Summary – Transcript
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The amount of debt that I had at that time seemed like an insurmountable amount of money that I would never be able to pay off in my lifetime, and I thought, if I go get another degree, I’m going to be to far in debt. So I went and got a job at the phone company.
A good friend of mine, his mother was a manager, for those of you in Canada, at Telus back when it was Alberta Government Telephones. So it was government, it was union, paid really well. After a little while being there, I bought my first house to live in, because my parents were really encouraging me, buy, buy, buy a house. Don’t rent. Buy. So I did that. Great. Thank you. Thank you, mom and dad. That was great advice and I did.
Shortly after I bought that home, a mortgage broker that I use called me up and said, “Mike, if you want, you’re making really good money. If you want, I can get you another mortgage if you want to buy another home.” I’m going “Another home? Why do I want another home?” I wish I got that call like every day because I love to buy… Anyway, I don’t get those calls anymore. But he said, “You buy the home. You put tenants in place. They pay down your mortgage. 25 years from now, that home is free and clear, and the money that comes in every month is gravy. You’re going to have all this equity and that’s your retirement.” I go, “Okay, that kind of makes sense.”
So back in those days, I didn’t have a single clue what due diligence you’re supposed to do as a real estate investor. I just bought something that looked pretty and that was close to where I lived, so that was easy to collect rent. And that’s what I did. I put a tenant in there. They luckily paid most of the time. I went and collected my own rent, which don’t ever do. We’re going to talk about that. Don’t ever be your own property manager. A couple of years after I did that, the market in Calgary took off. My principal residence went up quite a bit. My revenue property went up quite a bit. And all of a sudden I was sitting on all this equity, which as a kid in his mid twenties was a lot of money back in those days for me.
I remember thinking to myself, over the last couple of years, I’ve made this much at the phone company and I don’t really love it. It was okay. I mean, it paid better than being a student, for sure, so I liked that part. I like getting paychecks. But I made this much at the phone company. I made this much in real estate and I don’t even know what I’m doing in real estate. And from that point, I was hooked. I basically went and quit my job pretty soon after at the phone company. Don’t do that. If you’re just starting, don’t quit your job today, please. Because I also found out that when you quit your job, all of a sudden you don’t get mortgages anymore and that mortgage broker stops calling you saying, “Hey, we can get you another mortgage.” So anyway, that’s another story for another day.
But the more significant thing I did was I went and I told my parents, “Listen, this law school thing, this is your dream. That’s not my dream. I’m not going to law school. That’s not what I want to do.” And I remember just my mother was just saying, “Mike, go get that second degree, so you have something to fall back on, and then you can pursue real estate. And if it doesn’t work out, then you’ll have that other degree.” I go, “No, mom, I’ve got this figured out. I know everything there is to know about real estate. You don’t need to worry about me.”
And that was that, I was set. Once I saw that first paycheck, I was hooked and I knew this is what I wanted to do for the rest of my life. Now the only problem was, remember when I bought that first property, that was meant to be a 25-year hold. Well, now all of a sudden, I had a lump sum of cash, but I didn’t have any money coming in every two weeks like I did before, and basically thought, I’ll just figure out. I mean, if I obviously got this big paycheck, I’m obviously the god to real estate investing and I’ll just figure it out as I go.
Well, what happened next is I went and bought another property using pretty much the same due diligence techniques as before, buying something pretty, close to home. And it turns out when you do that, those don’t necessarily make good flips that you can just turn around and flip a few weeks or a few months later to make a paycheck. And to make a long story short, that deal turned into a big nightmare where I lost a lot of my earlier profits. I realized for the first time that this isn’t as easy as it looks. The first time I was taking credit for something that had nothing to do with me. I had gotten lucky. My timing was good. The market, well, it went up tremendously in a very short amount of time and it had nothing to do with me. And for the first time I had to admit to myself that maybe I’m not the god of real estate investing. Maybe I’m not this expert yet.
And so, it would have been really easy at that point to just give up and say, “Okay, screw this. My parents are right. I’m going to go back to law school.” But I was in my mid twenties and it was very difficult for me to tell my mom that she was right and that I should have gotten that second degree. So, I basically went and decided I’m going to figure this real estate thing out no matter what, and I basically hired a mentor. It was somebody who was already doing flips, because I was going from this long-term 25-year hold to all of a sudden trying to flip homes. Those are two very different strategies. I didn’t realize that back then. So I found somebody who was already doing what I wanted to do.