If you’ve ever wondered about the real estate market and whether or not it’s for you, our next guest will definitely convince you. They are Jessi Johnson and Kyle Green, authors of Rockstar Real Estate Investing. They’re talking to us today about how to make serious income from the real estate market and how it’s safer and easier than you think.
They know the secrets to investing in and profiting from real estate, and they’re going to share some about with us today.
Jessi Johnson: For me it was pretty simple…I just wanted a better way of making more money by working less. The concept of flipping and investing also allows you to use your creative juices. Then I’ve known of Kyle for quite some time, and he’s known as being an investment guru. We were at a networking event at down, had a couple of drinks, realized there was some synergy there to come up with something pretty cool. There’s my side.
Kyle Green: Yeah, Jessi brought up the idea of publishing a book together, and I thought it was a really cool idea. I think that there’s not a lot of easy to read books out there about real estate investing and we thought that we could deliver that.
A lot of our clients are looking for more information, more education all the time. Both of us are really big into the education part of things. We thought it would be a good idea, and next thing you know, I don’t know if it was the drinks or what, but next thing we know we’re jumping head first into it.
Not Your Average Real Estate Book
Rae Williams: I feel like when people think real estate investing, we think of an older guy in a suit trying to sell us things. What is the basis of this book?
Jessi Johnson: Man, there’s so many, that’s a tough one to respond. For me, one main reason why I really wanted to push this out myself was I didn’t grow up with family cash. I didn’t have any inheritance, you know. I’m not a genius, but I am creative. I guess for me, the issue was no capital.
I was able to conceptualize a number of ways that allowed me to come up with capital that I would not have had before, and I just kind of wanted to share that with the world.
Kyle Green: Yeah, I agree. I think that the number one thing we want to instill in the beginning of the book is really mindset and making sure that people understand that you don’t have to get into this with cash to be able to invest in real estate.
The first thing we want to switch and get people to understand is changing their mindset, understanding that anybody can do it. We’ve seen so many of our own clients be able to do this with very little to no money.
Change that mindset first.
Then second is delivering the different avenues to investing. Somebody jumping in can understand what type of person are they going to be, or are they going to be a buy and hold person? Are they going to be a flipper? Are they going to be commercial real estate?
Just delivering the different options, once they’ve warmed themselves up to the idea that they can do it, then the how and the what.
Jessi Johnson: Once you change the mindset to realize that this is really not that scary—a lot of people are just terrified of if I have to borrow $50 grand from the equity of my own home, how am I going to pay it back?
It’s not like that. It’s really not that intimidating once you get the right mindset. I mean, read the book, you get the education. Realize it’s not that difficult. Especially after you’ve had a little bit of success, there’s no concerns moving forward.
Real Estate Works
Rae Williams: Why real estate?
Kyle Green: It’s a very safe investment. Stocks are very volatile, people are becoming more disenchanted by stocks because of their volatility and to think people are looking at hard assets as a solution.
Real estate is a great investment opportunity.
The most important key that we really try to drill in to the book is going to the power of leverage. Understanding how leverage works and how you can use but not abuse leverage is a really important key. Especially for our younger readers.
They don’t have $500,000 available in their home equity or sitting around in other investments to use to just buy properties outright or use to invest.
The leverage aspect to really is where the return on investment can outpace a lot of other investments. That’s probably one of the most important keys that I would say that we try to make sure we educate on the very beginning of the book.
Jessi Johnson: The majority of millionaires as well have made their initial wealth from real estate. And there’s a reason that all of these geniuses, or even not geniuses, that are well off are in real estate. It works.
It doesn’t always work, but the more educated you are, the greater your chances of being successful and the more people with the right mindset that you surround yourself with that have similar goals and intentions, the better your success rate will be.
What Gets You Started
Rae Williams: What is the one thing that you can say to readers and our listeners to take action on this week that’s going to get them that head start?
Jessi Johnson: I guess for me, the action item, I’m assuming Kyle would agree is to get yourself pre-approved with a broker, ideally. Because they have more options than your bank, in most circumstances, who specializes in investment properties and in clients that are into investing.
That’s a good starting point.
That way, you at least know where you stand yourself. Kyle, if you want to add to that?
Kyle Green: I think it’s important to understand where you’re at now and where you want to be in five or 10 years. And the financing really is that bridge that connects the two.
Understanding where you’re at right now, do you have equity in your home you can access, how much can you qualify for, to start making acquisitions? And a good broker will actually work with you on that game plan.
A lot of the time, our job as a broker is to close doors.
You start to educate yourself, you read our book, there’s five different ways I can invest in real estate, but the reality of the situation is that to some of those you might not be able to qualify for, might not fit your financial plan.
Narrowing your focus a little bit more will help give you clarity and will allow you to not spin your wheels looking at every single deal that hits your desk.
You develop a niche and really work that niche, you’ll find that you’ll be a lot more successful. The other thing I want to add too is looking at educating yourself further. There are a lot of investment groups in many major urban centers across Canada and the US.
Look into what availabilities around you, start to educate yourself more, you’ll feel a lot more comfortable jumping in and taking action.
Jessi Johnson: That’s a great point. In addition to that, another thing you’re going to find when you go to these types of events are other likeminded individuals and it will allow you to substantially increase your network with the right people.
Kyle Green: Absolutely—you’ll tell your friends and family, “Yeah, I’m going to invest in real estate,” and half of them are going to tell you you’re crazy. You want to surround yourself with people that understand what you’re saying, right? Say, no, you know what? That’s a good idea, I like that strategy and you need to find people that will positively reinforce what we believe is one of the best ways of investing.
Rockstar Real Estate Investing
Rae Williams: Do you guys have any stories of people having success in using your methods and being able to be real estate rockstars?
Kyle Green: You know, it was a client that I worked with very early in my career and nowadays, I look at how difficult this client would be to finance with the way the world’s changed, right? But it’s incredible. This client owns in the teens, a number of houses in the suburb of Vancouver and she only makes about $50 or $60,000 a year, but she would buy one house, do some renovations to it, increase the rents, refinance it, buy another house. She kept doing that and doing that and on a very modest income.
Next thing you know, she’s got 12 or 13 rental properties, they’re worth well over four, five million dollars. It’s just incredible to see that, and she’s not the only person that will be able to help do that.
I always think of that example because it really paints a good picture because a lot of clients of ours are making $50 or $60 grand a year and they think, “I can’t do anything.” But the reality is you can.
This person just took action.
Year after year, she’d call back, wanting to do one more deal, and she just pushed the envelope, she never took no. I really point to that example as one especially because it’s so early in my career and it really opened my eyes to being able to emulate her formula with her other clients trying to get started.
Jessi Johnson: Yeah, it’s a good template. For me I’ve had a few clients, more than a few that have paid attention to me sharing what I’ve been up to, whether it be on social media or videos on YouTube or newsletters. I just talked about projects, flips and what not where I’ve had successes, but more importantly, it was the fact that I did it without a large sum of money.
It was a few great conversations with a few people where I simply just stated hey, I started with a very small project or small amount of money and paid it back in full. Then I was able to do that again and again.
You especially earn trust if the project goes sideways, which does happen once in a while, but you pay back an investor, perhaps a little bit late but you pay them back in full with interest. I’ve shared a few of these stories and a few people have gone out and emulated that with great success.
Now I can say based on doing that, I could pull almost anything that I needed within 24 to 48 hours by earning this trust. I’ve had a number of clients that literally have followed that formula which we do of course articulate in the book, and they have a lot of properties now. They’re doing flips on a regular basis and it’s really cool to see.
What’s a Flip?
Rae Williams: Just in case people don’t know, define what you mean when you say flip?
Jessi Johnson: Well, you’re purchasing with the intent to not necessarily to live there. Some people will buy with the intent to live, change their mind because they realize there’s a fair amount of equity growth through various reasons, sweat equity or simply the market going up and in that circumstance they will sell within a short period of time for a gain.
A lot of people will come in with the intention of putting their 20% down, putting X amount into renovations and selling it as soon as possible, that’s probably the most common flip.
However, at the same time, you can buy a property, close on it, and in a hot market, a couple of months later, realize, wow, it’s gone up $50 grand and you haven’t even touched it and then you can sell that. That’s still technically flipping.
Kyle Green: Yeah, flipping is really Jessi’s domain, but a flip is just when you’re buying a property with the intention of selling it, not holding it.
The whole idea there is, if you can, the best case scenario is a property where you’re buying in a market that’s increasing. On top of that, something where you can put, let’s say $40,000 into it but you’re creating a lift in the value. Maybe the value goes up by $60 grand if you put $40 grand into it.
Now, on a flip, you probably wouldn’t be making a lot of money if you put $40 grand into it and paid and got $60 grand back in value just because of the entry and exit cost. But essentially, what you’re trying to do is you’re trying to find properties where you can put in a small amount of money and get a large gain on it.
Rae Williams: What do you think is the biggest fear that you guys encounter?
Kyle Green: Probably the fact that you can’t make money if you don’t have money, and that’s not true. That is where we have a lot of discussion about joint ventures and how joint ventures work in our book because it is a way of connecting people that are what we would call working partners, people that are boots on the ground that are looking and finding deals and then connecting those people to people that have money.
There are a lot of people out there that have a lot of money, but they also don’t have a lot of time.
Professionals like doctors, dentists, etc. They make good income and they are always looking at ways of best investing those funds.
Somebody that is willing to do all of the work and provide them with a return, but they don’t have any of the work and they still outpace their stock investments or any other investments they would otherwise would have chosen, is a great fit.
So, we really try to open up people’s eyes to the fact that it is okay to ask for money. If you have a really good deal, the money will come.
Jessi Johnson: The only thing I can add to that is learning how to be able to present a good deal to somebody goes a long way. We do reference that a bit in the book, and it just adds to what Kyle was discussing, that you are able to do things you would never be able to do all on your own if you are totally creative with how you do it and how you present yourself.
Hard to Believe
Rae Williams: There’s one chapter I am just like “no way.” The One Dollar Condo.
Jessi Johnson: Yeah, you know I think this is my first actual flip. It was a pretty good start. Initially, technically this wasn’t a flip because I did actually hold it for longer than I expected and I’ll explain why.
So, I purchased outside of Vancouver. I purchased about an hour and a half out in a smaller city. We were able to purchase properties as a substantially lower price. So, I bought a property, and it was in a market that was going up, not crazy up, but still up.
But in a very conservative renovation and then just out of curiosity did an appraisal to assess the value and realized that the value was substantially over the purchase price, the renovations, the closing cost, everything. I realized that I was actually able to refinance this property to the number higher than I put into it.
If I remember correctly, I think I actually paid myself about three or four grand to buy a condo, but I figured no one is going to believe that.
So, we called it The One Dollar Condo. I emulated that a number of times and actually did, instead of flipping, held onto these properties for a little while just because it made sense and they still cash flowed, if you could believe that.
It is actually that easy.
The First Step is the Hardest
Rae Williams: What is the actual biggest challenge that people are going to face when they come to real estate and investing like that that they can easily overcome?
Kyle Green: I think for a lot of people it’s taking action. A lot of people are going to read the book and think, “Oh those are really cool ideas. Now I am going to start to learn more before I take any action. I am going to I read more books and then I am going to more events, I am going to talk to more people.”
And then the more people that they talk to, the more differing opinions—“Oh, don’t buy real estate it is going to crash”—and the next thing you know they are in this analysis paralysis.
I have a lot of clients stuck in this. It is a very common issue where people don’t want to take action until they know everything there is to know, and they also want to find the perfect deal. The reality is if you start taking action and do an average deal and then an above average deal and then a perfect deal and you start to mix it all in, your average deal will outperform doing nothing. I guarantee you.
The reality is you should be taking action and making things happen.
You will also learn a lot more by taking action than you will be by reading books, guaranteed. When you start to plunge into it, you start to write offers, you do due diligence, you say, “You know what? This isn’t the right deal for me.” You pass.
That is totally fine, but at least you learned a lot going through the process. A lot more than just reading a book.
Jessi Johnson: There is never really the perfect time to buy. There really isn’t. So, waiting and waiting and waiting, kind of like what Kyle is saying, it is not in your best interest.
They say it is better to buy and wait than wait to buy.
Rae Williams: I know in the beginning you said stocks are not really the safest investment—how is this going to work out for us if we are choosing other kinds of investments?
Kyle Green: Well geez, have you ever invested in stocks before? Because I know I have. One of the challenges with investing in stocks is that, yes, you could pick great companies, but there is this other thing called market sentiment, and it can move up or down based off of how people feel about the market, not the fundamentals of the companies you are investing in.
I could tell you how frustrating it is just looking at your portfolio to go up or go down by a thousand dollars, $10,000 a day for seemingly no reason.
And especially in today’s world, you will find that you have really, really big swings. You will be riding the wave up and you think nothing can stop you and the next thing you know it is crashing and burning and everything around you is on fire.
So, it is really interesting, but I think that the two reasons to invest in real estate over other investment classes is number one, there is less volatility with real estate.
It is still a tangible asset.
You can grow vegetables on it.
People always need a home to live in. So, it is very, very comfortable and safe, and let’s be frank, we are not making any more land on this planet.
On the flipside, by investing in stocks over real estate, you are going to have this ups and downs all the time and for some people they just can’t stand it anymore. We have a lot of clients coming to us and saying, “I can’t do this stock investing anymore. I don’t understand it. I don’t know what is going on. I just want something that I can feel and touch and know what I am buying.”
Jessi Johnson: People who push themselves to do things that scare them are more successful in personal and business life, and if you sit around and do nothing, you are guaranteed to get nowhere.
First Steps to Investing
Rae Williams: Where do you recommend that we start looking?
Kyle Green: Well I would say that the first step for anybody who wants to start investing in real estate is to usually own your own home. That is the easiest one to do, and it stops you from paying rent. Now you own your own place and that’s a great easy step for people to make. It is not challenging or difficult in the sense of doing an analysis on what the rental income would be, etc. So usually that is step number one.
And then number two from there, if you already own your own home, a lot of people feel most comfortable investing in their own backyard, so to speak. An area and a market that they understand.
They are not buying across the country, something that they have never seen before. They don’t really know if it is a good area or a bad area of town. So, it really does help to start with your own backyard.
Sometimes your own backyard isn’t the best place to be investing. And we understand that, but it is always good to start looking in your new backyard to see if there are opportunities for that.
It usually takes away that perceived risk factor of not knowing what you are buying.
Jessi Johnson: Also with owning your own home, you have the benefit after 12 months of potentially avoiding your capital gains, not that we are accountants and giving accounting information, but that is a huge bonus for your future net worth. As the equity grows you are able to pull equity from the property to use for investments as well, which is a pretty nice feature that a lot of people don’t utilize.
Kyle Green: Yeah, the residence usually becomes the hub, where it is usually the most profitable property in your portfolio because there are no capital gains on the residents in Canada, and number two, it often becomes the property that you leverage to access equity to the invest and whenever you borrow money to invest the interest payments are tax deductible.
So, if you borrow money to use for the down payment, both the down payment borrowed and the mortgage on the rental are both tax deductible, and that is often the best tax strategy for a lot of investors.
Jessi Johnson: Even when you borrow off your own home, and a lot of people don’t realize that.
Connect with Jessi Johnson and Kyle Green
Rae Williams: What are your parting words of wisdom?
Jessi Johnson: I am reiterating myself, but there is never a perfect time to buy. Step one, pick up the book, and then reach out. Contact Kyle and I and ask questions. We are both easy to find online, and we literally love what we do.
So, we recommend you go get the pre-approval, assess where you stand, and what he said, take action. Do something, don’t sit around.
Kyle Green: Yeah, Jessie said it really well. I think first step really is to start building your team, surround yourself with professionals who know what they are doing and are very heavily involved in real estate investing.
A lot of realtors and mortgage brokers say, “Yeah, I can do an investment mortgage for you or buy an investment property for you,” but they don’t specialize in it, and there is a big difference.
A realtor who doesn’t specialize in helping somebody buy investment property is going to say,
“Hey this property is great. It is close to a school. It’s got a nice walk in closet.” And as an investor you probably don’t care about those features as much as you care about the cash flow. That is what an investment focused realtor would be able to help you.
So, I would say number one build your team. Number two, get your pre-approval, understand what your numbers are and then you can really start to lay the foundation for your game plan.
And it gets really easy once you have a really simple step by step way of growing the real estate portfolio and if you surround yourself with good people, they will make it easy on you.
Jessi Johnson: Yeah and everything is a numbers game especially in the investment world. To add to what Kyle said, knowing your numbers is so important. Start playing around with investment templates. Kyle has some of the best ones I have ever seen.
Run the numbers and look at the property, punch in some fake renovation numbers, and just start understanding how the whole thing works and it will just get your juices going.
It is a lot of fun.
Rae Williams: How can we contact you?
Jessi Johnson: For me, www.jessijohnson.ca. I am pretty easy to find on social media.
Kyle Green:is where you can find all of your information and my social media, etc.