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SHOW NOTES FOR EPISODE 307: BEST OF OLD DAWG’S REI NETWORK PODCAST – BUYING STRATEGIES FOR TODAY’S REAL ESTATE MARKET
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After 10 years as a successful real estate broker, Seth Ferguson realized that the people making the real money in real estate were the real estate investors, not the brokers. So, he set out to learn that “certain set of skills” successful real estate investors have. In this episode, Seth shares how he was able to learn real estate investing, while leveraging skills he acquired as a broker, to strategically position himself with a goal to acquire one billion in multifamily properties.
What You Will Learn
- The importance of getting legal advice FIRST before adding people to deeds and other legal documents
- Why multifamily investing is better than single family investing
- How to develop an investor base from scratch
- What kind of people are the best new investors
- Why it’s important to find mentors
- The real estate investing market in Canada
- How to get an infinite return-on-investment
- The power of knowing how to acquire the right data
- Why it’s never to late to start investing in real estate
About Our Guest
Seth Ferguson
Seth Ferguson has more than a decade of experience in high-performance real estate. As the President of ALBA Capital Group, he partners with investors to acquire and improve multifamily properties in key growth markets. Seth speaks about various real estate topics and strategies, and is the host of Purchase to Profits where he interviews successful real estate investors. Seth also holds his real estate brokers license in the province of Ontario and was thrilled to publish his first real estate book, Sell For More, in 2018.
Interesting Facts: Seth is a former professional and junior hockey referee; plays the bagpipes; is a huge history nerd.
More About Seth
- Was a full-time hockey referee with aspirations to make it to the NHL
- Got involved with real estate because of his father
- His dad purchased a brokerage in outside of Toronto, Ontario in Canada
- He started selling real estate through his father’s brokerage part-time while he worked in hockey
- After about 10 years he had built a successful brokerage
- Over time, he realized the people brokering the deals were not the ones becoming wealthy – it was the people buying the properties who were getting wealthy
- Started learning about real estate investing from successful investors
Becoming a Real Estate Investor
- Started buying single family residences/homes (SFRs) in Milton, Ontario
- Bought 4 SFRs
- He found that SFR investors run into a “capital wall” at some point
- It’s difficult to grow fast with SFR homes because access to capital does keep up
- Mortgage lending is tight in Canada right now as well, especially if you don’t have a T1 (like W2s in the US)
- Also, there is a bank limit, as in the US, limiting investors to 10 houses max per investor
- Some of the successful real estate investors he knew were using multifamily investing to scale their business in ways that really isn’t possible with multifamily
- He knows investors that have 86 SFRs all over the place and it’s harder to manage than a single multifamily property with 150 units, for example
- He saw more promise with multifamily in terms of scalability and being able to leverage investor capital
Raising Capital
- He is actively raising capital and meeting Accredited Investors – he wants to have $2-4 million committed before he seeks to acquire a property
- He has partnered with some experienced multifamily investors
- He has been leveraging his network – it’s like any kind of sales. You’re seeking warm leads first from friends and acquaintances that know you first
- Because of his brokerage, he had built up a pretty good network over the last 10 years
- He’s leveraging his real estate expertise and sharing with everyone in his network what he is doing and how he is moving into multifamily
- There are people who always knew real estate is a great place to invest but never got the opportunity – these people don’t have the expertise but want to take advantage of the opportunity — these are his best investors
- “Just because someone is an expert real estate broker, doesn’t necessarily mean they are an expert at real estate investing”
Real Estate Investing Climate in Canada
- Single Family Market
- The market peaked in the Spring of 2017
- Last year sales volume was at a very low level
- Prices had eased up
- Depending on your sub-market, you could be in a buyer’s market
- Now’s a good time for investors to buy
- Multifamily
- Cap rates are extremely compressed
- Some multifamily is selling at 2.5 cap rate
- The key market drivers and fundamentals are solid but the sheer population growth and in-migration for the next 20-40 years (in Toronto) is huge (200,000 a year)
- Despite that, he is looking heavily at Houston, TX
- Building relationships
- Underwriting deals weekly
- Once he reaches his financial goal, they will seek to acquire
- His investment criteria
- Over 100 units (150-250)
- Value-add
- Light rehab
- Needs new management
- Current challenges
- Multifamily market is very heated
- Great deals are few and far between
- He is leveraging his contacts with local brokers
- He’s leveraging his partner’s experience to connect with brokers
- You can’t just buy the first thing you see
- You need to be patient
- You need to be aggressive seeking out good deals
- Need to be more conservative
Biggest Mistake
- Not speaking with a lawyer before adding someone on to properties
- He had a messy situation
- He had a partner out some bank accounts and a lot of money
- It was easier to put the properties in their personal names to qualify for the mortgages and save time
- Real estate deals can go south
- Partnerships can go sour
- You need to have a proper legal structure to protect yourself
Biggest Success
- Just taking the leap – taking action!
- In real estate sales, he saw it. People said they want to learn, he directs them and 3 years later, their still doing nothing
- He’s seen analysis paralysis
- One success he learned is “The Power of Leverage”
- Buying the right property
- Do the right renovations
- Put the right tenants in place
- Refinance that property
- Use the equity to buy another property — without taping into your own cash
- That’s the beauty of leverage
- Your return-on-investment is infinite at that point
Personal Gifts and Skills
- Knowing how to acquire the right market data.
- Before he invests, he looks at market factors like…
- Vacancy rates
- Sales volume
- Key market drivers
- What really fuels the local real estate cycle
- And more
- And he uses that data to make buying decisions within that market
- Learning those things allowed him to move from single family investing to multifamily
- You will never have 100% of the data you need but you can have enough to make a good decision
- Before he invests, he looks at market factors like…
- You also still need street smarts
Advice
- First, know that it’s never too late to get started in real estate investing
- As a young guy (32), he is looking to do amazing things in real estate in the next 5-10 years. What is the difference for someone starting at 60? You still have a lot more time than 5-10 years!
- There are deals out there every day. It’s just a matter of finding them
- When you’re looking at deals, always have your “angle” in mind
- If you’re looking at retiring in a couple of years and living off that cash flow, look at the deals and the structure of how you build your portfolio that will let you accomplish that
- When alot of people get started in real estate investing, they don’t have a plan and just start acquiring properties willy nilly, without any real structure or plan
- Work backwards
- Say, for example, “After 5 years, I want to live off of $10,000 in passive income.”
- Look at what you have to do and what properties you have to acquire to make that happen
- Work backwards
Current Business Goals
- Short Term Goal: Wants to have a multifamily deal (100 plus units, up to $4 million raise) under contract by July of this year
- Long Term Goal: Wants to have $1 billion in property under management in the next 10 years
Rap-It-Up
- Favorite real estate book: The Millionaire Real Estate Investor by Gary Keller
- Favorite business book: The E-Myth by Michael E. Gerber
- Most valuable web site for success (other than your own): BiggerPockets.com
- Favorite app: Google Calendar
- Favorite quote: “If you think it’s expensive to hire a professional, wait until you hire an amateur.”
- If you had to start all over, knowing what you know, and you only had $1,000, what would you do to launch your real estate investing business? I would use that $1,000 to build a platform where I could share my knowledge with other people for free. At some point, it will come back to you 10 fold.
How to Reach Seth
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