By Neill Taniguchi
Can real estate investing provide the vehicle that creates the financial freedom to do what one wants when one wants and with whom one wants? As living proof of that possibility, our response would be a resounding “Yes, absolutely!!!”
My wife Lynda and I had both dabbled as landlords independently of each other prior to getting engaged and moving to Alberta in 2000. We began our investing journey as a couple when we sold our first personal residence in Airdrie (it was poorly built), and purchased an interim townhouse to live in while our new house was being built. Our intent from the outset was to keep and convert that second property into a rental once our new place was ready. Little did we know where renting that one innocent little townhouse in 2003 would lead us to today.
We flipped a couple properties in 2005-06 as the market started to boom, purely as amateurs that were lucky to be in the market at the right time. A realtor friend, who remains a vital part of our team today, presented us with an unlisted opportunity for a nine townhouse deal that year, forming the cornerstone in our personal buy and hold portfolio.
After reading Don R. Campbell’s Real Estate Investing in Canada: Creating Wealth with the ACRE System, we joined REIN in 2007. We had by this time established a lifetime personal goal of five paid off rental properties. To say that REIN has been the springboard and catalyst for providing the education and tools to achieve our financial freedom would be the understatement of the decade.
With our confidence bolstered by the knowledge shared at the meetings, we added cash-flowing properties even in the downturn of 2009. More importantly, the fall of that year marked the tipping point where quitting our jobs first appeared on our radar. That fall we attended the REIN-hosted Ron LeGrand’s Canadian Quick Turn Real Estate School and our cash-flow increased significantly as a result.
In the fall of 2013, ten years after renting out that first townhouse, I asked for, and was granted, a one year leave of absence from my sales manager role at Calgary BMW. Lynda had already assumed a full-time role in our business. We spent the ensuing 18 months with family and travelling, supported by both our portfolio’s cash-flow, and our staff’s continued superb performance in our absence. Within the first weeks of being away, we rapidly came to the realization that my newly-found freedom of time alone posed an extremely large challenge for my return to work. I cut the cord officially in May of 2014, six months before the full year leave had elapsed.
While traveling we learned that a cell phone and email really shrink the distance factor, and more importantly, that our front line staff are our lifeline. We trust them implicitly. Do all decisions get made the way we would? No. Is this a bad thing? No. Quite often, they are better than we are at certain skill sets. Our job is to document the processes, train, train, train, provide feedback and then get out of their way!
Today, at the helm of our own business as full-time real estate investors, we ask ourselves from time to time “How did this happen?” In a nutshell, our success stems from:
- Being trained and taught processes and best practices by REIN that now form the foundation of our business: The ROI on our membership itself is off the scale.
- Purchasing predictable buy and hold cash-flowing properties that were stress-tested from both a revenue as well as interest rate expense standpoint: Quick-turn has paid down a ton of debt; buy and hold cash-flow now funds our life.
- Having geography on our side: The latest REIN Score continues to highly rate our hometown of Airdrie (where the vast majority of our holdings are). Yes, we were also fortunate to ride the wave during the boom years (2005-07), but the majority of the re-finance equity pull-out that we realized at that time went to fund our stake in a condo development project (see lessons learned below) versus into new rental property acquisition.
- Our personalities and skill sets as a couple: I tend to work on the business (the vision/30,000 ft. view) and love finding the deal, while Lynda works in the business (managing renovations, property repair and day to day administration).
- Staying focused on our core business: Lynda brought with us a copy of Peter Kinch’s article on why to avoid the vacation property purchase temptation whenever we went away. We also read Smart Couples Finish Rich : 9 Steps to Creating a Rich Future for You and Your Partner prior to joining REIN, and were acutely aware of our “latte factor” (the unconscious spending on the little everyday things that do not add any value to our lives), consciously choosing to plow as much seed money into our business as possible. Again, see lessons learned below, and the condo development project story as the big exception).
When asked what we would have done differently, it is a short list. We would have:
- joined REIN sooner;
- dedicated more time having investors pre-established; and
- taken more time to both celebrate our wins, as well as smell the roses along the way.
Quitting Our Jobs: Incremental Steps
Becoming full-time real estate investors certainly was not the original intent when we purchased our first revenue property, or even when we first joined REIN.
I was one of the lucky ones when it came to work: I loved my job, got paid very well, and had found a great home, culture, mentorship, and team at Calgary BMW. I was going to work there until I was 75.
Our exit started when Lynda took a leave of absence from her job in 2007, intending to spend more time with family. As an early-childhood literacy resource teacher, she enjoyed seeing the results of her efforts with kids as they learned to read, and also earned recognition as a specialist in her field. However, the demands of her job were very taxing, especially when combined with our burgeoning real estate portfolio.
She quickly ended up shouldering a good portion of the load in the sales and marketing aspect of our condo development partnership, but was called back to her passion for teaching once that project wound down. She was working half-days in 2009 when we attended the quick-turn real estate school, and as we started adding houses in rapid succession post-training, the reality set in that this new aspect of our business was going to require her full time attention. Lynda left the teaching profession permanently in 2010.
Reading Timothy Ferriss’ The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich helped to plant the seeds that led to my exit. The concept of mini-retirements was appealing, and we were both dedicating so many hours to work and our business, that we recognized that we were on a short path to burnout. I proposed taking a year off, and Lynda responded favourably that we would do it in two years’ time.
A year later, her response to the same question remained: “In two years.”
To hear Lynda tell the story, on the third occasion, faced with the ever moving horizon, I “lost it”. Fortunately, our mastermind group was able to provide the right venue to table and address the impasse. They helped us to work through our fears and anxieties, mainly centred around the financial aspects of unplugging from my high-paying job, and in August of 2012, we committed to a firm date.
My one year leave of absence was requested, granted, and subsequently began in November of 2013. I had full intentions at that time of returning to work, but informed the general manager at the dealership six months in of our change in plans. Do I miss the fast-paced team environment of high-line automotive sales management? 100% yes. Do I miss it enough to go back? 100% no.
Passions are not necessarily found only in one’s career choices.
Five Lessons Learned
- On having partners: Lynda and I have learned that we have all the partners that we truly need – and that is each other.
We became 25% owners in a condo development project in nearby Crossfield in 2007, as the late capital-injection partners to the table. The build was plagued with poor initial design, a small town for absorption of the commercial space, a general contractor that became insolvent midway through construction, and to top it all off, a fairly significant change to the underlying economy during the downturn of 2009. We were fortunate to turn over the pre-sold units, and pay off the bank as the condo prices around us tumbled.
While we understand that not all ventures end up as financial winners, we are grateful that this project did not lead us into bankruptcy. We still have capital frozen in that project to this day, and the question of return on investment long ago became reframed as percentage return of While we would do business with some, but definitely not all, of the group’s individuals again, we learned that more partners can mean increased risk. In hindsight, we would also have done way more due diligence to find answers to questions that we didn’t even know to ask at the time.
- On owning properties outside of Airdrie: While REIN has long extoled the virtues of long-distance investing, Lynda adopted a phrase a number of years ago from one of the Members that resonates with us to this day: “I like my trouble close to home.” Use as a highlighted quote.
Early in the quick-turn chapter of our investing life, we bought an estate house in southeast Calgary’s Deer Run. Although it was only eleven minutes south of where I worked at Calgary BMW, out of sight was out of mind, and the property languished both unloved and unsold. We sold it after a number of months, making essentially enough to offset our short-term, high-interest private finance costs. (The sub-lesson was also that we should have renovated it instead of attempting to wholesale it). That said, we have met numerous folks in REIN throughout the years that do very well with out of town properties, and it is an individual decision.
- On mindset: It is everything. The old Henry Ford quote “Whether you think you can, or think you can’t, you’re right” is as succinct as it gets. We cannot overstate what having the correct mindset, or inner dialogue, has meant to our success. Changing “I can’t” to “How can I?” instantly reframes our existence, and has allowed us to move forward.
Having a support network that understood and supported our Belize was absolutely crucial to helping both set and maintain our mindset. When we first started quick-turn, we joined a mastermind group of like-minded seasoned REIN members. For three years, we consistently met once a month for the weekend. They were instrumental in helping us achieve the final separation phase from our J.O.B.S.
- On money: It is truly in abundance: REIN and Russell Westcott introduced us to the concept of the Joint Venture. Joey Ragona, a REIN guest speaker, further elevated our game, pointing out the not so subtle difference between advertising that one needs a JV investor and instead stating that one has a limited opportunity for the right JV investor.
We have found, in our immediate circle of friends and acquaintances, that they almost all universally are searching for a rate of return that is consistent, easy to understand, and with less risk and gut-wrenching roller-coaster-like behaviour as witnessed in the stock market. Our top investor couple has done eight houses with us to date, and we count sixteen separate investors that have placed their trust in us.
We have the confidence today to go out and buy a property on cash terms, knowing that the short-term money to pay for not just one, but multiple purchases, is but a phone call or two away in within our established network.
- Never stop learning: As we near our eight year anniversary as REIN members, there is still new learning and knowledge to be gained and implemented. The market is constantly evolving, as is the economy that drives it. We had to hire a bailiff this past spring to help with an eviction for the first time ever, proving that we need to stay on top of our game.
As taught to us by REIN, we will continue to watch the local market and underlying economic fundamentals. REIN’s infamous curve that relates GDP growth/contraction to housing prices has just flipped for the first time in a number of years, which translates to buying opportunities being on the horizon. Even in this time of uncertainty, we will certainly still chase low-hanging fruit. We have just closed on a house that needs only minor work (minimal hail repair, yard detailing, plus new paint, carpet and laminate) with $50-60k in profit after repairs.
We will have investors teed up and ready to go to act on said opportunities as they arise.
Given the economic uncertainty, our rent-to-own inquiry traffic is reduced, but not gone entirely. We have considered outright rental (without the option to purchase) of some of these properties in the interim to reduce vacancies and maintain cash-flow, albeit at a reduced but still positive rate.
We plan to spend January and February in Puerto Escondido for our third consecutive year, followed in March and April with travel to places as yet to be determined. All of this freedom of time is attributable to our real estate business and REIN.
As I write this article, we have recently attended the REIN Multi-Family & Commercial Investing Summit here in Calgary, and the timing could not have been more fortuitous. To say that I took copious notes would be an understatement. The desire to migrate our office out of our house, combined with both demand and a noticeable lack of office space in Airdrie, has led us to diversify our real estate investing portfolio again. We are currently re-developing out a 1577 square foot commercial condo bay to convert it into shared office space.
We are also doing our due diligence on an 8600 square foot light industrial/retail Airdrie property that, before negotiating, has a 7.76% cap rate. The advantage and appeal of triple net leases has definitely caught our attention.
The conference also was a good reminder of the doors that REIN opens. We saw some of the ‘old dog’ established veterans that we hadn’t seen in person in a while, and perhaps these renewed relationships might lead us to deals where we become the investor – which dovetails neatly with our end goal of simplifying for increased freedom.
Interesting times indeed!
Lynda and Neill Taniguchi are full time property investors in Airdrie, AB. They cut the cord to their jobs in stages: Lynda left her teaching job in 2010, and Neill’s transition from sales manager began with a leave of absence from Calgary BMW that became a permanent departure in 2014. They enjoy spending their re-allocated time with family and friends, and have also traveled on extended trips to Mexico, Central America, and via RV to the Yukon and Alaska.