 30:30

Impossible.

Roy 30:31

You know, like Matthew, if he comes out of school today, he couldn't buy a house.

Hayden 30:33

Not at all.

Roy 30:34

You know, so, but if he can take that money, we can help him invest it. Even if he was to, you know, use that money, give it to us, and we can help him invest it for him and he could be a part owner or something, then that's great. Like, just trying to get that money into the market somehow, and get started, and then build some more equity. That's the key. That's the story of what I would tell everybody and we have been talking to a number of different family members and friends. They're getting into this as well, they see the value in it, and then some of them are about, well they're pretty much our age, they're getting into it. They're seeing the value of it. And so yeah, it's the way to go, I think.

Sylvia Ho 31:13

Very good. I just want to put in a little plug here that, you know, for your daughter, when she gets to residents, they do make some money for residents. And there are lenders out there that will give her a mortgage, even if she's only a resident.

Roy 31:28

Right, yeah, yeah. You know, she will make some money. And so we'll, with what we're doing now, we should be able to help her out a little bit. And, you know, if she gets into - you know, what I would recommend to her right away, based on what I've learned and different things that I've heard is, you know, get into this now, Keira. You know, start this right away. That's what we're telling Matthew too. If they can start when they're in their 30s, around that age, I think they're going to be very well off as they get older.

Hayden 31:59

Before their thirties. They could start before their 30s.

Sylvia Ho 32:05

Excellent. Thank you so much, Hayden. Thank you so much, Roy, for the time that you've given us here today. A lot of the advice that you've given us is absolutely invaluable, and I know will help a lot of other clients as well. So thank you from the bottom of my heart.

Hayden 32:18

Oh, you're very welcome. Thank you.

Roy 32:20

Thank you for all your help.

Sylvia Ho 32:23

Hey everyone. We just heard from Roy and Hayden, and his advice to those thinking about the Jump Program is, I wish I had done it earlier. I wish I had done it sooner. The reason Roy and Hayden do it is for their three kids, to give them a fighting chance to get into the real estate market. Now, in their opinion, their kids can now afford to get into the market later on when they are ready. You want to learn more about the Jump Program, go to SylviaHo.ca, book a 15 minute call with me - all it takes is 15 minutes for us to figure out whether this is for you or not.

Sylvia Ho 33:03

Hey friends, thanks so much for listening to the Sylvia Ho Mortgage Podcast. We'll catch you on the next episode. You want to learn more about the Jump Program, please connect with me at SylviaHo.ca. Love to hear from you, all it takes us 15 minutes for us to chat to see if this will work for you. Thanks guys.

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Sylvia Ho talks with Ali, a business owner in the Toronto area who realized success in investment through the Jump program. Ali explains how with the advice and guidance of Sylvia, he was able to take out a second mortgage on his condo and buy an investment property to rent out.

Ali shares how he was seeing the equity building up in his condo and came to Sylvia to see if he was eligible for a second mortgage. As a self-employed business owner, many expenses can be deducted on income tax which makes earnings show lower, so he wondered if he was even eligible. Sylvia and the Jump program walked him through the process and Ali learned he was able to obtain the second mortgage he wanted, despite his self-employed status, and turned that into purchasing his first rental property.

Ali has already rented out his new property to a tenant and the process by which he selected and interviewed the tenant applicants is something Sylvia explores with him. He has realized success not only in financing his new property, but in navigating the sometimes daunting idea of locating a quality tenant to rent it to. Ali is enjoying great success and encourages others who are on the fence or unsure to talk to professionals like Sylvia to help navigate the process.

Transcription

Sylvia Ho 00:00

Hey friends. So we are here today with Ali. He's a business owner here in the Toronto area, and he purchased his first rental property. Being a self-employed individual, you do show lower income because you have your deductions, right? And then being self-employed, a lot of self-employed people are like 'Can I really, you know, purchase another property, will the banks actually lend me money?' So he talks about that process. And then the other thing that we're going to talk about today is how he vetted his tenant. And when an issue came up with the tenant, how he dealt with it. So enjoy this podcast. And if you guys are interested in learning more about the Jump program, which is all about owning just one more property, do connect with me go to SylviaHo.ca to book a 15 minute consult, and then we can chat and see if Jump is all for you. Thanks.

Sylvia Ho 00:50

Hey everyone, today we're joined by Ali. Ali is from Toronto. He is a business owner and he owns a condo at Yonge and Sheppard area. He was seeing the equity that was building up in his condo, and he said 'What am I going to do with this equity?' So he decided to purchase an investment property. And today that's what we're going to talk to him about. So Ali, welcome to today's podcast.

Ali 01:11

Thank you, Sylvia. Thanks for having me.

Sylvia Ho 01:13

So talk to me a little bit more about what were you looking for when you first came to me? Like before you even thought about, you know, buying an investment property? What did you come to me for?

Ali 01:24

I was thinking if I am eligible at all for more, just for a second mortgage. So that's why I initially consulted with you to see if I'm eligible for a second mortgage. And I was thinking about a potential purchase of a second investment property.

Sylvia Ho 01:41

For an investment property. And then when you're saying potentially eligible, my understanding is because you're a business owner, right? And as a business owner, we can deduct a lot of expenses, right? So you and I, we're in the same boat. Because we're self-employed we can deduct a lot of stuff and then on our income taxes it always shows lower, but we actually make more money, but with the deductions it does show lower and it's hard to qualify as a self-employed individual.

Ali 02:05

That's correct.

Sylvia Ho 02:06

So as a self-employed individual, most people are finding it tough. They're like oh, you know what, it's great that I'm self-employed but sometimes it's tough to qualify for a mortgage. And so walk me through that process. Why did you want to invest in real estate?

Ali 02:19

So the idea was basically, to leverage this money or investment in the future and having an early retirement maybe, or using part of this investment for daily use in the retirement time. And that's why I consulted with you as you mentioned, because a business owner going through a different route and different path in terms of, like, the income, so I wasn't quite sure if I'm eligible to get a second mortgage. And then you introduced me to other lenders, and there are different ways of to look at the income.

Sylvia Ho 02:52

Right. Right. Absolutely. So talk to me about the process of going through Jump, like, was that as hard as you thought? Was it easy?

Ali 03:01

Yeah, so the process itself, I think it was very step by step, explained to me by yourself, you know, the concept of having a property or investment property is daunting itself, let alone, like, and you want to think about how to get funds when you are having a business, for example, and then you don't have a regular T4. It's very daunting, but then when I consulted with you it was very practical. So you walk me through step by step, you showed me that you can get some equity in your first home, and then use that equity in case you need that one. So you pull some money out of that, and then you walk me through the second mortgage, how we can get a second mortgage, and then there are B lenders, C lenders, and then you kind of rest assured me that there is possibility to get a second mortgage. But we went through a process of about like six to nine months, I guess. And every step you explain the things to me, so it made sense. And then... so it was really step by step, I would say.

Sylvia Ho 04:01

Okay, so it was basically very clear what you had to do at each stage of the process.

Ali 04:07

Exactly.

Sylvia Ho 04:08

Right now you've purchased your rental property.

Ali 04:10

Yes.

Sylvia Ho 04:11

How happy do you feel about this investment property?

Ali 04:13

I'm very happy in terms of accomplish the goal that I had for a long time, but I wasn't quite sure how to reach that goal. And then I consulted the professionals, obviously worked with real estate agent, myself, I was looking, I talked to a professional mortgage broker, and all of the team helped me to achieve that goal. And obviously, like, I'm happy right now. Yes.

Sylvia Ho 04:35

Yeah. So is your place rented out right now?

Ali 04:37

Yes.

Sylvia Ho 04:38

How long did it take you to find that investment property? You ended up buying an investment property here in the Toronto area?

Ali 04:44

Yes, correct. So it took about, I would say like eight to nine months overall. So from the time that the first step was to take some equity out of the primary residence, and then the next step was basically talking to real estate, looking for a property in different areas and see what makes sense in terms of the budget? And etc. So yeah, overall eight to nine months, but step by step.

Sylvia Ho 05:11

Okay, so it took you about eight to nine months to find this investment property, right?

Ali 05:17

Yes. But the whole process, I mean. From getting a line of credit, to finding the property, to second mortgage, everything all together.

Sylvia Ho 05:29

Okay. All right. So what would you tell your younger self? Right? What would you tell your younger self, if you were gonna say three things to our listeners today? Or even to yourself? If you were to say, okay, if I was 20 years old today, what would I say to him? Would you do anything different?

Ali 05:47

Yeah, I would say talk to professionals, somebody who knows his or her stuff better than you, obviously. If you want to invest in something, especially real estate, you got to talk to professionals who are in the business and they're doing, you know, this kind of investment themselves. So from real estate agent, to mortgage broker, talk to them. And obviously, they know ins and out of the market and how to proceed. Some of the stuff a normal person who hasn't done the investment before, they don't know the details of it. So there are ways to, you know, approach it. And if you are not ready, and if you don't have, you know, the downpayment, or if you don't have the conditions, you can definitely talk to a professional and then get ready, maybe down the road, six months or one year down the road, achieve your goals.

Sylvia Ho 06:36

Okay, so what I hear that you're saying to your younger self is talk to professionals, ask a lot of questions. Talk to the professionals who have done it before and learn off of their experience.

Ali 06:47

Yes.

Sylvia Ho 06:48

Now, talk to me a little bit more. Now, you're managing your own property, right?

Ali 06:52

Yes.

Sylvia Ho 06:53

How's that going? How's your tenant?

Ali 06:55

It's good. I mean, definitely it's an experience as well. I haven't done... I mean I've done it a little bit in terms of dealing with somebody who's renting, but it's quite an experience in terms of, you know, finding a tenant, obviously, I was going through MLS and a real estate, professional real estate agent. I'm communicating with my tenant myself. And it's going very well, I mean, you got to do your due diligence, but some of it, it's luck as well.

Sylvia Ho 07:22

Do your due diligence. Okay, so hold on for a sec, let's back up for two seconds for our audience to understand. So you bought the place, you closed on it, and then you put the listing up on the market for rent. Right? And did you use a real estate agent? Or did you do it yourself?

Ali 07:37

Yes, I used a real estate agent.

Sylvia Ho 07:39

Okay so you use a real estate agent. Okay. So you used a real estate agent and agents typically charge one month's rent, they charge you one month's rent, and they find a tenant. Now, did you tell the real estate agent, like, what kind of client you were looking for? Or were you willing just to take anybody like who apply, who first applied? Like, how did you decide on what tenant? Or what kind of tenant or which tenant to, you know, accept?

Ali 08:03

Yeah, so we got like a few different applicants. And my real estate agent presented those applicants to me, and then with the consultation with him based on his experience, and then they look at different credit score, and then different things, which is quite common, I think, in this real estate market, we decided to move forward with one of the applicants.

Sylvia Ho 08:26

So you had like three to four applicants that came in, or two to three, or one to two?

Ali 08:30

I think the final was two. So three were interested. And then it was very quick. It was just a week, that we called back some offers. And then we decided between two major applicants.

Sylvia Ho 08:43

Okay, all right. Okay, so perfect. Let me just run our audience through this. So you closed on the place. Did you have to do any renovations to the condo?

Ali 08:50

Sylvia Ho 08:51

No. So it was ready to go to be rented out, right? You didn't have to paint it or put up blinds or anything like that?

Ali 08:56

No, it was done before.

Sylvia Ho 08:57

So it was already prepared, ready to go. Okay. So once you close, then you got the real estate agent to help you list it. And then how did you decide what price to list it at?

Ali 09:11

So real estate agent presented some of the recent rents in the market in the same building or surrounding areas, and then we figured, like, even two days before, that we realized that it's, the rent is a little bit higher compared to, like, three months prior to that. So we just decided on the number and then moved forward.

Sylvia Ho 09:33

Okay, so then you decided on the number and then the showing started and it was for one week, right? And then you got three people interested? And then two people put in applications.

Ali 09:42

Correct, yes.

Sylvia Ho 09:43

And then you got to choose between these two. Okay, perfect. So between these two individuals, how did you pick one over the other?

Ali 09:50

Because there's certain criterias, I'm not a real estate agent, but they're looking at the credit score. Obviously, somebody is right now working, those kinds of things which is common, and standards in the real estate market, and based on different criterias, you decide between two.

Sylvia Ho 10:11

Okay, so you were looking at credit score and whether they were working or not working. The condo that you bought, were you looking for one individual, two individuals, like a couple or a single person? Who's living there right now?

Ali 10:22

Just one person, but it is a one bedroom so potentially one to two people can live there. Right?

Sylvia Ho 10:28

Okay, so one to two people can live there. Okay. So in regards to documents, when the real estate agent showed it to you, this really, really helps the audience because you've been through it before where, you know, you looked at, you know, getting a tenant, right? So this really helps the audience try to understand, like, what was going through your experience with the real estate agent? So they showed you the credit score, they showed you their income documents, right? Was there anything else that you looked at? Did you scope them out on, like, social media at all?

Ali 10:56

I just look at it briefly on social media as well. So one of the applicants send me a letter from his work. Pay stubs, you know, government ID, those kind of things to make sure, you know, as a professional person. But those are very common, I guess.

Sylvia Ho 11:14

Okay, okay. Okay. Perfect. All right. So now that you have your tenant in there, have there been any issues?

Ali 11:20

Not a major issue, like unfortunate that the first month, we realized that there was an issue with the laundry system. So the washer dryer, so I had to change that one. That was the main issue that I had. And it was pretty quick, and, you know, help the tenant within two weeks to buy a new unit. And then we remove the old one, replaced it. So they was really happy.

Sylvia Ho 11:42

Okay, very, very good. And so now you have a happy tenant

Ali 11:45

Exactly.

Sylvia Ho 11:45

Paying rent on time every single month?

Ali 11:47

Correct, yes.

Sylvia Ho 11:48

No other issues?

Ali 11:49

No other issues so far, yeah.

Sylvia Ho 11:51

Okay, beautiful, knock on wood. That's beautiful. Anything that you would want to tell the audience if they were thinking about Jump, but hasn't quite pulled the trigger yet? What would you say to them?

Ali 12:04

I would say that, definitely talk to a professional like yourself, Sylvia. Talk to Sylvia. And then if you're not eligible, or you're missing something, or, you know, you have some doubts, she can help you navigate this process. So it might be difficult for some people to think about renting a place and they think it's so difficult to deal with the renter, it might be like financial things. So they think, like myself, I wasn't quite sure if I can get, like, a second mortgage. So these are the questions that Sylvia can help you with.

Sylvia Ho 12:40

Okay, so basically, you're saying, hey, you know what, seek answers. Seek answers, and then make an educated decision instead of deciding based on your own assumptions and your own fears.

Ali 12:49

Exactly, yes.

Sylvia Ho 12:53

Hey guys, so we heard from Ali who's a business owner here in the Toronto area. He used the equity that was in his home to go buy another investment property. He knew about the idea, but he wasn't sure whether he could do it or not, because again, he's self employed and he does show lower income because of the write offs. If you want to learn more about the Jump program, about owning just one more property, go to my website at SylviaHo.ca and book a call with me. The other thing that you can do is go to watch my 45 minute webinar at JustOneMoreProperty.ca to understand the ins and outs of holding a property long term and how you build net worth. Thanks so much, guys. Take care.

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Sylvia Ho talks with Filomena who, along with her husband, is utilizing the Jump program to finance the purchase of a rental property and future retirement home in Florida. Filomena shares how the challenges she initially expected to face were not as difficult as expected with Sylvia’s assistance.

Filomena and her husband John have been married for 20 years and have two kids aged almost 14 and 12. After recently paying off the mortgage on their current home in Toronto, they began to wonder how they could tap into the value of that home and grow their assets. Sylvia confirms that the equity in owned homes can lead to opportunity to buy investment properties, which is exactly what Filomena did.

While Filomena loves the Toronto area, she and her husband decided to explore property options in Miami Beach, Florida. She cites the beautiful weather as a deciding factor but also shares that a key thought behind Florida is to secure a place for future retirement. Something to invest in now that will also present a place to retire when they’re ready. Filomena’s advice to listeners is not to be afraid but to arm yourself with information and not assume that difficulty with a first property will lead to difficulty with a second.

Transcription

Sylvia Ho 00:00

Thank you so much for coming on, Filomena. Tell me a little bit about yourself.

Filomena 00:05

So I'm married, now coming on 20 years, believe it or not. 45. I have two kids aged almost 14 and 12. We're kind of at the point of our lives where we just finished paying off a mortgage and thought, how can we tap into that value somehow? And how can we make our assets grow? I mean you start to think about retirement - figure now's the time, and that's what's prompted us to pursue this strategy.

Sylvia Ho 00:33

Beautiful, beautiful. So what were you looking for when you first came to me?

Filomena 00:37

I was looking to find out what our financing options were. How to tap into the equity that's in our home.

Sylvia Ho 00:43

Right, right. Equity just sounds like a foreign word because people just don't understand what the word equity is. I have my definition of equity. What do you think equity means to you?

Filomena 00:52

My net worth.

Sylvia Ho 00:53

Yeah. You know what they say a lot of Canadians, their biggest asset is sitting in their floorboards. Right? And that floorboard is not making you any money. So right now you're looking to use that money that's sitting in your house to make more. Did you think that you could ever own another property?

Filomena 01:09

Originally I thought, given the housing market in Toronto, I thought it would be very difficult. But given how it's taken off of late, I started to realize, hey, there's potential there that we can kind of harness that growth and get another property as well. So did I think I could 20 years ago? No, but I'm starting to see my view has changed.

Sylvia Ho 01:30

Okay, beautiful. You're one of those clients that are like, hey, Sylvia, I don't want to buy in the Toronto area. What are you and your husband thinking of buying right now?

Filomena 01:37

We are thinking of buying in Miami Beach, believe it or not. We've done quite a bit of traveling over the years, and there's always lovely places that you want to go and see. But it was unique to us, because it was very much like Toronto, which we love, except it's got nice weather year round. And that's what attracted us. And plus the entry levels to get into the real estate are a little bit more attractive than they are here. And so we thought that, you know, why not combine investment property with what we hope will ultimately be a place that we can go and spend part of our retirement in. So that was the plan.

Sylvia Ho 02:13

Wow. Beautiful, beautiful. It's definitely warmer down there than up here. So where are you in the process right now in regards to the Jump program? And what kind of obstacles are you facing?

Filomena 02:23

The obstacle we're facing right now is contrary to what I thought. I thought it would take a long time to sort of line up the financing, and all the legals and all the logistics, that part's actually been - thanks to you - quite easy. The challenge we're having is supply, we have our hearts set on a particular type of property - number beds, number bath - and for us right now the challenge has been a supply in those type of properties. There just isn't a lot right now. Trying to balance being patient with being afraid that what little there is there would be scooped up. So that's been the challenge for us.

Sylvia Ho 02:56

Right, right. Right. And then so your realtor down in Florida, what are they saying? Like supply's just really low?

Filomena 03:02

Yes. Yes. And apparently it has been for the last couple years.

Sylvia Ho 03:07

Okay. Okay. If you're talking to someone, say a work colleague or a friend, right? And they're like, oh, you know what, how are you buying this, like, other property in Florida? How does that work? What would be three things you would tell someone?

Filomena 03:20

Do your homework. Don't necessarily assume that because you have a large mortgage that you're, you know, you can't do it. The way that property values have risen over the last decade have given people the opportunity that they wouldn't necessarily have before. So do your homework, try and see what you can do. Also, don't get into more than you can. Try and do a very realistic budget as to, you know, how you'll be able to carry both properties. But explore it, go for it, don't just assume, I guess is the advice I would give people. Right? Explore your options.

Sylvia Ho 03:51

Exactly. I know, like, a lot of homeowners, they're like, oh, my goodness. You know, six years ago when I bought this place, it was so difficult. And you're telling me to, you know, buy another place? Are you crazy, Sylvia? How is that even possible? So tell me a little bit more about why you want to buy rental, like I heard you're thinking about retirement, you know, you're 45 right now, you're like, okay, when do you want to retire?

Filomena 04:14

That's an interesting question. I have a very unique employment arrangement. I work for two investment managers who are about 15 years older than I am. And they have their own wealth that they would manage. We've had the candid conversation: I can work for as long as I want. Will I work in the same capacity? No, I would probably scale it down in terms of hours. So I could work for as long as I want. Ideally, I'd like to retire between 60 and 65.

Sylvia Ho 04:41

Okay, so that's 15/20 years from now. Okay.

Filomena 04:44

Yeah.

Sylvia Ho 04:44

And then this property down in Florida, I know, it sounds like you want to retire down there because it's nice warm weather. Are there any other reasons that you want to get into another property? You could sell your current place and then just move down there, right?

Filomena 04:56

No, I'd still like ties. I think I mentioned before, I do love Toronto and I think if it were not for cold winters, for me, it will be the perfect place. And we have family ties here, parents and family, we don't want to move. And we just want the option of being able to go somewhere when it's cold. And we saw the opportunity come up when we went last time to visit and thought why not there, right? Only because we had been contemplating it, entering the investment property market here. But, as you know, property values are quite high. So we thought, hey, why not?

Sylvia Ho 05:27

Yeah, absolutely. Anything else that you wanted to add to let the viewers know or hear about your thoughts about how you can help other people who want to do this?

Filomena 05:37

Don't be afraid. Arm yourself with your information. Enlist your help, and try to see what your options could be and explore every opportunity. Don't just assume that you can't do it because your first experience with the first property was very difficult. Tap into the value of your home and try to extract as much as you can for your retirement.

Sylvia Ho 05:56

Okay, that's awesome. Thank you so much.

View Details

Sylvia Ho talks with Mima, a client in the Jump program who just bought her first rental property. Sylvia and Mima break down the real estate journey Mima has been on with valuable insight. Mima shares the emotions she’s feeling, her process with the real estate agent, and how she selected the neighborhood where she purchased the house.

Mima reveals that she came to Sylvia to renew the mortgage on her family’s house but when Sylvia introduced her to the Jump program, it felt right. She and her husband initially considered purchasing their rental property in Toronto, but after researching the real estate market and the offerings in outlying areas, Mima settled on Peterborough. She details her research and reasons for Sylvia and in doing so, provides key factors to consider when selecting property.

What Mima really wants the rental property to do is provide for her children: to help secure future financial milestones for them - things like weddings, properties, schooling - but also so she can consider an early retirement. When she selected Peterborough as the neighborhood to invest in, Mima interviewed three different realtors and she tells Sylvia what she learned through that process. While Mima will admit to feeling both excited and terrified, she is ultimately extremely satisfied with the house, how the numbers work, and what Sylvia and the Jump program provided for her. Her advice to others who may be on the fence is simple: just do it.

Transcription

Sylvia Ho 00:00

Hey friends, on today's podcast we're talking to Mima. Mima is a client who is in the Jump program, and she just bought her first rental property last night. We're going to talk about the emotions that she's feeling, the numbers that she's looking at, we're going to talk about how she interviewed the real estate agent. And then we also talk about how she was originally thinking about buying something here in the Toronto area and she ended up doing more research in outskirts of Toronto and ended up buying in Peterborough. If you guys want to learn more about the Jump program, the Jump program is all about owning just one more property. Click below, all it takes is 15 minutes for us to chat to see if this program works for you.

Sylvia Ho 00:39

Thanks so much for coming onto the podcast. So you just bought your first rental. Talk to me, how are you feeling?

Mima 00:49

Excited and then terrified? And then excited again and then terrified again? So yeah, I'm all over the place.

Sylvia Ho 00:55

Yeah, no, I hear you. It's exciting times. Now we just went over your Excel sheet and your numbers. How do you feel like, if we put the emotions aside and we just look at numbers, how are you feeling about the numbers?

Mima 01:09

I mean, the numbers look great. Yeah, as you said, we went through the sheet and what the outcome that we're going to see, hopefully, and you know, 15 years is not anything we would have been able to do, I don't think, without acquiring a second property and following your program. So yeah, I'm like, really excited.

Sylvia Ho 01:28

Beautiful, beautiful. So, now when you first came to me, what were you looking for?

Mima 01:35

Our five year term was up on our current home. We're just kind of like shopping around for rates and wanted to find a new agent to kind of help us out, and it was a Facebook group, actually, that I'm a part of, and I searched it and your name came up. And they're like, oh, and Sylvia helped us with another property and helped us figure out the numbers. And I was like, is this, can we do this? And then I reached out to you and you were like, yes, you can.

Sylvia Ho 02:03

Awesome. So your mortgage was up for renewal? You were searching for a good connection to renew your mortgage? And that's it, that's what you were looking for, right?

Mima 02:11

That was it, yeah.

Sylvia Ho 02:13

Okay. The world of real estate, investing in real estate, how has that perspective changed in wealth building for you now?

Mima 02:19

Like, the way that I grew up it was you get to homeownership, as quickly as you can, you don't carry debt. That was my Eastern Bloc, you know, first generation Canadian mentality of never carrying a debt. So it never even occurred to me that, like, you can pull equity from your home to then purchase another thing, like I heard about it, but that was something abstract that other people did. And it wasn't something that was for me or my family. So now having this insight into this whole other world of using a second property to help pay off this current property, and seeing that we could be, you know, mortgage free in less time than what we had originally signed up for, was not anything I thought we would be doing or something I hadn't even thought about.

Sylvia Ho 02:56

Right, beautiful. Now, tell me about the process when you're going through this whole Jump program? Like was it as hard as you thought it was? Or was it easy? Did you know that you could even do it?

Mima 03:07

I wouldn't say it was easy, because the learning curve was really steep for me. I mean, you and I have had 75,000 conversations by now with my 75,000 questions. So it was fast paced for me, like I try to understand where the expenses go, and how do you acquire these interest rates? And how do you lock in, and all these things that I didn't know how they worked. But your spreadsheet is amazing. And just, you know, every time I had questions, I would just go to the spreadsheet and look through the different scenarios. And that was super helpful. So I wouldn't say easy, but the way that you kind of explained everything, it felt attainable to me. Like following the steps.

Sylvia Ho 03:10

Absolutely futile. You go to the gym, and you're learning to, like, work out a new muscle and build that muscle up. It's a learning curve. It takes work, it takes effort, right? But then when you know what the goal is, right? So talk to me about what is your goal of attaining a second property? Like why did you want to do this in the first place?

Mima 04:07

Primarily for our kids. We have a great house now, we're in a neighborhood, and you know, financially like I'm not really worried, but I want to be able to like pay for their weddings and pay for their universities, and if they want to go to the States. And, you know, hopefully they're smart enough to get scholarships but just in case, to pay for whatever the kids are going to need. So ideally, we have that property for that reason, and then maybe even so we can retire a little bit early.

Sylvia Ho 04:34

Great. Okay, kids and early retirement. Now, we talked about this a little bit earlier in the interview: you are in the process right now where you just bought your rental, your offer's just got accepted.

Mima 04:47

Yesterday.

Sylvia Ho 04:48

Last night. And I got this email from you, you're like, Sylvia, what am I getting into? Talk to me about those feelings.

Mima 04:56

Well, the market is crazy everywhere and, you know, we thought we had a pretty healthy budget in the neighborhood where we were looking. I don't know. Do you want me to go into details of...?

Sylvia Ho 05:07

Yeah, whatever you feel comfortable. Yeah, talk about it.

Mima 05:10

So I researched a number of neighborhoods. Peterborough stood out for a number of reasons, but primarily good location - it's kind of close to Toronto, an hour and a half outside the city - the lakes are in that direction, there's a college and university, there's a government building. Like all these things, and the houses aren't super old. The basements already have great ceiling height. You know, the homes that we saw, the home inspections looks good. They're all detached on big lots in case of future development, most of them have side entrances. So all these things that we felt were good qualities in a home seemed to be in Peterborough and not in other places. I also checked like west end, like St. Catharines, Welland, and houses are like really old and basements aren't really an option for what we're hoping to turn into a sweet apartment. So anyways, Peterborough. But I guess everybody is thinking Peterborough, because what we thought was a good budget ended up like we weren't even close with our budget. We thought $600,000 would get us a house there, but that was not the case. So we were overbidding from the list price, everything was listed around like $5/600,000, but they're going between like 7 and 8. And so we went to our max budget to get this house. And now I'm like, oh my god, it's a three bedroom and bathroom bungalow in Peterborough. But, you know, this is for the long term. I'm not worried for the long term, even if there is like a little correction that may happen with growing interest rates or whatever the case may be over 10/15 years. I'm not worried.

Sylvia Ho 06:43

Right. Right, right, right. Now, one thing that I know that we were talking about was, you were looking originally in the Toronto area?

Mima 06:50

Yes.

Sylvia Ho 06:51

So talk to me about that, how you went from Toronto out to Peterborough. Like, what made you make that decision?

Mima 06:57

I follow real estate regularly. So I knew what the prices were like. And we thought, well, maybe we'll get a condo here. But actually it was your spreadsheet, so factoring in all the closing costs of acquiring a property here and with a double land transfer, to get within our price range... so our max-max budget was 750. And we're looking at these, like, condos that weren't even 500 square feet. And given the pandemic, I mean, I don't know how things will go back but I don't think that the, you know, five days a week, nine to five is going to be coming back for a lot of people so people are moving out. So yeah, we were thinking to buy like a 455 square foot condo with the maintenance fees that always go up, and the cost, closing cost of acquiring that property, it just didn't really make sense to us. So I'd rather get a house where there's, so for, you know, expansion if you wanted to and in a nice town where maybe, I don't know, depending on where our kids go, but if they're like globetrotters then we're going to be stuck in Toronto, now maybe go to Peterborough, or go and see how it goes. It's really pretty out there. It was ultimately the cost and I think the shift to how people work. But this market's crazy. I mean, a semi a few blocks from us sold for 1.8 million, and I'm very anti walls attached.

Sylvia Ho 08:17

It really just speaks upon the fact about helping our kids, right? Like if our kids want to stay in the Toronto area when they're like ready to buy in 20/25 years, they're going to be priced out of the market. Right? People are already feeling that pressure here. So by owning just that one more property, you're giving your kids a fighting chance to potentially own here in the Toronto area should they choose to, right? Now another thing that you went through was picking a realtor because you're working with a realtor here in the Toronto area. And they're like, okay Sylvia, I need to find a realtor out in the Peterborough area. And you did a bunch of interviews. How did you do these interviews? Like what kind of questions did you ask? Because these are questions that people will have, when they're talking about picking a realtor.

Mima 09:01

So I would actually do this stuff a little bit differently. Because what we did... so we interviewed with three realtors and, again, with the Peterborough market being so nuts, it sounds like this is activity that they had not seen before. So these multiple bids. You know one of the houses that we liked had 21 offers, just crazy. And in talking to our realtors, the realtor we spoke with was lovely and she seemed to know the market, she was ambitious and driven. And I asked her about her experience and who she's bought and sold with. And she seemed great. Like she primarily deals with sellers and her two colleagues are their buying agents.

Sylvia Ho 09:40

Oh the buy agent. That was Kayla and Kyle, was it?

Mima 09:43

Yes, Kayla and Kyle. And they were super responsive, which I really liked. They had this WhatsApp chat so that we were all on the same chat with my husband and with Jessica was the main, like the selling realtor and her team and the other two, so they were constantly very communicative, which I really liked when compared to another realtor that we had spoken with, but he was really hard to get on the phone. It took him like two days to call me back, and then to call me back he missed the time and he was too busy, and I needed somebody, I don't live there, and I don't know Peterborough. So I need somebody who's like super responsive and can answer all my questions. So that part didn't jive well with me. And then the other, the third agent we spoke with, just the vibe that I got was that she was like, very chill. And again, I needed somebody who was very, like, kind of go gettery. She was just like, yeah, you can see what happens, you know, the markets is what it is, was kind of like sort of relaxed about it.

Sylvia Ho 10:41

You wanted more, you want more oomph, you wanted someone to charge, to take direction, right? So when you're interviewing these three agents, you were looking for availability, you were looking for good communication, and you also went with your gut feeling.

Mima 10:58

I did, yeah. And I went with my gut to some of the other questions that we had asked. And they just, they seem to know the areas really well. But what I do regret not doing a bit more thoroughly, was I had asked them for a reference. And I said, ideally somebody who is from the Toronto area who we could work with to acquire a rental property in Peterborough. And the name they gave me and the person that I ended up speaking with, she was like, yeah, they were perfectly nice to work with, and everything was fine, but I knew exactly what I wanted, so I knew which area, I knew which street. And I said to them that this is where I'm looking. So they're perfectly nice. They're very responsive. They were great. They grew up and live in Peterborough, so, and I wanted somebody who knew the locations, but she was like, I knew what I wanted. I hum and hawed over that, I was like okay, well, I guess, in hindsight I was like if that's the only reference maybe I should have.... And I say all this because then when we actually went to see the properties, we went into the house, and they were like, oh so here's the house. Well, what do I need to know about it? Like, tell me stuff about it, like what should I check out in looking at this property? Is there anything that you're noticing that's like problematic? And ultimately, I think I'm really familiar with these things. And like we renovated our own house, so I knew what to look for and things you know, some of them had like sloping floors and one of the house we walked in, you could smell the dampness immediately. You really need to speak to those things. And I'm like, don't you...?

Sylvia Ho 12:28

It's like pulling out information from a rock.

Mima 12:29

It was like pulling out information.

Sylvia Ho 12:31

Yes. Like, just tell me, just tell me kind of idea.

Mima 12:34

Yeah. But I'm also very chatty and a little bit overbearing sometimes, so maybe they were terrified. I don't know.

Sylvia Ho 12:43

So let me let me ask you this. You're a very analytical individual. I'm hearing this from our conversations. And we had one conversation and I was like, analysis paralysis.

Mima 12:54

It's a real thing. Definitely a real thing. Yeah.

Sylvia Ho 13:00

But you still did it. You still jumped in with two feet and you still did it, right? Like you analyzed, you got the information, and you just went for it.

Mima 13:08

Oh, yeah. Anybody who follows real estate, like nothing's a sure thing. But if you're gonna do something, and if you have money, just kind of sitting... I mean, it's not sitting around like don't, I'm not this like baller. Yeah, no, no, no. But if you are going to do something with it, and we have other investments so it's not, we're not like putting everything into real estate. But if you're going to do something with it, I see the increase in property values. I mean, even in Peterborough, the houses - I know the markets really crazy right now - but the houses that sold in like November/December, now they're like between 50 and $100,000 more, from like four months ago.

Sylvia Ho 13:44

From four months ago. Yeah.

Mima 13:46

Completely nuts. So I had my maps set out. And you know, and I was looking, deciding on Peterborough, and we printed off this giant map and I mapped out all the properties and I'm like proximity to the schools, and proximity to parks. And, like, if you're walking here, what would that be like? And you know, like, really mapped it out. And I did the same with other neighborhoods. But you can do this for, you know, ever and not make a move. And it seems like the prices just keep going up. So it's like, just do it, just like just go.

Sylvia Ho 14:16

And it's just go in.

Mima 14:18

You're gonna freak out. Yeah, jump in. You're gonna freak out like I did. And I'm still kind of freaking inside.

Sylvia Ho 14:25

It's like what Nike says: just do it.

Mima 14:27

Just do it. Yeah.

Sylvia Ho 14:28

Just do it. Like the numbers make sense, you understand the numbers, we take out the emotional part of it. So, okay, so now that you bought in Peterborough, what are you planning to do with management? Like are you going to manage it on your own, are you gonna hire a management company, what are you thinking in that regard? How are you... or even have you even thought about that?

Mima 14:43

Yeah, the plan is to do it ourselves. The house we ended up getting is super cute and renovated. It actually reminds us of the very first house we had that was also small, which I like. It's three bedrooms and even if we rent it out to students, it's not big enough to have a party in or anything like that. So hopefully we'll rent it out to some people will take care of it. But given our experience with home rentals and knowing, you know, touch wood, what we've gotten ourselves into, we're gonna try and do it ourselves. See how things go. I have like a ton of research to do on how to find tenants and questions to ask and what to check for. But yeah, we're gonna do it ourselves.

Sylvia Ho 15:20

Okay, okay. So just three more questions here. What were some of the challenges of deciding to go down the Jump method? Are you facing any obstacles today? So I think we talked about a lot of that. Are there any other obstacles that you want to share with the audience that they can learn from? And they can like, jump in, like I'm hearing jump in with two feet, you know, analyze it, understand the numbers, but still just just go for it. Because what is it they say: feel the fear and do it anyways?

Mima 15:44

Yeah, we were just talking about this, the golden toilet and, you know, removing the financing clause. That's the thing that's giving me the most anxiety right now and did before, because offers are just not being accepted with financing clauses. So to have the advantage, I mean, unless you have like a pile of money that you still, like to offer way more over asking and then include the clause... actually, that wouldn't make sense. But anyway, yeah, that part of it, it just, it's what the market is like, and I am still scared that we're gonna come, you know, the bank's gonna come back and say actually, it's 700 or whatever. But that is still, yeah, financing clauses in Toronto, it's like no conditions, you just go in.

Sylvia Ho 16:28

Yeah, you really jump in with two feet in, right. So in regards to contingency plans in the gold toilet, we talked about that, and we talked about our different options. But we will know once we order the appraisal, and then we go from there, right? But when we were preparing to put in an offer, without that financing clause, we talked in depth about the gold toilet, you understood the numbers, and you looked at your comparables between the different homes and what's been selling in the neighborhood and stuff. So it's all about trust. Like I said, it's all about trusting your agent and what your agent is showing you in regards to the recent sales. They must be in the last 30 to 60 days in the same neighborhood, same three postal codes, similar property taxes, similar lot size, but you can't compare a two story to a one story, you know, stuff like that. Right? So it's comparing apples to apples, right? And that's where your realtor comes in to truly tell you yes. Even though they listed at $1 - now, they didn't list your listing at $1 - but even whatever they listed, it doesn't necessarily mean that that's what market value is, right? Because it's just a very different market up there.

Mima 17:32

Oh, yeah. 100%. There's this listing for 499 selling for 750/700. Like it's just, the list price is just like the....

Sylvia Ho 17:42

Yeah whatever, they could put it for $1. Yep. So how long did it take you to find this property?

Mima 17:48

Oh, not long at all. I mean, we could have started looking back in December, but it came on the market like a week ago. And so we decided, after doing our research, we're like Peterborough seems to be the place. Let's go this weekend, drive around and see which neighborhoods that are considered good neighborhoods are like, which ones are the shady ones, whatever, just like kind of assess the neighborhood.

Sylvia Ho 18:08

Mm hmm. So you drove around the neighborhood?

Mima 18:11

So we drove around the neighborhood and -

Sylvia Ho 18:14

Doing your research.

Mima 18:15

while we were there, let's book some showings. So we saw like 9 or 10 properties and, you know, they're all very kind of similar, that style within our price range. The bungalow the three bedroom bungalow, was kind of where we thought we would land anyways. And we really liked this house. It's super cute. Renovated. We don't have to do anything. All the other properties that we saw would have required some sort of upgrade, not like a giant renovation, but at least some cosmetic,

Sylvia Ho 18:46

Some extra work.

Mima 18:47

Yeah, upgrades to them, whereas this one doesn't require anything, and we thought we would never get it. Hilarious the timing is so weird, you know, they were accepting offers at 1pm, which is kind of like a bizarre time to take offers since people are working and, you know, they need quick replies and people, you know, to do the negotiating back and forth. So a similar property ended up, it had 21 offers at their 8pm. And that's the one that ended up selling for, it was listed at like 539 or something end up selling for 810. Whereas these guys were accepting offers at like 1pm and they received, I think it was like six offers. Back and forth meant like three times. We started off at 670, went up to 710 then ultimately did 750. And yeah, that was, that was our process. So it took us, you know, a week really from when we started looking, to doing the showings, seeing the neighborhood, liking this particular neighborhood very much, putting in the offer and getting it.

Sylvia Ho 19:46

Nice. So three things that you are going to tell your younger self that you know today that you didn't know before, what are those three things?

Mima 19:54

Buy your first property like as soon as you possibly can. Take whatever money you have. My God, I think about the money that I spent in my 20s, and where I could be now. So I would say to anybody younger, people always need a place to live, you can invest in other things, but you're always going to need a place to live. And other people always need places to live. So, like, just get into the market as soon as you can and at least you will always have a roof over your head.

Sylvia Ho 20:23

Yeah, you got into the real estate market, right? Real estate market is very, very profitable. So the one thing you would say to yourself, just get into the market.

Mima 20:31

Just get into the market.

Sylvia Ho 20:32

Get into the market. Would you say anything else to yourself? Your younger self? Like let's just say you're in the Jump program now, you jumped in with two feet, you bought your first rental property. Now you own two properties. Now, you did mention something earlier, where you're like, you know, what Sylvia, we could have bought in December. It's February now, like, that's your younger self. That was your younger self a month and a half ago? What would have you told yourself then?

Mima 20:57

The neighborhood research that I did over January, I wish - we knew we were going to be doing this, we met you back in October, I think - I wish that I had done that research at that time and started following prices of homes at that time so I could have been really familiar. So that like December 16, when we closed and we had that money, I could have already at that time been like yes, there, that is great value, that is whatever. Because ultimately as well, like, we knew we couldn't afford Toron.... well, we suspected. So that would mean, like, frequent, you know, weekend drives out to other neighborhoods, like this was an emotional journey, even the one week that we were doing it. And that was also partly why we went up to our max. Because when I think of the emotional cost of every weekend going out seeing properties or not, but then trusting that someone else is going to look at them for you and you know what they're doing. Everything has a cost, right? So the emotional toll that would have taken can be expensive. So I wish I had done this back in like October/November, when we knew we're going to go this route. I had been prepared with the neighborhoods - neighborhood, neighborhoods - of where we wanted to look, and then been, like, ready to go. So that we acquired a property then because even, yeah, the market just went nuts over Christmas. And, you know, we could have gotten that house for probably like 650 back in December.

Sylvia Ho 22:18

So you're saying get into real estate right away. So any first time homebuyers just get in, buy a place even, they just get into the market? And the second thing is, people who are like contemplating this Jump program, just jump in with two feet, do your research and just go for it.

Mima 22:35

If anyone is on the fence, you know, you're not sure, like just start researching neighborhoods and see what rentals are going for. Those are the things we were checking: you know, Kijiji, Facebook, local rental boards to see what.... oh yeah, that was the other part of Peterborough is that there is like a crazy shortage of vacancies for rentals. Or it seems like based on what we've seen rental prices are listed for that we need to cover our expenses for the home. Yeah, just get in because it's, I don't know, it just doesn't seem to be slowing down and people have been waiting. We bought our first house together for like $570,000.

Sylvia Ho 23:16

Your first first house.

Mima 23:18

Our first first house in Toronto, in kind of like a historic neighborhood in college town. I remember freaking out then and it was like, oh my god, what have we done? We bought a, you know, it was a end row unit, end unit of a row house, and I was freaking out then as well. And that house made it possible for us to buy this house so... and even then everyone's like, there's gonna be a correction, there's going to be - this was like 10 years ago - there's going to be the bubble breaking, whatever.

Sylvia Ho 23:45

Yeah, a burst in the market. You know, the market's gonna drop, it's gonna just crash.

Mima 23:49

Just wait, just wait, it's gonna it's gonna crash. Just wait, just wait. And if we had taken, and we were given that advice then by others, and if we taken that advice that would have been it. We were already at our max then and it just kept going up and up. And that was 10 years ago.

Sylvia Ho 24:01

Yeah. Beautiful. Any last minute comments that you want to share with the audience? This has been amazing.

Mima 24:09

I hope this was helpful. I'm happy you asked me to do this because really, like, we've had a great experience so far. It's been a whirlwind for sure, we're just kind of in this thing now and it's brought like this excitement and momentum. Yes, it's great.

Sylvia Ho 24:30

Today, we just talked to Mima and her advice is just do it. Just do it by now. You guys want to learn more about the Jump program, click on the link below, book an appointment with me. Go watch my 45 minute on demand webinar at www.JustOneMoreProperty.ca. You can learn all about what it means to buy your first rental investment property and hold it long term and how you can build wealth through real estate. There are three main reasons to buy another property, to buy just one more property. There are three main reasons and the first reason is to pay off your mortgage in 10 years. Second reason is to help our kids, to help our kids get into market later on, to help our kids with their education. And third thing is to retire with passive income. For Mima, her main two reasons for getting into a rental property is to help her kids in the future. She has young kids and she wants to be able to help them like, you know, get into the market. Her parents helped her get into the market and her sibling get into the market way back when and she wants to be able to do the same for her kids. And then the second reason is to retire with some passive income. So those are her two main reasons for getting into the Jump program. When Mima first came to me, she was just looking for a renewal. Her mortgage was coming up for renewal. She was currently with one of the five big banks and she got my name from Facebook, and she called me up and we had a conversation. I introduced her to the Jump program, and she was like, let's do it. So they pulled money out and they have just bought their first property.

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Sylvia Ho welcomes Armel to the podcast to talk about the purchase of his first investment property and the differences between bad debt and good debt. Armel and his wife are young, motivated, and analytical, and Armel shares how he dove into researching finance and learned to view debt differently ahead of his real estate investment.

Armel shares with Sylvia that a lot of his “why” in terms of the Jump Program and investment is his family. He and his wife share a very strong set of values and had a lot of conversations about what would be right to propel their young family forward and when the right time would be to do it. Armel says he leveraged information from online, from Kiyosaki books, from friends, and from his passion for knowledge to prepare for the action he wanted to take.

Sylvia learns that Armel views his residence property as a more emotional purchase but the investment property as exactly that: investment. He appreciated that Sylvia was someone who could understand his direct questions about interest, mortgage, equity, and the more mathematical reasons behind his choice. Armel has great insight into debt, how to view and differentiate types of debt, managing your property, and why “just do it, take action” is his advice to anyone considering the Jump Program and real estate investment.

Resources mentioned in this episode:

Robert Kiyosaki

Transcription

Armel 00:00

Just do it. Visualize, think about it, measure it, make a decision that you thought through, that you're comfortable with and just do it. Just act, action it, and you'll see the benefits once you're on the other side. It's challenging, but I think that is where the value is. It must be challenging, it must be a learning opportunity for it to be fruitful for you, to take care of it.

Sylvia Ho 00:23

Hey, friends, have you ever wondered how you can pay off your mortgage faster? Or maybe you'd like to help your kids get into the real estate market. Or better yet, retire with some passive income? Well, you're in the right place. Welcome to the Sylvia Ho Mortgage Podcast. My name is Sylvia. I'm here to teach you how to achieve your goals simply by owning just one more property.

Sylvia Ho 00:45

Hey, everyone, its Sylvia here. Welcome to the Jump Podcast. Today we have Armel here who just purchased his first investment property out in the Ottawa area. And his advice is about good debt versus bad debt. His advice talks about, you know, how his mindset changed from, you know, having debt is actually a good thing. And how he did his research and how he read books and educated himself. His biggest advice is just do it. For Armel his big why in getting into the Jump Program and buying his first real estate investment property is for his family. If you're interested in getting into the Jump Program, all it takes is 15 minutes, go to SylviaHo.ca and book a time with me. And let's chat. And let's work out some numbers and see if this is for you.

Sylvia Ho 01:36

Hey everyone, we're here joined by Armel. He just closed on his first rental property. Armel, how do you feel?

Armel 01:44

I feel great. I feel like it was a great accomplishment for me and my family. And it's exciting as to the whole opportunity to learn new things, a new challenge, and I look forward to it.

Sylvia Ho 01:59

Beautiful. Now why did you want to do this in the first place? You guys are pretty young, right? You guys just had your little one, you guys are pretty young. Most of my clients are between 45 to 55. Like, talk to me, like, why did you guys want to do this?

Armel 02:13

Exactly because we are young. Now, you know, these are earning years. These are, you know, the beginning of your peak years, the ability to to propel yourself is much more likely now. So we wanted to start early. We wanted to look back when we're 40, 45, 50 having taken the opportunities early so that you make it the time to enjoy much more free time time together in the years when we don't have the capacity to work so hard.

Sylvia Ho 02:46

Right. Right, right, right. Now, you guys did all the hard work, right? Like, the only way we were able to do this is because you already own a property. Right? And you guys are very successful at your careers. So talk to me about, you know, the whole Jump Program. A lot of people are scared because they're like, what, you want me to go into more debt? Like, how does that make sense, Sylvia. So talk to me, how did that make you feel when I first introduced it to you?

Armel 03:13

You know what, my eyes kind of lit up because you were speaking a language that I understood. Both my wife and I, we invest a lot of time learning, we've taken courses, my wife especially, courses in financial management, in understanding debt and how debt is used in the benefits of debt. So, for us, it isn't necessarily scary to jump into debt. What is scary is to jump into debt not knowing how you're going to use it, or not knowing what kind of debt it is. So there are certain debts that we think is a good tool is a good lever. Mortgages are one.

Sylvia Ho 03:50

Okay. Okay. So, essentially, you're talking about... you're essentially talking about good debt versus bad debt. Right?

Armel 03:56

Right. Yeah.

Sylvia Ho 03:59

So how did you first come to me? Like, what were you looking from me specifically? And how did you get to come to me? It was through someone else, right?

Armel 04:08

I had been looking at properties for the better part of a year. That's how I am. I literally, I get a vision, I figure out how I'm going to do it, and I just obsess and obsess and obsess and obsess until it's real. Once I was ready - once we, you know, my wife and I reviewed our position, and agreed that we are now ready to buy another property - I reached out to my friends, my network, the people that I trust, the people that are probably doing more or less the same thing. In terms of either buying their own homes, buying second homes, those sort of things, for a reference, for somebody who can help me on the financing side. And one of my closest friends that, I'm part of 25 years, said listen, reach out to Sylvia, she was super helpful with me. And she specializes in exactly what you're thinking about. It's in that respect that, you know, I gave you a call right away. And, you know, you're pretty responsive and we jumped right into it. We didn't waste any time. Four months later...

Sylvia Ho 05:12

Yeah, you did not waste any time. Like, between the time we chatted to the time you close, you said it was four months.

Armel 05:19

Four months. Actually, yeah. Actually less, because we started talking after the birth of our child. And he's four now, so it's maybe three months.

Sylvia Ho 05:31

Okay. Okay. And how did you know - like, you said something very interesting here. And then you were doing a bunch of research, you know, you were obsessed about it, you really focused on it, right? And you really looked at that goal. How did you know you ready?

Armel 05:45

Cash flow. The amount of debt I was carrying, or at least our family was carrying, we review it every time. We reviewed the home, the financial assets that we would have had, the equity we had in the home. We looked at where we wanted to be 30 years from now. And we said okay, we have to start here. And so the decision to do it - we had a conversation for a while - but the actual metrics, the actual math, figuring out okay, so if we do it, what are we doing it for? Are we going after cash flow? Are you just going to speculate and just jump into real estate hoping it's going to shoot up the way it's been shooting up for two years? What is the value proposition? How much are you willing to buy? If you buy now, how much are you willing to spend? If you spend that much will you be able to buy again? So there's a lot of math that went behind it. And then also the market. Where do we see value? Do we see value in the GTA, where in the GTA do you see value? Where else can you see value? You know, those sorts of things, we sat down and literally we spoke about it every day at dinner. And, you know, the key thing with us is just we have to act. From there, you iron out the details. You can think and analyze all you want. Unless you act, it's difficult to narrow your spectrum of things you have to think about.

Sylvia Ho 07:09

It sounds like you guys are very analytical and very knowledgeable, and you guys do your research, right? I'm a huge believer in Tony Robbins. And I love what he says. He goes, knowledge is potential power. Action is power.

Armel 07:23

I agree. I couldn't agree more.

Sylvia Ho 07:26

So you said that you and Florian asked yourselves, like, what are you doing this for? So why are you doing this? What is your big why?

Armel 07:36

The big why, for us, is really fundamental. We have values, Flor and I have written values. Values that we both consider when making decisions that relate to our family, and what we're going to do to propel our family. So one of the first things that we always think about is how do we propel our family forward in the future? How do we do it? How do we put our children in a position to have a stake in society? To believe that they can also propel themselves? How do we do it? How do we systematically do it? So for us, propulsion of the family, be it financially, be it intellectually, that is a value for us. We do a lot of things, especially the things that affect our family, we look and, you know, we kind of look back to that value and say, okay, is this something that we're doing, you know, in relative to this value. So that's really where it comes from.

Sylvia Ho 08:43

Okay, so if we were to summarize, you're basically like, these are our values, and we value family. Right? And we're doing this for our family. And we're doing this for our kids. Our kid and our future kids.

Armel 08:59

Correct. Yep.

Sylvia Ho 09:01

So, you live up in Newmarket. And most people try to stay within their realm. Where did you end up buying?

Armel 09:11

Bought in Ottawa.

Sylvia Ho 09:13

You bought in Ottawa! So how did you go from... Llke, do you know Ottawa? At all? You just do research into, like, that area? Or, how did you decide on Ottawa?

Armel 09:23

So, there were two factors. On the one hand, my wife's family and my wife's from Ottawa. She grew up there, she went to school there, she worked there. And she's very familiar with it. And also my extended family, with the exception of my immediate family, most of them are in Ottawa. So it's a place that I've gone every Christmas as long as I can remember because that's where we spend our time in the holidays. On the other hand, I saw value in Ottawa. I saw a city that is professional. I saw a city that's underdeveloped, that is developing. I saw a city that has space to grow outward, which to me meant that it's much easier to grow outward, at least in the way we do things in North America, than it is to go up. You don't really go up unless you've exhausted out. So, to me, that meant that the land is going to continue to disappear, or shrink, which meant that the value of land will go up in time. So again, I grew up in Toronto, I saw this happen, I saw the core in the city just disappear. All the parking lots, all the little things just disappear. And you could just see these things, you know, I saw Brampton do this. You saw the suburbs do these sort of things where, you know, land disappears or shrunk very quickly, and the values of land then suddenly jump up. And, you know, for Canada, we are basically a bunch.. we're five cities for the whole of Canada. So I started seeing the value in, you know, what I would call secondary cities or growth cities. That's the other aspect.

Sylvia Ho 11:10

Okay, you live in Newmarket. Your investment property's in Barrie, you have a lot of family in Barrie. How are you planning on managing this property?

Armel 11:18

I do have a network, just like I said, inside Ottawa. I do have the network of people, some of whom are in the trades. So in terms of, I've already gotten connected with, say, a handyman, somebody who's willing to go in every time to troubleshoot. I don't mind the drive once in a while. I've done it many times. So the first portion of managing it, especially now with a much tighter cash flow, and, you know, I don't think I can hire out of that cash flow, hire somebody to do it for me. And I want to learn all the ins and outs of doing it myself. So the management, the correspondence, is primarily my wife and I with the tenants. And we rely on the network there to get things done in terms of jobs. There are ways now you can provide access to the property without being there. Could it be smart keys, could it be all these things, there are lots of ways now to manage that kind of thing. And then we're going to install things like cameras outside for a) security, b) to kind of keep track if, you know, if you hire somebody to move snow, you want to make sure that they did that. So there are, you know, little tools that you can use right away to kind of manage the property at a distance. But there's also an element of being there visiting, which I don't mind going. Make the drive in the morning, do what I have to do, get back in time to feed my boy.

Sylvia Ho 12:52

That's beautiful. You could also do it as a family trip, as well, right? Because you have family out there, right? It would be nice to go out and see family at the same time.

Armel 13:01

Yeah and we are actually going anyway, you know, we were going there a lot more without any investment, without a stake in the city. We were going there at least once, at least twice a quarter. Yeah. So we were already going there for family visits. So now, we just go a little bit earlier.

Sylvia Ho 13:21

Beautiful. So you guys are very analytical individuals. What do you guys do?

Armel 13:27

So I work as a metal trader for a recycling company. And my wife works for Health Canada, in the medical devices bureau.

Sylvia Ho 13:36

Okay, okay. So why did you decide to work with myself? Like, I know you got me through a referral. But did you try anybody else to try to do this on your own? Like, to do this, buy a rental property?

Armel 13:49

I guess I'd call it occupational hazard. I wouldn't, you know, every time I engage, especially in a relationship that's managing a potentially large deal, reference is key for me. Because, for me, that's a way of filtering a lot of noise that I would otherwise encounter having called by myself. So that's critical. But, you know, with that said, I messaged a few people who are also brokers, traditional mortgage brokers, and I had already gone through the route of going to the bank myself with our primary residence. So, you know, that wasn't so interesting for an investment property for me, because the primary residence has a lot of, like, the acquisition of it is a lot more emotional than an investment property. Investment property, for the most part, is math.

Sylvia Ho 14:41

So you're saying primary residence is an emotional process versus buying an investment property is more financial, like math numbers.

Armel 14:49

Yeah. It's much more clinical, it's much more math. So you want to engage somebody who understands that. Where if you go into a traditional bank, it's simple. First of all, the trip there with your wife is awesome, you know, your profile is there for them to see, it's a cool experience. I found that experience to be okay for your primary residence. But if you're going to go and invest, you know, you want to get somebody who understands that, like, the interest rate that you're going for is this and this, and why you're going for it, and where's the best place for it? Somebody who has the reach, who has the, you know, the visibility in the market to understand the product that you're looking for. Sometimes it's hard to articulate to somebody who's there, who doesn't want you to go anywhere else, who only has one or two options for you, you know, at the branch level.

Sylvia Ho 15:42

Basically you're saying by working with someone like myself, a mortgage agent, that understands the mentality of an investor, I'm able to help you out better than you just trying to figure it out on your own at the branch level?

Armel 15:57

Exactly. I'm able to communicate something to you, you understand what I'm trying to say when I use certain language. You know, that's why we worked well together. And that's why I went so fast. You understood what I was trying to say, even if I didn't articulate it the way you'd expect.

Sylvia Ho 16:12

So if you were to tell your younger self an advice, or two advices or three, what would you tell your younger self?

Armel 16:22

I would say, start sooner. But I did start young, and then fail sooner. But maybe I'd say start sooner, fail more.

Sylvia Ho 16:34

Interesting.

Armel 16:35

Yeah. I think, for the most part, real estate, I understood it when I was younger, I loved business. It's just, you know, some people get fixated on a piece of pie. Like as soon as you start talking about business, this is where my passion is. So I love that. So in my head, I always wanted to do business, and from those proceeds, you move into real estate. But not until I started actually doing business. And I realized that they are two different things, you can do them separately. And had I been asked first, in terms of real estate and real estate investment when I was younger, I would have jumped in much sooner. Especially, like I missed the boat for Toronto.

Sylvia Ho 17:18

Missed the boat for Toronto, you know, I hear that a lot. I hear that a lot. Missed the boat for Toronto, people repeat that over and over again. And what I always tell people, I go, you feel that you've missed the boat, but in 10 years time, are you gonna say the same thing to yourself?

Armel 17:34

No, I hope not. I missed the boat. Just, like, I wasn't there in time. That's just how life works. There's another boat. There's always another boat. That's just the nature of it. But it was a lesson, you have to pay attention to what you missed, how you missed it. And that whole experience teaches you to look out for the next boat. What does it look like?

Sylvia Ho 18:01

Basically, you're saying that, you know, though you may feel that you've missed the opportunity here in Toronto - in my opinion, I don't think you did, right? Because I still believe in Toronto, I still believe that the values in Toronto will continue to increase over time. But you personally feel that you missed the boat, but you're like, that's okay, I'm just gonna go find another boat to go into. Right? I'm gonna go into a secondary market, like what you said.

Armel 18:25

Go into a secondary market, and that may allow you to jump back into the market. Absolutely.

Sylvia Ho 18:32

Okay, I think that's it. Is there anything else that you wanted to add to tell the audience, like, to get into the Jump Program? Because you've given this a lot of thought for many, many, many years, right? And your wife is on board with you. So are there any last minute advice that you would give the audience about buying an investment property?

Armel 18:54

The things that worked for me: being on the same page as your partner, that's critical, because there's a lot of big financial moves and decisions that you are making. If you guys are not seeing it the same way, two, three years down the line it might add stress to your partnership. The other thing that I may add is, just do it. Just think about it, measure, visualize, think about it, measure it, make a decision that you thought through, that you're comfortable with it. Just do it. Just act.

Sylvia Ho 19:24

Just act.

Armel 19:25

Yeah, just act, action it. And you'll see the benefits once you're on the other side. It's challenging, but I think that is where the value is, it must be challenging. It must be a learning opportunity for it to be fruitful, for you to take care of it.

Sylvia Ho 19:39

So let me challenge you on this because a lot of people - like, I tell people to act, I tell people to do it. Right? But then people are scared.

Sylvia Ho 19:46

Okay, so this is interesting. So what you're saying is that - it's again, going back to that good debt, bad debt thing, right? And it's a mindset of how you look at debt.

Armel 19:46

It's scary. It's scary. It's big debt. They call this big, big debt. You get the sense, even if it's big, you know, it's big debt. And it's the bank that really owns - you own your property, but what happens, the inability for you to foresee what would happen in the future? What happens if I lose my job? What happens if, you know, if suddenly somebody needs this financial, I don't know, capacity to help? You know, what happens then? And, you know, what do I do, I don't want to go through that ordeal. And that fear is justified. It is, it is a scary thing to do. But what works for me is just have the confidence that, you know, whatever challenge comes ahead, you can meet. You can meet and you have support. There are ways. Call Sylvia. You have support, think about ways to make it work. That fear factor, it's a lot of money to tie up, but until you look at tying up money the right way as a good thing, the whole thing is scary to you.

Armel 20:59

Correct. I think the fear comes from that. And the more people learn about debt - I was fearful of debt. When you don't understand money, or you don't learn about money, and debt, and the tools around derivatives, all the things that have to do with money, it's scary. But the more you learn about it, the more you understand. It's like anything, it's like learning how to ride a bike. Because the more you ride it, the better you understand how momentum works. So I think that for the people who might be afraid of debt, and big debt, learn about it. There's a lot of resources available online. There's a lot of resources. I'm a reader, I read tons. So that's where I learned. Through business and I learned through my everyday job, the things I'm doing to invest. I also learned technically by reading and I think the more you learn, the less fearful something becomes.

Sylvia Ho 21:03

You're a big reader, what book would you recommend if someone wanted to learn?

Armel 21:36

Any Kiyosaki.

Armel 21:37

Any of his series. Read them, they're good palatable reads. You can consume them in, I don't know, five sittings. Yeah, so they're easy to read for somebody who wants to conceptualize debt, and have a different perspective on it. And then from that, he refers to a lot of technical books.

Sylvia Ho 21:37

Kiyosaki?

Sylvia Ho 22:29

Last thing before I let you go here. There is the concept of old school thinking and new school thinking about debt. And old school thinking is how I grew up, which is you don't do well in school, Sylvia, go to university, get a degree, get a good paying job, buy a house, save, save, save, pay off your mortgage, and then retire. Right? And that's what I grew up with. And that's what a lot of individuals our age grew up in, right? While you're younger than me, but, our generation, you know, grew up with is just get rid of debt, get rid of debt. But now you're saying no, look at debt as an opportunity instead.

Armel 23:10

Yeah, correct. Again, you are right. Grew up thinking that you don't want debt, you really don't want debt. You want a good job, you want a good company. You want to sit there and maybe go through the company, you know, upward mobility that way. You know, stay until retirement, until cash became worthless. Until you having savings accounts became, to me, you know, became a bit - I don't say, I don't want to say useless - but it works against you. Well, if you have savings, and you're sitting on savings, and maybe you get 4%, back, but your inflation is 7%... it's working against you. So your cash does much less than it used to when you started earning it, by the time you access it.

Sylvia Ho 24:03

Got it. So you're basically saying, you know, make the cash work harder, smarter, and better.

Armel 24:09

And better. In the future, at least looking forward, debt is a much more effective tool today than cash. But I think both work together. But, I think, you know, in a world where the response to anything is pop more money, there's lots of money available. So there's lots of cash. So that's a tool that's in the marketplace. It's gonna do something.

Sylvia Ho 24:33

Beautiful. Thank you so much, Armel, this has been absolutely amazing. Thanks for sharing your insight and congratulations on your first purchase. What's your next plan? Are you planning to buy another one?

Armel 24:44

Yes, hopefully. Now I gotta figure out how to do it. I gotta cost the next one. But that's the next plan. You know, where else can we, you know, can we rinse and repeat?

Sylvia Ho 24:58

Thank you so much, Armel. This has been absolutely wonderful, lots of good nuggets of great information and advice. Again, congratulations on your purchase.

Sylvia Ho 25:07

Hey, everyone we just heard from Armel and his advice to those who are thinking about the Jump Program is just do it. He says visualize it, visualize that you have another property, and just do it. You guys are interested in the Jump Program, connect with me at SylviaHo.ca. You could also go to my YouTube channel. There's a lot of Jump videos there. Watch my 45 minute webinar JustOneMoreProperty.ca to learn more about how this whole program works.

Sylvia Ho 25:36

Hey friends, thanks so much for listening to the Sylvia Ho Mortgage Podcast. We'll catch you on the next episode. You want to learn more about the Jump Program, please connect with me at SylviaHo.ca. I love to hear from you, all it takes 15 minutes for us to chat to see if this will work for you. Thanks, guys.

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