July 26, 2022

Have you ever felt financially desperate or hopeless, or both?

Don’t get me wrong. I did not come from most people’s class definition of a poor family. In fact, at one point in my life (between the age of 5–11), I had great creature comforts and then some. Dad’s government job was stable and Mom’s manufacturing business was growing. If you’re looking for a rags to riches story, I probably don’t fit that box. However, I do describe my upbringing as hopelessly middle class (if not lower middle-class).

There is absolutely no disrespect to my parents. I know they did their best given the upbringing they had. However, I also know that I wanted to break that mold. I had to — if I wanted something different. Something more. After all, my Mom’s the one that always said: the next generation should do better.

Many have asked me how I learned everything I’ve learned over the years, I usually paint them this picture:

• Just moved from Vancouver to Edmonton in 2009 as a bright-eyed 27 year-old wanting to climb that corporate ladder. I was willing to suffer through being lonely again leaving my close friends in search for a better future. After all, what’s hard work and sacrifice? Aren’t those the bare minimum requirement for success?
• After some consistent 80-hour weeks for months at my job, I was further beat down by opening my “investment statements” — mentally and emotionally — on a weekly basis.
• Feeling smart, I asked a co-worker (who is my mother’s age) how she manages her money as she looks to be doing pretty well — a beautiful house, amazing (not to mention constant) vacations and multiple luxury cars — all the while forgetting that she’s twice my age and has had way more time to accumulate her wealth. Regardless, I was connected to her ‘guy’. This was the guy that represented the developer that later on took every last penny of my hard earned money away from me — among many others. (Side note: this is why one of my favourite quotes is “Don’t compare your chapter 1 to someone else’s chapter 30.”)
• Feeling deflated, stressed, cheated and angry, I went to this meeting at a law firm with people in their 50’s, 60’s, 70’s…and maybe even 80’s. The scene I witnessed still shocks me to my very core every time I picture it. Imagine seeing people who are your parents’ and grandparents’ age — in a public space and they are just yelling, howling, crying and screaming. Nobody was able to get a full sentence out other than the lawyer representing us. The collective us that had our money ‘stolen’ in broad daylight. The collective us that thought: real estate is much safer than stocks and mutual funds. Since most of us already took giant losses and nobody knew if they would see their retirement funds bounce back, we all thought we were being smart cutting our losses and redirecting our money into real estate.
• Now imagine this: your parents and grandparents saying things like: “How am I going to live?” “How am I going to pay rent and put food on the table?” “I’m too old to go back to work.” “That was my entire life’s work.” Are you feeling what I’m feeling now?

Instead of feeling hopeful like I was potentially going to get my money back, I walked away from it feeling shook and completely numbed.

The reality slowly woke me as I auto-piloted myself home after that brief and emotionally disturbing meeting. Here I am —

• Been in the workforce for 3 years,
• Making a 6-figure income year after year,
• Living in a nice house,
• Driving a Mercedes,
• Having a rental condo back in Vancouver.

All the labels that should’ve been considered as success markers meant nothing. Because, the truth was this —

• I was having “Ramen Mondays” and “Deep Fried Fridays” to save money on food. When I first moved into this beautiful new home that’s 3 times the size of my Vancouver condo, I did not know all the surprise expenses that would pretty much incur immediately. Here’s a picture of our living room, dining room, media room, office space and storage:

Those are towel-covered moving boxes.

• I was using Future Shop (if you remember them) flyers and any flyers I could get as window coverings. Forget about buying new furniture or anything else other than the bare essentials.
• I was feeding into my Vancouver condo. This, I later learned is also called “paying my tenant to live in my property”. It was further draining my income.
• I was worth more dead than alive. With a lousy life insurance policy that came with my work benefits plan (always had a hard time finding life insurance for me due to my health conditions) and the recent ‘loss of money’, I was in negative net worth. In other words: I. WAS. BROKE.

That made me doubt everything I believed in — is working hard alone enough? Is having a high income job enough? Is having a corporate ladder to climb enough?

That made me question my choice to move away from my friends — my support network. Was the sacrifice worth it?

And, something happened.

Weeks later, on my drive to work one day, I heard about a financial education seminar. I perked up. Turning the volume a bit louder, I heard that it was about real estate investing. I was hooked.

That was January 2010.

As of today, I’ve been broke twice, literally. And those experiences are the fuel for these articles.

Of course, there are more layers as to why I continue to build cashflow and wealth through real estate (and yes, there are days that I get tired of the idea of the process of buying another property). However, it’s now time to share some lessons first. Lessons from both times when I was ‘broke’.

For starters, recognizing that our behaviour during a personal financial recession is usually the same behaviour we exhibit during an external financial recession.

Lessons from the 1st Negative Net Worth

1. Learn how to identify deals and calculate risks myself. You don’t know what you don’t know.
2. Find ways to make money when I sleep. You don’t know what you don’t know.
3. Create multiple income streams.
4. My financial well being is 100% my own responsibility and no on else’s.
5. Live largely yet frugally. Buy assets first and leverage assets to fund my liabilities.

Lessons from the 2nd Negative Net Worth

1. Get to Financial Freedom #2 (refer to previous article) first before taking on more risk.
2. As long as I stay above Financial Freedom #2, I’m ok to refi (after the BRRRR process) and let a few of properties in my portfolio go into negative cashflow with the plan to scale up. IMPORTANT concept here: despite what most people might think, not every Starbucks, Safeway or Exxon is profitable. However, as an overall corporation, they are.
3. Leverage the funds to acquire new performing assets, or feed into portfolio income (aka park it), or simply keep as contingency funds depending on the larger economic conditions.

The lessons got bigger.

Surprisingly, I also find these lessons very applicable and relevant to what most investors are going through these days — new and seasoned.

I have been speaking with many “investors” over the last couple of months who are looking for guidance and support. If there’s anything I can do to help, feel free to request for a call with me. I know that my team is also happy to support in any way they can as well.

Tomy dedicated readers, I thank you for your support and feedback. If this is the first time you’re reading one of my publications, I hope you’ve enjoyed it and learned a thing or two.

If you’re wanting to be a part of a community of real estate investors from around the globe, here is the T.A.L.E.N.T.ed Investors Facebook Group. It’s a place where people come together to share experiences, knowledge, successes and challenges, and money making opportunities!

For those of you who prefer watching videos, here is the YouTube channel where some of my work (very raw) has been shared.

If you prefer the live interaction and delivery to help you build some foundation, our next live in-person real estate investing Bootcamp is on September 24 and 25 in Toronto. Go ahead and speak to a Strategy Coach on how you can attend.

Lastly, I just want to say thank you for your continuing support.

I aim to be authentic and adding value to your life.

I invest to build a life. I build business to create better life experiences.

It’s ultimately about LIFE and I appreciate you coming on this journey with me!

(Written at home in Edmonton, AB)

August 16, 2022

Some of you have asked from Part 1 of this series: what is a good deal?

That is truly the essence of every investment opportunity. If you’re also asking this question — Congratulations, you are on the right track!

I seldom speak in absolutes these days and that has been the result of my conscious effort to avoid that kind of trap and thinking. After all, all the ‘good investments’ that I was brought up on failed me (if you’ve been following the articles, you know what I mean). Some of them failed me BIG TIME, including real estate — before I was financially educated to leverage real estate to create income and wealth.

Through years of getting coaching and mentoring, I’ve adapted the idea that the world mostly works on spectrums. And this has helped strengthen my mindset tremendously as an investor and a business owner. There’s a Chinese proverb that loosely translates into: “If nobody was selfish, the world would end.” I remember thinking: Wow, this is such a horrible saying! As I grew up and life experiences built up, I simply realized that it’s actual a beautiful and insightful piece of timeless wisdom.

You see, like almost everything else in life, what’s a good situation might be a bad one for others. Vice versa. This is why, speaking more generally, seller financing is not always a good thing for active investors when the conditions aren’t just a fit for the deal. I have seen many over the years that would put through a seller financing deal just to say that they have done one and it ended up dragging them through court because the buyer didn’t know any better.

In short, seller financing becomes available when the necessary criteria align for both the seller and the buyer.

Inthis article, I will go into the first way of the most basic form of VTB. And that is VTB as a tradition/typical mortgage.

This is likely the most common way and really, the easiest way, to facilitate a bona fide VTB.

Since it’s a mortgage, this means that all typical criteria would apply: rates, length, payment frequency, etc. What’s more important to note (in my opinion — or IMO as the kids would text these days) is the position and the total LTV (loan to value) the VTB would be on the secured collateral.

Here’s a very simple yet important concept to be clear on — Seller financing is part of a bigger umbrella term of private lending. I’m sure some of you have already sniffed that out when I mentioned in the first article to offer VTB (as much as you can) when you sell your properties.

Many people are finding private lending deals these days to ‘park’ their money because they can generate double digit returns. These are also the same people who can get hurt without knowing how to analyze the deals their money is ‘secured’ on. Funny enough, these are also the ones who have been buying properties for the sake of buying them. Let’s unpack that a little bit more here, shall we?

From the Wheel of Wealth articles, we’ve learned that equity is like the piggy bank that we cannot open (often times especially with rental properties). Through offering VTB, you can automatically open that piggy bank and, often time, turn a non-performing asset into a performing one.

This example I’m sharing with you is hot off the press and a US-based deal.

After selling a few properties in May, the proceeds went into a 1031 Exchange as I had my eyes on a specific purchase (another story for later!).

Side bar: IRS Section 1031 — What is it? Section 1031 of the IRS tax code provides that taxable gain or loss shall not be recognized when property held for productive use in a trade or business or for any investment is exchanged solely to “like-kind” property. The term, “like-kind”, refers to the similarity in the nature or character of properties being exchanges, as opposed to the grade or quality of such properties.

I found a distressed seller who wanted to get out of her ‘leftover’ portfolio in the US. She was very motivated to sell and, as a result, open to 100% seller financing. Now, given that I had some funds in the 1031 Exchange to use, 100% VTB was not necessary in this case. However, whatever the balance of the total purchase price became VTB. Here’s the overview of how it came about:

• It’s a small portfolio of 11 single family properties with a total of 15 rentable units.
• The 15 units are split between 2 cities/states— in one city, all units are performing well and not so good in the other.
• The motivation for the seller to sell is that she did not want to stress over the non-performing units anymore.
• I negotiated for all 11 properties to be one package deal as they would be performing overall and giving me the time to stabilize the performance of the non-performing properties.
• The seller agreed to an 8% interest-only VTB on the outstanding balance — this is very comparable to most lending options through institutional lenders in the current lending climate for purchasing properties in corporations or LLCs in the US.
• The VTB saved both of us a lot of time because I did not have to go through the traditional qualification process (which can easily take 2–5 months right now after speaking to various mortgage brokers and lenders) for 11 properties in 2 states.
• The seller also agreed to the repayment starting 3 months after the closing of escrow to give me some runway to start to deal with the problem properties and tenants.
• We agreed to a 2-year closed VTB and can pay out the remaining balance anytime after that.
• The seller is now headache free, got a lump sum chunk of cash and will be cashflowing from her VTB. Meanwhile, I’ll be cashflowing and the cashflow can only improve.
• Best part about this: the seller did not lose money with the purchase price as agreed on and I still have money in the buy — VTB is funny like that when you structure it well!
• I also offered to pay for all closing costs as a gesture that helped with the negotiation process and shortened the closing timeline. This often times is a great tool to use as long as it still makes business sense.

Asyou have concluded for yourself, this was a process of alignment between the seller and myself.

And before some of you go and say “you’re lucky”, I want to let you know that I spent countless hours, spoke to 30+ people (between real estate agents, wholesalers, lenders and property managers) in 8 different markets before finding this opportunity. It also didn’t become a deal automatically just because the seller is willing to offer 100% VTB. All the necessary due diligence went into making sure it’s a viable deal.

For the conveyancing process and the mortgage documents, I simply commissioned a lawyer to create them. In certain cases and places, it’s perfectly acceptable for your trusted mortgage broker to help creating the mortgage documents or at least provide a template as your baseline. Upon closing, titles will be transferred and the VTB will be registered against hard asset. Her money is protected and I do not intend to default. Why? In this case, my 1031 Exchange — aka the downpayment — accounts for 55% of the total purchase price.

We have solved each other’s problems — she wanted to sell and I needed to buy (due to the 1031 Exchange requirements)! It’s a win-win. And that is the true essence of VTB.

Some quick tips for you to prepare your VTB offer:

• Build a financing track record to show your investing experience and existing portfolio.
• Include a snapshot of your financial statement — both corporation and personal.
• Demonstrate that you have some sort of expertise and knowledge in the strategy, market and or property type that you’re asking for VTB on.
• Be clear about your initial ask on your VTB terms and the reasons why.
• Remember that it’s often cash or terms — VTB tends to fall under terms and that means you likely will not get the cheapest rates but it will buy you the time you need to get your affairs together to buy out the VTB at a later date.
• If you do not have the experience or track record yet, showcase your financial/investing education (most people overlook this) and leverage your real estate investing mentor to help you in the alignment process.

More stories and examples to come with this series. Not to mention other ways of seller financing!

Tomy dedicated readers, I thank you for your support and feedback. If this is the first time you’re reading one of my publications, I hope you’ve enjoyed it and learned a thing or two.

If you’re wanting to be a part of a community of real estate investors from around the globe, here is the T.A.L.E.N.T.ed Investors Facebook Group. It’s a place where people come together to share experiences, knowledge, successes and challenges, and money making opportunities!

For those of you who prefer watching videos, here is the YouTube channel where some of my work (very raw) has been shared.

If you prefer the live interaction and delivery to help you build some foundation, our next live in-person real estate investing Bootcamp is on September 24 and 25 in Toronto. Go ahead and speak to a Strategy Coach on how you can attend.

Lastly, I just want to say thank you for your continuing support. I aim to be authentic and adding value to your life.

It’s ultimately about LIFE and I appreciate you coming on this journey with me!

(Written at home in Edmonton, AB)