In this episode Carla & Adrian are talking about 'the investor mindset' - something that no matter when you start researching property management or investing in real estate, will constantly come up.
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Welcome to Canada's Property Management Podcast, your number one resource for investing, managing, and maximizing the value of your real estate assets. And now here's your hosts, Carla Browne and Adrian Schulz, Canada's rental property experts.
Carla Browne (00:19):
Okay, Adrian, are you in the right mindset?
Adrian Schulz (00:22):
I am, I was just thinking of something that my wife said to me the other day. I had to show her what you look like in one of our videos and she said, "Adrian, I think you need to get a haircut because your hair is now longer than your co-hosts, Carla."
Carla Browne (00:39):
Adrian Schulz (00:40):
Carla Browne (00:40):
And it keeps getting shorter and shorter, and next week I'm actually going to Mexico, and it's supposed to rain every day that I'm there.
Adrian Schulz (00:47):
Carla Browne (00:48):
And actually my hair is going to look a lot longer, because that humidity actually does a number to this fine, short hair, you'll be surprised. I'll have to send some pictures back home so everyone can see it. Okay, on with the show to. Today we're talking about investor mindset, and this is something that no matter when you start researching property management, investing in real estate, this constantly comes up as a theme, this investor mindset. So you're an investor, Adrian, so let's dig into this and help people understand what is that mindset that they have to have, or what exactly does investor mindset mean? So I'm going to throw it out there, when I say investor mindset, what resonates in your mind?
Adrian Schulz (01:29):
Carla Browne (01:30):
I'm going to stop saying mind here pretty soon.
Adrian Schulz (01:32):
Yeah, yeah, what resonates in my mind, in my mindset, first and foremost is to create legacy wealth, or family wealth, to have financial freedom, and I think to stop, or not to worry about what the future brings. I think a lot of us are worried or concerned about what the future may hold, and I think if you're single, or married, or whatever your domestic circumstance is, finances can play a huge role in the mood of your relationships, because finances enable or disable you to do certain things. So I think my investor mindset is just having that calmness, knowing that wealth is being created which will enable us to have more and more freedom over time.
Carla Browne (02:38):
Yeah, so it's that creating the life that you actually want, right? I loved the legacy piece that you talked about, and I think that's when people close their eyes that's what they really see, they see that end goal. And I caution investors, it's not like it is on reality TV. That could be a whole nother podcast, quite honestly, and this is where some people see that end goal but they don't realize that there is a start and there is a journey to get them to that end goal. So there's a few things I think in between that that people have to realize that are important as they make this choice, which really, it's a choice, to create legacy or wealth in the real estate asset.
Carla Browne (03:19):
So when we talk about things that maybe investors have to be aware of as they go through this journey, what their minds have to be prepared to understand. And there's ways to overcome them, and I think the services of what we do at our RPM can definitely help that, but let's talk about that a little bit. So if you were to say you're meeting an investor for the first time, or an investor to be, and you're trying to prepare them on what this is going to look like, what do they need to be aware of? And maybe how can they overcome it? What are your thoughts there?
Adrian Schulz (03:52):
Well, I think the first thing that I would yield someone to is don't do this for cash flow, at least not for immediate cash flow. And I want to tell you a little story, because we love stories here on this podcast.
Carla Browne (04:08):
We do , we do.
Adrian Schulz (04:09):
And that is we when I bought my first rental property, which would've been in the early 2000s. I remember those first couple of years actually enjoying some cashflow, and I was pleasantly surprised, only to realize that the property management company at that time wasn't properly maintaining and investing in the property, so I thought I had all this cash flow, but it was fake cashflow, it actually needed to be invested back in the property. So here I am, cashflow being taxed as passive income, and all of a sudden, boom, you get this shock phone call saying you need to do a capital injection, and I'm going, how can that be? This thing throws money every month. So really get cash flow out of your immediate mindset, I think that's the ultimate goal down the road, especially once the asset perhaps is paid off, or mostly paid off.
Adrian Schulz (05:08):
And the second thing is, is don't be afraid of your tenant or your resident relationships, and don't be afraid of what a resident may or may not do to the rental property. In the grand scheme of things the majority of rental property problems can be addressed with a fresh coat of paint, some fresh flooring, a good cleaning. The world isn't always, or this sky isn't always falling when you have a disrespectful tenant.
Carla Browne (05:48):
Yeah, that's a good point. You have to realize that the stats show that almost 40% of Canadians are now renters, and we hear one or two stories a year where tenants have demolished a property. So that's a very, very, very, very small percentage, and I would say that there was ways to somehow prevent what happened there in most cases, and it's not to disregard the actual investors themselves, but I could have probably, on one die here I was like, hmm, could have solved that one differently for these people.
Carla Browne (06:26):
But the cashflow piece is really interesting. If you think of the plant analogy, you plant a seed, you water it, you care for it, you talk to it, and then you let it grow, and that takes time, it's not an immediate win. There's other places where you can put money that if you're looking for that high risk, I just want the win right away and I want to increase, but real estate is not one. Real estate is one where you're going to create passive income for years to come, and I think it's a fantastic place to put your money as an investment, stats show that, on how that appreciation grows, but it is definitely not a get quick rich scheme, easy cash, that type of thing.
Carla Browne (07:08):
A lot of times I do see investors say to me, on that maintenance piece, we're asking to do regular inspections, and we're asking them to do regular prevention of maintenance and they're like, "Well, I lived there for 10 years and never did anything, why are you asking me to do all these things now?" I'm like, "Yeah, you didn't do anything, so now I'm asking you to do things." But the reality is you don't live in a house and never do any improvements, and that isn't a tenant's responsibility to do.
Carla Browne (07:37):
So let's go back to of the mindset piece, so how do you think that an investor could best feel in control? Because I think mindset is a control thing, and we all need to feel in control of our situation, surroundings, so what could they be doing to help their mindset get into this place where they're okay with realizing that they're going to give money into this investment to allow it to make money, they're not going to have control of exactly what's going to happen in those walls day to day, because they're putting a tenant in there, what would you suggest?
Adrian Schulz (08:10):
Well, I think I would really hammer down on the why. Like why, why do you want to invest in real estate? Because you read a book, or you saw a TV show, or because other people are doing it? None of those are good reasons. I think your why needs to be clearly defined on what the reasoning is behind you wanting to invest in real estate. We know that people who invest in an RESP are doing it to have funds for their children's education. We know that people who are investing in an RRSP are doing it for their retirement. Those are very clearly defined, so give me your clear definition of why you want to invest in real estate. And I think once you've got the why, all of the other five W's come into context, and I think eventually that will enable you to have a good quality positive real estate investor mindset.
Carla Browne (09:19):
Yeah, I think you're so right. And the other piece of that is don't rush it. Do this when you're ready, because there's no sense in rushing it because you'll feel uneasy, and I always think there's that correlation between control and confident. So you have to feel confident about this decision, so you've got out your why figured out, don't be scared to go and get some education, make sure you're talking to people, talk to people like us, people that are in this space that can maybe help with those decisions on what worked and what didn't, and I think that you'll feel that sense of control to jump in. And then when you jump in, leave your emotions on the swim deck, so to speak, if you're jumping into the water.
Adrian Schulz (09:58):
Carla Browne (09:59):
Because this is a business decision and it can't be purely made on emotion, because there's too much at risk to do that.
Adrian Schulz (10:07):
I'll tell you my why, and my why, because it's my wife and I who the assets belong to, and the reason that we invested in real estate, it started with me while I was still single, but the reason that we've continued to and continued to evolve it is because we wanted to assure that, aside from being diversified in our investments, we wanted to assure that we would in fact have cash flow producing assets when we choose to retire. And that's the key, when we choose to retire. Doesn't have to be at any particular age, we can choose that.
Adrian Schulz (10:48):
Also, the freedom that that allows us in our mindset is we know that our future planning is finished. We're done. So everything that we do today we do because we want to. And the other is the obvious, you need to have some cash coming in for regular day to day expenses, but our future is taken care of. That's the freedom that we have by having made the decision over 15 years ago to start in real estate investing. But back then it was, oh, I want to have some additional monthly income, and very quickly learned, of course, that that is not initially the benefit of real estate.
Carla Browne (11:35):
Yeah, and that, I think people still have that thought in their mind, so hopefully we've wrapped that up in a way that people understand that it is about future income, that's why we talk about passive income, that's what we mean by passive income. I'm going to end with one quick story here and that, because you reminded me of something, is that years ago, in a different lifetime, before this one, we had a real estate trainer in our office that joined our company, and what we used to do is bring on students as they were going through course, and she would do all of their training with them and help them through the course, and then obviously they would then become real estate agents with our brokerage.
Carla Browne (12:13):
She used to tell people, in the education portion, that you're not getting into real estate just to sell real estate, you're getting into real estate to understand real estate. And her advice to them was for every year you spend in this industry, each year by an investment property. So she was trying to engrave that into people that it's not just about what you're doing in this career, it's about what you can be doing because you're so integrated in this career. So she believed in that investment of real estate and I'm sure that she, I can't imagine how many properties she still has, and I think she's now retired, so she's reaping the benefits of all of that passive income that was created. So yes, it is investor mindset, getting your why, and understanding the real reason why you want to get invested into real estate, and then look at the future and what it can bring to you, I guess is really what we're saying.
Adrian Schulz (13:04):
Now that's real property management.
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