How to Build Your Property Portfolio with Derek Timmons │ Cherry Live!

Today's real estate market is pretty wild! Whether you're purchasing your first home or that first rental investment, there are certainly some tricks to the trade that will help you come out on top.

About the Event

Join us for a conversation with Derek Timmons, where we dig into all things real estate!  Derek is an award winning realtor in Alberta who's journey into real estate has been nothing short of inspiring and built on his passion to serve and support both his clients and those around him.  

In this Cherry Live!, Derek will offer some key insights into today's crazy market and trends as well as some pointers on how to build a successful portfolio. We can't guarantee you'll walk out with your dream home but we do guarantee you'll have learned something new, AND you'll be infected by Derek's passion for this space!  

Objectives and Discussions
  • Will there be a market crash? 
  • Purchasing property
  • Rental properties
  • Passive income
  • Obtaining financial freedom

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Speaker Identification:

[Host]: Alitta Tait

[Speaker]: Derek Timmons

Alitta: Hello and welcome to this episode of Cherry Live. I'm Alita and for those of you tuning in for the first time, Cherry Live is brought to you by Cherry Health, Canada's medical network where healthcare professionals go to connect. If you haven't logged onto the site yet, Cherry is the number one largest platform in Canada for physician jobs, featuring opportunities from thousands of clinics, hospitals and virtual clinics across the country. If you're on the other side of the equation, looking for talent to join your team, it's actually free to create your company profile and post jobs to reach thousands of physicians across Canada. You can go to www.cherry.health to sign up and create a personal profile and a company page to begin connecting for free. Cherry Live, of course, is our podcast series where we connect with innovators, entrepreneurs and professionals of all sorts who are working to move Canada's health care system forward. I'm very excited for today's episode where we're joined by Derek Timmons. Derek has built a phenomenal real estate team here in Alberta. And with today's booming markets across the country, I think we can all benefit from some sound advice. If you have any questions during this session, please pop them into the chat channel. I'll be watching that and trying to answer your questions as soon as possible. But without further ado, Derek, thank you for joining us today. Why don't we start with getting to know you a little bit and what got you into real estate?

Derek: Awesome, well, first of all, thanks for having me. I'm excited about this opportunity. I know it's been really exciting to watch from the sidelines as you guys have developed your platform and hearing about all the updates and now to get to be a part of it is really cool. And we're all thrilled to see what you guys do over the coming years. I think it's a great space for your people and what a collaborative way for them to all meet each other and grow together, so. Yeah, excited to be here. As for me, how did I get into real estate? Wow, unlike a physician, I got into real estate very much by accident. I didn't plan, I never planned to become a real estate agent but my story is, I don't think uncommon or unique for real estate. I think it's a career that people do tend to stumble into. So before I was in real estate, I was a contractor. for 17 years and I always, you know, wanted to have a business and started a company when I was very young, but I struggled with it, growing the business and the challenges of the construction industry eventually started to get to me and one day I decided I was gonna get my real estate license because I wanted to flip houses. That was the intention when I first got it. I wanted to buy and sell houses, be on the inside track. of the industry, learn about the MLS system, get paid to purchase the home, not have to pay a commission when I sell it, things like that. So my intention was always for that. But once I got into the industry, I started meeting people that were inspiring to me. I started learning about, you know, the skills and the traits that are required to do it. And then suddenly by default, I started selling on the side to people that I knew and people that I had met. And one day I realized that I was kind of good at this thing and I wanted to give it a full-time shot. So in 2019, I packed in my construction business and took a leap of faith and haven't looked back since. So I'm in my fifth year full-time and it's been an amazing experience. So I was nine months into my, well, actually I was just over a year into my career as a full-time realtor when COVID hit, which was interesting. And I thought for sure I had made the biggest mistake of my life because now the world was shutting down and who's going to buy and sell a house during a global pandemic. And as we all know, the real estate market just went insane, specifically in Southern Alberta. And we've just had continued growth ever since. So it's been a wild ride, but one that I'm definitely grateful for.

Alitta: Amazing. And I think I love how you say it's nothing special here and there, all that kind of thing. You undersell your, your credit a little bit, Derek. I think what you've built in, in Airdrie and Calgary and Southern Alberta is pretty special. So tell us a little bit about Maverick Group and your team and what your teams kind of focuses in, because I think you guys have, you guys have grown pretty successful, I think for a pretty special reason, so why don't you tell us a little bit about your team.

Derek:Thanks, yeah, we have a really, I believe we do have a special group of people that all are focused on the same thing. And ultimately our focus, the reason I think that we've grown as quickly as we have is because our main focus number one priority over anything is to make sure that the experience for the client is an enjoyable and a stress-free one. Becausebuying and selling houses, our tagline is, it's not like buying a pair of shoes. You know, you can't just walk into the mall, pick up a house for a hundred bucks, come home and then never use it. And so that's why we say it's not like buying a pair of shoes and there's a lot of moving parts to buying and selling a house. So when I first got into the industry, I thought to myself, there's a lot of pain points here. Like this is a really uncomfortable experience for anybody. And I wanna try to takethose pain points away from people. So my main focus when it was just me starting as a realtor on my own before the team even was a thing, was I wanna make sure that I can remove as much pain points as I can for the client and I take on that responsibility because I do this stuff every day. They don't. So they're not familiar with the documents they'll need to get to a lender or how to book a home inspection or what they need to do for a condo purchase and documents they need to gather, things like that.For example, when you purchase a condo and you're doing a document review, there's sometimes over a hundred documents that you need to gather. And if you're the seller and you have a full-time job, say you're a doctor, you don't have time to go collecting these documents. So we started doing those things for our clients. And again, making it just an enjoyable experience. So along the way, as a result of that, our volume grew very fast. My first year as an individual agent, I was fortunate to sell 25 houseswhich is well above the industry standard. The average realtor sells six houses a year, which, and I'm not trying to brag, just trying to give you guys some context. Second year in business, before the team started, I went to 47, and then at that point in time, I realized I had way too much on my plate and I couldn't handle it, and my personal life was really suffering. So from the stories that I've heard from Alitbout the purpose of this platform in general, like I've been there with you guys, where I know what it's like to take a vacation and still be working. I may be in Kelowna on vacation, but I'm working just in a different location. So I realized after my second year, I needed a team or I needed to start to get some staff. And so I hired a full-time assistant and then our volume almost doubled again. So third year we did 91 transactions. And then now last year we did 107. And so far this year we're at 100. We're on pace to do about 150. And there's four of us now. So there's a full-time administrator, slash marketing director, and then three agents. So it's been a wild ride and we've had a lot of fun and we're looking to continue growing that just by doing good work for people and treating people the way that we wanna be treated.

Alitta: That's right, I love that. And so, you know, when we wanted to kind of bring you into this episode, we wanted to really talk to all those folks who are early in their, you know, house buying life cycle. So maybe it's the first house, first condo they've ever gotten and start there and then, you know, eventually talk a little bit about what it's like to start buying more rental properties and kind of building up from there. But why don't we start with, you know. Today, what you're seeing in the current market, obviously Alberta is just going crazy. Calgary and Alberta area is just going crazy. But what are you seeing overall in the market with mortgage prices and lending prices and all that kind of jazz? Give us a snapshot in time.

Derek:Yeah, so I think it's just like anything, it's really important to be cautious of where you're getting your information from because the news can cast a very gloomy picture of the world is ending and there's this huge crash coming and all these things. I hear people asking me all the time, when's the crash coming, when's the crash coming? It's like, if I could predict it, I'd have a lot more money than I do now, but because I can't. But don't believe there is a crash coming specifically to Southern Alberta or anywhere else. Like Canada is such a thriving country and so many people coming here and for obvious reasons. But to answer your question, what we're seeing right now is massive appreciation in the Southern Alberta market. And there's very much an anomaly happening right now in Alberta, but specifically Southern Alberta because there  factors at play. So one thing that we're seeing is every time the interest rates go up, our market improves, which is really weird. So now we're facing more potential interest rate changes and me as a realtor after nine that we've had, or I think 10 now, I don't have any more fear in that regard that our market's gonna crash or things are gonna slow down. I have fear that like, do we have enough capacity to handle the volume increaseBecause every time the interest rates go up, the people from Toronto or the GTA or British Columbia who are used to paying $1 million for a townhouse are like, I'm not, I can't, I'm not gonna do this. And so I'm out of here and they move and a lot of them relocate to Alberta. So we had 16,000 people in the last 12 months relocate to Alberta. 48% of those people are from Ontario. We don't know where from Ontario. I'm sure we could dig deeper and find that out, but I mean.46% of those people, so you're talking about 8,000 people in one year moved from Ontario and then 22% came from British Columbia. And an example of that is, I mean us directly, we just helped a very nice lady move from Surrey who sold her townhouse, two bedroom, single car garage, townhouse in Surrey for $930,000. She thought she should have got 975, but she was happy with 930. And she came here and bought a
detached home, 2,300 square feet with a fully finished basement and a double car garage, fully fenced in backyard and she bought that for $740,000. So to her, she thought she stole the house and she thought the sellers were like on glue. And so we're seeing that all the time. So when that happens, of course, it's gonna cause our prices to come up because every now and then a buyer from out of province will come in and they'll just write a crazy offer because they don't wanna lose in multiples and they think they're still stealing it. So the interest rate thing is actually improving our market. Now, the other thing that we have happening in Alberta is that we have no rent control and our rental market is really tight in Southern Alberta. So we have a lot of landlords whose rental properties have appreciated to the point in the last few years that they're now able to turn a profit. They took so many years of losses that they're like, well, for four or five years, I was paying $200 out of my pocket. But now if I sell today, I'll recoup all those losses and still make a profit. So a lot of those landlords are selling their houses and the vast majority of those properties are being taken over by homeowners, not landlords. So it's maybe one in 30 times that we see someone buy a property and keep the tenant. So those tenants have nowhere to go. So now they're circling back into the rental market and now there's landlords raising their prices like crazy. And suddenly these people have nowhere to go and they're getting into bidding wars for rentals. Well, now they're getting frustrated and circling back into the resale market, which is further fueling our real estate market and our multiple offers and price raises and things like that. So from an investment standpoint right now, as a personal investor, it's an exciting time in a sense that, you know, if you were able to scoop up a property or two in the next few years, it's the signs are pointing towards a very good appreciation and you will cashflow. Now, the other thing to consider is that if you're buying a rental property and your numbers make sense today, it's six and a half percent interest when they come down and it's going to come down. You're just going to make that much more money. I'm afraid for the people that bought a rental property that barely made sense at 1.8% now sudden, you know, but those are the people that are selling their homes. So, um, that's a quick snapshot into, uh, Southern Alberta's real estate market. Um, but even Ontario and BC, they're still, they're still seeing price increases. It's, uh, it's, it's really just quite strange.

Alitta: It is. Well, I mean, and then we get the pressure and we'll get into building that sort of portfolio later, but then we get into the pressures that also come when people are purchasing properties to only do short-term rentals with, which is a whole another pressure on the market and stuff like that. But we'll get into that a little bit further down when we start to talk about why building a portfolio, what to think about in that space. But if you were, okay, so if you were a first-time home buyer right now or those first-time home buyers that you're working with, you know... lots of physicians and stuff like that. They're practicing, they're finally, maybe getting out of some of that debt, getting out from underneath that university debt and such. What should they think about when they're considering getting into that first home?

DerekWell, there's a few factors for sure. Now, it depends on your situation. One thing that I suggest to people is if you're in a, like if you have a partner in life and you're both employed, you should always try for your first property to be able to qualify for that on a single income so that any other, any secondary income that you have is just bonus. If you can pay all the payments off of a single income and you can qualify for that, great. Nowyou have a lot of security, but also you're gonna be living well under your means. The biggest mistake we see people make is completely maxing their selves out and they go way too far up the ladder way too quickly because it feels good, it looks good, it makes, you know, I've worked hard. I just got my, I became a doctor. I've been in school for so long. I deserve to have this. And I do agree with those things, but don't put yourself in a position where you're gonna potentially be underwater or you're susceptible to things like an interest rate change.e or things like that because you don't ever want to be house poor. It's a very uncomfortable situation to be in and it just causes stress that doesn't need to be there. So that's one piece of advice that we like to offer to people. And as far as being a first time home buyer, the things that you want to know is you really want to know your numbers. So how much do you qualify for? What are yourpayment's going to be, what are your monthly taxes, you know, your property tax is gonna be, your utilities. Like make sure you really understand your numbers clearly before moving forward. And then you can plan around that. So if you do have a slow month, all of a sudden, you know, and you have a cash reserve, you're good to go. So those are a couple of pieces of advice that we like to give first time buyers.

Alitta: love that. I think, you know, everyone gets pretty excited about it and maybe they can qualify for a pretty large mortgage, but it's not always the best opportunity in actually taking it at that time. So instead, think a little bit more prudently, especially for that first one. In terms of how about, you know, identifying the right type of property, whether it's a condo, whether it's a house, whether it's this. I mean, yeah, there's budget, but what else goes into identifying the right type of property for a first-time buyer, in your opinion?

DerekYou really wanna look at your lifestyle. So if your lifestyle is very active, you're not home very much, you're not big on maintenance, things like that, then a condo's probably gonna make sense for you because you don't have to shovel snow, you don't have to cut grass, you don't have to go around and clean your gutters in the spring, things like that. Your lifestyle's gonna be really important. Now, if you're planning on building a family and having kids in the next two to three years, then a condo's not a good ideabecause you're gonna grow out of it quickly. So it really depends on where you're at in life and what you want. So, you know, a lot of people, I hear it all the time, like, well, you would assume that people wouldn't want anything to do with condo fees, but there's a lot of buyers that we work with that love the idea of a condo corporation taking care of their property and them not having to worry about painting the hallways or maintaining the elevator or doing any of that stuff. So,whatever works best for you is what you're gonna want to look for based on your lifestyle. And another thing that I suggest is do what makes you feel good in the sense that if you can afford it and it makes sense and you like it and that lines up for you, then go for it. Some people just don't want to have someone connected to them on the other side of the wall. And some people feel safe having a neighbor right beside them. So it really depends on your personal preference and what's gonna make you feel best in the end.

Alitta: I think, you know, you mentioned condo boards and those kinds of things. I mean, I think we've all heard some horror stories about the condo board maybe being in a good place or maybe not such a good place when things happen. I don't know here with weather the way it is these days and all that kind of stuff. There's some new roofs or siding or flooding and all this kind of stuff that can happen. What do you look for in a condo, in a condo board when you're helping your buyers evaluate that property?

Derek: So one of the major, major huge things that we suggest for anyone purchasing a condo is doing a condominium document review. So there are four conditions that can be used on a purchase contract for residential real estate. They are financing, home inspection, sorry, let me back up. If you're buying a condo, there's gonna be five. So there would be financing, home inspectioncondominium document review, then there's additional conditions, and then there's a sale of buyer's home condition. So if you're not buying a condo, you have all the same conditions, just not the condominium document review. But the reason I'm telling you this is it's important to understand that your conditions are very important when it comes to purchasing a property. So financing goes without saying, you're gonna put a financing condition on your deal or on your transaction to certify that you can actually get the lending. A pre-approval and an actual approval,are not the same thing. So just because the bank said, we'll lend you up to $700,000, doesn't mean for sure they're going to do it because then when they do the deep dive and find out, oh, you actually have a line of credit from 10 years ago, you never paid off and you have terrible credit or whatever, that could be bad. So don't assume that a pre-approval is good as gold because it's not. So that's why you want a financing condition because you can walk away from the property if you can't get your lending. Same with a home inspection goes without saying.If you do a home inspection on a property and it's just in bad shape, and it's gonna cost you tens of thousands of dollars to repair all those things, you're gonna want an opportunity to walk away. Now condominium document review sounds exactly as it is. You get the documents from the condo corporation and you hire a professional document reviewer, which is not me. I don't do these. But there are people that are trained for this. This is what they do all day, every day, and they go through all the documents. So they're gonna check for things like the reserve fund to make sure that the corporation has enough money in there in case some major renovation comes, not if, but when a major renovation comes up, you know, to make sure that it's managed properly. Do they have the proper insurance? Are they running their meetings? Has there been any issues? Is there any lawsuits, things like that. Condominium document reviews are so important, so important. We had a client recently write an offer on almost a brand new building down by Mount Royal, wanted to buy this unit for their daughter who's going to that school. Beautiful, beautiful building, beautiful unit. But after looking at the document review, I just had an honest conversation with them and said, hey, you can do whatever you like. You have the information just like I do. But if it were me, I'd be taking this deal and walk it, getting as far away from this as I possibly can because this is not looking good and your condo fees are gonna skyrocket in the next five years and that's not a good investment. So those are the things that you'll find out. If there's a special assessment, meaning like, let's say that the board has decided all the windows in the whole building need to be replaced, but they don't have the cash on hand to fix it, they're gonna do a special assessment or a cash call and every unit's gonna have to fork over 5,000 or 10,000 or $2,000. You'll know that's coming up if you do a document review and then you can make your decision from there.

Alitta: Mm-hmm. I love that and I think yeah Condo fees make a lot of sense if the health of the condominium board and all of their finances in order But man, they can be scary if they're not and a rest for disaster Now if someone's thinking about getting that first home, you know, how do you guys support them like What do you guys try and focus on in that first time? Is it mostly emotionally understanding exactly what they're really looking for? Is it, and then trying to find that right place. Or just tell me how you work differently maybe with a first time buyer than a seasoned home buyer who's had a few trips around the sun.

Derek: You know, it's funny, I don't really believe there ever is a seasoned homebuyer. Even me, when I get into purchasing a property after having sold hundreds of them, I still find that I'm dealing with the emotional roller coaster. So it's normal if that's what you're feeling. But to answer your question, we created a whole bunch of resources and guides for people so that they understand the process from start to finish. Because it's really a fairly simple process. And if you understand what you're going to be going through, you can prepare yourself for those things ways that we support people is we tend to not take anybody shopping for a home until they've got their pre-approval in place. Now again, I did just say that a pre-approval and approval aren't the same thing, but a pre-approval by a qualified mortgage broker who knows what they're doing is more often than not solid. So we recommend Mortgage Connection, which I believe is partnered with this platform as well. And they're amazing. So when one of their brokers gives us a pre-approval and we get it in writing, I assume that that's good to go because they are so good at what they do. Now, the reason we don't want you to go looking for a property before you have a pre-approval in place is not because, you know, it's not this whole cliche of like, well, we don't wanna waste your time or ours. Like it's simply because we don't want you to get heartbroken. Like if you go and look at a property that's say $700,000 and it's absolutely perfect for you in every single way and you love it but your max budget is 650. Now you're gonna lose that one. You're gonna be heartbroken. You're gonna compare every property you see after that to the one that got away and then you're not gonna enjoy the experience. And that's super avoidable if we do the process step-by-step. Now, I'm sure doctors and physicians and anybody listening to this is gonna love to hear this, but we're all about flows and step-by-step process. So you don't move on to the next step until you have one step done. So when you have a pre-approval in place, now we know where we can look. And another thing that we advise is like, hey, look, if your pre-approval is for 700,000 and we're looking at properties that are listed at 700,000, not only are you at the max of your budget, but if two other offers come in and go over that list price, you have no wiggle room whatsoever. So your best offer is full price. And right now, sometimes you have to be aggressive and go over the list price to win the property. So we can gauge our strategy a lot better based on that starting point.

Alitta: You know, for anyone, whether this is their fifth home, their tenth home, or their first, there is that emotional connection. And that, you know, everyone's going through the feels through this process and the stresses and things like that, even if it's their first, second, or fifteenth. And I think that's nice for people to remember, you know, they're not alone. This is something that happens to everyone going through this. It's a massive purchase and big commitment. So that's what I think.

Derek:Oh my, it's huge. And then after you have done it, then you're into home ownership. And that's a whole different beast. So like my girlfriend and I, we bought a rental property last summer, super excited about it. Three weeks after we bought it, the washing machine exploded, which leaked into the mechanical room below it, leaked all over the hot water tank, which fried the circuit boards. So the hot water tank was toast. So when one day we had all of a sudden, like a $4,000 repair bill,
and then three weeks after that happened, the dryer exploded. So then we had to go buy a new dryer, which made sense. I knew, I called it too. I probably put it into, I probably brought it to fruition by saying it, but I was like, well, I bet you the dryer is gonna go soon because it's the same age as the washer. And so, and we did a home inspection. So how are we to know that the washing machine was about to, and if it hadn't have leaked where it did, it wouldn't have blown the hot water tank, but at the same time, had it had been in a different location, it wouldn't have leaked into the mechanical room and would have caused a huge drywall repair. So we were like, and so, and that's home ownership. That's just part of the deal of, of getting into rental properties or being a homeowner. You know, like it's, it's one of those things.

Alitta: Well, I think, yeah, you nailed it. And that, but it is actually a great segue too into being now transitioning from that first home that you're living in and that you purchased and hopefully you're just gonna love for a long time or as long as it serves you to, versus being a rental property owner and what that looks like. And I will, I'm actually gonna just pause. There's a question comment that came from audience.So this person is looking at investment properties. However, the main banks are not always, and we're gonna have a mortgage broker on the call in the coming month too, so who might be able to answer this question a little bit more, but Derek, we're gonna run a buy first. So main banks are not always so open to lending for these at times. If that happens, where's a good place to go for investment property mortgages, even if the rates are higher?Where is good to go for getting a mortgage for investment properties, please? I mean, of course, this is going to be a little bit different by province or the cities and the different types of brokers around. But overall, for those investment properties, what do you recommend in terms of getting mortgages?

Derek: So I've never, I've actually never seen or heard of a major institution having an issue with rental properties, so long as you understand that you have to put 20% down payment minimum on a rental property. We, for our personal investments, we've used Scotiabank in the past. Scotiabank is one of the only major institutions that will lend to a holding company. So We purchase our properties through a holding company for tax advantages and to lump them all together. And Scotiabank's very friendly with that. There is a lot more hoops to jump through and a lot more paperwork to do. But from my experience, if you're working with like RBC, TD, CIBC, and you just disclose to them upfront that you're buying a rental property, they generally are okay. The challenge that comes in is if you're self-employed. So self-employed people do have a harder time getting any kind of mortgage because you need to have a two-year income history that supports the income or supports the mortgage amount. And you have to have a variety of different checks and balances to show that you've paid your taxes, that you're running a solid and legitimate corporation, all these different things. So self-employed people have a double-edged sword and I've suffered with this my whole life because you're like, yeah, I'm a business owner, I'm gonna write off everything and have pay no taxes. We all wanna pay no taxes, right? But then your income shows up as $30,000 in the bank, it's like, ha, sucker, we ain't lending you nothing. So yeah, you can't get anything. So it's like, what do you do? Do you suffer for a couple years and pay more taxes so that you can invest into real estate? or do you use your business as a tax vehicle so that you don't pay as much tax? I like to go right in the middle. So we made a few major purchases in the last two years. So yeah, we got hammered with taxes, but now we have this portfolio that's growing and other people are paying for our property. So we're not paying out of pocket for it. So our down payment is significantly leveraged into that property because you put 130,000 into a... a $700,000 property, now all of a sudden that grossed to be $900,000. You didn't add any more into it. Plus your tenants are paying down that mortgage and you're gaining equity from it every day. So yeah, there's a lot of moving parts with investments, but I've found it's definitely worth it.

Alitta: Yeah, that's really interesting. And I think when we have, we're going to have a mortgage broker specialist kind of fell out on in the coming weeks or months. And we might be able to dig into that question a little bit further about the nuances and specifics about, about mortgages and how to navigate that today or not. So you've done this, you're building that rental empire right now. Tell us a little bit about your thought process and the things that you're thinking about when you're considering those rental properties versus your primary dwelling.

Derek Timmons: So our mindset is we are big fans, my girlfriend and I, of having other people pay for our life and our expenses. From a business standpoint, it makes sense. So if we can get into a position where our real estate portfolio not only turns a profit, but also covers our personal expenses, now the money that we would be paying for our mortgage is extra cash that we're saving in the bank to put towards either a really nice vacation or another property or, you know, God forbid, an emergency that comes up. And on top of that, we're having other, you know, these properties paid off by other people that we're not coming out of pocket. It's a really good place to be. And I can tell you that the way you feel when you get to a point where your assets are covering all your expenses and growing in value, it's just like, when you get up to go to work, it's not because you have to anymore ou want to, and I know that's so cliche, and I used to like throw up in my mouth a little when people would say that, but that was our ultimate goal. That's what we wanted. We saw the value of, can we get into a position where our assets are covering all of our liabilities and then turning a profit? And that wasn't hard. It only took us two properties to do that. So yeah, it's something that we're excited about.

Alitta: Not every property for rental is created equally and is going to help you do that so quickly. So how do you determine a little bit about what is, what's better for, for using as a rental property and one of some of those, those specifics that you think about in picking the right house for renting or the right property. I should say for renting.

Derek: Just like anything, it comes into the numbers. So you're gonna say no to a lot more properties than you're gonna say yes to. If you're super eager and you just jump on the first thing that comes your way, you're gonna get stung. You really have to understand your numbers. You have to understand what's a good investment, what's gonna generate a return. And that's where a really good realtor is gonna be to your benefit because they should know that stuff. If you're asking those questions and they sort of hesitate and they don't know the answers off the top of their head or aren't confident about it, then you should run in the other direction is my advice. Because not all realtors are created equally either. But when it comes to a rental property, you're gonna wanna look for a few factors. So location is gonna be a key. Like location, location. It's the biggest cliche in all of real estate, but it's so true. 60% of the value of a home actually comes from the location. So if you're not familiar with Calgary, we have an area of town called Marda Loop and what I tell people all the time is that, hey, let's say we pick your property up and drop it in Marta Loop and they're in an area that's not as nice as Marta Loop, what's gonna happen to your value? And everyone unanimously just says, it's gonna go up. Okay, why is that? Well, it's a great location, it's close to downtown, it's really popular. So 60% of your value is gonna come from your location, 30% is actually gonna come from the size. And it goes without saying, so a 1500 square foot bungalow is going to be worth more than a 1000 square foot bungalow because it's bigger. And the last 10% of the value actually comes from the finishes and people get caught up on well, I've got, you know, I've got quartz counters and I've got, you know, LV luxury vinyl plank on my flooring and the guy across the road doesn't have those things. So I should be a hundred thousand dollars more than him. And I have to politely tell people that like, yes, you do have very nice finishes, but at the end of the day, everyone has counters and everyone has flooring and those things can be changed. So they are the things that cause people to want to buy the house, but they don't increase the value significantly in that regard. So when it comes to a rental property, one thing that you wanna look for is, is it cashflow positive from day one? You don't wanna buy a property that could potentially be cashflow positive in like 2025. You wanna make sure the month you get it, it's making money. And how you're gonna do that is you're gonna evaluate what's the cost of the property and what's the potential rent that I can bring in. We are big fans of two sweeps. So upper and lower, side by side. The more opportunity you have to maximize your rental income from one mortgage, the better. Because if it's turning a profit and making you money, you're in a winning position. Over time, when those people pay off that mortgage, and it goes up in value, you're making a huge return. So one thing that people don't know, I actually learned this in the last few years because. Now, since I got into real estate, two of my favorite calls to make are to my banker and to my accountant, which I never thought I'd say those words. But so from the accounting side, let's say you buy a house for $500,000 and you have it for 10 years and your tenants pay off $100,000 of that mortgage. So you have gained $100,000 in equity that you didn't pay out of your pocket. Now, hypothetically speaking, let's say you sell that at exactly $500,000. But there's $100,000 of equity. That $100,000 of equity is actually tax free, which most people don't know. So if it's appreciation for, or if it's equity from the rental income, you get that tax free because you have to claim the rental income on your taxes annually. So if you're making $500 a month, $6,000 a year, you have to claim that as an income. So all the equity that comes from...the property that the tenants have paid off, that's tax free. Now, if you buy it at 500 and you sell it at 700, you have to pay tax on the gain. At capital gains tax, which is, you know, really, that's the best kind of tax to pay, to be honest. But so these are things that you wanna keep in mind is that if you're buying anything, you have to make sure it's going to make money now, not later today. Like as soon as you get the keys and you fill those spots, you're earning income from it. It doesn't have to be a lot, but if a winning rental property makes $1,000 a month or more, if it makes a thousand bucks a month cashflow and someone else is paying for it, do it, you should do it. Now again, keeping in mind right now, if you find a rental property and people are, and we have helped a number of people in the last six months, at these interest rates that are turning $1,000 profit, what do you think is gonna happen when the interest rates go from six to three? Their profit margins gonna increase. So those are things to think about. It's gotta make money. If it doesn't make money, it doesn't make sense and it's not a long-term buy.

Alitta: I think that's really, really important because I think a lot of people think, oh, I'll just buy a couple of rental properties and they're looking for like a cheap condo. Maybe it's in an undesirable area or whatever. But if you're not going to be able to rent that out at a profit from day one and you're not making some money off that, those expenses are going to hit. It's also just not making a profit and you're going to end up end of the year not ahead. And in fact, potentially behind.

Derek: And I think ultimately what we all want as humans and members of this society, if you really boil it down, like I understand that anyone that's willing to go through medical school and become a doctor has a genuine fascination with biology. But let's be honest, there is the element that you'll be financially successful, right? And ultimately what we all want as members of this capitalist society is we want freedom. We wanna have the freedom to be able to choose what we do or go nice places or have nice things. We want some freedom. So if you could put yourself in a position where your investments are paying off your personal liabilities, that's freedom. That's where you don't have to go anymore if you don't want to. And you get to a position where, you know, a two week vacation now makes sense because you don't have that obligation. So if you're buying properties and you're increasing your monthly expenses to support them, that's a bad investment. I said, not freedom, that's a shackle. We don't want shackles, we want to cut the shackles and run away from them. And that's generally what we strive for with all of our clients who are looking to build a portfolio is how many properties do you need so that your personal home is no longer a liability, it's now being paid for by somebody else. Because at the end of the day, imagine how good it would feel if your $3,000 a month mortgage was now being paid by someone else and you didn't have to worry about making that payment every month. It's pretty sweet.

AlittaSo now how about in terms of, and I think from some of our previous conversations, you're dabbling with this too, but these short term slash vacation rentals versus longer term tenant rentals. What's some of your perspective on that?

Derek: I love short-term rentals as an investment standpoint, but if you're getting into it thinking this is gonna be passive income, you're wrong. It's not passive at all. It's very much active. You work for it. It's there's, you know, don't, anytime someone casts you a vision on YouTube or social media or whatever that this is, and it sounds too good to be true, dive into it and you're fine that it is. So these guys that are saying, oh, you can build a million dollar business off of Airbnb and only put four or five hours a week into it. It's just like, it's baloney. I know guys that have hundreds of properties and they have teams of like 30 people who are working around the clock. So we currently have three properties that are on Airbnb. We enjoy it. We like the business. It turns over a lot more profit, but it has a lot more, we're tied to it a lot more in a sense that like, if you have a guest that can't get into your house at 11 o'clock at night and they're messaging you, you can't just ignore that. They're stranded outside in a property they paid you to stay in, they can't get the locks working. Like you have to kind of, your systems have to be dialed in. So if you're looking for passive income from a rental portfolio, that's not the route. Further to that, getting into the Airbnb or the short-term rental market is even more so like winning property. You have to have an absolute stunner. Like it has to be just 10 out of 10 because there's a lot of competition and there's a lot of flash in the pan competition where people will be like, let's try Airbnb, let's put our house up and we're gonna make millions of dollars or tons of money or whatever. And then they find out that it's hard and it doesn't actually work like that and they're not making money. So you have a listing, a competitor pop up, you know, for two, three months, they don't like it, then they disappear, but you will have a lot more competition. So you have to have a property that is gonna be so good. It makes so much sense that, that people are gonna wanna go there, but then they come back to it. So it's a business just like anything. If you're not willing to dedicate the time to it, to build it and to systemize it, it's not a good idea. Now, if you are, it's highly profitable, like highly profitable, very significantly more than a long-term renter. But a lot of people don't like the idea. I mean, every month, when we look at the beginning of the month, I joke, and I say like, well, it looks like we're paying the mortgage this month, and then we never do because we don't get too many people booking like long term, right? Like our lead time is like eight days for a booking. So all of a sudden, by the end of the month, we'll like, we'll look back and we'll see our, you know, our profit and loss on it. And it's like, well, we were 85% occupied and this is what we brought in. So, but at the beginning of the month, it looked like we weren't even gonna have a single stay. So you have to have a bit of a stomach for it, but it is, it's a cool experience. I like it personally.

Alitta:Yeah, I think your energy level lends well to it. I think that for a lot of people, like you said, if you think that this is passive, it's not. Yes, high profits, but also high time and energy requirement. You've got to market it and it is competitive. So I think those are really, really good things for people who think, you know, I'm just going to get a couple of condos and pop them on this. Sure, but you better be able to support those if the bookings don't come in. You better be able to show up if the locks aren't working or ifyou know, all these short-term pain points happen because people are using them in such a different way than a long-term rental property.

Derek Timmons :100%, yeah, no, totally.

Alitta: ward, but also, you know, all the pain in the middle.Well, no, I think that's really awesome. And I think there are also a lot of people out there telling people that they can, you know, build this little property empire and it's going to be super easy. And I think one thing that's really important, all, you know, from, from this conversation to is all rentals can be high stress, can be, you know, high expenses coming. So it's not really something to get into until you feel like you've got the stability, you've got the time and some energy for it, um, whether it's a long-term rental or even those short-term rentals as well. Is that fair?

Derek:Yeah, one of the reasons that we choose to go with short term rentals for these properties, and we do have very much we do have in our intentions for our portfolio to buy a few long term rentals as well. Like there's townhouses coming up in Dover of all places, brand new with fully legal basement suites. And when you run those numbers, they make a lot of sense on a long term basis. So we are, that is part of ourstrategy right now, but one of the things we like the most about the short-term rental is that we actually can we can ensure that our properties being taken care of better than a long-term rental because people stay for like three to five days and They're on vacation They usually take care of the property better than they take care of their own house because they're they feel good Whatever and but we can have them out in a heartbeat So if they're you know, if they're violating the terms of our agreement, we don't like them They're gone whereas with a tenant if you sign a lease It's very difficult to remove them and you don't know because you're not going therethree, you know, like we have a professional cleaning crew in those properties at least once a week on average, right? Because of the checkout. So we see what's going on. If there's anything that needs to be fixed, we're in there, but it's being cleaned consistently, maintained consistently. So our properties are actually being maintained better for the longterm and gonna appreciate more because of that. So that's one thing that we really like about it. And people have been bringing this debate to me lately, like, well, this is adding to the crisis of the housing crisis.To some extent, I think, yeah, it can be, but if you think about it from the other side of the coin, it's like me as a business owner, if I have a profitable business that's causing me to make more money, would I not buy more properties? Now they're not all gonna be for short-term rental. I am going to be purchasing properties for long-term rental to help with the problem. And at the same time, the more successful I am, the more taxes I pay, which means the government has more money to fund programs for low-income housing and building and all those things. So it's kindaI mean, which side do you want to be on, right?

Alitta: Yeah, yeah, and I think it is a fair debate, but I think that, you know, yeah, it totally makes sense that there's pros on both sides of the equation for sure. So I know we're getting close to our time, we're getting to our time here. And so I just wanna thank you again for coming and giving us all this kind of information. I'd love to have you on every couple of months to tell us what's new in the industry and what you're seeing in the markets. But if a person wants to, Derek puts out a newsletter also every month that's full of tidbits about what's going on at this point in time. Is it every month there or is it more than that?

DerekWe, yeah, we try to put something out every 10 days or so.

AlittaOkay, well, so even more. So if you want to get those current tidbits from Derek and his team, then in a follow-up or in the notes, we'll have some links for you to be able to access that material. You can also find Derek on the Cherry Health platform. And we'll send a follow-out or follow-on from this as well so that we can get anyone connected who's interested in chatting with Derek. And if you're looking for a property outside of the Calgary-Airdrie-Southern Alberta spot,ou can also reach out to Derek because he's got a great network and they span all across Canada and he's happy to help try and find the right person. Is that fair Derek? Derek, thank you for joining us.

DerekYeah, 100%.

AlittaThat's what I thought, perfect. So they can chat with you that way to get the resources that they require or learn about what it's like moving to Alberta because like you said, lots of people are currently in that process and we know on the platform we're seeing it all the time. The doctors who are looking at Alberta jobs are often coming from other provinces. So if you just want some information and have a chat about what it's like, don't hesitate to reach out to Derek as well. Any final words Derek on what people should think about, you know?ral estate in Alberta, any final two bits of wisdom.

Derek:I think we need to fasten our seat belts, honestly, for the next few years. I think what we're gonna see is gonna be hard to wrap our heads around. It's exciting and scary at the same time. I don't know how to put it any other way. I don't know if it can be stopped, but it's gonna happen. So again, the question is, which side of that equation do you wanna be on?Even if it just says a homeowner who, and I don't mean to downplay that just as a homeowner. If you become a homeowner and that's all you wanna do is just have control over your property so that no one can tell you have to leave, you're gonna see crazy things in values over the next few years. But as an investor, now is the time. It really is. You're getting ahead of the wave and it's gonna pay off in the end.

AlittaAmazing. Perfect. Well, thanks for that last moment. Thanks everyone for joining us today and look forward to seeing you soon.

Derek:Thanks guys.

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