Sarah Larbi: REITE Club community, welcome back to another episode, and I am here with my co-host today, Francois Lanthier. Today's guest is Andrew Hines from the Andrew Hines podcast, and we had a great conversation. He's actually starting to invest in Florida. He's been there for the last three months.
We have a great conversation about some of those differences that brought him to start diversifying in a different country altogether. Enjoy today's podcast and don't forget to leave a rating and review. Let's bring in Andrew Hines. Andrew, welcome to the show. How are you?
Andrew Hines: Good. Thanks for having me.
Sarah Larbi: I'm excited to have you now you are and have been in Florida for the last three months and have been living a much more normal life than we have here. And I am a little envious though I'm at the cottage this week. But for those people that may not know who you are, can you give us, say, a 30,000 foot view on how you got started in real estate investing in the first place?
Andrew Hines: Okay. Yeah. So I started as a younger kid, realizing that the normal path didn't make sense. I heard my parents disagreeing about money and I'm like, Hey, I want to figure that out when I grow up. And so I went to school and then while at school I saw my friends in these townhouses outside the gates of Western and they're paying $500 a bedroom, and there's 80 bedrooms on that corner.
I'm like, holy crap, this guy's making a lot of money. I need to do that. And so student rentals were ultimately my goal. And it took me a little while to get there, but after a few hiccups, I finally started investing in student rentals in 2015 and doing the BRRRR model, eventually incorporated a company and started actually selling them as a kind of purpose.
Purpose rebuilt investments and started a general contractor company. Never thought I'd go there, never thought I'd do that, but I was renovating my own properties and I got asked to do others. So now I'm building townhouses. I've built custom homes. Just a lot of things that I never thought I'd do, but that's how it goes in this business, I think.
Sarah Larbi: Absolutely. Now, you were on my podcast before and you are really good at BRRRRng the student rentals. And I remember you were adding bathrooms in each room and were able to get a higher rent, which is awesome. But let's fast forward to what's happening, I guess in 2020, 2010, 2021, in regards to student rentals. Like what are you seeing in your properties right now happening and are you pivoting at all?
Andrew Hines: Good question. So I actually and being I guess I'm trying to think of the right word here. I'm really attempting to be ahead of the curve here where if something is going to happen in student rentals, I'm going to be hedged against that.
Student rentals were the majority of my position, so I decided to divest out of some of that. So far so good. Quite frankly, like everybody's renewed, I have not missed a payment of rent. Like for the record, I have always thought student rentals were by far the best investment. Like I, obviously biased, but to me from a management perspective, for so many reasons, so much better than our regular residential rental.
That was based on the notion that whether the economy's up or the economy's down, people go to school. That's all changed. So I think the biggest thing that we have to acknowledge about the last year and a few months is that all of our previous assumptions need to be challenged. And what we thought was one way may not be, and I no longer think student rentals are the guarantee they used to be. We've been given this opportunity to react and anyone who has student rentals, if that's the majority of your position and you don't feel totally comfortable with that, you have the ability to make changes now cause the market's still very strong for student rentals.
Francois Lanthier: I've found as well, I don't have student rentals per se, but I do have some places that are more student friendly, I guess you could say. The students I'm finding are different. They're older, they're more like PhDs, they're completing a degree. They're still international students in Canada, even during the pandemic. But they arrived here years ago. So they're finishing, I don't know, fourth year. So I don't know if that's something you're seeing as well. They're, they have a card. They're older, like to me, I don't know, 25 and a different crowd.
Andrew Hines: You know what? I haven't seen that. But what I've noticed is the students I have, they didn't want to go home even though school wasn't happening in person and they were just doing online classes. They still wanted to be there.
I think that would persist. A few years to come, even if school wasn't going to come back in full swing. But I have started to see a little bit of it. I had one student say I just can't afford to pay rent when I don't need to be here. And she just found somebody to replace her on the lease.
Anytime that's happened, I've just found somebody to replace them. I just subbed the new person in, into the lease. So that's all been when well, and good. As I said, there's no cause for alarm just yet. I'm just thinking ahead. I think that this is changing the dynamic in Ontario.
I don't think Ontario is the same place it used to be, and I think that there's going to be a lot more online learning. So even if that decreases demand for student rentals just a bit that means there's less demand and the same supply. So prices are gonna go down. The marginal rentals are not gonna get rented the same.
That probably wouldn't affect me nearly as much because I've always aimed to have really good products like standout amongst the crowd. But for anyone with marginal rentals that are far away or not in a great location or not a great product now might be the time to consider selling.
Sarah Larbi: Absolutely. And then like you said, if you have something different that's not cookie cutter, like every single other investor, you're gonna stand out and you're gonna have an easier time. And, I just keep going back to the bathrooms and with every single room, having an en suite and being able to get, instead of 500 bucks a month, you were, 850.
Probably more depending on what it is. If I was a student, I probably wouldn't want to go the cookie cutter route. I would say, I'm gonna go into something where I can have my own bathroom. My own Basin and all that good stuff. So what are you? It doesn't seem like it's affected you quite yet, but what are you now focusing on and buying these days to keep scaling? Or are you just enjoying your time in Florida?
Andrew Hines: It's been a bit of both. The last three months have been, I've sold a few properties, I've refinanced the couple. So I've put myself in a position where there's quite a bit of cash to be deployed and I'm looking at new construction down here in Florida.
That's been my game. So it's the thing that after three months here of going to real estate investor meetups and networking with people it's what's felt the most a plan that makes sense to me. I really like the fact that they're fully open down here in Florida things are moving along.
A lot of people are moving to Florida. So I think I'm bullish on this market. I think that values are gonna continue to go up and I think that Florida's sort of at the early stages of what happened in Ontario, late 2016, early 2017, where it really started to heat up. That's really happening right now down here.
Trying to get on that train. So new construction makes a lot of sense to me down here. I'm looking in Cape Coral. Which is in southwest Florida. And you can still buy lots of, under $30,000. And you can build something like an 1800, 1700 square foot house, three bed, four bed, two bath, something like that with a pool.
Like that, screened in, covering and be in for, say 300,000, maybe 310,000. And that could be worth close to 400. So those are the kind of numbers that I like from a burst standpoint. I think there's a lot of room to grow there. So that's where my head's at right now. And then of course, I'm just adjusting as I go.
Francois Lanthier: How's the price of lumber ? Or do they use lumber?
Andrew Hines: They frame cinder block, the entire shell of the house is cinder block. The only thing they really need to use lumber for is the trusses at the moment. But If we could figure out a solution that's equally strong for trust as we could even get away from it there.
Yes, you are, you're definitely gonna be impacted by lumber. They are still framing interior walls with lumber, but that's an easy pivot over to aluminum studs. Like in apartment buildings, everyone uses aluminum studs and insurance companies like that more. Anyway I don't think that's gonna be too much of an issue.
Sarah Larbi: Awesome. I was looking at your Instagram a little while ago and you were actually talking through finding land and making sure that there's connections and utilities nearby, cause that could be costly even though the price of the land is 30 grand. Can you expand on that?
Andrew Hines: The biggest concern in Cape Coral as I learn more about this so in Cape Coral you'd have to dig into the road anyway, so that's gonna cost you a bunch. So to put in a septic and well is roughly the same. What you don't want to get into is if you buy a lot in an area that's got the sewer pending, they're gonna bring the sewer. Down your street, and then you're going to have to connect within two years. So you might have just spent, say, $20,000- $25,000 on a wellins septic, and then they're gonna force you to connect to the city, and you're gonna spend that money all over again.
When you can buy a lot for 25,000, if you're gonna get a tax assessment for 25,000, when they bring in the sewer down your street. That's not something you wanna deal with. And I know even in Ontario, people have dealt with tax assessments, although it's not as common, but down here it's a big thing to watch out for when you're buying. You don't wanna buy on a street that's about to get a sewer, cause you're gonna have to put in a septic and then you're gonna have to replace it.
Sarah Larbi: Absolutely. Great point there. And just as you're going in and you're expanding and you're getting out of Ontario and buying elsewhere in the US specifically, what are some things that you're finding out?
Maybe some challenges or maybe some insights that you can share with somebody saying, I'm considering it as well, just looking outside of Ontario into different markets, whether it's Costa Rica or the US or whatnot. What are some insights that you've learned along the way?
Andrew Hines: There's a number of challenges that you gotta think about, right? Cross-border investing is something I've done before, and that means you've got two tax filings. That means you're gonna have legal entities in the US like an LP or an LLC. And you have to talk to a tax expert that does cross-border, that understands the impacts of the tax treaty between Canada and the US.
Cause if you set your entity up one way in the US you could be getting double tax. So there are ways of setting it up where you wouldn't however, if you were planning to say, relocate to the US and get something called an E-2 Visa, which is an investor visa, that would allow me to stay here full-time and I wouldn't be limited to the six months and I could actually operate my business.
I could manage my business if I were to do that. Then I might wanna set up my entities differently. So you have to have an entire plan if you want to come down here and invest, and you definitely need experts on your side. The funny thing is I used to be the guy that wanted to do everything myself and figure it all out myself.
When I got into investing in the US the first time around, I realized, okay, I need a really good accountant. I really gotta figure this out. After a couple little hiccups, I realized the error of my ways. I've held that lesson through and I think that for anybody who's thinking about it, start with your account and talk to them.
If you want to go the investor visa route, find yourself somebody who's really good at working with Canadians and works with real estate investors, because real estate's not an easy thing to get an investor visa. What I've learned is they want, they wanna see like an all cash investment.
They want to see, they don't like it when you borrow, which is tough for a real estate investor. So they want to see you investing a significant amount. So I've structured a plan that I'm gonna be applying for to get that visa and basically I would be Showing them that I could build in all cash.
It helps that I sold a few properties so I can basically have an inventory of lots and then be able to put some money and trust with a lawyer to cover contractor bills and draws as construction progresses. So that's my angel right now as to what I think I'll do, and I may need to revise that.
I'm working with an immigration lawyer down here, so in E two doesn't mean I have to relocate, but it gives me the option to, I can stay in Canada or I can move as a tax resident to Florida. And it's just a matter of where do I spend more time? If I spend more than six months in the US I can be treated as a US tax resident. My understanding, not tax advice. Guys, see your accountant.
Francois Lanthier: That leads me to my next question: financing. So you mentioned a lot of cash. Have you looked at financing options? I know it's very different compared to Canada, so I don't know if it's something you've explored, especially with the networking. I'm sure you've met mortgage brokers and.
Andrew Hines: Yes. So for financing, it's definitely doable. Just go to your local REIA, like they have the meetups they have down here, they call 'em REIA real Estate Investor Associations, and you'll find them. The guys come into the room, then, hey, we help people flip. We do 80% financing. One guy even says he does a hundred percent. I said, Hey what difference does it make for me as a Canadian? He says we'll cut you back 10% on the loan to value. But they don't care that I don't have a social security number. They'll still do business with me. But they wanna see my track record.
I have to prove that I'm competent and know what I'm doing. But it's still totally possible. So those people who say, Canadians can't do this, I don't buy that. Think about how many more lenders there are in the US compared to Canada. There are so many more options. So as far as rate wise goes, I've been quoted on a passive rental somewhere in the ballpark of 6%.
If I just had a rental property, Six on a 30 year amortization, so not nearly as good as Ontario with our 2% interest rates, but at the same time, like you're getting better rent ratio against purchase price down here. So it's possible up in the Tampa area to get the 1% rule. So even if you are paying 6% on your mortgage, that's still quite lucrative for many.
Sarah Larbi: Absolutely. If the deal works at 6%, then you know it's not that expensive. And in comparison, right? Yeah. If the deal doesn't work, even at 6% you probably shouldn't do it. You always wanna assess your stuff.
Andrew Hines: Then once, if you do go the E-2 route, you can get a social security number in the US and then you can apply as a resident and then you can get much lower interest rates. So even to do the visa for that route. Again, not advice, look into it, but , that's something that I'm considering as well.
Francois Lanthier: There's something about buybacks with mortgages and stuff. I've been delving into it and I guess you were able to put in more cash and then the interest rate goes down, but then it's more cash intensive.
Andrew Hines: Really different. And that makes sense that there would be, cuz again they're just analyzing their risk position. They have a lot of non-recourse loans down here, which means they can't hold you liable personally. If you default it, they take the property. So if they get very squeamish when they know you're not even a resident in the US you might just bail on your property. So that's why they adjust their loan to values down. That's just my understanding of it so far.
Sarah Larbi: That is interesting. And Franco has also purchased a few in the US as well. So he's been working with US properties and I think you got some good birds going on.
Francois Lanthier: Absolutely. So that's why. But Florida's my next goal. I guess we'll have to meet up in person. We never met in Canada, but maybe we'll meet in Florida.
Andrew Hines: That sounds great. I throw this invite out there if I'm down here. Obviously by the time this airs come on down, the company's fun. It's more fun to have more people down here. And I'll just say I've had so many people reach out to me saying, Hey Andrew, have you looked into getting a visa down there? I'm like, yeah, I'm doing that right now. They're like, we want to come down. So many people, savvy, real estate investors in our community are saying, yes, we are looking to get our visas and potentially relocate.
They wanna be investors down here. I think, this last year in Ontario was really, I taught a lot of people some unfortunate truths about Canada and where we stand right now. And right now it seems like it's a pretty great opportunity to be down here. So I'd love some more company. Come join the fun.
Sarah Larbi: Absolutely. I will say though, that I'm quite surprised with how Ontario handled the whole thing, but I'm also more surprised, if you look back at a year and a half ago would we have thought that the market would've gone so crazy and in most markets gone at 40%.
Again, that this is an anomaly, and without having a curse of all, nobody knows. But what do you think is happening? I know you, Andrew, you do a lot of digging and searching and trying to figure out meanings of different things. But what can you tell us about some of the research that you've done on this crazy market and what you think might happen?
Andrew Hines: I think that there's just so many contributing factors that have driven up Canadian real estate prices. At the end of the day, it's all supply and demand. So we have to look at the factors that restrict supply and then also overstimulate demand. So on the demand side, we have got international investors with no restriction.
Anyone from any country can come in and pretty well buy in Canada with no restriction. Canada's seen it as a very safe place. It's seen as a very safe place to store money. It attracts people on that front. But then we have immigration that's going crazy. Even Justin Trudeau's announced 1.2 million over the next three years people coming into a country where most people want to go to the Toronto area.
Vancouver area, or Montreal. And so when you have so many people who say, pouring into Ontario and all going to one location, our planning process is really slow. It's really hard to get approvals to build new properties. And then you have all these restrictions with the green belt. And then you want to add onto that, that it's getting very difficult with the covid restrictions to get lumber because they've shut down mills.
Pretty well. Every supply chain is compromised across the board driving prices up. So when the price of new construction goes up. That's going to drive the price of resale up. So all those things are this chaotic, perfect storm. And then you add on the fact that our government is basically printing money at an alarming pace, an unprecedented pace.
They're dumping more cash into an economy that has less in goods, less goods and services available. And when you combine all that, so now, so if there's less goods and services, but more dollars, that just means prices go up. So we've had a combination of all these things happening all at once, and I don't see them stopping.
Unless we have something that causes a major correction in demand. There is going to be a plateau where prices just get outside of affordability for the average Canadian. And then what we're gonna see is more people occupying smaller units. So smaller units or two families move into a three bed, two bath and use double the utilities but saving space.
I see eventually going that direction in Ontario smaller and more and more people cramming into smaller spaces so that they can afford it. But who knows where it stops, but those are the factors that I see contributing to it. And sure there could be a big correction at some point. If something severe enough happened to the economy, that it rocked people's confidence and said, okay, if I've got a little bit of money, I better hang onto it. That could correct demand. And then we would see prices fall. It could happen. We could see a massive correction. We could see no correction.
We could see a stagnation, or we could see things just continue on and maybe just at a slower pace. But there's no way we can continue at 30%, 40% sustainably unless something really bad on its way. speculation. I love talking about this stuff. Trying to figure out what's gonna happen so that we can position ourselves to win as a result of it, right?
Those who hold assets when inflation happens, it actually helps us. It's helped me. I'm sure it's helped you, Sarah Francois. It's great when you have assets. It's unfortunate for those who don't. But if you're in that position, now's the time. Get into something that cash flows and make sure you're ready to hold it long term.
Francois Lanthier: You mentioned something very interesting on your podcast. So for any of those who listen to your podcast, like creating value, a lot of people are not creating value right now, and I think that's why this is not sustainable at all. Like salaries are not going up. We're not, yes, we are producing some stuff, but not nearly enough. I wonder where that's going too. I don't know if you have any insights on the job market.
Andrew Hines: It's hard to work when government won't let you, right? I have multiple people who can't come to work right now because they're under stay at home orders because they came into contact with somebody. When that kind of thing happens it's gonna create a challenge. But I heard the statistic, and I'm trying to find where I found this, but basically only 20% of Canada's population is actually producing goods and services. aka not working for government and actually able to work.
Right now only 20% of all people in Canada. So that means all 100% are consumers, but only 20% are creating. Value that is a recipe for disaster. That means 20% of the population of Canada props up the rest of the. Because governments just consume value. They don't actually create value, they redistribute and consume.
We've gotta get back to a place, if we could get back to a place where nearly 100% of the population, or we'll call it 80% we're producing goods and services Think about how much lower taxes would need to be. We wouldn't have all these needs for support. People would be able to support their own families. They wouldn't need government intervention. My macro look at is the government has just gotten way too big, way too many services being provided. And I think if we were to learn something out of this last year and half in this reckless spending, this craziness, think about any of us we make, say we make $3,000 a month and we decide where we're gonna spend it.
How long until you're bankrupt, right? Like you got a few months, a year , yet the government can do it for decades at a time and never stop and never be held accountable. I'm hoping we see something change on that front because I just don't see how this could be sustainable going forward.
I think that if we stay on this path, it leads Canada to be a second rate nation and a third World Nation. We don't wanna be like that, I'm very proud to be Canadian as I grew up, but I'm certainly not proud of our government. I'm really not proud of what's happened.
Sarah Larbi: I think it's it's quite unfortunate and without getting into the politics and stuff like that, I wouldn't have expected that from conservative premier, but, I think part of it is somebody's, pulling the strings and, I think he's becoming more and more the puppet and, comparing that to where you are with a premier somebody that's leading the, Florida, the state of Florida that is actually able to, stand up for the people.
Again, not everybody is going to agree with what we're saying and I don't wanna get into politics per se. But wherever you were standing, at some point you're gonna, there's no reason why we should still be in this a year and a half later.
Andrew Hines: I think at the end of the day it's an abstract discussion, if no man or woman has more rights than another, then how does 100 men or women in a legislature have the right to take away the human rights of another?
I think the big thing that we've forgotten is that we all assume risk every day. We assume risk when we walk outside the sidewalk. A car could jump the curb and kill. If we get in a car, we can get in a car accident and we've got a death rate associated with that. We could get struck by lightning.
There's a million things. To live you must assume risk. And what our government's tried to do is say we can make you safe and we can take away that risk, but we're gonna take away your choice too. But that's not what it is. To live is to choose to take the risk in order to live.
Things have really changed. And maybe it's easier for me to say that being down here in Florida, cause that's just what the government did, said you make the choice. You wanna stay home? Stay home. If you want to go out and they're doing okay. Like they're doing just fine. Cases have been on the decline or stagnated which is interesting, right?
Because, I think they're only about 27% vaccinated down here which is similar to Ontario, yet fully open. A UFC fight just happened the other day about a week ago. And they packed it. 15,000 people. So just a different world. And this just means to me we need an open discussion, there's always two sides to the debate, but we're not being allowed to hear both sides.
Sarah Larbi: We're not balancing it out.
Andrew Hines: Exactly. Let's hear both sides.
Sarah Larbi: The doctors, let's look at the doctors, like from a mental health standpoint. Not just specific doctors for, from a different or one specific.
Andrew Hines: Exactly. Just balance.
Sarah Larbi: Let's go back to inflation for a second. Cause I know you mentioned governments and printing money and it's not like we could just create more money ourselves, but the government seems to be doing a lot of it. And what are some of the risks? And you've probably done some research but hyperinflation and creating inflation very quickly by printing a lot of money can be very dangerous. What are your thoughts?
Andrew Hines: If you made a great point there, if you or I were to create money in our house or create currency, we'd go to jail for a criminal offense yet the government can do it like they can just do it as much as they want. And it's called economic easing. They create these nice names to make it sound like it's easing success, or they give it to you. They say we're creating a benefit for you . Don't worry about the fact that we're taking it from you to give it to you.
What it is you need to look at inflation. Everyone listening needs to look at inflation for what it really is. It's a tax on your buying power. So the government has two ways of taxing you. There's the direct tax, like sales, taxing tax, income tax, and then there's the indirect tax, which is inflation.
If they don't have enough money, they print more. Which basically just effectively steals from everyone who has dollars. Everyone, it just steals equally from everyone in their buying power. But you don't see it in your bank account, so you don't get mad. But if somebody handed you a beer with half beer and half water, you'd be like, what's this?
I don't wanna drink. This isn't what I ordered. But I think we're just conditioned not to see that, not to pay attention to it. And that's unfortunate. But the issue with the potential pending hyperinflation is, Say that people have been at a reasonable level of concern in not wanting to spend money in the last year.
I don't know if we can really say that's true, but say that people have been a little conservative in their spending, so they've been getting their benefit, they've been collecting their full salary and they've been saving up, and a lot of people are. I've talked to a lot of real estate investors particularly that are in a very cash rich position right now.
What happens when all those people start spending? What happens when the velocity, they call that the velocity of money, how fast people are spending and how many times my money cycles in an economy, what happens when that speeds up? If we think inflation's been bad. And I think most people will notice that groceries have gone up this year. In the last couple years I've noticed, the average bill in the grocery store is going off quite a bit.
What happens when we drive that up even more so what happens in the summer because of our compromised supply chain with food and they're not allowing migrant workers to actually bunk up. So a lot of Canadian farmers are saying we're not gonna be able to produce a solid yield this year.
What happens when we have even less food yield and then even more dollars trying to get it. It can quickly turn into hyperinflation. And back in the seventies, they had a crisis. This is why interest rates went to 20%. My mom and dad told me the story of how they renewed their mortgage and they went to the banker and he said, "You're in luck.
Rates just went down. You're 12 and three quarter percent to renew today. And. , we think that sounds high. Can you imagine when we get into a state where we're 20% plus inflation every year, meaning you're being robbed of 20% of your purchasing power. Even that's not considered hyperinflation, but that's scary.
Because people's wages aren't going up. So the risk is absolute dependence. What happens when you can't get food? When you can't get water? That's the risk. That's why we can't take this risk. We have to stop this because if you can't get the basic essentials of life, What will you be willing to accept so that you can feed your family?
It creates desperation and dependency and that's never worked in history. And that's the big thing that I see as a danger of all this. It's not about speculating. Is there an agenda on this? Maybe there isn't. But if we continue down this path we're putting ourselves at an incredible risk, and it's a risk that no one will talk.
We need to be able to pay for the basics and we're losing that ability every single day in Canada. Which is the reason I want to diversify on the other side of the border, because that's a political hedge to me, right? If I don't like the politics in one country, now I'm protected because I have some in another country too.
Francois Lanthier: That's why I think the REITE Club is all about educating about real estate investment. But I think it goes beyond that. It's like educating people about having multiple streams of income, which you're doing even though it might be real estate. But in two countries. So then yeah you're creating a hedge and safeguarding your assets and being smart about it.
Cause I know a lot of our listeners also still have a job. But if you're fully dependent on your job, what happens if your employer disappears, and you have your assets. If you don't have your assets, you still have your job. You need to diversify. That's very smart.
Andrew Hines: Absolutely. And I, to that point, I know people that are crushing it with this stock hacking thing. This is blown up in our investor community. So many people are doing that where they're selling options and stuff. I went golfing with a guy from Ontario down here and he was just killing it. I wait, make way more than I do for my job.
I want to keep my job. I'm like, yeah, that's not a, that's not a bad idea. Things could change in a dime in that market, and that's your only source of income. You could be put in a difficult position. So even though you don't wanna work, having multiple streams is very important.
You don't wanna be dependent on anyone at any time, ever. And like that. That's my philosophy. I don't wanna be dependent on anyone. I don't wanna be dependent on my contractor. I'm gonna make sure that I can take control of that project if I need to. And that's the way I live my life cause I got burned very badly early in my real estate investing.
I think that's what maybe makes me a little bit more concerned with what's happening with Ontario. I'm like, if I don't trust my contractor, I definitely don't trust that politician with the amount of people that want to control his positions. So that's just the way I think about it. Not to get down too many tangents here.
Sarah Larbi: Absolutely. But you're right. It is important to diversify. It's important to look at the good, look at the bad. And like they say, the average millionaire has five different sources of income. So don't put your eggs all in one basket, including real estate or the same area. And I think it's great that you started diversifying the past while you're doing that as well. I'm diversifying into, different in terms of a resort that we're building, my next move is going to be the US or possibly Costa Rica.
I'm looking at that as well, but I think it's important to have more than one source of income. I know you mentioned stock options. I don't do that, but I have other things that I do as well. And then, if one doesn't do as well, at least you are not stuck. And I think that this is a good time that if you're speculating, don't speculate because there's a lot of people that if things turn and everything's been good for the last 10 years, but at some point things will pivot. And a lot of speculators might be left unfortunately in a bad situation. So cash flow and diversification I think is a great thing.
Andrew Hines: You said it. Yeah. That's what I say. Cash flow. You can't ever pass on cash flow. You have to have cash flow if you're speculating your negative cash flow or you're like Andrew, I can't find anything. I hear that, I can't find anything in Ontario. Look somewhere else.
Sarah Larbi: It doesn't have to be that much either. Like even if you've got barely any of your own money because you've refinanced it out or whatnot. And you've you're making a hundred, $150 a month, but you're, you've accounted for your maintenance, your CapEx, your vacancy allowance, your everything else. At least that's some cash flow, but you're not paying somebody to live there for $500 extra that you're coming outta pocket every month.
Andrew Hines: But we do need to be prepared mentally. And there's a difference in where you're at as an investor when you're early on and you risk bankruptcy, you accept that as a risk. I certainly risked some stuff that I don't risk anymore when I got started. But rents could go down 20%. What happened if that happened? Run these scenarios in your head, and I'm probably one of the more conservative investors out there.
There's a lot of people in Ontario, way more aggressive than I am these days. But I like to cover myself, six different ways. I want to be covered and if I don't feel comfortable with the prospect of rents going down 20% and my value going down. So picture your property rents down 20% and your property underwater, meaning your value's less than your mortgage.
Are you still cool to hang onto that property for 20 years? . And that if your answer is yes, and for some people it will be right, even if it goes down 20%, they're still cash flowing or they're still okay and they like the property, they like the fundamentals. If you invest like that, then you're not gonna regret anything.
You're gonna say, I made the best decision I could, I like this property. I'll hang onto it. Oh, it'll work out. It'll pay for itself in the long run. But you don't have staying power. If, as you said, sorry, you don't have cash flow. If you don't have cash flow and your property's underwater, you're gonna say this isn't gonna work. I'm gonna realize my loss, or, and it could put a lot of people into bankruptcy. And I don't wanna see that. I wanna see our investors make smart decisions and be in it for the long run.
Sarah Larbi: Absolutely. You're saying something that's interesting, it could go down 20%. Here's the thing. In some markets it's gonna, it's a very slim chance in some other markets, with higher vacancy rates, condos in Toronto. That's gone down. You do have to plan for everything. But when I look at properties, two hour radius, Vacancy of under 2%, still lots of demand, low supply.
Here's the thing is cause I don't, is that probable? Probably not. Could it potentially happen one day? In the worst case scenario, sure. But I also don't want people to say, I'm gonna have analysis paralysis. I'm not gonna do anything because a 20% drop would kill me. While in a market like Ontario where the government dictates the amount that we can increase, which in 2021 is absolutely nothing.
We can't do any rent increases. And market rents going up and up because ultimately, even if the market does take a 20% nose dive in prices or people are panicking and selling, where are they gonna live? They still have to rent, I think it's still far and few between the risk of that, but I do understand. If you wanna stress test it, you wanna say in maybe instead of rents going down 20%. Rates are increasing a heck of a lot. Are you still cash flowing at five or 6%? But there's gonna be some good opportunities I think in every single market, even if there's a correction down the road.
Andrew Hines: To that point, Sarah, I will say like, When I got started, I didn't care about that. The deal worked. You have to have some face, some, when you're getting started, if you play it so conservative, you'll never go anywhere. And that's not advice, that's just how I see it. But now I can be a little bit more careful now and I can say why don't I just look to a new market where if that did happen, I'd like it.
The market I'm looking at now, that would be okay. It's not ideal, that's why people are going to places like Sudbury or why they were going to Windsor, because even if that happened, and they might not have thought of it consciously that way, but they knew they had a buffer.
When I see that you don't have a buffer in Ontario, in most southwestern Ontario markets right now, And we're pressing the level of affordability with the average income and what people are having to pay to rent a place. I'm like, how much further up can this go unless people start piling in there, 12 people living in a three bed, two bath.
Sure it could happen, but I don't really wanna rent to that kind of group. So I just see that's a bit of a challenge and I do think a correction is possible. I don't think it's necessarily likely, but I'd rather just avoid the speculation and go find a market that makes a lot more sense for cash flow. That's just my opinion. Everybody's gotta do what they feel is right for them, and just because it's right for me doesn't mean it's right for someone else.
Sarah Larbi: Absolutely and I would just say, cash flow in the US and cash flow in Canada is gonna be different. You'll get the most lift in Canada, but as long as you still have cash flow, it doesn't, it's not, cash flow is not gonna make you what's gonna create your wealth, right?
Ultimately, you gotta scale and you gotta do quite a bit, but the cash flow will help sustain the ups and downs. Especially on the downs. And you don't wanna have an o eight and o nine like in the US happen in Canada, and then all of a sudden everybody loses their shirt and they can't afford to keep the properties.
Stress test your property is a hundred percent Andrew, I agree with you. Awesome. So we can keep talking because I think it's fun. But we're gonna go into our lightning round next and we're gonna ask you a few more questions and you're gonna give us the first answer that comes to mind. Are you ready?
Andrew Hines: Sure, go ahead.
Sarah Larbi: All right. Question number one, Andrew, what is the best advice that you have ever received from another investor or at a networking event?
Andrew Hines: Oh wow. That's a really good one. Someone probably somewhere told me, don't trust anyone and in the contracting world. I think that's good advice.
Sarah Larbi: That is good advice.
Francois Lanthier: I agree.
Sarah Larbi: To earn trust.
Andrew Hines: You have to earn it. Don't give it by default. Make them earn it. That's what I would say. You can trust 'em once you, once they earn it.
Sarah Larbi: Don't find your contractor?
Andrew Hines: I've done that. I found a lot, and that was probably why I learned that lesson.
Francois Lanthier: That trust must be verified. That's what they say. And I agree with it. So sometimes, like you mentioned a younger investor and all that so I need to get started.
Andrew Hines: We wanna believe the best in people, right? You really want to, you're like, you know what? I wanna shake your hand, look you in the eye and we'll, man to man or man to woman, we'll make a deal and we'll do this. But not everybody acts that way. And you gotta acknowledge that. So you gotta make sure that you learn about them, their integrity, and let them show you in small examples that they can be trusted. Absolutely.
Francois Lanthier: Second question. So what is your favorite resource for real estate investing? Anything? A book, a person, an event.
Andrew Hines: Biggest thing for me is networking. So getting into your local real estate investment meetup. Obviously in Canada that's challenging right now. They've come back to Florida. That's been really nice. But the absolute biggest thing has been connecting with people who are doing it. So find somebody in your area. I found mentors, not from real estate investor meetups, but I found other investors that were crushing it and I just watched everything they did. And I took what I liked, left, what I didn't like, and I adapted that into my strategy.
Sarah Larbi: Great insight. Question number three. What is the one attribute that has made you most successful in your opinion?
Andrew Hines: Not making the same mistake twice. Learning from my mistakes. That's the big thing.
Sarah Larbi: Cool. Awesome.
Francois Lanthier: Final question, what do you typically do on a Sunday morning?
Andrew Hines: I typically make breakfast for my wife and we hang out and might listen to some soothing, calming meditation music or maybe possibly put on a religious service of some sort in the background. Yeah, we'd like to make Sunday mornings peaceful.
Sarah Larbi: All right. Very cool. That was our lightning round. Thanks for playing with Andrew. Where can our REITE club community reach out and find out more about you?
Andrew Hines: Probably the easiest place is my Instagram page, which is just at Andrew Hines. And if anyone wants my cash flow spreadsheet, a lot of people like to use that when they're analyzing deals. You can grab that on my website. It's andrew-hines.com.
Sarah Larbi: Awesome. And you also have a podcast, what is the name of that?
Andrew Hines: The podcast is the Andrew Heins Real Estate Investing podcast. So whatever platform you listen on, just search my name, Andrew Hines, and you'll find it.
Sarah Larbi: Awesome. Final last words of advice. We always ask this as the very final question for our guests.
Andrew Hines: Okay so trust your gut. When you're analyzing investments, if something doesn't feel right or something, if something seems too good to be true, it probably is acknowledged, yeah, you do have to introspect here. You have to spend some time quiet with your thoughts.
I am analysis paralysis, paranoid, or am I valid in my concern? And you do need to learn to trust your gut. And sometimes it takes time, it takes experience. So if you've got a good vibe on something and you've done your numbers and they make. And you're just scared because it's new then, not advice, but that's typically the time and point where I would take action even if I don't know everything, if I have a good feeling. And I've done a very reasonable amount of research and I think I'm well hedged.
Sarah Larbi: Amazing. Andrew, thank you so much for being a great guest on our show and we hope to have you back again.
Andrew Hines: Thanks for having me. I really appreciate it was great talking to you both.
Sarah Larbi: I always like talking to Andrew. He's got tons of great insights. He does a lot of research about what's happening in the market, what the fundamentals are in terms of the overall like politics and global economy. And, the discussion on money printing and inflation was entrusting and also about what he's doing in Florida.
I think. That is awesome. What about you have you taken any good insights that you wrote down for what you wanna do, implement, potentially, or change for down the road?
Francois Lanthier: Yes. So the BRRRR, I've been wanting to do the BRRRR, but I'm in Ottawa and markets. It's just been too insane to find anything. That has any space for a lift, even if you renovate, it just doesn't make sense. And I have been looking at Florida, so very excited and I hear Andrew will be spending more time there and I've actually never met him in person in Canada, so maybe at a live meetup in Florida. That's really good. We can talk about BRRRR strategies or I don't know about investing in the US so that's great.
Sarah Larbi: Awesome. All right. Sounds good. When you check out Florida, let me know. I'm thinking of joining you in either Florida or Costa Rica. We've got something really cool happening at the REITE club with Costa Rica and some opportunities.
I may actually do that one. I've always had a soft spot for that country and I like a lot of their fun. But on that note, Francois, great co-hosting with you. Andrew, if you're listening to this, you are awesome. Thank you for providing so much of value and also with the podcast as well he's got a great podcast, guys.
Go and download it. Go and search for it. It is awesome and he really dissects deals as well with all the financials and all the numbers and many other great things. So go check out his podcast, Francois. Thank you so much.
Andrew Hines: Thank you. Cheers.
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