29 – Cash Flow Does Not Make You Wealthy

Episode Summary

In this episode, Quentin talks with a member who immigrated to Canada 10 years ago and is looking to get back into real estate investing. He is working on a triplex in New Brunswick and also looking at properties in other provinces because of the cash flow potential, we cover how cash flow will help hold on to it, but it will not make you wealthy.

The member shares that before immigrating to Canada 10 years ago, he bought an apartment in the UK. he rented the apartment, and it has been positively cash flowing. After a bad experience with private lending, he moved away from real estate. Now, he is considering taking the money he had against ETFs and stocks and putting it into real estate for better returns, and just had his offer accepted on a triplex in New Brunswick. He is looking to learn about the due diligence process and grow his network as well.

Quentin suggests that the bi-monthly Q&A calls are a great place to learn, share and network with other investors in the area. The member shares that his motivation behind investing in the New Brunswick area was the better tenant rules, lower purchase price and higher cash flow, as he is looking to get out of his 9 to 5 sooner and build up that passive cash flow. Quentin adds that “cash flow is not going to make you rich. It will help you to hold on to an asset, but it will not make you rich. You need to make sure that you’re also getting some appreciation.”

He further suggests looking at other markets around Ontario that make sense and are in a good positive cash flow market such as Kingston, Peterborough and St. Catharines. Quentin also recommends going through the “Your First Three Properties in Real Estate” course, as it will help him find out which areas, he should invest in. He adds that there’s always a reason why you have higher cap rates because usually there’s a risk. Cap rate is based on the asset price, the asset location and the interest rate. He suggests comparing the debt against the asset versus the cap rate. He further advises “I want you to go back to the street that you purchased your triplex on, talk to a realtor in the area, get the last 10 years of appreciation on that asset on the property that you purchased…you will get an average appreciation rate over the last 10 years.”

Quentin adds that cash flow will help you keep the asset. It will also help you to leave your 9 to 5 but appreciation will make you wealthy and you want to be able to have both. He also suggests talking with investors during the Q&A calls and discussing their cash flow numbers in the areas that they are investing in. On the subject of whether multifamily buildings are a sound investment, Quentin says that “the key is if you are going to scale just make sure that you include all your maintenance repair vacancy and property management into your calculations…”

He also adds that if he bought two newly built fourplexes side by side and the titles merge, he might be able to get commercial financing on the property. As it’s a new build, there are some benefits to that. Quentin suggests looking at getting two together and then getting commercial, like CMHC financing, which on the new build would be impressive.

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